P1 - Session 1 -Corporate Governance Part 2

[jrggraham]

Question 1 - Explain and analyse the issues raised by the development of the joint stock company as the dominant form of business organisation and the separation of ownership and control over business activity.

Question 2 - Compare, and distinguish between public, private and non-governmental organisations (NGO) sectors with regard to the issues raised by, and scope of, governance.

Question 3 - Explain and evaluate the roles, interests and claims of, the internal parties involved in corporate governance.[3]
i) Directors
ii) Company secretaries
iii) Sub-board management
iv) Employee representatives (e.g. trade unions)

Question 4 - Explain and evaluate the roles, interests and claims of, the external parties involved in corporate governance.[3]
i) Shareholders (including shareholders’ rights and responsibilities)
ii) Auditors
iii) Regulators
iv) Government
v) Stock exchanges
vi) Small investors (and minority rights)
vii) Institutional investors

[Vivienne]

Went through the questions for session 1 part 2.in my opinion i found it difficult to answer them because i feel they must be related to a scenario.in the said questions they were asking about the issues that had been raised.am sure these issues were raised in the scenario.so i feel you cannot answer it in isolation minus looking at the scenario.
Please jrggraham advise.

[Vivienne]

Question 3

The roles of the following

1. Directors
Directors are the ones that manage the companies,that is they are the managers.
There are two types of directors non executive and executive.the executive directors are involved in the day to day running of the business.in other words they act as agents on behalf of the principal(shareholders).The non executive directors on the other hand have the role of advisory or monitoring.

interest
the directors have an interest of getting a salary from the companies they work for.

2.Company secretary
The role of a company secretary is as follows though it varies with the size of the company
a)To arrange meetings of the board of directors.this includes issuing the agenda in advance,drafting and circulating minutes.communicating decisions to staff and outsiders.
b)maintenance of documents and statutory registers.delivering various other statutory returns to the authorities.
c)general administration duties and may also act as headofice manager.

3.sub board management
interest similar to that of directors.they are involved in the day to day running of the business.as employees they also have an interst in pay and working conditions

4.employees representatives eg trade unions

trade unions exist to protect employee interests hence they are interested in pay and working conditions of their members
They may also be concerned about aspects of poor governance eg failure by directors to communicate with employees .they will also be concerned about a risky enviroment which may jeopardise health and safety.



Question 4
1.Auditors
this is one of the mpst important corporate governance procedures.it enable investors to have much greater confidence in the information that their agents are supplying.they must be independent.
Their role is to audit is to form an opinion on the finantial statements whether they show a true and fair view or not

2.Goverment
goverments have a strong indirect interest in companies' affairs.goverment may provide funds towards the cost of some investment projects.
they may also encourage private investment by offering incentives .govts establishes and determine the overral regulatory and control climate.

3.Regulators
Regulation is any form of interference with the free market.regulators are interested in maintaining shareholder-staeholder confidencein the information with whichthey are being provided.
regulators are also concerned with actively promoting competition by encouraging new firms in the industry and preventing unreasonable barriers to entry


4.stock exchanges
provides a means for companies to raise money and investors to transfer their shares easily
stock exchanges list companies whose shares can be held by the general public.


5.small investors
small investors are those with a minority shareholding in a company or small holdings.these may not have the same ease of access to information and finances

6.instituitional investors
these manage funds invested by individuals.instituitional investors representatives attend general meetings and make considered use of their votes.
evaluating and reporting to their clients the impact and effectiveness of what they have done.

thats all i can gather for now. can someone please chip in on the various claims by these groups i seem not to know

[alamode]

Im sorry im a little late. Ill be posting the answer to this question tommorow. Ill be done with Section A today im studying from BPP book, Which book are you guys using GTG ?

[alamode]

Question 1 - Explain and analyse the issues raised by the development of the joint stock company as the dominant form of business organisation and the separation of ownership and control over business activity.

Not Sure.. :unsure:

Question 2 - Compare, and distinguish between public, private and non-governmental organisations (NGO) sectors with regard to the issues raised by, and scope of, governance.

Not sure.. again.. Which chapter are these questions from? i have studied 2 out of 3 chapters from Section A from BPP

Question 3 - Explain and evaluate the roles, interests and claims of, the internal parties involved in corporate governance.[3]
i) Directors
The role of the directors is to run the company for the shareholders. The are the agents of the owners/shareholders and it is their duty to make sure that they maximise the wealth of their shareholders.
ii) Company secretaries
Look at companies day to day activities, Arrange meetings, Make sure company is properly following laws and regulations, Maintenance of documents etc..
iii) Sub-board management
:swoon:
iv) Employee representatives (e.g. trade unions)
They safeguard the rights of Employees.

