Session 1- Scope of Governance I-updated
Post on 02-Jun-2018
222 Views
Preview:
Transcript
8/11/2019 Session 1- Scope of Governance I-updated
1/73
WELCOME TO
P1 GOVERNANCE, RISKS & ETHICS
ABBD5054 Corporate Governance &Ethics
~khor seng cheong
8/11/2019 Session 1- Scope of Governance I-updated
2/73
ACCA email to: myinfo@accaglobal.com Facebook: ACCA Malaysia
ACCA Connect at 1800 88 5051----------------------------------------------
My handphone: 017-4999056 My email: khorsc@acd.tarc.edu.my Facebook: ACCAP1khorsengcheong.tarpenang TARC ACCA FB: acca@tarpenang
mailto:myinfo@accaglobal.commailto:khorsc@acd.tarc.edu.mymailto:khorsc@acd.tarc.edu.mymailto:myinfo@accaglobal.com8/11/2019 Session 1- Scope of Governance I-updated
3/73
8/11/2019 Session 1- Scope of Governance I-updated
4/73
Level 1: Knowledge and comprehension
Level 2: Application and analysis
Level 3: Synthesis and evaluation
8/11/2019 Session 1- Scope of Governance I-updated
5/73
PA (P1)
AB (F1)
AA (F8)ONLINE ETHIC
MODULE
PROFESSIONAL
PAPERS
8/11/2019 Session 1- Scope of Governance I-updated
6/73
He is professor inaccounting &
corporategovernance ofNewcastleUniversity
8/11/2019 Session 1- Scope of Governance I-updated
7/73
. A- Governance & Responsibility
E-Professional Value & Ethics
B-Internal
Control &
Review
C & D-Identify,
Assess, &
Control
risks
8/11/2019 Session 1- Scope of Governance I-updated
8/73
Part A- Focus on
corporate governance,responsibility andaccountability. eg.Agency relationship,
governance, roles ofdirectors, issues ofresponsibility, limits ofaccountability
8/11/2019 Session 1- Scope of Governance I-updated
9/73
Part B, C & D- Internal control, identifying &assessing risk, controlling and mitigating risks
Part E- Ethical assumption and ethicalframework & ethic theory. Ethic is alsoassessed in Part A is subsection.
8/11/2019 Session 1- Scope of Governance I-updated
10/73
Section A (50%)
Q1- Compulsory
Section B (25% x 2)Choose 2 out of 3 questions.
8/11/2019 Session 1- Scope of Governance I-updated
11/73
Question 1-Case Study.It Involves corporate governance, risk,
internal control & ethics.4-6 marks are allocated for professionalmarks- eg. format used, structure, layout.
Question 2, 3 &4 are short scenario questions
8/11/2019 Session 1- Scope of Governance I-updated
12/73
DEFINE (L1) Give the meaning of
EXPLAIN (L1) Make clear
IDENTIFY (L1) Recognize/select
DESCRIBE (L1) Give the key features
CONTRAST (L2) Make a comparison
ANALYZE (L2) Give reasons for current situation or what has
happened
ASSESS (L3) Determine the strengths/weakness/ importance
/ability to contribute
DISCUSS (L3) Examine in detail by using arguments for &
against
CONSTRUCT THE CASE (L3) Present the arguments in favor & supported by
evidence
EVALUATE (L3) Determine the value of..
RECOMMEND (L3) Advise the appropriate actions to pursue
8/11/2019 Session 1- Scope of Governance I-updated
13/73
Scope of Governance I
8/11/2019 Session 1- Scope of Governance I-updated
14/73
Define (key words) and explain (CRE) the meaning ofcorporate governance
Analyze (Detailed causes of .....+ impacts) the purposeand objective of corporate governance
Explain and analyse the issues raised by the developmentof thejoint stock companyand the separation ofownership and control over business
Explain and apply the key conceptsunderpinningcorporate governance
Explain and assess the major areas of organizational lifeaffected by issues in CG.
8/11/2019 Session 1- Scope of Governance I-updated
15/73
A) Define and explain the meaning of corporate governance.
8/11/2019 Session 1- Scope of Governance I-updated
16/73
"Corporate governanceis a set ofpolicies and proceduresby whichbusiness corporations are
directed, administered
and controlled (DAC).
