On May 27, 2025, the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), in collaboration with the National Association of Corporate Directors (“NACD”), released and is inviting public comment on an exposure draft of a Corporate Governance Framework (the “CGF”). COSO and NACD engaged PwC to act as the lead author of the CGF.
The CGF provides principles-based guidance for U.S. public companies to establish and strengthen their governance practices. It is designed to work together with COSO’s Internal Control (“IC”) and Enterprise Risk Management (“ERM”) frameworks. According to the exposure draft, the goal is not to impose new mandates but to outline widely accepted principles that enhance governance effectiveness. COSO and NACD explain in the exposure draft that public companies should focus on their governance practices in order to (1) enhance their competitive advantage by strengthening reputation and driving long-term value creation, (2) safeguard organizational value through proactive risk management and oversight, (3) confirm that the company’s governance model is fit for its purpose now and in the future, considering technological advances, emerging disruptive risks, and the full range of stakeholders, and (4) uphold ethical business practices and corporate responsibility, promoting integrity and accountability.
The CGF emphasizes six broad, interconnected core components that represent the foundational elements of effective corporate governance: oversight, strategy, culture, people, communication, and resilience. The components include a total of 24 principles, providing key objectives necessary for effective corporate governance. For instance, the culture component includes a principle to “promote ethics, respect, and open communications.” Most of the CGF consists of a discussion of the implementation of the principles within each component.
COSO is a nonprofit organization led by the American Institute of Certified Public Accountants (AICPA), Institute of Management Accountants (IMA), American Accounting Association (AAA), Institute of Internal Auditors (IIA), and Financial Executives International (FEI). COSO initially was formed to investigate the fraud scandals of the 1970s and 1980s. It published its first IC framework in 1992. A revised IC framework was published in 2013. Most U.S. public companies use the revised IC framework as the basis for their internal control reports as required under the Securities Exchange Act of 1934, as amended. COSO has also published an ERM framework (2004) and guidance on controls over sustainability reporting (2023), among other publications. More information on COSO is available on its website.
Comments on the CGF are due by July 11, 2025.
