Corporate Governance " Corporate governance - ten years ago the phrase was not used, today it is commonplace. The work of company directors is in the spotlight. The issues are legion: How to improve corporate performance and strategies, how to ensure corporate conformance through executive supervision and accountability, the role of outside directors, audit committees, chairman and CEO, directors' remuneration, German two-tier boards, Japanese boards, institutional, investor power….. " (Corporate Governance, Bob Tricker, 1984) The term 'corporate governance', in recent years has been used in a number or contexts, particularly in relation to that of boards of companies listed on the stock exchange. But many of the issues surrounding corporate governance have had implications for boards of privately owned companies too. Indeed, governance is the central role of all boards of directors, so an understanding of what it is and the issues involved can provide a useful insight for directors. This report will not only present the requirements of the 'Combined Code of Practice on Corporate Governance' but also take a look at the debate that has evolved around corporate governance within the UK over the past years. It will discuss some of the specific initiatives that have been undertaken to help clarify and codify some of the issues raised, look at some of the definitions that have been used. The corporate governance debate has flourished in the last few years, not only in the UKbut all over the world. The ranges of issues are substantial and varied. Company performance, individual performance, role of directors, roles of sha... ... middle of paper ... ...f Bob Ayling got a £2 million "golden parachute", plus a £ 260,000 a year pension after seeing the airline's value plunge from £7 billion to £3 billion. But the world's biggest pay-off went to ex-MEI music chief Jim Fifield in 1998 - he got £12 million. Conclusion Good corporate governance is not just a matter of prescribing particular corporate structures and complying with a number of hard fast rules. There is an underlying need for broad principles that extend beyond immediate economic effects to social consequences. And the ways in which a company gives effect to these principles will differ according to its size, complexity, and whether its shares are made publicly available. This idea of good governance will then apply to a small corner shop in as much entirety as a multi-national conglomerate.
Shivdasani, A., & Zenner, M. (2004). Best practices in corporate governance: What two decades of research reveals. Journal of applied corporate finance, 16(2/3), 29-41.
...ith strong share price and some of them will get the organisation with the worst conditions of company performance. This is when the corporate governance bringing the right direction for organisation making best practice in deciding executive remuneration to sufficiently attract and motivate, eventhough to reach the satisfactory result there is a long way to go, involves time and efforts. The executives' remuneration at WH Smith especially for CEO is considered appropriate because it does not rely on agency theory alone but also considered the guidelines of the UK Corporate Government Code (2010) which is to attract, retain and motivate directors. To support this argument, “high pay itself is not evidence of inefficient contracts but may simply reflect the market for CEOs and the pay necessary to attract, retain, and motivate talented individuals.” (Conyon, M. 2006)
According to Mallor, Barnes, Bowers, & Langvardt (2010) “modern corporation law emerged only in the last 200 years, ancestors of the modern corporation existed in the times of Hammurabi, ancient Greece, and the Roman Empire. As early as 1248 in France, privileges of incorporation were given to mercantile ventures to encourage investment for the benefit of society. In England, the corporate form was used extensively before the 16th century. In the late 18th century, general incorporation statutes emerged in the United States” (p. 1009).
Imagine being in a world where people are paid in cash bonuses, stock options, or generous severance pay when fired from their job due to a company merger, are asked to leave, or choose to retire. This happens to be a reality for many CEO’s and top executives of companies. We live in an economy where mergers and take over’s have become common, and to allow this option for the highest paid employees of a company is arguably unfair. While researching golden parachutes, I formed questions due to the circumstances surrounding this executive option. For example, why should CEO’s, who live very comfortably, be given a compensation package for losing their position due to a company merger or retirement when employee and shareholder’s futures are at stake? Is it fair for the rich to get richer when numerous employees below top executives are dealt the same fate from a merger and shareholders’ investments are at risk but neither receive a form of additional compensation? Of course, there’re those who support the issuance of golden parachutes, arguing they can persuade a possible company merger to not take place due to the costs associated with a top executives golden parachute package. Another supporting point for golden parachutes is, they can make it easier for higher up executives, like CEO’s be absorbed into the future merged company. I will be addressing the point of whether CEO’s and other executives deserve to be awarded a Golden Parachute option by their company. As well as a brief background of Golden Parachutes and my stance on them. They’re a very important part of our growing economy and will always be considered in a merger/takeover if awarded to executives.
