Corporate Governance & Business Ethics Flashcards
Who is responsible for governance of a company?
Its board of directors
What criteria needs to be satisfied for a company to make disclosures on corporate governance?
From 2019, criteria is ‘large private companies’ (>2,000 employees, or turnover of >£200m and balance sheet of >£2bn)
Who does the UK Corporate Governance Code apply to?
The UK Corporate Governance Code applies to all companies with a premium listing of equity shares in
the UK, regardless of whether they are incorporated in the UK or overseas.
What are the main provisions of the Corporate Governance Code?
- Board leadership and company purpose
- Division of responsibilities
- Composition, succession, and evaluation
- Audit, risk, and internal control
- Remuneration
- DiversityW
What is the UK Stewardship Code?
Voluntary code for institutional investors which aims to improve the quality of corporate governance through better stewardship.
What are the four high level principles for asset managers under the UK stewardship code?
1) Purpose and governance
2) Investment approach
3) Engagement
4) Exercising rights and responsibilities
Idea is to use your votes to encourage companies in the right direction
What is the CISI Code of Conduct?
1) Personal accountability
2) Client focus
3) Conflict of interest
4) Respect for market participants
5) Professional development
6) Aware of capabilities
7) Respect others and the environment
8) Speak up and listen up
In what codes and rules are ESG expectations detailed?
ESG expectations are covered in many codes and rules:
- UK Corporate Governance Code
- UK Stewardship Code
- Financial Stability Board (FSB)
- Strategic report (Companies Act s172) requires reporting on non-financial aspects:
o Environmental matters
o Entity’s employees
o Social, community, and human rights issues
Who does the UK Corporate Governance Code apply to
All companies with a premium listing of equity shares in the UK, regardless of whether they are incorporated in the UK or overseas.
What is the revised UK Corporate Governance Code designed to do?
- Set higher standard of corporate governance to promote transparency and integrity in business
- Attract investment in the UK for the long-term, benefitting the economy and wider society.
Why is the Quoted Companies Alliance (QCA) Corporate Governance Code more popular than the traditional UK Corporate Governance Code for smaller companies?
It focuses more closely on the needs of smaller listed companies.
How is the independence of a director determined?
Referenced by other current or recent connections to the company or its executive directors, such as employment, shareholdings, commercial arrangements, or familial relations
What is the minimum requirement for proportion of non-executive board membership and when does it not apply?
Usually 50%, but for UK funds, the board NED membership requirement is only 25%
Who decides executive remuneration?
No director should be involved in deciding their own remuneration outcome, but remuneration should be decided by the board of directors
What is the purpose of the ESG sourcebook?
1) Better outcomes for clients and consumers
2) Deeper consideration of climate-related risks and opportunities by in-scope firms
3) A better and more co-ordinated information flow along the investment chain