The corporate governance structurespecifies the distribution of rights and
responsibilities among differentparticipants in the corporation, such as,the board, managers, shareholders andother stakeholders, and spells out therules and procedures for makingdecisions on corporate affairs. "
8/11/2019 Session 1- Scope of Governance I-updated
17/73
The term corporate governancehas come to mean 2 things.
I) the processes by which how
the companies are directedand controlled.
II) the processes by which those
direct and control thecorporation (here means theboard of directors) aremonitored and supervised.
8/11/2019 Session 1- Scope of Governance I-updated
18/73
The corporate governancestructure spells out the rulesand proceduresfor making
decisions on corporate affairs.
It also provides the structurethrough which the company
objectivesare set, as well asthe means of attaining andmonitoring the performanceof those objectives
8/11/2019 Session 1- Scope of Governance I-updated
19/73
MECHANISM 1
Corporation is directed and
controlled
MECHANISM 2
Those who direct & control
the corporation aremonitored and supervised
8/11/2019 Session 1- Scope of Governance I-updated
20/73
DIRECTORS ARE RESPONSIBLEFOR
1. Proper controls for the
achievement of goals2. All the operations oforganization are carriedout in accordance withset policies and
procedures
METHODS OF MONITORING &CONTROLLING
1. Internal audits2.
Inclusion of non executivedirectors in the board3. Incorporation of audit
committee.4. External auditor
8/11/2019 Session 1- Scope of Governance I-updated
21/73
It supports the development of strategicprocesses, risk management processes and
controlsthat give reasonable assurancethatorganizational objectives will be met.
It prevents any single individual fromhaving too much power and influence
8/11/2019 Session 1- Scope of Governance I-updated
22/73
8/11/2019 Session 1- Scope of Governance I-updated
23/73
Increase shareholders confidence Reduce the risks of manipulation in the FS
Increase chances of obtaining credit facilitiesat the lower cost of borrowing Increase good reputation Obtain favorable treatment from the
regulator
8/11/2019 Session 1- Scope of Governance I-updated
24/73
B)
B) Purpose and objectives
corporate governance
8/11/2019 Session 1- Scope of Governance I-updated
25/73
Purpose- The basic purpose of CG is tomonitor those parties within a companywhich control the resources owned byinvestors.
Objective- The objective of CG is tocontribute to improved corporateperformance and accountability in
creating long term shareholder value.
8/11/2019 Session 1- Scope of Governance I-updated
26/73
Development of
Joint Stock
Company
8/11/2019 Session 1- Scope of Governance I-updated
27/73
A joint stock company is a company form of business entity.It is a voluntary association of persons who generallycontribute capital to carry on a type of business, which
established by law and can be dissolved by law.
This form of business entity has a legal existence separatefrom its members. This form of business organizationsgenerally requires huge capital investment, which is
contributed by its members.
8/11/2019 Session 1- Scope of Governance I-updated
28/73
8/11/2019 Session 1- Scope of Governance I-updated
29/73
The owners (shareholders) andrunners (directors) of the company areseparate parties
The dispersed shareholders(individual/institutional/local/foreigners) entrustthe management of company to its
board of directors
8/11/2019 Session 1- Scope of Governance I-updated
30/73
The board of directors , in turn, delegates the power andauthority to professional managers to handle daily runningof business.
The directors act as agentsof the shareholders
The directors are required to act the best interestsofshareholders, employees, investors, suppliers, customers
etc.
8/11/2019 Session 1- Scope of Governance I-updated
31/73
They can collect a large amount of capitalthrough public offering
They are limited liabilities. They are normally run by professionals and
experts They could achieve operational competitive
advantages
8/11/2019 Session 1- Scope of Governance I-updated
32/73
They are difficult and expensive to form They could be controlled by the government
The decision making in joint stock company isslow because they need to conduct manydiscussions and voting
Joint stock company is suitable for only thosebusiness that has high volume of businessand requires huge financial resources.
