Corporate Governance law
Corporate Governance law refers to the system of rules, practices, and processes by which a company is directed and controlled. It encompasses the relationships among stakeholders and the goals for which the corporation is governed. The primary aim of corporate governance law is to ensure transparency, accountability, and fairness in the management and decision-making processes of a company.
8 Key excerpts on "Corporate Governance law"
eBook - ePub- Susan McLaughlin(Author)
- 2018(Publication Date)
- Routledge(Publisher)
...Taken in its broadest sense it refers to how corporations are structured and governed, or, made to work. The study of corporate governance may focus on how, in reality, corporations are structured and decisions are taken, etc. That study may include describing the laws relevant to how corporations are structured and decisions taken, which is essentially what this chapter does. If an attempt is made to assess the appropriateness of governance structures and decision-making, and/or the relevant laws, a framework or set of criteria against which to make the assessment is required. It is here that corporate governance becomes a contentious subject. Analysis of corporate governance, usually conducted to illustrate how well or poorly corporations are or have been governed with the aim of working out how governance might be improved, is conducted by individuals and institutions with a range of backgrounds, interests and objectives. It is important to consider the background and motivation of the author of anything you read relating to corporate governance so that you can reflect on how these factors may have affected the orientation and focus of the piece and any conclusions and proposals regarding corporate governance it contains. Contributors to the voluminous literature on the subject come from different academic disciplines, have vastly differing levels of practical experience and hold different political viewpoints. Whilst all share the view that corporations should be governed well, significant differences exist as to what that entails. stakeholders Groups with an interest in the company, such as shareholders, creditors, employees, customers, suppliers and the local communities in which the company operates Since the inception of the registered company in the UK it is clear that the law has required directors to run companies for the benefit of the shareholders as a whole and the same appears to hold true for other common law jurisdictions, including the USA...
eBook - ePubAirline Governance
The Right Direction
- Victor Hughes(Author)
- 2020(Publication Date)
- Routledge(Publisher)
...In such a fluid environment producing a definition (i.e., a clear complete statement of the meaning) for corporate governance, is difficult. For this book, the term ‘corporate governance’ will mean ‘the rules, laws, policies and practices which govern the operations of a company’. Directors and shareholders In a company the ownership and the operation of the company are separate. This separation is fundamental to the way in which most economies work in the world and arose from the landmark case of Salomon v. A Salomon & Co Ltd. (which was decided by the United Kingdom’s House of Lords on 16 November 1897 with the ruling that the creditors of an insolvent company could not sue the company’s shareholders to pay up outstanding debts owed). This case concluded that a limited company was a separate entity from its shareholders. Essentially the shareholders own the company, although even this statement can be debated because some lenders may have a prior charge over all or some of the company’s assets, and the shareholders appoint directors to run the company for them. This separation produces the need for an approach which allows shareholders to be assured that the company is being well run, however that is defined, and is meeting its objectives, all without the shareholders interfering with the day-to-day operations of the company. The solution to this need is the requirement that the company’s directors periodically and regularly report to the shareholders on the result of the company’s operations and the current financial and business position of the company. In addition, the directors are required to run the company for the benefit of the shareholders. In general, this means they must make decisions in the best interests of the company and exercise independent judgement. They must also use reasonable care, skill and diligence in all matters relating to the company...
