Chapter One Flashcards
Key features of a remuneration committee
It should comprise only of NEDS
At least three for FTSE 350 companies at least 2 for smaller listed companies.
The company chairman can be a member but cannot chair the committee
Chair must’ve been a member of the committee for at least 12 months.
Aims of corporate governance (3)
Protect shareholders
Effective risk management
Ensure clarity of roles and responsibilities at the top of the organisation
Description of corporate citizenship
Recognition, the responsibilities extend beyond the scope of commercial relationships
Description of corporate governance
The system by which companies are directed and controlled
Normative, motivation definition
Desire to look after stakeholder interests is driven by an internal belief that a business has a moral and ethical duty towards its stakeholders
Instrumental, motivation definition
Directors are motivated by economic interests and will only consider wider stakeholders if it is in the economic interests to do so
Sustainability definition
To use resources at a rate that allows them to be replenished
Managing activities to prevent the depletion of resources
VUCA
Volatility,
Uncertainty,
Complexity,
Ambiguity 
Creating and preserving value cycle
Planning
Report
Control
(repeat) 
Different groups of stakeholders
Internal – directors senior staff, low-level employees
Connected – shareholders, lenders customers suppliers
External – government pressure, groups local community
The CGMA code of ethics
PPCC
Professionalism - be clearly identifiable as a professional person 
Provide high-quality services
Credibility - information systems must be credible
Confidence - users should feel confident that a framework of professional ethics, governs the provision of services
Organisational values
(six)OHARTE
Openness– open and clear disclosure of relevant information to stakeholders.
Honesty – tell the truth and avoid misleading stakeholders
Accountability – individuals must be accountable for their actions and subject themselves to scrutiny when carrying out their duties
Respect - there should be a culture of respect within the organisation,
Trust – the organisation should ensure it can be trusted by stakeholders
Empowerment – in power staff to allow them to behave ethically in all situations
Personal qualities required of an accountant
RRRTC
Reliability
Responsibility
Respect
Timeliness
Courtesy.
Professional qualities required of an accountant
SASI
Scepticism
Accountability
Social responsibility
Independence 
Stakeholder Ethical stances and strategy
Four main stances
Short-term shareholder interest
Long-term shareholder interest
Multiple stakeholder view
Shaper of society 
Aims of corporate governance
Corporate
Control - using systems to control corporate activity
Oversight - and involved board, non-execs supervising execs
Risk - wanting to manage risks appropriately according to risk appetite of the entity
Profit maximisation - the overall objective of a board in commercial enterprise
Objectives - creating a framework within which to pursue them
Roles - a balance board in which everyone plays the part
Active - execs and non-execs working together
Telling - communication with shareholders
Experience - experience and independence bought by non-executives
Approaches to CSR
Proactive strategy
A reactive strategy
Defence strategy
And accommodating strategy
Stakeholder theory and CSR
Donaldson and Preston
Normative – looking after shareholder interest is driven by internal motivation
Instrumental – the business exist, primarily for economic reasons 
Benefits of good corporate citizenship
Process and product design - designed to minimise the amount of resources used and if waste is created, it should be recycled
Supplier selection - suppliers should share the organisations, sustainable objectives – use local suppliers, where possible
Quality and efficiency - drive to reduce waste of resources may bring efficiency and quality improvements
Costs - costs may rise in some areas of savings can be made through better efficiency and potential environmental tax is avoided 
The five activities that finance performs to fill his roles
CPCSC
Collect data
Provides insight
Communicate insight
Supports implementation of decisions.
Connects different activities to one another.
Information to impact framework
Assemble – collect data from internal and external sources and convert into information.
Analyse – broadly questioning. This might include comparisons
Advice – this is where finance influences users by communicating the information to influence decision-making
Apply – accountants, assist with execution of plans.
Acumen – the ability to use practical skills and a depth of perception or decent meant to make good judgements and accurate. Quick and effective decisions. This is the underlying value which finance brings to the above cycle from cross function collaboration.
Collecting data – the characteristics of good information
ACCURATE
Accurate
Complete.
Clear
User-friendly
Reliable
Accessible
Timely
Effective
The four professional qualities required by an accountant under the same CIMA of ethics
Scepticism
Accountability
Social responsibility
Independence
Equity based rewards
Compensation which is non-cash pay offer to employees.
May include options, restricted stock and performance shares. 
Enabling
The creation, preservation of value by planning forecasting and enabling the allocation of resources to achieve maximum value
Shaping
Through performance management and control.
Comparing actual performance to budgets to identify areas for improvement.
Control action can be taken when deviations identified.
Narrating
Recording daily financial activities and preparation of legal required annual accounts 
Contributing factors to the shift at the finance function to a diamond structure
Market orientated, approach and process automation
Consortia
And Association of franchises, companies etc, especially one form for particular purpose 
