Corporate governance

Question 1

what is corporate governance

Answer 1

The system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of the many stakeholders in a company - these include its shareholders, management, customers, suppliers, financiers, government and the community.

Question 2

what is total responsibility management (TRM)

Answer 2

it begins with the premise that the strict vision of the firm enforces and drives the development of the from through its code of ethics.

Question 3

what san example of a company that follows TRM?

Answer 3

sainsburys opted for the ethical root and had a very good ethical reputation. however after the financial crash, people could afford to be ethical and needed cheap products. People could afford ethics.

Question 4

what is ethical leadership?

Answer 4

involves both acting and leading ethically over time, and all of the time

Question 5

what are the three areas that covers ethical leadership?

Answer 5

Moral, Values and ethics

Question 6

What does Morals means for ethical leadership

Answer 6

core beliefs or desires that guide and motivate attitudes and actions. everyone has thousands of values - both ethical and unethical.

Question 7

What does Values mean for ethical leadership?

Answer 7

custom and personal beliefs of individuals about what is right and wrong. morals are a personal evaluation

Question 8

what does ethics mean for ethical leadership ?

Answer 8

standards of conduct that indicate how one should behave based on principles of right and wrong.

Question 9

what are the three elements of the fraud triangle?

Answer 9

FOR -
Financial pressure - financial pressure if often the motive for committing financial fraud, more often than not this is down to greed
Opportunity - Opportunities that allow for fraud to take place, depending on his or her position in the company depends on how accessible these opportunities are.
Rationalisation - Fraudsters try to justify there action once they have been caught.

Question 10

what are the three different types of management

Answer 10

Moral
Immoral
Amoral

Question 11

what is moral management

Answer 11

conforms to a high ethical standard. moral managements want to succeed, but only within the confines of sound ethical practices.
example Merck and co pushed a drug for a cure, but could not find a sponsor for the drug! rather than giving the drug away for free they decided to give it to poor countries who were in more need for it. Good for their reputation

Question 12

what is immoral management

Answer 12

A manager that has no regards for ethics in business practice.
Infamous Inside trader Ivan Boesky in the 1980s. he was an insider trader who mad his money through arbitrage and junk bonds. He made $200million and was fined 100m and served a 3 year prison sentence.

Question 13

what are the two types of Amoral management?

Answer 13

Intentional - intentional ammoral managers consciously decide for themselves that ethics and business should not mix.. ethical matters are not considered within there decision making process because they believe business activities do not require moral judgement.
unintentional - do not think about business activities in ethical terms either, but for a different reason .these managers are casual and careless about the fact that there activities may have effects on others. these managers lack ethical perception, sensitivity or ethical awareness these managements show absolutely no sign of ethical concern. these managers comply with the law but do not go above and beyond. Example Nestle with baby powder formula.

Question 14

what is amoral management?

Answer 14

amoral manager does not know the difference between right or wrong.

Question 15

what is code of ethics

Answer 15

A code of ethics, also called a code of conduct or ethical code, sets out the company’s values, ethics, objective and responsibilities. A well-written code of ethics should also give guidance to employees on how to deal with certain ethical situations. Every code of ethics is different and should reflect the company’s ethos, values and business style.

Question 16

what is agency problem?

Answer 16

Conflict of interest, information asymmetry, incomplete contracts, moral hazard (not rising to opportunities)

Question 17

who are the owners of a business?

Answer 17

Its shareholders

Question 18

what is possible solution to Agency problem?

Answer 18

Incentive based contracts, monitoring mechanisms

Question 19

what are a shareholders rights?

Answer 19

right to sell stock, vote, right to certain information, the right to sure management,

Question 20

what are managements duties

Answer 20

act in the best interest of the shareholder, duty of care and skill, duty of diligence.

Question 21

what does corporate governance mean?

Answer 21

“a good corporate governance regime helps to assure that corporateions use their capital efficiently and ensure that corporations take into account the interests of a wide range of constituanceis, as well as the communities in which they operate, and that there boards are accountable to the company and their shareholders”

Question 22

Corporate governance

Answer 22

As the shareholders are owners of the business they hire in agents who act as managers, the idea of corporate governance is a structure that is to ensure that the managers spend the shareholders money wisely and not on bonuses and also that the managers are held responsible in making sure that however the business functions it take care of how it act and also to consider the wider community.

Question 23

when were auditing committees established?

Answer 23

1976

Question 24

Who famously failed at corporate governance?

Answer 24

Robert Maxwell he used dubious accounting techniques which hide liabilities, over exaggerated profits.

Question 25

what is the corporate finance committee called?

Answer 25

the Cadbury committee

Question 26

why was the Cadbury committee started?

Answer 26

because of major fraud incidents, such as Robert Maxwell who stole pension and financial institutions money laundering.

Question 27

what did the Cadbury committee recommend?

Answer 27

that the company’s board of directors would have sub committees that dealt with matters of remuneration, audit, and nominations. The subcommittee would have to be independent of the board of directors.

Question 28

was the Cadbury committee recommendations mandatory?

Answer 28

No, however businesses are expected to take it on voluntary.

Question 29

what two other committees released reports?

Answer 29

Greenbury committee in 1995 (looked at directors salaries)

Hermel committee in 1998 ( looked to see if recommendation of Cadbury are actually being implemented

Question 30

Whats the combined code 1998?

Answer 30

its the combined recommendation of the three committees (subcommittees, Directors salaries and if its being implemented)

Question 31

when was the combined code revised?

Answer 31

2003 and then 2008

Question 32

what does the company code consist of?

Answer 32

Companies were again expected to implement these codes. Stating that “companies should wish to be governed in the ‘best interest of shareholders’ and they should be efficient, effective and have entrepreneurial management that can deliver to shareholder value over the long term”

Question 33

what is Corporate governance code?

Answer 33

“corporporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place.”

Question 34

whats the message in the governance code?

Answer 34

The idea of the code is a call to directors to face the challenges of being responsible agents of the investors funds this principle is essentially “comply or explain” which is suppose to be the trade mark of the company.