CH3 - Impact of Corporate Governance on Strategy Flashcards
1
Q
Definition of Corporate Governance
A
‘The system by which organisations are directed and controlled’
2
Q
11 Core Principles of Corporate Governance
A
- integrity
- fairness
- professional judgement
- independence
- scepticism
- transparency
- probity
- responsibility
- accountability
- innovation
- reputation
3
Q
Organisation for economic co-operation and development (OCED) Principles
A
- rights of shareholders
- equitable treatment of shareholders
- role of stakeholders
- disclosure and transparency
- board responsibilities
4
Q
International corporate governance network (ICGN) - Guidance emphasises (Companies):
A
- responsibilities
- leadership and independence
- composition and appointment
- corporate culture
- risk oversight
- remuneration
- reporting and audit
- general meetings
- shareholder rights
5
Q
Corporate governance
- UK and USA
- Principles or Rules-based approach
A
UK: UK Corporate Governance Code 2016
=> Principles-based approach
USA: USA Sarbanes-Oxley Act 2002
=> Rules-based approach
6
Q
The role of investors
- 3 types/roles
A
- Insider systems (family owned businesses)
- Outsider systems (stock market)
- Institutional investors (strategic focus)
7
Q
Board Responsibilities
- effectiveness of boards
A
- entrepreneurial leadership
- strategy
- briefing
- training
- appraisals
8
Q
Board support mechanisms
A
- committees
- NEDs
- Remuneration (performance-related pay)
9
Q
Specific provisions of Sarbanes-Oxley (SOx):
A
- establishment of Public Company Accounting Oversight Board (PCAOB)
- auditors should review internal controls
- rotation of lead/reviewing audit partners every 5 years
- auditors prohibited from carrying out most non-audit services
- audit committees responsible for appointment, compensation and oversight of auditors
- all members of audit committee should be independent & 1 or more should be a financial expert
- annual reports should contain internal control reports and management confirm responsibility and effectiveness of internal controls
10
Q
UK Corporate Governance Code - Board composition
vs Singapore
A
- NEDs => at least 1/2 of board (Singapore = 1/3 or half if chairman is not independent)
- Chairman and CEO should be separate (Singapore = should be but don’t have to be if safeguards in place)
- For FTSE350 Companies re-election should take place every year (Singapore = every 3 years)
- No shares/performance-related pay for NEDs (Singapore = NEDs encouraged to take shares)
- Audit committee => entirely NEDs & 1 with recent financial expertise (Singapore = majority NEDs, 2 members with recent financial expertise)
11
Q
CPD for Corporate Governance
A
- Strategic planning
- financial management
- HR issues
- Risk management
- Legal and regulatory issues
- Audit practices and procedures
12
Q
Criteria for Director Appraisal
A
- independent and innovative
- industry familiarity
- active participation
- positive and enthusiastic
- business development
- CPD
