FINAL INTERNATIONAL ISO/FDIS

DRAFT
STANDARD 37000

ISO/TC 309
Secretariat: BSI Governance of organizations —
Voting begins on:
Guidance
2021-06-09
Voting terminates on:
2021-08-04

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Contents Page

Foreword...........................................................................................................................................................................................................................................v
Introduction................................................................................................................................................................................................................................. vi
1 Scope.................................................................................................................................................................................................................................. 1
2 Normative references....................................................................................................................................................................................... 1
3 Terms and definitions...................................................................................................................................................................................... 1
3.1 Governance and organization..................................................................................................................................................... 1
3.2 Principles and outcomes................................................................................................................................................................. 3
3.3 Roles.................................................................................................................................................................................................................. 5
4 The governance of organizations ........................................................................................................................................................ 6
4.1 General............................................................................................................................................................................................................ 6
4.2 Integrated governance...................................................................................................................................................................... 7
4.2.1 General...................................................................................................................................................................................... 7
4.2.2 Governance and delegation..................................................................................................................................... 7
4.2.3 Governance and management............................................................................................................................... 8
4.2.4 Governance and sustainability............................................................................................................................. 8
4.2.5 Governance and stakeholders............................................................................................................................... 8
4.3 The governing body............................................................................................................................................................................. 8
4.3.1 Composition and structure...................................................................................................................................... 8
4.3.2 Competence........................................................................................................................................................................... 9
5 iTeh STANDARD PREVIEW
Overview........................................................................................................................................................................................................................ 9
6 (standards.iteh.ai)
Principles of governance ............................................................................................................................................................................ 13
6.1 Purpose........................................................................................................................................................................................................ 13
6.1.1 Principle................................................................................................................................................................................
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Rationale............................................................................................................................................................................... 13
6.1.3 Key aspects ofc5526849016f/iso-fdis-37000
practice............................................................................................................................................. 13
6.2 Value generation.................................................................................................................................................................................. 15
6.2.1 Principle................................................................................................................................................................................ 15
6.2.2 Rationale............................................................................................................................................................................... 15
6.2.3 Key aspects of practice............................................................................................................................................. 15
6.3 Strategy........................................................................................................................................................................................................ 17
6.3.1 Principle................................................................................................................................................................................ 17
6.3.2 Rationale............................................................................................................................................................................... 17
6.3.3 Key aspects of practice............................................................................................................................................. 17
6.4 Oversight.................................................................................................................................................................................................... 19
6.4.1 Principle................................................................................................................................................................................ 19
6.4.2 Rationale............................................................................................................................................................................... 19
6.4.3 Key aspects of practice............................................................................................................................................. 20
6.5 Accountability........................................................................................................................................................................................ 22
6.5.1 Principle................................................................................................................................................................................ 22
6.5.2 Rationale............................................................................................................................................................................... 22
6.5.3 Key aspects of practice............................................................................................................................................. 22
6.6 Stakeholder engagement.............................................................................................................................................................. 24
6.6.1 Principle................................................................................................................................................................................ 24
6.6.2 Rationale............................................................................................................................................................................... 24
6.6.3 Key aspects of practice............................................................................................................................................. 24
6.7 Leadership................................................................................................................................................................................................ 25
6.7.1 Principle................................................................................................................................................................................ 25
6.7.2 Rationale............................................................................................................................................................................... 25
6.7.3 Key aspects of practice............................................................................................................................................. 25
6.8 Data and decisions............................................................................................................................................................................. 28
6.8.1 Principle................................................................................................................................................................................ 28
6.8.2 Rationale............................................................................................................................................................................... 28

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6.8.3 Key aspects of practice............................................................................................................................................. 28

6.9 Risk governance................................................................................................................................................................................... 30
6.9.1 Principle................................................................................................................................................................................ 30
6.9.2 Rationale............................................................................................................................................................................... 30
6.9.3 Key aspects of practice............................................................................................................................................. 31
6.10 Social responsibility......................................................................................................................................................................... 33
6.10.1 Principle................................................................................................................................................................................ 33
6.10.2 Rationale............................................................................................................................................................................... 33
6.10.3 Key aspects of practice............................................................................................................................................. 33
6.11 Viability and performance over time................................................................................................................................. 34
6.11.1 Principle................................................................................................................................................................................ 34
6.11.2 Rationale............................................................................................................................................................................... 34
6.11.3 Key aspects of practice............................................................................................................................................. 34
Bibliography.............................................................................................................................................................................................................................. 36

