LAWS3100 Study Guide - Final Guide: Retained Earnings, Issued Shares, Adrian Cadbury
Managing Companies (Chap 6)
Corporate governance
= the way companies are directed and managed. !
= to encourage the efficient use of resources and equally to require accountability for the
stewardship of those resources (Sir Adrian Cadbury in 2000)!
The aim is to understand the various forces at play in company management. !
Good corporate governance is about protecting and balancing the interests of stakeholders by
setting up the appropriate mechanisms to align these divergent interests where possible and to
ensure adequate monitoring of management.!
Key tools: management structures, transparency and accountability, alignment of interest!
What mechanisms play a role in corporate governance?
1) Directors and officiers legal duties !
2) The structure of the board !
3) Auditors !
4) Institutional investors !
5) Takeovers !
6) Disclosure of information by companies !
7) The product market in which the company operates !
8) The capital market !
9) The labour market for managers !
10) Executive demure ration !
11) Shareholdings by managers/directors !
12) Ownership concentration !
13) Corporate financial policy !
14) Member voting !
15) Litigation by members !
16) Intervention by regulators !
17) Legal rights given to members!
Rules and guidelines for corporate governance in Australia
Hard rules: in the Corporations Act and ASX Listing Rules!
Soft rules: in the form of ‘if not, why not’ reporting by listed companies agains the ASX Corporate
Governance Council’s principles !
exist relating to:!
-the structure and decision-making processes of the organs of the company !
-the duties of directors and other officers and !
-disclosure, financial reporting and audit!
ASX Listing Rule 4.10.3
-a listed entity must include a corporate governance statement in its annual report. It must
disclose to what extent the entity has followed the recommendation (CGPR) of the ASX’s
Corporate Governance Council (CGC) during the reporting period. If not followed, in its
corporate governance statement they must separately identity that recommendation and the
period during which it was not followed and state its reasons for not following the
recommendations.
Examples – formalise and disclose the role of the board, have a majority independent board, have
an independent chairman!
The CGC was formed by ASX in August 2002. The recommendations are guidelines, not
prescriptions, to re-examine their corporate governance practices. The 8 corporate governance
principles adopted by the CGC are:!
1) Lay solid foundation for management and oversight (responsibilities of its board and
management) !
2) Structure the board to add value !
3) Act ethically and responsibly !
4) Safeguard integrity in corporate reporting (formal and rigorous processes)!
5) Make timely and balanced disclosure !
find more resources at oneclass.com
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Document Summary
= the way companies are directed and managed. = to encourage the e cient use of resources and equally to require accountability for the stewardship of those resources (sir adrian cadbury in 2000) The aim is to understand the various forces at play in company management. Good corporate governance is about protecting and balancing the interests of stakeholders by setting up the appropriate mechanisms to align these divergent interests where possible and to ensure adequate monitoring of management. Key tools: management structures, transparency and accountability, alignment of interest. What mechanisms play a role in corporate governance: directors and o ciers legal duties, the structure of the board, auditors. Rules and guidelines for corporate governance in australia. Hard rules: in the corporations act and asx listing rules. Soft rules: in the form of if not, why not" reporting by listed companies agains the asx corporate. The structure and decision-making processes of the organs of the company.