Question 4 - Explain and evaluate the roles, interests and claims of, the external parties involved in corporate governance.[3]
i) Shareholders (including shareholders’ rights and responsibilities)
They own the company and they want to insure that the money that they have invested is being utilized properly by the directors.
ii) Auditors
Their role is to make sure the directors are working in the best interest of the shareholders and to audit the financial statements to see if they give a true and fair view so that shareholders can know how their money is being utilized


Thats the best i could do ... I will start studying harder damn..

[fyuenleng]

Question 3- - Explain and evaluate the roles, interests and claims of, the internal parties involved in corporate governance.[3]

i) Directors
Operational Role:Run co
Governance Role:Responsible to s/hs
Interest: Remuneration/reputation/status

ii) Company secretaries
Operational Role:Improving the corporate governance
Governance Role:ensuring board procedures are observed & regularly reviewed; advise board on governance matters
Interest: Remuneration/working conditions status/power

iii) Sub-board management
Operational Role:Implement board decision
Governance Role:Evaluate risk & implement controls
Interest: Remuneration/working conditions status/power

iv) Employee
Operational Role:Follow mgt decisions
Governance Role:Comply with internal control
Interest: Remuneration/working conditions status/power

iv) trade unions
Operational Role:Protect employee
Governance Role:Protect whistleblower
Interest: Power/status

Question 4 - Explain and evaluate the roles, interests and claims of, the external parties involved in corporate governance.[3]

i) Shareholders (including shareholders’ rights and responsibilities)
Operational Role:Receive information from co & to vote on AGM/ Role & influence over direction of co & policy making
Interest:Economic value of co/maximize shareholder value

ii) Auditors
Operational Role:Independent review of financial statement
Interest: Fees/reputation/compliance with audit requirement

iii) Regulators
Operational Role:Implement & monitor regulations
Interest:Compliance with & effectiveness of regulations

iv) Government
Operational Role:Implementing co law
Interest:Compliance with laws/ receipts of co taxes/impact on economy

v) Stock exchanges
Operational Role:Implement & monitor regulations for listed co/provide regulartory frameworks
Interest: Compliance with regulations/fees

vi) Small investors (and minority rights)
Operational Role:None-limited power
Interest: maximize shareholder value

vii) Institutional investors
Operational Role:Role & influence over direction of co & policy making
Interest: Value of shares & security of investment/ timely information from company

[fyuenleng]

Question 1 - Explain and analyse the issues raised by the development of the joint stock company as the dominant form of business organisation and the separation of ownership and control over business activity.

The agency problem in joint stock companies derives from the principals (owners/shareholders) not being able to run the business themselves and having to rely on agents (directors) to do so for them.
The separation of ownership from management (control) can causes issues if there is a breach of trust by agents (directors) by
·intentional action
·omission/neglect
·incompetence

This breach may arise because agents (directors) are
1.pursuing their own interests rather than the principals (owners /shareholders)
2.have different attitudes to risk taking to the principals (owners /shareholders)

To alleviate the agency problem, the principals (owners /shareholders) have to take steps to exercise control, to monitor the activities of agents (directors). Therefore agency costs arise
1.to verify what agents (directors) is doing
2.to introduce mechanisms to control the activities of agents (directors)

Question 2 - Compare, and distinguish between public, private and non-governmental organisations (NGO) sectors with regard to the issues raised by, and scope of, governance.

public/large listed/joint stock companies
Primary Accountability:Shareholders & regulators
Principal stakeholders:Shareholders
Governance Structure:Board of directors who are appointed according to regulations or guidelines: ED & NED
Performances monitored by: Financial Statements
Transparency/ Openess:Corporate governance requirements

Private/ small listed /not quoted companies
Primary Accountability:Shareholders
Principal stakeholders:Shareholders
Governance Structure:Board of directors who are appointed according to regulations or guidelines
Performances monitored by: Financial Statements
Transparency/ Openess:Limited disclosure

non-governmental organizations/not for profit/charities /clubs
Primary Accountability: Fund providers, regulators
Principal stakeholders: Donors/ regulators / service users
Governance Structure: Board of voluntary trustees appointed by formal recruitment: paid or volunteers
Performances monitored by: Financial statements & non-financial / qualitative measures
Transparency/ Openess: Limited legal requirements for disclosure however may have statutory requirement to disclose information as evidences that money being spent as intended & effectively

[pacer123]

Hi Jrggraham,

I would like to join the P1 BIT. Is it alright for you to list out all the sessions of P1 as per the GTG text that you are using? As I don't have the GTG text for now, I think I can still participate in these seesions as long as I know the topics that's on for the week. Many Thanks.