8/11/2019 Session 1- Scope of Governance I-updated
33/73
33
9 Key Sub-Concept ofCorporate Governance
8/11/2019 Session 1- Scope of Governance I-updated
34/73
8/11/2019 Session 1- Scope of Governance I-updated
35/73
8/11/2019 Session 1- Scope of Governance I-updated
36/73
Voluntary corporate disclosure to stakeholders enables to
increase the trust and confidence of stakeholders
in the company affairs.
Timely and accurate disclosure on all material matters beingviewed as good corporate governance practice.
36
8/11/2019 Session 1- Scope of Governance I-updated
37/73
IndependenceIndependence is the state that exists when
there is no conflict of interest.
It is an important concept in CG particularly
concerning the Independent Non ExecutiveDirectorswho are in the position to monitorthe performance of executive directors andpromote the interest of stakeholders.
8/11/2019 Session 1- Scope of Governance I-updated
38/73
2 types
Type 1- Independent NEDs=Hire thembecause want their independent views.
Type 2-Non Independent NEDs=Hire them
because of their knowledge, skills &competence.
8/11/2019 Session 1- Scope of Governance I-updated
39/73
Probity/honesty
Honesty in business dealing is
important in buildingstakeholders confidence thattheir interests are protected.
For example, presenting the trueand not misleading information tostakeholders is a must.
8/11/2019 Session 1- Scope of Governance I-updated
40/73
Responsibility Directors are responsible to protect the
stakeholders interests. They are responsiblefor the companys strategies, internalcontrols and risk management process.
8/11/2019 Session 1- Scope of Governance I-updated
41/73
Accountability Directors who make decisions and take actions
need to be accountable for the results of the
action. Corporate accountability refers towhether an organization or its directors areanswerablein some way for the consequences oftheir duties.
Reward for the failure- If the companysperformance is poor, the directors are stillrewarded with the bonuses.
8/11/2019 Session 1- Scope of Governance I-updated
42/73
Reputation Reputation is the opinion of the public
towards a person or organization.
Reputation reflects the organizationsculture. (Well known for the good practice of
corporate governance. Reputation is builtthrough practice of ethical standards. Goodcorporate governance requires practicingethical standards.
8/11/2019 Session 1- Scope of Governance I-updated
43/73
Judgment A judgment is a balanced evaluation of the
information necessary to make a decision.For example, making decision is only aftertaking a broad knowledge and itsenvironment.
8/11/2019 Session 1- Scope of Governance I-updated
44/73
Judgment A judgment is a balanced evaluation of the
information necessary to make a decision.For example, making decision is only aftertaking a broad knowledge and itsenvironment.
8/11/2019 Session 1- Scope of Governance I-updated
45/73
8/11/2019 Session 1- Scope of Governance I-updated
46/73
Openness/Transparency
AccountabilityResponsibilities
ReputationIndependence
8/11/2019 Session 1- Scope of Governance I-updated
47/73
8/11/2019 Session 1- Scope of Governance I-updated
48/73
C) Operational areas affected by issuesin corporate governance (Exam Focus)
8/11/2019 Session 1- Scope of Governance I-updated
49/73
8/11/2019 Session 1- Scope of Governance I-updated
50/73
Board of directors (Executive Directorsand Non Executive Directors)
Sub-board committee (remunerationcommittee, nomination committee, riskcommittee, audit committee )
Management
Shareholders (institutional investors,minority shareholders)
Employees (trade unions) Auditors (internal and external auditors)
Government (tax authority, regulators,stock exchange)
8/11/2019 Session 1- Scope of Governance I-updated
51/73
The board should meet regularly todischarge its duties effectively.
The board should always be informed on
the situation Directors to be suitably trained Clear list of responsibilities for the board
should be in place and decisions that theboard should take.
8/11/2019 Session 1- Scope of Governance I-updated
52/73
Formal procedures should be in place forappointments to the board
The chairman should decide on a process
of performance evaluation for the board ofdirectors and for individual directors.
Directors should submit themselves for re-
election at regular intervals. Key and strategic decisions must be
reserved for the board.
8/11/2019 Session 1- Scope of Governance I-updated
53/73
Directors should not have excessivepowers
The board should include a balance
of Executive Directors (EDs) andindependent Non ExecutiveDirectors (NEDs) so no group candominate the decision making.
At least half of the board members,excluding the chair, should be NEDs.
