Corporate Governance

Question 1

Corporate governance –

Answer 1

the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation … and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance.

Question 2

Those charged with governance (TCWG) –

Answer 2

individuals with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity, including overseeing the financial reporting process.

Question 3

In general, governance responsibilities involve several oversight activities, including matters relating to:

Answer 3

strategy development and implementation;

economic development, mergers and acquisitions;

appointment of professional operating management executives;

compensation of executives;

risk and control systems and compliance with laws and regulations;

engaging internal auditors and independent external auditors.

Question 4

Relevance

Answer 4

Virtually all corporate governance regulations are aimed at listed companies, where the separation of ownership and control/management have, in several notorious cases (e.g. Enron, Royal Bank of Scotland, Lehman Brothers), caused severe losses to the shareholders through mismanagement of company resources, missed opportunities and poor decision-making or fraudulent activities (including misleading and dishonest financial reporting).

Question 5

Importance

Answer 5

Research has shown that entities that take good corporate governance practice seriously are more prosperous over the long term than entities which do not.

Analysts and policymakers agree that improving corporate governance is crucial to a company’s ability to generate sustainable growth in the future.
There is a risk that weak corporate governance will lead to financial losses, both for entities and shareholders. Strong corporate governance helps reduce this risk.

Question 6

OECD Overview

Answer 6

The mission of the Organisation for Economic Co-operation and Development (OECD) is to promote policies designed to improve the economic and social well-being of people around the world.