eBook - ePub20 LESSONS from 20 YEARS of Quality and Value Investing
One of Australia's most established value fund managers shares its guidelines for successful sharemarket investing
- Anton Tagliaferro, TBD(Authors)
- 2020(Publication Date)
- Investors Mutual Limited(Publisher)
...The CEO then assesses whether the company has the appropriate executive team in place to properly manage the various functions of the company and to execute on the strategy; and appoint and run sub-committees (e.g. audit and risk, governance and remuneration) to help fulfil and manage the Board’s various responsibilities. Corporate governance is the term coined to cover all the structures, rules, relationships, systems and processes by which decisions are made and how the Board goes about exercising its authority in performing its duties and running the company on behalf of shareholders. DEFINING CORPORATE GOVERNANCE The issue as to what constitutes good corporate governance and the precise nature of each Board’s members’ responsibilities are subject to interpretation as they are not clearly defined in the Corporations Act. Various regulators and bodies have attempted to set out corporate governance principles that all company Boards of Directors are encouraged to follow. Thus, the ASX has published a set of corporate governance principles which Australian listed companies are encouraged to adhere to and report on regularly. While having frameworks may help in giving further guidance as to what constitutes good corporate governance, it is still fairly subjective. Boards of Directors are effectively given a fairly large degree of latitude in the ways that companies are run. It is thus up to shareholders to have their voices heard if they are unhappy with certain aspects of a company’s performance or direction. CORPORATE GOVERNANCE – NOTORIOUS FAILURES Over the last 30 years, corporate governance has come to prominence after many instances where Boards of Directors failed in their duty of safeguarding shareholders’ interests...
eBook - ePub- Michael Moore(Author)
- 2020(Publication Date)
- Austin Macauley Publishers(Publisher)
...Corporate Governance Governance is a word that is bandied around a lot these days, particularly when it comes to board directors and their responsibilities. One the one hand, we have board directors insisting on the scope they require to apply good governance and on the other we have governmental institutions insisting that boundaries are needed to control the activities of board directors. Of course, any function requires some boundaries as well as freedoms. But where do these boundaries and freedoms extend and who sets out the role of directors in boards. Further, how far should government go in imposing boundaries for corporate governance? And at what point is the responsibility of directors overshadowed by too much legislation with regard to director’s functions and range of activities? Let’s look at some basics to help to understand this issue. Governance: Governance has been around since the dawn of civilisation. We see it in history with governments going back to the Roman Empire and again further back in the Chinese Courts many thousands of years ago. Governing the country or the land, setting up laws and basically stating the freedoms and barriers under which the country would operate. The term governance refers to the activity of exercising and directing an influence over the decision making and how these decisions are put into effect. This comes from governing, to direct and control the actions, affairs, policies, functions, etc., of (a political unit, organisation, nation, etc.); rule. It also means to be a predominant influence on (something): to decide or determine...
eBook - ePubEnergy Law and the Sustainable Company
Innovation and corporate social responsibility
- Patricia Park, Duncan Magnus Park(Authors)
- 2016(Publication Date)
- Routledge(Publisher)
...So what has gone wrong? Nations around the world have provided far reaching programmes for corporate governance reform, with corporate governance increasingly including stakeholder concerns. In policy terms, society wants corporations to behave in a way consistent with the public good. In economic terms, society does not want corporations to externalise their costs onto the community. How does society make that happen? By looking to accountability. Defining corporate governance Corporate governance can mean different things depending on the country or jurisdiction. A relatively early definition of corporate governance sought to establish a broader remit than that enshrined in agency theory, which stated that the governance role is not concerned with the running of the business of the company per se, but with giving overall direction to the enterprise, with overseeing and controlling the executive actions of management and with satisfying legitimate expectations of accountability and regulation by interests beyond the corporate boundaries. 3 But the Walker Review in 2009 defined corporate governance in a much more restrictive way: ‘the role of corporate governance is to protect and advance the interests of shareholders through setting the strategic direction of a company and appointing and monitoring capable management to achieve this’. 4 Despite the general acceptance that corporate governance should have a more wide-ranging stakeholder inclusive definition, the Walker Review reverts to the restrictive shareholder centric approach to corporate governance. The broadest definitions of corporate governance consider that companies should be accountable, not only to the whole of society, but also to future generations and the natural world...