CEO compensation has been a heated debate for many years recently, and it can be argued that they are either overpaid or that there payment is justified by the amount of work they do and their performance. To answer the question about whether CEO compensation is justified it must be looked at by the utilitarian viewpoint where the good of many outweighs the good of one. It is true that many CEO’s are paid an exorbitant amount of money; however, their payment is justified by the amount of money that they bring back to the company and the shareholders. There are many factors that impact the pay that the CEO receives according to Shah et.al CEO compensation relies on more than just the performance of the CEO, there are a number of factors that play a rule in the compensation of the CEO including the fellow people who help govern the corporation (Board of Directors, Audit Committee), the size of the company, and the performance that the CEO accomplishes (2009). In this paper the focus will be on the performace aspect of the CEO.
This report aims to evaluate how M&S applies the expectations and requirements of corporate governance based on their recent annual report, review of composition of...
This report gives the brief overview of the concept of corporate governance, its evolution and its significance in the corporate sector. The report highlights various key issues and concerns that are faced by the organizations while effectively implementing and promoting Corporate Governance.
Currently, directors have no prima facie entitlement to be remunerated for their work (Hutton v West Cork Railway Co 1883), but Article 23 of the Companies (Model Articles) Regulations 2008 establishes that it is for directors to decide the lev...
Bibliography: Turnbull, S. (1997). Corporate governance: its scope, concerns and theories. Corporate Governance: An International Review, 5 (4), pp. 180--205.
Organizations that only have top management as the board members are more susceptible to accounting malpractices. Members of the board should preferably own shares in the company to ensure diligence when it comes to the interests of the company. Apart from the Board of Governors, there should also be an audit committee in place to oversee the financial dealings of the bank. Members of the board and the audit committee should have basic financial knowledge. Some of the members should also be experts in finances so that they can detect any anomaly that may take place in terms of financial reporting. An overhaul of the regulatory framework is required to empower authorities to intervene immediately, and make improvements. New technology is required. Manual antiquated processes should be eliminated because this causes greater human error and poor
Tsui, J., & Gul, F. A. (2002). Consultancy on a Survey on the Corporate Governance Regimes in Other Jurisdictions in Connection with the Corporate Governance Review. Hong Kong: CityU Professional Services Ltd.
Nottingham Trent University. (2013). Lecture 1 - An Introduction to Corporate Governance. Available: https://now.ntu.ac.uk/d2l/le/content/248250/viewContent/1053845/View. Last accessed 16th Dec 2013.
K, . N., ER, w., DAVID, K., PAUL, M., WALTER, O., & EVANS, A. (2012). Corporate governance theories and their application to boards of directors: A critical literature review . Prime Journal of Business Administration and Management (BAM), 2(12)(2251-1261), 782-787.
The office of the Director of Corporate Enforcement (ODCE, 2015), Ireland defines Corporate Governance as “the system, principles and process by which organisations are directed and controlled. The principles underlying corporate governance are based on conducting the business with integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions and complying with all the laws of the land”. It is the system for protecting and advancing the shareholder’s interest by setting strategic direction for the firm and achieving them by electing and monitoring the capable management (Solomon, 2010). It is the process of protecting the stakes of various parties that have their interest attached with a company (Fernando, 2009). Corporate governance is the procedure through which the management of the company is achieving the goals of various stake holders (Becht, Macro, Patrick and Alisa,
The Role of the Directors in a Company is of a paramount importance in the discourse of the proper running of the company. Directors are the spirit of the company .The company is merely a legal entity, governed by its directors. These directors have certain duties and responsibilities. These are mainly governed by the Corporation Act, 2001. Section 198A (1) of The Corporations Act, 2001(The Corporations Act 2001 s 198A (1)), clearly states that, ‘The business of a company is to be managed by or under the direction of the directors’.