9: Governance and Ethics Flashcards
3 impacts of poor governance?
Falling share price
Corporate failure
Criticism of accountants or auditors
What is the agency problem?
Managers should run the company in the interest of the shareholders
Problem occurs when managers pursue their own objectives instead
Good corporate governance should align the objectives of management with those of the shareholders
Define corporate governance?
A set of relationships between a company’s management, its boards, etc
that provides the structure through which the objectives of the company are set, attained and monitored
What are the four perspectives on corporate governance?
From wider to narrower view:
- public policy perspective
- stakeholder perspective
- corporate perspective
- stewardship perspective
What is CSR?
Concept that integrates social and enviro concerns in operations and stakeholder interactions
What ideas does SASB embed?
Sustainable and ethical compensation
Supply chain management
Oversight of board
Engagement of shareholders on ESG
Ethical conduct
What are the three elements of financial systems?
Intermediaries: banks, pension funds
Securities: shares and bonds
Markets: primary and secondary, capital and money
Describe the two financial systems?
Bank-based
- lending is most important source of business finance
- banks are highly concentrated and integrated
- stock markets are volatile and speculative
- heavy regulation
Market-based
- markets are more important than banks for long term finance
- banks less close, less integration
- stock markets bigger and more effecient
- less regulated
What are Hofstede’s 6 key dimensions of national culture?
Power distance
Uncertainty avoidance
Individualism and collectivism
Masculinity/femininity
Long-term orientation
Indulgence verses restraint
What are the OECD principles?
Promoting transparent and efficient markets
Equitable treatment of all shareholders
Relationships with investors
Rights of stakeholders in corporate governance
Accurate and timely disclosure and transparency of financial performance
Responsibilities of the board and accountability to shareholders
What are the two types of board structure?
Unitary board
Dual board
- management board (runs the company)
- supervisory board (everything else)
What do the Companies Miscellaneous Reporting Regs 2018 require?
Disclosure corporate governance if they meet at least one of the following:
- more than 2000 employees worldwide
- turnover >200m globally
- Total assets >2bn
What are the six Wates principles?
Help large companies meet governance regs (voluntary):
- purpose and leadership
- board
- directors responsibilities
- opportunities and risks
- remuneration
- stakeholder engagement
5 Nolan principles?
Integrity
Objectivity
Accountability
Openness
Honesty
5 institute of business ethics principles?
Respect
Transparency
Fairness
Responsibility
Trust