eBook - ePubCulture, Conduct and Ethics in Banking
Principles and Practice
- Fred Bell(Author)
- 2019(Publication Date)
- Kogan Page(Publisher)
...06 Corporate governance Introduction This chapter will explore what is meant by ethical leadership and the role of corporate governance frameworks in influencing conduct in business. LEARNING OBJECTIVES By the end of this chapter you will be able to: define corporate governance and describe its constituent elements; assess the development of corporate governance in the UK by reference to the various reports and codes that have shaped corporate governance standards; describe what we mean by the three lines of defence and assess their role in supporting the development of sound banking outcomes. What is meant by corporate governance? Corporate governance was defined by the Cadbury Report as ‘the system by which companies are directed and controlled’ (The Cadbury Committee, 1992). The Organization for Economic Cooperation and Development (OECD) offers an insight into the nature of corporate governance in its preamble to the G20/OECD Principles of Corporate Governance (2015). The OECD’s definition is adopted by the Bank for International Settlements (BIS): ‘Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined’ (OECD, 2015). The Cadbury Report definition is concise, but the key words ‘directed’ and ‘controlled’ offer substance as to what corporate governance is all about. ‘Directed’ implies that an organization should have direction, or a road to travel, and the direction is set by the directors in a strategic plan. If directing is about setting a course on a road to travel, ‘control’ is about keeping the organization on the road it intends to follow. One limitation of the Cadbury definition is the reference to companies...
eBook - ePubRethinking Corporate Governance
The Law and Economics of Control Powers
- Alessio Pacces(Author)
- 2013(Publication Date)
- Routledge(Publisher)
...The analysis of this tradeoff, from both a positive and a normative Law and Economics perspective, will be the subject-matter of the following chapters. Positive analysis will speculate on how corporate law influences the models of corporate governance prevailing in different countries of the Wealthy West of the world. The foregoing analysis of the economics of corporate governance has shown on what basis the efficient structure of corporate ownership should be selected and should then evolve endogenously. However, the legal system determines to what extent that process can take place. On the one hand, legal rules need to prevent the corporate controller from expropriating non-controlling shareholders by disciplining the extraction of diversionary PBC. Unconstrained opportunities for stealing would in fact undermine separation of ownership and control. On the other hand, separation of ownership and control need also to be supported by legal entitlements to discretionary management and control safeguards. In this respect, law shapes the actual patterns of corporate governance by vesting ultimate decision-making power in one or more controlling shareholder (through the shareholders’ meeting), or in the corporate managers (through the board of directors). The flip side of the coin is that both opportunities for expropriation of non-controlling shareholders and entrenchment devices available to the corporate controller influence, in turn, the evolution of control allocation over time. Through the comparison of some representative systems of corporate governance, I will therefore investigate the corporate law’s role in determining the following: (a) whether the interest of non-controlling shareholders is adequately protected from expropriation; and (b) how control can be exerted by an entrepreneur-manager, how it is maintained and, ultimately, transferred...
eBook - ePub- Andreas Kokkinis(Author)
- 2017(Publication Date)
- Routledge(Publisher)
...2 The UK corporate law and governance framework as a mechanism to facilitate risk-taking by corporate managers and shareholders Having examined conceptual arguments and empirical evidence demonstrating that the interests of equity investors in financial institutions and of the public are diverging with regard to risk-taking, this chapter seeks to identify the corporate law doctrines that make this possible. In particular, it is shown that modern corporate law and governance seek to align the risk appetite of risk-averse senior managers with that of risk-neutral shareholders by setting strong incentives for executive directors and managers to maximise the market price of a company’s (and thus a bank’s or other financial institution’s) shares in the short term in order to maximise their remuneration and secure their positions. At the same time, UK company and insolvency laws shield financial institution directors and senior managers from the negative consequences of risky decisions insofar as they acted in good faith and followed a reasonable decision-making process, as was demonstrated in the aftermath of the 2007–2009 global financial crisis. This chapter is structured as follows. Section I reviews the broadly accepted conceptual framework of agency theory as it applies to corporate law, emphasising the issue of aligning the interests of managers with those of shareholders. Section II explains how limited liability banking arose and argues that limited liability is a necessary precondition for the separation of ownership from control and portfolio diversification. Sections III and IV then analyse the legal and soft-law mechanisms which seek to align the risk appetite of corporate managers with that of diversified shareholders...
