governance and responsibility

8/17/2019 Governance and Responsibility

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Governance andResponsibility


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What is corporate governanc

• “the system by which companies are directed andcontrolled” (Cadbury Report 199!

• "he system by which companies are directed andcontrolled in the interests o# shareholders and other

sta$eholders

• Companies are controlled and directed #rom inside aoutside o# company


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%ene&ts o# corporate

governance• 'ncreases accountability o# management and maim

sustainable wealth creation

• *ore attractive to institutional shareholders

• +governance dividend,- share price to rise

• +socially responsibility dividend,- socially responsiblecompany may attract more customers and investors thus lead to increase in share price


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.urposes o# corporate

governance• Monitor those parties within a company who

controlled resources owned by investors

• /nsure balance o# power on the %0

• /nsure eecutive directors remunerated #airly

• *a$e %0 responsible #or monitoring and managing

• /nsure eternal auditors remain independence

• 2ddress other issues such as C3R4 business ethics aprotection #or whistleblowers


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0b5ectives o# corporate

governance• Contribute to improved corporate performance an

accountability in creating long-term shareholders

• Control the controllers by increasing amount o# disclosall sta$eholders

• 'ncrease the level o# con&dence and transparency incompany activities

• /nsure the company is run in a legal and ethical mann

• %uild in control at the top that will cascade down theorganisation


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6ey concepts- #airness

• 3ense o# e7uality in dealing with internal sta$eholde

• /ven8handedness in dealing with eternal sta$ehold

• 2n ability to reach an e7uitable 5udgement in a giveethical situation


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6ey concepts-

0penness"ransparency• 0ne o# the +building bloc$s, that underpin the sound

corporate governance

• "ransparency is re7uired in agency relationship4transparency means lac$ o# withholding or relevant

in#ormation unless necessary• 'n#ormation provision vs: in#ormation concealment


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6ey concepts- 'nnovation

• “trans#orms $nowledge and ideas into new productsprocesses or systems #or the bene&t o# &rm and itssta$eholders”

• 'n terms o# corporate governance; innovation and

eperimentation in reporting4 move away #rom rigidcompliance4 towards better communication

• *uch $nowledge #rom which innovation stems is +tauni7ue to the company and environment

• "he capacity o# a &rm to integrate eternal $nowled

crucial


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6ey concepts- 3$epticism

• 2n attitude which includes a 7uestioning mind4 beinto conditions which may indicate possible misstatem

• .rovide critical assessment o# evidence

• "he =6 Corporate Governance Code encourages non

eecutive to apply s$epticism in order to challenge ascrutini)e management e>ectively


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6ey concepts- 'ndependenc

• 2 7uality possessed by individuals re#erring to avoido# being unduly inuenced by vested interests

• /nables a more ob5ective position to be ta$en on issu

• 'ndependence #rom personal inuence o# senior

management

• 'ndependence o# the %0 #rom operational involvem

• 'ndependence o# directorship #rom personal motivat


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6ey concepts- .robityhones

• 2 #oundation o# ethical stance in both principles andbased system

• @onesty in &nancial reporting

• .erception o# honesty #rom internal and eternal

sta$eholders


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6ey concepts- 2ccountabilit

• "he obligation o# an individual or organisation to acc#or its actions

• 2ccounting #or business position as a result o# accepo# responsibility

• .roviding clarity in communication channels with inand eternal sta$eholders


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6ey concepts- Reputation

• eveloping and maintaining personal reputation throther moral virtues

• eveloping and maintaining the moral stance o# theorgani)ation

• eveloping and maintaining the moral stance o# theaccounting pro#ession


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6ey concepts- Audgement

• "he ability to reach and communicate meaning#ulconclusions

• "he ability to weigh numerous issues and give each considerations


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6ey concepts- 'ntegrity

• 2 stead#ast adherance to strict ethical standards desany other pressures to act otherwise

• 'ntegrity describes the personal ethical position o# thhighest standard o# pro#essionalism and probity

• 't is an underlying and underpinning principle o#corporate governance and it is re7uired that all thosrepresenting shareholders interests in agency relatiboth possess and eercise absolute integrity at all ti


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Case 3tudy

• Bred is a certi&ed accountant: @e runs his own accountancy practice #rom hwhere he prepares personal taation and small business accounts #or about clients: Bred believes that he provides a good service and his clients generahappy with the wor$ that Bred provides:

• 2t wor$4 Bred tends to give priority to his business #riends that he plays gol#Charges made to these clients to be lower than others E although Bred tendguess how much each client should be charged as this is 7uic$er than $eepi

detailed time8records:

• Bred is also care#ul not to as$ to many 7uestions about clients a>airs when personal and company taation returns: @is clients are grate#ul that Bred dopry to #ar o# their a>airs4 although the taation authorities have #ound someirregularities in some ta returns submitted by Bred: Bortunately the client halways accepted responsibility #or errors and Bred has $indly provided his s#ree o# charge #or the net year to assist the client with any &nancial penalti

• iscuss whether the moral stance ta$en by Bred is appropriate

governance and responsibility

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