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HULT International Business School
ACC440 - Corporate Governance (Prof
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Willcox)
Outline of the Required Book (Tricker, ​Corporate Governance​)  

 
 

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Companies must follow the CL of the
jurisdiction in which they are incorporated and the legislation of the countries they operate in
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➔ Companies and their directors are also exposed to other legislations:
- health and safety regulation
- consumer protection
- environmental standards
➔ The company secretary takes the lead of the compliance
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These regulations are mandatory, otherwise
penalty
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➔ SEC developed an extensive ​Corporate governance Regime ​for the US listed companies, its
missions:
- Protect investors
- maintain fair, orderly, and efficient markets
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- Enron
- WorldCom
- Tyco Waste management
- Arthur Andersen
SOX = Sarbanes Oxley Act (2002) = Sarbox → emphasized the US belief that the regulation of
the corporate governance should be under the law, not through discretionary codes
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→ submission
of an annual report about the internal accounting controls of the SEC
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”
- officers: ​“have evaluated the effectiveness of the company’s internal control, of a date
within 90 days prior the report
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”
SOX also establishes:
- new standards for boards and their audit committees
- mew independence standards for external auditors
- a new ​Public Accounting Oversight Board (PACOB) to oversee public accounting firms
and to issue accounting standards overseen by the SEC
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SOX did not prevent the Global Financial crisis 2008… → companies bankruptcy and tragic
consequences of mythic firms lead to the ​SOX2 (​Dodd-Frank Wall Street Reform and Consumer
Protection Act 2010​): improves american financial regulation and the governance of the US
financial services industry
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Responsibility of the board:
- paramount duty: select and oversee CEO
- responsibility of management: oversight of the board
- oversight of the audit committee of the board → financial statements
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- playing a leadership role in shaping the fair practices and internal policies
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- engage in long-term shareholders value creation in a meaningful way, and act on their
concerns
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Business roundtables continues to believe that corporate governance should be
enhanced through conscientious forward looking action by a business community that
focuses on generating long-term shareholder value with the highest degree of integrity
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➔ CII = Council of Institutional investors published in 2002 a ​set of corporate governance
principles​:
- All directors should be elected annually, the rules of the actions should be disclosed
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- Companies should have audit, nominating, and compensation committees
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➔ NYX (NYSE - Euronext) Corporate Governance Listing Standards
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➔ UK produced the 1st world Corporate Governance Report (1992)
- The Cadbury Report (1992)​: Response to corporate failure in the UK from Sir Adrian
Cadbury (​The Financial aspects of Corporate Governance​) → ​comply or explain​ principle
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- The Hampel Report (1998)
The Cadbury Report (1992)

The Greenbury Report (1995)

The Hampel Report (1998)

[1]the wider use of independent
non-executive directors
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[1]remuneration committees​ of
companies should consist solely
of ​independent non-executive
director​,
[2]chairman ​of the
remuneration com
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[3]annual reports ​should
include details of all directors
rewards,
contracts directors ,2Y
[4]share options schemes ​for
directors should be linked to the
LT corporate performance​
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[2]governance compliance
should be adjusted to each
individual case and not taken as
a ticking boxes exercise
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➔ 1998 Combined Code of C,G, and H reports was prooses to the ​London Stock Exchange listing
rules​
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Leadership

Effectiveness

Accountability

Rémunération

Relations with SHH

➔ The ​Stewardship code 2010​ (revised 2012)
➔ The U
​ K Companies Act 2006
➔ The U
​ K financial conduct Authority ​(FCA): new independent entity that regulates the financial
services industry in the United Kingdom, protecting consumers ensuring the industry in
financially secure, and promoting fair competition between providers of financial services
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2003​: ASX (Australian Stock
Exchange) ​→ ​Principles of good
Corporate Governance and Best
Practice Recommendations:​
non-prescriptive and principles-based
framework for good CG
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Canada
The ​Canadian Saucer report ​→
performance oriented view on CG
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A committed cohesive
and effective B adds value, first and
foremost, by selecting the right CEO
for the company
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1999:​ The​ Vienot Report II​ →
separation chairman/CEO,
notion of director
independence, more
information on director
rémunération
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Codes from international agencies
➔ OECD (Organization for Economic Co-operation and Development)
➔ Guidelines from the Commonwealth of Nations of 1999
➔ the Statements on Global Corporate Governance Principles from the International Corporate
Governance Network (ICGN) of 1995

➔ OECD Principles:
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Ensuring the basis for an effective corporate governance framework
The rights of shareholders and key ownership functions
The equitable treatment of SHH
The role of STKH in corporate governance
Disclosure and transparency
The responsibility of the board
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- That company managers want to adopt long-term strategies and visions, but often do
not feel that their Shareowners are patient enough
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➔ The ​Hermes CG principles (2002​, update 2008) → UK multispecialist asset manager
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- efficient capital structure maximizing the LT CoC
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- Social, Ethical, Environmental
- manage effective relationships with all stakeholders and behave ethically in this
regard
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Selection and composition of the board
Board functioning
Board relationship to senior management
Meeting procédures
Committee Matters
Leadership development

Codes for the public and voluntary actors
➔ It is recognized that all corporate entities needs to be governed, as well as managed
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- charities
- Trusts
- Mutual societies
- Sports
- Associations
- Cultural Organizations
- Public Authorities
- NGOs
- and other entities in the public and voluntary sectors
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- They have​ many constituencies to satisfy ​=> many objectives and multiples measures of
perf
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➔ In the ​UK​: ​Good Governance: A Code for the Voluntary and Community Sectors (2005)​ = The
Good Governance Code
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➔ EU:
- Improve the EU framework on CG
- enhance CG disclosure requirements
- strong and effective role for independent non-executive or supervisory directors
- Provide an appropriate regime for directors remuneration
- Confirme as a matter of EU law, the collective responsibility of directors for financial and
key non-financial statements of the company
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produce an integrated legal framework facilitating efficient shareholder information
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Principles or prescription: the governance debate
➔ Anglo-American​ approach to CG → unitary board (both exec and non-exec directors)
➔ Continental European & other civil Law countries​ → ⅔ supervisory and executive boards
➔ SOX, response to the Enron and WorldCom Scandal → reinforce state demands for CG
conformance by law (otherwise penalties, fines and imprisonment)
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➔ The ​fundamental dichotomy ​for the ​rules-based approach​ and the​ principles-based approach
goes to the heart of CG philosophy
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The ​Principles versus Prescription paradox ​remains unresolved
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China Unicom and SOX

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Southern Cross Healthcare

 

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