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Foreword
ISO (the International Organization for Standardization) is a worldwide federation of national standards
bodies (ISO member bodies). The work of preparing International Standards is normally carried out
through ISO technical committees. Each member body interested in a subject for which a technical
committee has been established has the right to be represented on that committee. International
organizations, governmental and non-governmental, in liaison with ISO, also take part in the work.
ISO collaborates closely with the International Electrotechnical Commission (IEC) on all matters of
electrotechnical standardization.
The procedures used to develop this document and those intended for its further maintenance are
described in the ISO/IEC Directives, Part 1. In particular, the different approval criteria needed for the
different types of ISO documents should be noted. This document was drafted in accordance with the
editorial rules of the ISO/IEC Directives, Part 2 (see www​.iso​.org/​directives).
Attention is drawn to the possibility that some of the elements of this document may be the subject of
patent rights. ISO shall not be held responsible for identifying any or all such patent rights. Details of
any patent rights identified during the development of the document will be in the Introduction and/or
on the ISO list of patent declarations received (see www​.iso​.org/​patents).
Any trade name used in this document is information given for the convenience of users and does not
constitute an endorsement.
For an explanation of the voluntary nature of standards, the meaning of ISO specific terms and
expressions related to conformity assessment, as well as information about ISO’s adherence to the
iTeh STANDARD PREVIEW
World Trade Organization (WTO) principles in the Technical Barriers to Trade (TBT), see www​.iso​.org/​
iso/​foreword​.html. (standards.iteh.ai)
This document was prepared by Technical Committee ISO/TC 309, Governance of organizations.
ISO/FDIS 37000
Any feedback or questions on this document should be directed to the user’s national standards body. A
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be found at www​.iso​.org/​members​.html.

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ISO/FDIS 37000:2021(E)


Introduction
The pursuit of purpose is at the centre of all organizations and is, therefore, of primary importance
for the governance of organizations. Good governance of organizations lays the foundation for the
fulfilment of the purpose of the organization in an ethical, effective and responsible manner in line with
stakeholder expectations. The organizational outcomes of this good governance are:
— effective performance;
— responsible stewardship;
— ethical behaviour.
Good governance means that decision-making within the organization is based on the organization’s
ethos, culture, norms, practices, behaviours, structures and processes. Good governance creates
and maintains an organization with a clear purpose that delivers long-term value consistent with the
expectations of its relevant stakeholders. The implementation of good governance of an organization
is based on leadership, values, and a framework of mechanisms, processes and structures that are
appropriate for the organization’s internal and external context.
This guidance is directed at governing bodies and governing groups but can also be useful to those that
support them in discharging their duties such as:
— personnel;
— governance practitioners; iTeh STANDARD PREVIEW
— other interested stakeholders. (standards.iteh.ai)
Organizations that use this guidance will be better equipped to understand the expectations of their
stakeholders and to apply the creativity, culture, ISO/FDIS 37000and performance required to deliver the
principles
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objectives of the organization according to its purpose and values. Their governing bodies will hold
management to account and ensure that thec5526849016f/iso-fdis-37000
culture, norms and practices in the organization align with
the organization’s purpose and organizational values.
This guidance sets out governance principles that will assist governing bodies in discharging their
duties effectively, prudently and efficiently, while enhancing trust, inclusion, accountability, legitimacy,
responsiveness, transparency and fairness. Governing bodies that apply this guidance can expect that
the organizations they govern will realize effective performance, responsible stewardship and ethical
behaviour.
When organizations use this document, stakeholders across countries and sectors can have increased
confidence that the governing bodies of these organizations are responsible, accountable, fair and
transparent, they act with probity and make decisions which are risk-based and informed by:
— credible information and reliable data;
— stakeholders’ expectations;
— compliance obligations;
— ethical and societal expectations, including those anticipated for future generations;
— impacts, and reliance, on the natural environment.
The benefits of good governance can apply to:
a) the organization itself;
b) member stakeholders;
c) other stakeholders.

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Examples of the value generated by good governance include the following.

