Corporate Governance

[Suze]

What are the objectives, relevance and importance of corporate governance?

[vmyvmy]

I don't know whether I'm right. The importance/relevance of CG are

1) Align agents' interest to principal interest.
2) Underpin investors' confidence.
3) Prevent corporate failures
4) Emphasize on integrity for professionals
5) ETC.......

[krishna3898]

Hi,
CG is the Heart of the company,its mention all functional area of the company,objective,vision mission,and all will mention in the CG,(including internal Audit,)
based on CG investors will invest the company,
Regards.
krishna

[Suze]

Can we say that the objectives of good corporate governance is to highlight the need for business to maintain good systems of internal controls and for directors to manage the the risks that their company faces.

[frankmudiaga]

CG is the way the companies are run and directed. This entails that those charged the with goverance must governed by ethical behaviour in aspects of there duties.

[dragoon_alex]

I think the main objective for corporate governance are:

Protecting mintory shareholder's interests

Segregation of duty

Establishing 4 committees in the board

Setting majority NEDs in the board

Improving internal control

[Suze]

I think the main objective for corporate governance are:

Protecting mintory shareholder's interests

Segregation of duty

Establishing 4 committees in the board

Setting majority NEDs in the board

Improving internal control

I will work with that. Now please tell me what the relevance of CG is?

[dragoon_alex]

I think in F8 the main syllabus for corporate governance are the board structure, roles of audit committe and internal audit.

You will learn more details about it in P1

[Suze]

ok. Thanks for your help.

[Keyperson]

I read textbook and know that CG is a guideline / rule for how an entity to be controlled and operated. CG is more emphasize and important recent year due to mega collapse, for example Enron.

I think an entity will collapse due to the board do not run the company effectively and efficiency. one of the important role of director is set up an internal control system to prevent, detect and correct any omission, misstatement, fraud & error.

If director fail to do so, what will happen? anyone within the entity have an opportunity to commit a fraud (for example, employee withdraw entity's money for personal use) and no one detect the fraud immediately.

So, 1 of the rule of Corporate Governance is set up a audit committee to assist board to ensure entity have a sound internal control system.


Except that, director is an agent of an entity act on behalf of shareholder (under agency theory). if director only care about his own interest (director salary) without consider shareholders' interest (Dividend and share price). what will happen? Shareholder may loss confidence on the entity and sell their share. Ultimately, the entity may collapse.

So Corporate Governance states that sufficient NEDs should appoint in the board to monitor company operation and provide independent advise. and the power of executive director may also share with NEDs.

The above is what i think. if any mistake made, pls tell me. thank you.

[coolguyyy]

There is no single, accepted definition of corporate governance. Corporate governance as a specific discipline is relatively new. As beauty “lies in the eyes of the beholder”, so does the answer to the question “what exactly is corporate governance?”



Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled.

source: Free ACCA study material and practice questions (http://www.educationatyourdoor.com)