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Chapter 3 : Corporate Governance (What is it?, Communication with the…
Chapter 3 : Corporate Governance
What is it?, Communication with the auditors, International codes
What is it
Shareholders have different levels of interest
Investors have small investment so minimal contact
Pension attend AGM
Who is protecting shareholders investment?
Directors responsible for running the company & corporate governance is how companies are directed and controlled
Good corporate governance there to protect all stakeholders
Problems arise when you have an 'agency' (when one person manages anothers goods)
Potential conflict between principals and agents
Principal (shareholders)
Safe investment
Regular dividends
long-term capital growth
Maintenance of value
Agent (directors)
Salary and benefits
Maximum bonus
Share options
Personal success of successful business measured by share price
OECD principles of corporate governance
Principles of corporate governance 1994 & revised 2004
'General code' for countries to protect shareholders
Voluntary
Advs
More flexible to suit different companies
Ignore irrelevant (decrease costs)
Dis
Non compliance with sensible framework
Lack of compatibility
Should ensure that...
Shareholders
rights are protected
all treated equally minority is important
Stakeholders
recognise rights of stakeholders, companies should to create wealth, jobs & sustainability