BSB111 Business Law & Ethics Exam Revision Week 2.doc

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Queensland University of Technology
Management and Human Resources
Ms Jenny Georgiades

BSB111 Business Law & Ethics Lecture Week 2 - Corporate Social Responsibility and Corporate Governance Background • A company is an artificial entity recognised by the law as a legal person with its own rights and liabilities • The terms company & corporation are often used interchangeably • In AUS, a company comes into existence when it has been registered by the Australian Securities and Investments Commission (ASIC). A company has 2 characteristics: • Separate legal entity • Limited liability Separate legal entity • A company by law is considered to be a separate legal entity. • This means that it is legally a different ‘person’ to the shareholders, the people who control the company (directors) and the employees. • Considered to have the legal powers of a person - so it can own property, has its own obligations, can enter into contracts, has the right to issue shares to raise funds and the right to sue other parties. Limited liability • This means that the shareholders of the company are liable only to the extent of any amounts unpaid on their shares in the winding up of the company. Any creditors who are still owed money cannot claim from the shareholders’ personal assets. • This is not the same for a stole trader or partnership – they have unlimited liability The interest in corporate governance Corporate governance has come under increased scrutiny as a result of high profile corporate misconduct and concerns over the management of corporations. Examples: • Directors of a company using company resources to benefit themselves often involves fraud; • False reporting or hiding information to shareholders to avoid consequences • Lack of disclosure What is corporate governance? • The system by which business corporations are directed and controlled • These are the "procedures and processes according to which an organisation is directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organisation and lays down the rules and procedures for decision making". • A good corporate governance system ensures that the corporation sets appropriate objectives and puts systems and structures in place to ensure that these objectives are met and also provides the means for others to control and monitor the activities of the corporations and its managers • Good governance principle - without this, companies have high turnovers for employment, and lose money having to hire and train new staff Elements of corporate governance There is no single model of corporate governance, models include • OECD's Principles of Corporate Governance • ASX Principles of Corporate Governance • Focus of BSB111: 1. Controlling and directing the directors •
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