development of corporate governance

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development of corporate governance

  1. 1. Development of corporate governance<br />Chapter 2<br />
  2. 2.
  3. 3. Influences in corporate governance<br />Governance theory<br />2 major factors affecting organisational operation<br />Agency theory.- leads to s/h pressure- s/h activism<br />Stakeholder theory.- Stakholder lobby & concern over social responsibility<br />Other influences – Company law, auditors impact, codes of governance .<br />
  4. 4. Different CG reports and focus areas<br />
  5. 5. UK Combined Code<br />The Code deals with 2 areas:<br />Companies – Directors, directors’ remuneration, accountability , relations with s/h<br />Institutional s/h- Dialogue with Co, evaluation of governance disclosures, s/h voting.<br /><ul><li>Each area has a set of principles & a series of provisions with details on how the provisions will be achieved.
  6. 6. Since the Hampel report(1998) , the FRC has issued several editions of the Combined code.</li></li></ul><li>
  7. 7. Governance codes<br />Reasons for the Code:<br /><ul><li>Attempt to reduce fraud & corruption
  8. 8. Improve s/h perception & market confidence
  9. 9. Poor governance = poor performance
  10. 10. Attract institutional investors
  11. 11. Good rating / reputation from regulators eg Moody’s
  12. 12. Positive impact on share price = attract even more investors</li></li></ul><li>Governance codes<br />Problems with Governance code<br /><ul><li>Reactive process, responding to problems not anticipating them
  13. 13. Directors freedom of decision making may be hindered
  14. 14. Adds bureaucracy in the use of committees & disclosure requirements
  15. 15. Cannot stop fraud
  16. 16. Adherence to governance req , may harm competitiveness</li>

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