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Reflections on Governance
This document discusses corporate governance and defines it as facilitating effective, entrepreneurial, and prudent management to deliver long-term success for a company. It outlines key principles such as companies being separate legal entities that are responsible for their own debts, and having owners called shareholders. The document also discusses different types of companies and the key tasks of boards in establishing vision, mission, values, and strategy. It covers principles from the UK Corporate Governance Code regarding board composition and director duties from the Companies Act 2006 to promote company success.
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Reflections on Governance
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- 2. What is CorporateGovernance? Corporate •Corporation • A body of individuals joined together for an agreed purpose • Where money is involved Governance •Governor • Regulates the speed • (Regulation) • Allows speed to increase safely • (Growth v Risk )
- 3. “The purpose ofcorporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of the company.” UK Corporate Governance Code
- 4. Basic Principles • A company is a separatelegal entity • Company assets are owned by the company • Companies are responsible for their own debts and liabilities (limited liability) • All companies have owners – they may be called shareholders, members or partners • Companies also have stakeholders such as creditors, employees, customers, suppliers and communities • Companies in England, Wales & NI are registered at Companies House • A registered company must have a board consisting of at least one director
- 5. What is acompany? • Public Companies (Plc) • Listed (Limited by shares) • Unlisted (Limited by shares) • Private Companies (Ltd) • Company Limited by shares • Company Limited by Guarantee • Community Interest Company (CIC) • Limited Liability Partnership (LLP) • Unlimited Company • Charitable Incorporated Organisation (CIO)
- 6. Key Tasks ofthe Board • Establish and maintain • Vision • Mission • and Values • Decide strategy and structure • Delegate to Management • Account to Shareholders and be responsible to Stakeholders
- 7. UK Corporate Code mainprinciples • Board should have a balance of skills and experiences and ideally at least half the members will be non executives • Role of Chair and Chief executive should be separated – no one person should have unfettered powers of decision making • There should be a rigorous process for selecting directors • All directors should be subject to re-election and the membership of the Board should be refreshed to reflect the company’s changing needs and to preserve objectivity and independence
- 8. Governance • Motivation • Settingobjectives in line with its vision, mission and values • Ensuring human, financial and physical resources are available to achieve the objectives • Assurance • That objectives are being achieved • That company is behaving ethically • Compliance • With legislation • For a CIC or Charity ensuring that the company continues to meet the CIC test or satisfy the Charities Commission
- 9. Executive & Non-ExecutiveDirectors • No difference in law between executive and non- executive duties and liabilities • Executive directors are directors who are also employees of the company • Non executive directors are not employees they are officers of the company and are not expected to be involved in the day to day running of the company • Can be a Governor or Trustee • “Critical Friend”
- 10. Companies Act 2006 •The seven general duties • To act within powers • To promote the success of the company • To exercise independent judgement • To exercise reasonable care, skill and diligence • To avoid conflicts of interest • Not to accept benefits from third parties • To declare interest in proposed transaction or arrangement with the company
- 11. Companies Act 2006 Topromote the success of the company - having regard (amongst other matters) to: • The likely consequences of any decision in the long term; • The interests of the company's employees; • The need to foster the company's business relationships with suppliers, customers and others; • The impact of the company's operations on the community and the environment; • The desirability of the company maintaining a reputation for high standards of business conduct; and • The need to act fairly as between the members of the company.
- 12. Corporate Governance Articles of Association Articles of Association Governance Handbook Governance Handbook Governance Program Governance Program • Meetings •Agendas • Auditors • Bankers • Mission • Vision • Values • Strategic Objectives • Performance • Capability • Reward • GovernanceRiskRisk • Strategic • Operational Assurance Framework Assurance Framework
- 13. Typical Governance Structure OwnersOwners DirectorsDirectors EmployeesEmployees The Board Beaccountable to shareholders and responsible to stakeholders
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- 16. Case Study –Panorama Fallout
- 17. Volkswagen – theperfect storm?
- 18. Corporate Governance inthe News
- 19. Summary Corporate Governance is •abalancing act between • Regulation (“holding to account”, “critical challenge”) and • Encouragement (“sustainable growth”, “support and advice”) •not (just) box ticking, compliance or following the rules •the joint and several responsibility of all directors/trustees •concerned with enhancing corporate performance, a modus operandi which adds value to the organisation •essential for the success of the organisation •the ‘glue’ that keeps all the various strands of the organisation aligned to the same strategic purpose •less a list of rules and collection of processes, more a state of mind
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Editor's Notes
- #9 Definition: formal and informal organisational frameworks through which an organisation is ‘governed’ to ensure a company is run in compliance with the law and regulatory requirements, and achieves its purpose and objectives. Governance is about the exercise of power on behalf of the organisation therefore involves selection, delegation, objective setting and holding to account Less about operational activity, more about giving overall direction to the enterprise and overseeing the executive actions of management and ensuring accountability to shareholders and stakeholders