— Improved long-term stakeholder value generation: Good governance promotes effective oversight
of the organization and thus helps to ensure alignment between the organizational purpose,
strategy, activities, and the United Nations Sustainable Development Goals (UN SDGs)[15]. This
improves long-term stakeholder value generation.
— Effective resource stewardship: Effective stakeholder engagement, protected disclosures
(whistleblowing) and mediation, appropriate executive authority limits, consistent terminology,
transparent decision-making and accountability, all contribute to improved stakeholder
confidence that the organization is stewarding resources in a responsible manner.
— Improved organizational resilience and performance: The organization is able to remain
resilient when negatively impacted by its changing context and realize valuable opportunities
as a result of these changes via good governance practices. These practices include adapting
strategy, ethical leadership, effective succession planning, clear delegation of authority and
responsibilities, and oversight of risk management and internal controls.
— Improved decision-making effectiveness: With the increasing rate of change and complexity
within which organizations operate, good governance promotes holistic consideration of the
organization, its purpose, and the context within which it operates, resulting in improved
decision-making. Clarity of accountability, responsibilities and delegated authority are good
governance practices, which increase the speed of organizational decision-making, action and
outcomes.
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— Improved personnel composition and retention: People who are motivated not only by financial
(standards.iteh.ai)
interests, but also by the organizational purpose and by intangible organizational values such
as fairness and transparency, are attracted to organizations demonstrating good governance
practices, such as effective and ethical leadership.
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— Increased investor and creditorc5526849016f/iso-fdis-37000
confidence: Effective leadership and oversight, holistic decision-
making, transparency and effective stakeholder relations, sustainability considerations and
certainty of compliance management all contribute to increased confidence in the organization.
In turn, this can improve access to capital and reduce the cost of capital.
— Increased value of intangible assets: Transparency with stakeholders and responsible
organizational behaviour (corporate citizenship) contribute to the value of the organization’s
intangible assets such as reputation, public image, public confidence and goodwill.

Finally, good governance includes actions by the governing body (e.g. creating governance policies)
to direct their organizations to provide stakeholders with transparent, clear and concise reports and
access to information. This allows regulators and society, through their duly appointed representa­
tives, to evaluate the organization’s positive and negative natural environmental, social and economic
impacts. Good governance further affords stakeholders the opportunity to hold organizations to
account, benchmark their results, highlight inappropriate practices, and reduce harm to society, the
economy and the natural environment.
The governance of organizations is enabled by the application of principles that help the organization
fulfil its organizational purpose and, in doing so, generate value for the organization and its stakeholders.
Figure 1 provides an overview of the governance of organizations and the principles and governance
outcomes outlined in this document. These components can already exist in full or in part within
the organization. However, at times they need to be adapted or improved so that the governance of
the organization remains effective, efficient, and appropriate for its unique and dynamic nature and
context.

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Key (standards.iteh.ai)
governance outcomes ISO/FDIS 37000
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primary governance principle c5526849016f/iso-fdis-37000
foundational governance principles

enabling governance principles

Figure 1 — Governance of organizations — Overview

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Governance of organizations — Guidance

1 Scope
This document gives guidance on the governance of organizations. It provides principles and key aspects
of practices to guide governing bodies and governing groups on how to meet their responsibilities so
that the organizations they govern can fulfil their purpose. It is also intended for stakeholders involved
in, or impacted by, the organization and its governance.
It is applicable to all organizations regardless of type, size, location, structure or purpose.

2 Normative references
There are no normative references in this document.

3 Terms and definitions

For the purposes of this document, the following terms and definitions apply.
ISO and IEC maintain terminological databases for use in standardization at the following addresses:
iTeh STANDARD PREVIEW
— ISO Online browsing platform: available at https://​w ww​.iso​.org/​obp
(standards.iteh.ai)
— IEC Electropedia: available at http://​w ww​.electropedia​.org/​
ISO/FDIS 37000
3.1 Governance and organization
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3.1.1
governance of organizations
human-based system by which an organization (3.1.3) is directed, overseen and held accountable for
achieving its defined purpose
3.1.2
organizational governance framework
strategies, governance policies (3.2.9), decision-making structures and accountabilities (3.2.2) through
which the organization’s (3.1.3) governance arrangements operate
3.1.3
organization
person or group of people that has its own functions with responsibilities (3.2.3), authorities and
relationships to achieve its objectives
Note 1 to entry: The concept of organization includes, but is not limited to, sole-trader, company, corporation, firm,
enterprise, authority, partnership, charity or institution, or part or combination thereof, whether incorporated
or not, public or private.

[SOURCE: ISO 37301:2021, 3.1, modified — Note 2 to entry has been deleted.]
3.1.4
organizational entity
organization (3.1.3) that has a distinct and independent existence
Note 1 to entry: In some cases, an organizational entity can be a legal entity.

