3. Corporate Governance Flashcards
Stakeholder
a group or individual who has an interest in what an organisation does
Types of stakeholder
Internal
Connected
External
Internal stakeholder
employees
managers
Connected stakeholder
shareholder
customer
supplier
finance providers
External stakeholder
community at large
environmental pressure groups
government
trade unions
Ethics
moral principles that examine the concept of right and wrong
CIMA code of ethics
COPPI
Confidentiality
Objectivity
Professional competence
Professional Behavior
Integrity
Corporate Social Responsibility CSR
company should be sensitive to the needs and wants of all stakeholders
CSR dimensions
Economic
Legal
Ethical
Philanthropic
Advantages of CSR
Customer expectations
Brand name
Lower environmental costs
Trading opportunities
Access to staff
Investment and funding
Sustainable business
Corporate governance
the system by which companies are directed and controlled
the separation of ownership and control
Agents
managers act as agents of the owners (shareholders)
Features of UK corporate governance code
Must hold AGM
Separate CEO and chairman
Board members must be trained at the cost of the company
Board members are independent in thought
Independent non execs NEDS
should represent the shareholders
Non exec directors NEDS
50% of the board
Renumeration committee
Audit committee
Nomination committee
decide on appointments to the board
50% of this committee should be NEDs
Remuneration committee
100% NEDs
Audit committee
Consists of NEDs
internal and external auditors report to committee, committee then reports to the board
US Sarbanes Oxley applies to companies
if they are part of a company listed on the US stock exchange
Regulation
government interference to ensure needs of stakeholders are met and businesses act in the public interest
Effective regulation
safe and effective product or service is delivered and not inhibit the function of the business
Efficient regulation
total benefit to the nation is greater than the total cost
The Competition Act 1998
prevents mergers creating monopolies
The Enterprise Act 2002
to stop price fixing
limiting production
dividing up markets
