Please enable JavaScript.
Coggle requires JavaScript to display documents.
P1- [B] Governance(2;3) - Coggle Diagram
P1- [B] Governance(2;3)
1. Agency
- Agency monitoring systems:
.Request formation of committees;
.Employ consultant;
.Increase numbers of NEDs;
.Attend AFM and question board
- Agency solutions:
.Verify what the board is doing, partly because the board has access to more information about its activities than the principal does; and
.Introduce mechanisms to control the activities of the board, without preventing it from functioning effectively
- Any steps taken by shareholders are likely to incur 'agency costs' (Jensen and Meckling) - Common agency costs include: Cost of studying company data and results; Purchase of expert analysis; External audit fees; Time spent attending company meetings; Transaction cost; etc
-
- Agency relationship: 'Is a contract under which one or more persons (the principals) engage another person (the agent) to perform some service on their behalf that involves delegating some decision-making authority to the agent' - (Jensen and Meckling, 1976: p.5)
-
3. Corporate governance
-
-
3.1 Corporate governance
- Corporate governance: 'A set of relationships between a company's directors, its shareholders and other stakeholders. It also provides structure through which the objectives of the company are set, and the means of obtaining these objectives and monitoring performance are determined.' (OECD, 2004: p.4)
- Corporate governance: Is the system by which organisations are directed and controlled. (Cadbury, 1992: p.15)
- 11 core principles:
.Decision: integrity; fairness; judgement; independence; scepticism;
.Disclosure: transparency; probity; responsibility; accountability; innovation; reputation
Regulatory guidance
- Organisation for Economic Co-operation and Development (OECD) => developed its Principles of
Corporate Governance in 1998 (revised 2004): The rights of shareholders; The equitable treatment of shareholders; The role of stakeholders; Disclosure and transparency; The responsibilities of the board
- International Corporate Governance Network (ICGN) => role of corporate boards: Responsibilities; Leadership and independence; Composition and appointment; Corporate culture; Risk oversight; Remuneration; Reporting and audit; General meetings; Shareholder rights