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3.1.5
constituting documents
authoritative and unique set or collection of documents that establishes the organization’s (3.1.3)
existence and accountability (3.2.2) as amended from time to time
Note 1 to entry: Documents vary depending on the type and location of the organization, and can include a deed
of incorporation, articles of association or charter.

3.1.6
risk
effect of uncertainty on objectives
Note 1 to entry: An effect is a deviation from the expected. It can be positive, negative or both, and can address,
create or result in opportunities and threats.

Note 2 to entry: Objectives can have different aspects and categories, and can be applied at different levels.

Note 3 to entry: An objective can be expressed in other ways, e.g. as an intended outcome.

[SOURCE: ISO 31000:2018, 3.1, modified — Note 3 to entry has been replaced.]
3.1.7
risk appetite
amount and type of risk (3.1.6) that an organization (3.1.3) is willing to pursue or retain
[SOURCE: ISO Guide 73:2009, 3.7.1.2]
3.1.8 iTeh STANDARD PREVIEW
risk criteria (standards.iteh.ai)
terms of reference against which the significance of a risk (3.1.6) is evaluated
Note 1 to entry: Risk criteria are based on organizational objectives,
ISO/FDIS 37000 and external and internal context.
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Note 2 to entry: Risk criteria can be derived from standards, laws, policies and other requirements.
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[SOURCE: ISO Guide 73:2009, 3.3.1.3]
3.1.9
risk tolerance
organization’s (3.1.3) or stakeholder’s (3.3.1) readiness to bear the risk (3.1.6) after risk treatment
(3.1.11) in order to achieve its objectives
Note 1 to entry: Risk tolerance can be influenced by legal or regulatory requirements.

[SOURCE: ISO Guide 73:2009, 3.7.1.3]

3.1.10
level of risk
magnitude of a risk (3.1.6) or combination of risks, expressed in terms of the combination of
consequences and their likelihood
[SOURCE: ISO Guide 73:2009, 3.6.1.8]
3.1.11
risk treatment
process to modify risk (3.1.6)
Note 1 to entry: Risk treatment can involve:

— avoiding the risk by deciding not to start or continue with the activity that gives rise to the risk;

— taking or increasing risk in order to pursue an opportunity;

— removing the risk source;

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— changing the likelihood;

— changing the consequences;

— sharing the risk with another party or parties (including contracts and risk financing); and

— retaining the risk by informed decision.

Note 2 to entry: Risk treatments that deal with negative consequences are sometimes referred to as “risk
mitigation”, “risk elimination”, “risk prevention” and “risk reduction”.

Note 3 to entry: Risk treatment can create new risks or modify existing risks.

[SOURCE: ISO Guide 73:2009, 3.8.1]

3.2 Principles and outcomes

3.2.1
principle
fundamental truth, proposition or assumption that serves as foundation for a set of beliefs or behaviours
or for a chain of reasoning
[SOURCE: BS 13500:2013, 2.14, modified — The singular form has been used.]
3.2.2
accountability
obligation to another for the fulfilment of a responsibility (3.2.3)
iTeh STANDARD PREVIEW
Note 1 to entry: The obligation includes the duty to inform and to explain the manner in which the responsibility
was fulfilled. (standards.iteh.ai)
Note 2 to entry: The non-fulfilment of a responsibility has consequences that can be enforced on the accountable
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3.2.3
responsibility
obligation to act and take decisions to achieve required outcomes
[SOURCE: ISO/IEC 38500:2015 2.22]
3.2.4
delegation
assignment of authority and responsibility (3.2.3) from one that holds them to another
3.2.5
compliance
meeting all the organization’s (3.1.3) compliance obligations (3.2.6)
[SOURCE: ISO 37301:2021, 3.26]
3.2.6
compliance obligations
requirements that an organization (3.1.3) mandatorily has to comply with as well as those that an
organization voluntarily chooses to comply with
[SOURCE: ISO 37301:2021, 3.25]
3.2.7
ethical behaviour
behaviour that is in accordance with accepted principles (3.2.1) of right or good conduct in the context
of a particular situation and is consistent with international norms of behaviour (3.2.8)
[SOURCE: ISO 26000:2010, 2.7]

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3.2.8
international norms of behaviour
expectations of socially responsible organizational behaviour derived from customary international
law, generally accepted principles (3.2.1) of international law, or intergovernmental agreements that
are universally or nearly universally recognized
Note 1 to entry: Intergovernmental agreements include treaties and conventions.

