Financial Governance And Corporate Governance

Corporate governance in itself has no single definition but common principles which it should follow. For example in 1994 the most agreed term for corporate governance was “the process of supervision and control intended to ensure that the company’s management acts in accordance with the interest of shareholders” (Parkinson, 1994)1. Corporate governance code is not a direct set of rules but a self-regulated framework which businesses choose to follow. This code has continued to change in the past 20 years in accordance with what is happening in the business world. For example the Enron scandal caused reform in corporate governance with the Higgs Report which corrected the issues which were necessary. Although it does not quickly fix problems, it gives a better framework to

Farrar, J. (2008). Corporate Governance: theories, principles and practice. 2nd ed. South Melbourne, Vic: Oxford University Press

Phenomenal growth of interest in corporate governance has emerged in recent years. The body of literature on the subject has grown markedly in response to successive waves of large corporate failures. Furthermore, there have been numerous attempts to define what constitutes ‘good corporate governance’ and to provide guidelines in order to enhance the quality of corporate governance.

This was a very interesting article, in my opinion it brings to mind the derived phrase, which came first the chicken or the egg. Meaning, is corporate governance an attempt to control the results of unethical practices of corporations or is it meant to deter them. In reading this article, it is clear that certain corporations practiced unethical business behaviors for self-interest, but the questions this author have are: 1. Should corporate governance be regulated by the legislature as well as the organization and to what degree, 2. Is corporate governance, there to protect the shareholder or the stakeholder, 3. How effective is corporate governance on a global level. The need for a governance system is based on the assumption that the separation between the owners of a company and its management provides self-interest executives the opportunity to take actions that benefit themselves, with the cost of these actions borne by the owners (Larcker & Tayan, 2008).

How the latest edition (3rd) of the ASX Corporate Governance Principles plausibly halts the failure of Dick Smith Electronics will be discussed in this essay. I argue that ASX Corporate Governance Principles is one of the corporate governance practices that many listed entities in Australia should comply with in order to achieve good corporate governance preventing the collapse of corporations and increasing investors’ confidence. Regarding Dick Smith Electronics as a listed entity, it would survive and continuously operate as a biggest Australia electronic retailer if the better application of this practice is fully adopted.

The ASX Corporate Governance Council defines the ‘corporate governance’ as the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled within corporations (Corporate Governance Principles and Recommendations, 2014). The term “failure” of a corporate can be described as “Insolvency” in Australia (Michaela Rankin, 2012). And the reasons for corporate failure can be grouped into six categories: 1. Poor strategic decisions. 2. Greed and the desire for power. 3. Overexpansion and ill-judged acquisitions. 4. Dominant CEOs. 5. Failure of internal controls 6. Ineffective boards(Michaela Rankin, 2012).

In the 21st century there has been many corporate collapses and changes in the legislation of corporate governance. An inadequate internal risk management leads to failures which then leads to the global financial crisis, as The Turner Review (2009) identified. The UK Companies Act 2006 highlights that a stakeholder must hold major responsibility by companies with a result of emphasis divergent from a stakeholder view of accountability to a broad understanding of corporate governance (Solomon 2013).

This paper will be a literature review that discusses the notion that, the board of directors (the collective) as a self-regulating social system. This will be achieved by a systematic review of a collection of works in the area of corporate governance spanning the birth of the industrial revolution to the modern day. The areas of emphasis will be a view to identifying the key concepts, issues and laws created to better focus the actions of boards. In addition to identifying the locations for each of these developments and how this has led to divergent practices across the globe. Following the review of the literature the author of this paper will seek to discern the current direction and nature of corporate governance in the future. The

Corporate governance refers to ‘the ways suppliers of finance to corporations assure themselves of getting return on their investment’ (Shleifer and Vishny, 1997: 736). Corporate governance discusses the set of systems, principles and processes by which a

This report is considered as the Megna Carta of Corporate Governance. The Committee was set up in May 1991 by the financial reporting council of the London Stock Exchange and the accountancy profession to the address the financial aspect of corporate governance. There was unexpected failure of the major companies like world com. Xerox, Enron etc. Moreover there was heavy criticism by the investors media and the general public of the lack of effective board accountability in respect of these massive failures. Further, there was a huge demand by these agencies to take penal action against the directors and management and also to clarify the responsibilities. The Cadbury committee drew on these documents and wide range of submissions from interested parties in producing its draft report that was issued for public comments on 27 may 1992. The code recommendation consists of 19 points set out under the heading of (1) Board of Directors (2) Non-Executive Director (3) Executive Director (4) Reporting and Control. The main points are summarized as follows:

The rise and fall of the Royal Bank of Scotland is characterized by poor corporate governance which allowed for the complete dominance of the executive management over the board of directors and a massive principal-agent problem. Positive social dynamics and the power of weak ties allowed for compliance while intimidation and bullying tactics silenced questions, concerns and opposition. The board’s utter compliancy and borderline negligence enabled rampant, unchecked empire-building at the cost of shareholder value and led to a spiral of unaccountability and gross incompetence. Stakeholders’ loss of confidence from misinformation and misdirection was an inevitability that sealed

Risky business: Corporate governance and risk management in the wake of the global economic crisis.

Corporate governance is founded on laws, policies, processes, systems and behaviours and together they provide a system for the way in which an organisation is directed, administered and controlled. As such, the Charity Commission, (the ‘Commission’) recognises that to deliver its strategic aims, objectives and priorities successfully, it needs sound corporate governance arrangements in place, (Charity Commission UK). Corporate Governance is not - or should not be - about debate and discussion on executive compensation, shareholder protection, legislation and so on. In recent times, corporate governance became not only a subject of fierce debate and public outcry, but also, as a result of this and arising legislation, a subject which been wearisome for many company directors. The hidden gem here is to a great

This paper investigated the corporate governance of Board of Directors of listed companies in China. As the research results shows that, the governance of the board in China plays a critical roles for the listed firms corporate performance. This paper discusses the board features including board size, board meetings frequency, board independence, and the leadership structure of the board in china in relationship with the corporate performance. For the corporate performance, I am using the return on equity (ROE) and Earnings per share (EPS) as the proxy for the corporate performance. Based on my analysis and previous research, it verifies that the size

International differences Within-country differences Private vs Public initiatives Cultural attitudes, infrastructure and public policy Economic environment