Other Governance Issues Flashcards
What are the concepts on which the King IV Code is based?
Ethical leadership
The organisation as an intergral part of society
Corporate citizenship
Sustainable development
Stakeholder inclusivity
Integrated thinking
Integrated reporting
What are the main requirements of s.404 of the SOX in the US?
The annual report required to contain an internal control report which shall:
State the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and
Contain an assessment, as of the end of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.
A statement that the external auditors have issued an attestation report on management’s assessment of the company’s internal control over financial reporting. Auditor’s report should be filed as part of the annual report.
Why should institutional investors want companies to comply with a code of corporate governance?
May be reluctant to invest in companies that do not comply or do not comply with comparable governance standards.
Encourages companies to carry out good governance and stay accountable to its shareholders.
If a company complies with a code of corporate governance it is less likely to be exposed to various risks including those that may damage its reputation, lose business, breach regulation or laws and be forced to pay penalties.
Protect the interests of its stakeholders.
Encourage the directors to maintain good dialogue with shareholders and align their interests and consider any concerns that they may have.
How does governance in the public sector and not-for-profit sector differ from corporate governance?
No commercial pressure of accountability to shareholders.
Not profit -making.
Strongly influenced by elected politicians (advised by senior administrators and ultimately accountable to the electorate), the general public and pressure groups.
Has its own specific circumstances and therefore adapted its principles of good governance.
What are Nolan’s seven principles of public life?
- SELFLESSNESS - holders of public office should take decisions solely in terms of the public interest.
- INTEGRITY - should not place themselves under any financial (or other) obligation to outside individuals/companies that might influence them in the performance of their duties.
- OBJECTIVITY - should make choices on merit when carrying out public business (i.e. making public appointments, awarding contracts, recommending individuals for rewards/benefits).
- ACCOUNTABILITY - accountable for their decisions and actions to the public. Must submit themselves to whatever scrutiny is appropriate to their office.
- OPENNESS - open as possible about the decisions and actions they take. Give reasons for decisions and restrict info only when wider public interest clearly demands.
- HONESTY - duty to declare any private interests relating to their public duties. Must take steps to resolve any conflicts arising in a way that protects the public interest.
- LEADERSHIP - promote and support these principles by leadership and example.
What might be the consequences of bad governance practice in a police force?
Lack of trust from public in their ability to carry out their duties. Public may begin to show a lack of respect for the laws if it is that bad and even in worst cases take the law into their own hands.
Low morale in the police force will lead to officers not carrying out their duties effectively and to their best abilities. Professional relationships within the police force may be challenged as a result when tension rises due to poor governance within the day-to-day processes which could be deadly when the police are in high risk scenarios and should be acting as a united front.
The police force may lose staff as a result and be too low on resources to respond to public matters leading to a bad reputation as seen in certain areas of the world.
Officers may find themselves in positions that they have not been properly trained for and maybe under resourced which is a danger upon themselves and could even mean that the public are more at risk to danger.
For what reasons have governance guidelines and codes of practice been developed for the not-for-profit sector?
Increase in size and importance of voluntary sector.
Perception of a decline in public confidence in charities. Restore public confidence.
Greater competition for funding. Better governed charities are more likely to get funding.
Lack of clarity about the duties of voluntary board members.
Growing demand for accountability to users/beneficiaries. Greater transparency for where the money is being spent and how much is going on the admin of charities.
What are the main principles of ‘Good Governance: A Code for the Voluntary and Community Sector’?
- UNDERSTANDING THEIR ROLE
- ENSURING THE DELIVERY OF ORGANISATIONAL PURPOSE
- WORKING EFFECTIVELY BOTH AS INDIVIDUALS AND AS A TEAM
- EXERCISING EFFECTIVE CONTROL
- BEHAVING WITH INTEGRITY
- BEING OPEN AND ACCOUNTABLE