Note 2 to entry: Although customary international law, generally accepted principles of international law and
intergovernmental agreements are directed primarily at states, they express goals and principles to which all
organizations (3.1.3) can aspire.

Note 3 to entry: International norms of behaviour evolve over time.

[SOURCE: ISO 26000:2010, 2.11]

3.2.9
governance policy
intentions and direction of an organization (3.1.3), as formally expressed by its governing body (3.3.4)
3.2.10
organizational purpose
organization’s (3.1.3) meaningful reason to exist
Note 1 to entry: The organizational purpose is the ultimate value the organization intends to generate for
specified stakeholders (3.3.1).
iTeh STANDARD PREVIEW
Note 2 to entry: The organizational purpose guides the performance objectives and provides clear context for
daily decision-making by relevant stakeholders.
(standards.iteh.ai)
3.2.11
organizational values ISO/FDIS 37000
beliefs about desirable outcomes or actions defined by the organization (3.1.3) as good and important,
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to be explicitly or implicitly shared and applied by the organization
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3.2.12
social responsibility
responsibility (3.2.3) of an organization (3.1.3) for the impacts of its decisions and activities on society
and the environment, through transparent and ethical behaviour (3.2.7) that:
— contributes to sustainable development (3.2.14), including the health and the welfare of society;
— takes into account the expectations of stakeholders (3.3.1);
— is in compliance (3.2.5) with applicable law and consistent with international norms of behaviour
(3.2.8);
— is integrated throughout the organization and practised in its relationships.
Note 1 to entry: Activities include products, services and processes.

Note 2 to entry: Relationships refer to an organization’s activities within its sphere of influence.

[SOURCE: ISO 26000:2010, 2.18]

3.2.13
sustainability
state of the global system, including environmental, social and economic aspects, in which the needs
of the present are met without compromising the ability of future generations to meet their own needs
Note 1 to entry: The environmental, social and economic aspects interact, are interdependent and are often
referred to as the three dimensions of sustainability.

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Note 2 to entry: Sustainability is the goal of sustainable development (3.2.14).

[SOURCE: ISO Guide 82:2019, 3.1]

3.2.14
sustainable development
development that meets the needs of the present without compromising the ability of future generations
to meet their own needs
Note 1 to entry: Sustainable development is about integrating the goals of a high quality of life, health and
prosperity with social justice and maintaining the earth’s capacity to support life in all its diversity. These social,
economic and environmental goals are interdependent and mutually reinforcing. Sustainable development can
be treated as a way of expressing the broader expectations of society as a whole.

[SOURCE: ISO 26000:2010, 2.23]

3.3 Roles
3.3.1
stakeholder
person or organization (3.1.3) that can affect, be affected by, or perceive itself to be affected by a
decision or activity
Note 1 to entry: Depending on the nature of the organization, stakeholders can include member stakeholders
(3.3.2) and other stakeholders, including customers, regulators, suppliers and employees.

iTeh STANDARD PREVIEW

Note 2 to entry: In ISO management system standards, a stakeholder can be referred to as an “interested party”.

(standards.iteh.ai)
[SOURCE: ISO 37301:2021, 3.2, modified — The term “interested party” has been deleted. Notes 1 and 2
to entry have been added.]
ISO/FDIS 37000
3.3.2
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member stakeholder
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stakeholder (3.3.1) who has a legal obligation or defined right to make decisions in relation to the
governing body (3.3.4) and to whom the governing body is to account
Note 1 to entry: These rights or obligations are often recorded in the organization’s (3.1.3) constituting documents
(3.1.5), laws and/or regulations.

Note 2 to entry: These decisions can include, for example, the determination of the composition of the governing
body or the parameters within which the governing body is to make decisions.

Note 3 to entry: Governing bodies account to these stakeholders for the organization’s outcomes as well as the
governing body’s performance.

Note 4 to entry: Member stakeholders are often referred to, and can include, shareholders and members of an
organization.

3.3.3
reference stakeholder
stakeholder (3.3.1) to whom the governing body (3.3.4) has decided to account to when making decisions
pertaining to the organizational purpose (3.2.10)
EXAMPLE Scientific advisory board to a research organization, parents of the pupils in a school, community
advisory boards for companies.

Note 1 to entry: In some cases, a member stakeholder (3.3.2) can also be a reference stakeholder.

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