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AYB311 - Lecture 1 Notes

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Queensland University of Technology

LECTURE 1 – CORPORATE GOVERNANCE The Growing Interest in Corporate Governance  Highly publicised cases of corporate misconduct and concerns over the management of corporations o The National Australia Bank o HIH look these companies up on the internet o One Tel  Problems with the management of corporations o Use of resources o Actions o Provision of Information o Performance  Directors remuneration linked to company perfoamnce  Has resulted in an increase in the use of corporate governance o Management has taken action to meet consumer expectations What is Corporate Governance?  The system by which business corporations are directed and controlled  There is not one size fits all  The system by which business corporations are directed and controlled.  Milton Friedman: “Corporate governance is to conduct the business in accordance with the owner or shareholders’ desires, which generally will be to make as much money as possible, while conforming to the basic rules of the society embodied in law and local customs”. This is an Anglo-Saxon view of corporate governance.  The pluralist view considers stakeholders beyond the narrow interests of shareholders, e.g. employees, the public, etc. Advantages of Good Corporate Governance  Increased globalisation of business  Need for efficient market  Facilitate economic growth (reduces risk)  Competitive advantage o Invest o buy The need for Corporate Governance Systems  Rules and prescriptions are needed  Separation of management and capital providers Corporate Governance Guidelines and Practices  Required or desired: o Nature of the particular corporation and its activities o The environment in which the corporation operates Elements of Corporate Governance  ASX Corporate Governance Principles and Recommendations – CLERP 9 2004 o Lay solid foundation for management and
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