Governance and Ethics Flashcards
What is governance?
Ensuring managers do not lose sight of who they are seeking to benefit and the fact they should not harm others - agency problem
What is corporate governance?
System by which companies are directed and controlled
What are the 4 perspectives on corporate governance?
1) Public policy - leadership, sustainability, good corporate citizenship
2) Stakeholder - balance of economic and social goals
3) Corporate - achieve long-term sustained value for shareholders
4) Stewardship - act in best interest of company
What indicates poor corporate governance?
Domination of the board
No involvement by the board
Inadequate control function
Lack of supervision
Lack of independent scrutiny by auditors
Lack of contact
Short-term profitability
Misleading financial statements/info
What are the qualities of good corporate governance?
Risk management
Ethical and sustainable pursuit
Openness and transparency
Integrity and probity
Accountability
Reconciling interests
What are the 2 types of financial system?
Market-based
Bank-based
What is a bank-based system?
Low risk appetite
More gov regulation
Lending creates relationships
What is a market-based system?
More risk
More important for long-term
Less regulation
What are Hofstede’s Cultural Dimensions?
Masc v Fem - money v quality of life
Indiv v collect - debate v avoid argument
Power distance - bureaucracy v responsibility
Long-term orientation - reward based v profit bonuses
Uncertainty avoidance - risk
Indulgent v restraint - personal gratification v regulation
What are the 2 types of governance structure?
Statutes
Codes of structure
Principle or shareholder led
What are the possible structures for the board of directors?
Unitary board - mgmnt and reporting
Two tier board - mgmnt board and supervisory board
What does the Wates principle consist of?
Purpose and leadership
Board composition
Director responsibility
Opportunity and risk
Remuneration
Stakeholder relationships and engagement
What are the Nolan principles?
Integrity
Objectivity
Accountability
Openness
Honesty
What principles do the Institute of Business Ethics follow?
Respect
Transparency
Openness
Fairness
Trust
What features do ethical leaders have?
Openness
Courage
Ability to listen
Honesty
Fair mindedness
