MLL221 Study Guide - Final Guide: European Central Bank, Fiduciary, Counterclaim
24 May 2018
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Corporate Law Topic Six
• Learn the concept and principles of corporate governance and understand the importance of good
corporate governance
DEFINITIONS:
the fraework of rules, relatioships, systes ad proesses withi ad y whih authority is
exercised and controlled in corporations. It encompasses the mechanism by which companies, and those in
control, are held to account. Corporate governance influences how the objectives of the company are set and
achieved, how risk is monitored and assessed, ad how perforae is optiised.
A“X Copoate Goeae Couil s ‘epot, Copoate Goeae Piiples ad ‘eoedatios ith
2010 Amendments.
Proedures ad proesses aordig to whih a orgaisatio is directed and controlled. The corporate
governance structure specifies the distribution of rights and responsibilities among the different participants in
the organisation – such as the board, managers, shareholders and other stakeholders – and lays down the rules
and procedures for decision-making.
European Central Bank, 2004, Annual Report: 2004, ECB, Frankfurt, Glossary
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• Know ASX Listing Rules and Principles of Good Corporate Governance
ASX CG LISTING RULE:
• A“Xs Piiples of Good Copoate Goeae Piiples ad ‘eoedatios:
The uet esio of the Couils Copoate Goeae Piiples ad ‘eoedatios the Thid
Edition) was released on 27 March 2014 (https://www.asx.com.au/regulation/corporate-governance-
council.htm)
• Adopted by ASX Corporate Governance Council:
The council is composed of interested groups including financial institutions, director organizations, business
interest groups and professional organizations.
• ASX Listing Rule 4.10.3:
Requires annual reports of listing companies to disclose the extent of their compliance with the CG Principles
and Recommendations
• If ot, h ot? appoah:
Emphasis on disclosure rather than compliance
CORPORATE GOVERNANCE PRINCIPLES AND GOOD PRACTICE:
1. Lay solid foundations for management and oversight
a. Requires companies to adopt a charter that:
i. Establishes functions reserved to the board and those delegated to senior
executives
ii. Provide explanation of the balance of responsibilities between the chair and CEO
b. Responsibilities of the board
i. Oversight of the company including its control and accountability systems
ii. Appointing and removing CEO
iii. Providing input into and final approval corporate strategy and performance
objectives
iv. Reviewing, ratifying and monitoring systems of risk management and internal
control, codes of conduct and legal compliance
v. Monitoring performance of senior executive and implementation of strategy
vi. Approving and monitoring major capital transactions; and
vii. Approving and monitoring financial and other reporting
2. Structure the board to add value
a. Effective composition, size and commitment to adequately discharge its responsibilities
b. Majority should be independent
i. non-executive directors and no conflict of interest
c. Independence indicators:
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i. Not being a substantial shareholder
ii. Employee or professional advisor within the last three years
iii. Material supplier or customer of the company
d. Board should regularly assess the continuation of independence
e. A study in 2010 found that 50% of listed co directors were independent
i. 70% for top 200 companies
f. Chair:
i. Should be an independent director
ii. Roles of chair and CEO should not be carried out by same person
1. The two roles are distinct
2. Separating the roles increases accountability and avoids conflict of interest
a. E.g. when the chair may need to sack the CEO!
iii. Responsibilities of the chair
1. 2.2
a. Provide leadership for the board
b. Ensure efficient organization of the board and conduct of its
functions
c. Brief all directors on issues arising at board meetings
d. Facilitate effective contribution by all directors, promote
constructive and respectful relations among board members and
with management
i. Also see ASIC v Rich [] fo sua of hais
responsibilities
iv. Nomination committee
1. 2.4
a. Composition
i. At least three directors, the majority of whom are
independent and one of which a chair
b. Responsible to recommend
i. Necessary and desirable competencies of directors
ii. Review of board succession plans
iii. Development of process of evaluation of the
performance of the board, its committees and directors
iv. The appointment and removal of directors
c. Dietos seletio poess should ilude:
i. Disclosure of board selection process
ii. Plan for identifying, assessing and enhancing director
competencies
iii. Board renewal plan to maintain an appropriate mix of
skills, experience, expertise and diversity
iv. Evaluating whether the composition and commitment of
the board is conducive to making appropriate decisions
d. Diversity
i. Diversity
1. Age, gender, ethnicity, cultural background
ii. Gender
1. Women are a minority of directors of listed
companies in Australia but steady increase
2. In 2013, women accounted for 19.7% of ASX 100
board seats
iii. Other countries (2009 figures)
1. 15.2% of directors of US Fortune 500 companies
2. 11.5% of directors of larger UK listed companies
3. 13% of the top 500 Canadian listed companies
4. 44% of listed Norwegian Companies
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Document Summary
Learn the concept and principles of corporate governance and understand the importance of good corporate governance. Definitions: (cid:862)the fra(cid:373)ework of rules, relatio(cid:374)ships, syste(cid:373)s a(cid:374)d pro(cid:272)esses withi(cid:374) a(cid:374)d (cid:271)y whi(cid:272)h authority is exercised and controlled in corporations. It encompasses the mechanism by which companies, and those in control, are held to account. Corporate governance influences how the objectives of the company are set and achieved, how risk is monitored and assessed, a(cid:374)d how perfor(cid:373)a(cid:374)(cid:272)e is opti(cid:373)ised. (cid:863) A x co(cid:396)po(cid:396)ate go(cid:448)e(cid:396)(cid:374)a(cid:374)(cid:272)e cou(cid:374)(cid:272)il (cid:858)s epo(cid:396)t, co(cid:396)po(cid:396)ate go(cid:448)e(cid:396)(cid:374)a(cid:374)(cid:272)e p(cid:396)i(cid:374)(cid:272)iples a(cid:374)d e(cid:272)o(cid:373)(cid:373)e(cid:374)datio(cid:374)s (cid:449)ith. 2010 amendments. (cid:862)pro(cid:272)edures a(cid:374)d pro(cid:272)esses a(cid:272)(cid:272)ordi(cid:374)g to whi(cid:272)h a(cid:374) orga(cid:374)isatio(cid:374) is directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organisation such as the board, managers, shareholders and other stakeholders and lays down the rules and procedures for decision-making. (cid:863) European central bank, 2004, annual report: 2004, ecb, frankfurt, glossary. Know asx listing rules and principles of good corporate governance.
