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Good management and reduce risk to the organisation. Maintain good performance by good supervision and management using best practice guidelines. Operate within a framework (system) that is ethical and effective to all stakeholders avoiding abuses to the organisation. Not only following the framework but must follow law and the spirit of morality. Accountability be responsible to the stakeholders. Balance in transparency of information to stakeholders.
Governance principles
Minimise risk such as financial risk (bad investment), legal risk
(labour suits) reputation risk (bad name for the company) To achieve company strategic objectives and not to side track Responsible to stakeholders and avoid conflicts of interest. Clear line of accountability (responsibilities of each manager) Maintain independence of certain parties such as NED, internal and external auditors. Provide accurate reports and submit on time eg financial statement, tax report. Involve owners/BOD and NED in the management. Integrity transparency in dealings, meaning clear and straight forward to avoid malpractices.
Inadequate financial reporting to investors causes lack of confidence. Individual countries have different standard in corp governance based on their culture.
Increased in high profile corp scandals eg CBT (corp breach of trust) cases.
followers. Board does not involved regularly, therefore lack of info and does not know what happened in the organisation. Lack internal audit such as stock check, financial audit etc.. Lack of supervision on employees to ensure greater performance and efficiency. Lack of independent scrutiny no external auditors to check. Lack of contact with shareholders-shareholders become not important as long as they get good returns. Emphasis on short-term profitability- do creative accounting to create profit. Misleading accounts and information in order to look good (concern with the reputation of the company)
Investment
Bank borrowing
Oversee strategy
Risk management and control systems
Human resource
Communication
Not employee
Take part in decision making at board meetings Does not take part in day to day operation
comprise independent NEDs. A smaller company should have at least two independent NEDs. One of the independent NEDs should be appointed to be the senior independent director. They are available to be contacted by shareholders who wish to raise matters outside the normal executive channels of communication.
Remuneration committee
Formulate remuneration arrangement for executive directors. Should be independent (nothing to do with company other than shareholders).
A small listed company should have 2 independent NEDs in the remuneration committee and minimum 3 of bigger listed company.
Nomination committee
Select board members and make recommendation to board. Majority should be non-exec directors.
Audit committee
Independent non-exec directors Liaise with external audit, supervise internal audit, review annual accounts and internal
controls. A small listed company should have 2 independent NEDs in the audit committee and minimum 3 of bigger listed company. Audit committee meetings are closed to public. BOD responsible for internal controls. Audit committee, int and ext auditors concern about the quality of internal controls.
Internal Auditors
Risk committee
Takes care of risk management of the organisation in terms of financial risk (eg investment, disruption of operations cause by flood, liquidation of customers or suppliers, market downturn etc).
Sustainable development
Corp Responsibility (Sustainable development)
Defence strategy-minimise or avoid additional obligation. Act ignorance (make dont know).
Accomodation strategy-Act whenever is pressured to do so eg activist or government pressure.
Main aim of business is to make money. CSR is just part of the rules.
Against CSR
If manager has CSR, it means it goes against the employer. Higher CSR, lower profits.