Vivienne
06-10-08, 01:38 PM
Corporate Governance(CG) cannot be understood fully and extensively without the inclusion of the various codes that have been issued as a guidance to gorvenance
The major governance codes are
1. The UK Codes
1.1 Hampel Report 1998 ( Principles based approach)
1.1.1 Designed to be a revision of the corporate governance system in the UK.
1.1.2 To review the code laid down by the Cadbury Report.
1.1.3 Asked whether the code's original purpose was being achieved
1.1.4 Hampel found that there was no need for the revolution in the UK CG system
1.1.5 The report aimed to combine harmonise and clarify the Cadbury and Greebury recomendations
1.1.6 Was against treating the CG Codes as a set of rules.
1.2 Under Hampel Report
1.2.1 Company acounts should contain a statement of how the company applies CG Principles
1.2.2 Accounts should explain their policies including any circumstances justufying departure from best practice.
2.0 Cadbury Report(1992)
2.1 Sets out recommendations on the arrangements of company borads and accounting systems to mitigate CG risks and failures.
2.2 Main difficulties were considered to be in the relationship between auditors and board of directors.
2.3 There should be clear division of responsibilities at the head of a company eg the posts of Chairman and chief executive should be held by different people.
2.4 There should be at least 3 non executive directors on the board.
2.5There should be a disclosure acbout director's remuneration and provisions about length of service.
2.6 There is need for an audit committee which should liase with internal and external auditors.
2.7 Directors to explain their responsibilities for preparing accounts.
3.0 Greenbury Repors (1995)
3.1 Established to determine the directors' pay
3.2 Recommends that remuneration committee should determine executive directors remuneration.
3.3 The remuneration committee should comprise solely of non executive directors.
3.4 Directors service contracts should be limited to 1 year.
4.0 South African King Report (updated 2002)
4.1 To take account of developments in South Africa and elsewhere.
4.2 Puts emphasis on advocating an intergrated approach to CG in the interest of wide range of stakeholders.
4.3 Emraces social ,enviromental and economic aspects of a companies activities.
4.4 Encourages active engagement and relies heavily on disclosures and regulatory measure.
5.0 Singapore Code
5.1 Puts emphasis on companies giving a detailed description of their governance practices and explaining any deviation from the code.
5.2 It has some guidelines particulary on directors remuneration.
5.3 It expands the role of audit committees requiring companies to have procedures in place for whistle blowing.
COMBINED CODE:
Issued by the London Stock Exchange(for listed companies)derived from the recommendations of the Cadbury,Greenbury and Hampel reports.
Since the publication a number of rports have been published:
1.Turnbul Report (internal control and risk management)
1.1 informs directors of their obligations under the combined code with regard to keeping good internal controls.
1.2 To have good audit checks to ensure the quality of financial reporting and catch any fraud before it becomes a problem.
1.3Internal controlssystems have a key role in managing the risks linked with a company's business objectives.internal controls also includes effective financial record keeping.
1.4 Companies should carry regular review of the risks it faces.
2. Higgs Report
Forcussed on the role of non executive directors
2.1 Recommends that performance of the board should be assesed once a year.
2.2 Non executive directors should scrutinise the performance of executive management in meeting goals and objectives and monitor the reporting of performance.
2.3 Non executive directors should satisfy themselves that financial information is accurate and that financial controls and systems of risk management are robust.
3.Smith Report( role of audit committee
3.1 Recommends that audit committes should consist entirely of independent non executive directors and should include at least one member with significant and recent financial experience.
3.2 Audit commiittees to be responsible for appointment or removal of the external auditors as well as their remuneration.
3.3 Should act as a forum for liason between the external auditors ,the internal auditors and the finance director.
I wil come back with the SARBANES OXLEY LEGISLATION
The major governance codes are
1. The UK Codes
1.1 Hampel Report 1998 ( Principles based approach)
1.1.1 Designed to be a revision of the corporate governance system in the UK.
1.1.2 To review the code laid down by the Cadbury Report.
1.1.3 Asked whether the code's original purpose was being achieved
1.1.4 Hampel found that there was no need for the revolution in the UK CG system
1.1.5 The report aimed to combine harmonise and clarify the Cadbury and Greebury recomendations
1.1.6 Was against treating the CG Codes as a set of rules.
1.2 Under Hampel Report
1.2.1 Company acounts should contain a statement of how the company applies CG Principles
1.2.2 Accounts should explain their policies including any circumstances justufying departure from best practice.
2.0 Cadbury Report(1992)
2.1 Sets out recommendations on the arrangements of company borads and accounting systems to mitigate CG risks and failures.
2.2 Main difficulties were considered to be in the relationship between auditors and board of directors.
2.3 There should be clear division of responsibilities at the head of a company eg the posts of Chairman and chief executive should be held by different people.
2.4 There should be at least 3 non executive directors on the board.
2.5There should be a disclosure acbout director's remuneration and provisions about length of service.
2.6 There is need for an audit committee which should liase with internal and external auditors.
2.7 Directors to explain their responsibilities for preparing accounts.
3.0 Greenbury Repors (1995)
3.1 Established to determine the directors' pay
3.2 Recommends that remuneration committee should determine executive directors remuneration.
3.3 The remuneration committee should comprise solely of non executive directors.
3.4 Directors service contracts should be limited to 1 year.
4.0 South African King Report (updated 2002)
4.1 To take account of developments in South Africa and elsewhere.
4.2 Puts emphasis on advocating an intergrated approach to CG in the interest of wide range of stakeholders.
4.3 Emraces social ,enviromental and economic aspects of a companies activities.
4.4 Encourages active engagement and relies heavily on disclosures and regulatory measure.
5.0 Singapore Code
5.1 Puts emphasis on companies giving a detailed description of their governance practices and explaining any deviation from the code.
5.2 It has some guidelines particulary on directors remuneration.
5.3 It expands the role of audit committees requiring companies to have procedures in place for whistle blowing.
COMBINED CODE:
Issued by the London Stock Exchange(for listed companies)derived from the recommendations of the Cadbury,Greenbury and Hampel reports.
Since the publication a number of rports have been published:
1.Turnbul Report (internal control and risk management)
1.1 informs directors of their obligations under the combined code with regard to keeping good internal controls.
1.2 To have good audit checks to ensure the quality of financial reporting and catch any fraud before it becomes a problem.
1.3Internal controlssystems have a key role in managing the risks linked with a company's business objectives.internal controls also includes effective financial record keeping.
1.4 Companies should carry regular review of the risks it faces.
2. Higgs Report
Forcussed on the role of non executive directors
2.1 Recommends that performance of the board should be assesed once a year.
2.2 Non executive directors should scrutinise the performance of executive management in meeting goals and objectives and monitor the reporting of performance.
2.3 Non executive directors should satisfy themselves that financial information is accurate and that financial controls and systems of risk management are robust.
3.Smith Report( role of audit committee
3.1 Recommends that audit committes should consist entirely of independent non executive directors and should include at least one member with significant and recent financial experience.
3.2 Audit commiittees to be responsible for appointment or removal of the external auditors as well as their remuneration.
3.3 Should act as a forum for liason between the external auditors ,the internal auditors and the finance director.
I wil come back with the SARBANES OXLEY LEGISLATION