8/11/2019 Session 1- Scope of Governance I-updated
54/73
The Chair and the CEO should be a separate
person
Board committees should be set up such asaudit committee, risk committee,remuneration committee, nominationcommittee, finance committee.
8/11/2019 Session 1- Scope of Governance I-updated
55/73
NEDs should make up of the remunerationand audit committee, and the majority of thenomination committee.
Time availability of directors, personalcompetence of directors, quality of
information gathered and boardroom
culture should be taken into considerationwhen considering the effectiveness of board.
8/11/2019 Session 1- Scope of Governance I-updated
56/73
8/11/2019 Session 1- Scope of Governance I-updated
57/73
8/11/2019 Session 1- Scope of Governance I-updated
58/73
Directors should disclose theirresponsibilities, going concernassessment, application of CG andjustification of departure from best
practice in the annual report
Auditors should present a statementabout their auditing responsibilities in
annual report.
8/11/2019 Session 1- Scope of Governance I-updated
59/73
Remuneration should be linked to
company performance. Rewards forfailure should be minimized.
Remuneration should be sufficientto attract and retain directors.
8/11/2019 Session 1- Scope of Governance I-updated
60/73
Formal procedures for developingremuneration policy should be in
place including the appointment ofa remuneration committee
No director should be involved in
deciding own remuneration.
8/11/2019 Session 1- Scope of Governance I-updated
61/73
The board should maintain aneffective internal control system tosafeguard shareholders assets.
The board should review theeffectiveness of internal controlsystem and report to shareholdersat least once a year. The areas to
cover are: financial control,compliance controls & risk controls.
8/11/2019 Session 1- Scope of Governance I-updated
62/73
8/11/2019 Session 1- Scope of Governance I-updated
63/73
Shareholders are entitled to receiveannual report from the company.
The company should provide allshareholders with statutory notice of
meetings and copies of annual report toensure good communication
The company should have
regular dialoguewithinstitutional investors
8/11/2019 Session 1- Scope of Governance I-updated
64/73
8/11/2019 Session 1- Scope of Governance I-updated
65/73
CSR encourages firms to consider theinterests of society in all aspect of theiroperations. The firms take responsibilities forthe impact of their activities on customers,employees, shareholders, the public andenvironment.
8/11/2019 Session 1- Scope of Governance I-updated
66/73
Business ethics involves examining ethicalprinciples and moral or ethical dilemma thatarise in doing business.
8/11/2019 Session 1- Scope of Governance I-updated
67/73
SUMMARY
Summary
8/11/2019 Session 1- Scope of Governance I-updated
68/73
1..............................................., the systemby which organizations are directed andcontrolled, is based on a number of concepts
including transparency, independence andintegrity.
2. Directors and managers need to be awareof the interests of............................... ingovernance, however their responsibilitytowards them is judged.
8/11/2019 Session 1- Scope of Governance I-updated
69/73
3. Key issues in corporate governance reportshave included the :
(I) role of ..........................., (ii) the .................. of financial reporting and
auditing, (iii) directors..............................., (iv)...............management (v)
corporate......................................................
8/11/2019 Session 1- Scope of Governance I-updated
70/73
4.............................. means open and clear disclosureof relevant information to shareholders and otherstakeholders, also no concealing information when itmay affect decisions.
5. Corporate................................... refers to whetheran organization and its directors are answerable insome way for the consequences of their actions.
6............................... is a duty imposed upon certainpersons because of the position of trust andconfidence in which they stand in relation to others.
8/11/2019 Session 1- Scope of Governance I-updated
71/73
1.Corporate governance 2.Stakeholders 3.board of directors, quality, remuneration,
risk and social responsibility. 4.Transparency 5.accountability. 6.fiduciary duty
8/11/2019 Session 1- Scope of Governance I-updated
72/73
1. Corporate governance of Public, private & nongovernment organizations (NGO) sectors
2. The roles, interest and claims of, the internal &
external parties such as directors, employees,regulators etc
3. The role & influence of institutional investors incorporate governance systems and structures.
4. Corporate Governance and Agency Theory(Issues Arise From Agency Theory)
8/11/2019 Session 1- Scope of Governance I-updated
73/73
Thank You
top related