Corporate Governance across the world Flashcards
Name 4 CG across the world?
- Corporate governance outside the UK
- The US and Sarbanes-Oxley Act 2002
- South Africa and the King Codes
- Corporate governance frameworks in Germany
- Corporate governance frameworks in Japan
- Corporate governance frameworks in China
- Corporate governance frameworks in Scandinavia
- Corporate governance frameworks in the Netherlands
- Governance in other sectors
- Governance for family-controlled companies
- Global principles of corporate governance
The Wates Principles
What is the south Africa king code based on?
King Code is:
- Based on the ‘stakeholder inclusive’ approach
- Corporate responsibility and ethics form part of the King Code definition of corporate governance.
- They are well-established, having been first introduced in 1994. They provide for a single corporate governance framework in that they apply to all types of organisation, not just listed companies.
- Follow the ‘apply and explain’ approach
- The focus of King IV is on outcomes-based governance. It places accountability on the governing body within an organisation to attain four governance outcomes:
- ethical culture and effective leadership;
- performance and value creation in a sustainable manner;
- adequate and effective controls; and
- trust, good reputation and legitimacy with stakeholders.
China’s CG?
China
- Concentrated ownership structure
- Focus of their corporate governance regime is on protecting minority shareholders, regulating controlling shareholders and disclosure and transparency.
- China’s corporate governance framework is rules based and consists of:
- Laws
- Code of Corporate Governance for Listed Companies (2018) based on the OECD Principles of Corporate Governance
- Listing Stocks and Trading Rules
- Follows the two-tier board system originating in continental Europe, whereby Chinese companies have:
- a board of directors which is responsible for the management of the company including the oversight from an
- operational perspective of the management who run the company on a day-to-day basis; and
- a supervisory board which is responsible for ensuring that the board of directors and management do not violate laws or the company’s articles of association. It is also entitled to inspect the company’s financial records.
Netherlands CG
Netherlands
The Dutch model of corporate governance accommodates both the two-tier German model, which is followed by the majority of Dutch listed companies, and the one-tier Anglo-Saxon model.
In January 2019, the Dutch Stewardship Code 2018 came into force providing Principles and Guidance for institutional investors in Dutch Companies.
-The Code operates on a ‘comply or explain basis’.
Nolan’s seven principles of public life?
LOOH-IS
- Selflessness:
Holders of public office should take decisions solely in terms of the public interest. They should not do so to gain financial or other material benefits for themselves, their family or their friends.
- Integrity:
Holders of public office should not place themselves under any financial or other obligation to outside individuals or organisations that might influence them in the performance of their duties.
- Objectivity:
In carrying out public business, including making public appointments, awarding contracts or recommending individuals for rewards and benefits, holders of public office should make choices on merit.
- Accountability. Holders of public office are accountable for their decisions and actions to the public and must submit themselves to whatever scrutiny is appropriate to their office.
- Openness. Holders of public office should be as open as possible about the decisions and actions that they take. They should give reasons for their decisions and restrict information only when the wider public interest clearly demands.
- Honesty. Holders of public office have a duty to declare any private interests relating to their public duties and to take steps to resolve any conflicts arising in a way that protects the public interest.
- Leadership. Holders of public office should promote and support these principles by leadership and example.
Global principles of CG
- Ensuring the basis for an effective corporate governance framework:
‘The corporate governance framework should promote transparent and fair markets, and efficient allocation of resources. It should be consistent with the rule of law and support effective supervision and enforcement.’
- The rights and equitable treatment of shareholders and key ownership functions:
‘The corporate governance framework should protect and facilitate the exercise of shareholders’ rights and ensure equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights.’.
- Institutional investors, stock markets and other intermediaries:
‘The corporate governance framework should provide sound incentives throughout the investment chain and provide for stock markets to function in a way that contributes to good corporate governance.’
- The role of stakeholders in corporate governance:
‘The corporate governance framework should recognise the rights of stakeholders established by law or through mutual agreements and encourage active co-operation between corporations and stakeholders in creating wealth, jobs and sustainability of financially sound enterprises.’
- Disclosure and transparency:
‘The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company.’
- The responsibilities of the board:
‘The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.’.
