| Corporate
Governance |
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Corporate
governance is a complex subject with many varying perspectives.
Similarly, what constitutes good and bad corporate governance is an
on-going debate.
Basically,
it is a combination of who and how. The ‘who’ being the
corporation, and the ‘how’ being the governance.
Corporations
(who)
The
word ‘corporate’ relates to a type of legal entity known as a
corporation (who) which is typically formed to conduct business.
While
being composed of people, in the eyes of the law, a corporation exists
completely separately from them. This separation gives the
corporation unique powers which other legal entities, such as sole
traders and partnerships, lack.
Corporations
are also be formed by:
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non-profit
organisations for political, religious or charitable purposes and
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government
or quasi-governmental entities (public corporations).
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Depending
upon the legal jurisdiction, corporations are ruled by either federal or
state government regulations, and if they are public corporations, by
stock exchange regulations.
Corporations
can use the Compliance Management system (MIS
10 100) to reduce the time and resources required to manage the
requirements of these regulations. This system will also reduce
the costly and often embarrassing errors associated with these
regulations.
Governance (how)
The
term ‘governance’ typically deals with the processes and systems by
which an organisation or community operates. Governments and/or
directors are established to direct and administer these processes and
systems.
Corporate
governance
Corporations
and regulators often use the word governance to describe the manner in
which their executive team directs a corporation. This team is
typically made up of the Board of Directors and the Chief Executive
Officer (CEO).
The
traditional concerns of corporate governance involved ensuring that
procedures and processes were in place that ensured that the
organisation’s directors and managers acted in the interests of their
shareholders.
Some of
the recent events that have raised the awareness of those being affected
include:
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large
public corporation failures (Worldcom & Enron)
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highly
publicised corporate debacles (Arthur Andersen, Typo & AOL) and
board dismissals of their CEOs (IMB, Kodak, Honwell) and
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government
regulations (SOX)
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Consequently,
as shown in the following diagram, the traditional shareholder focus has
been extended to include stakeholders such as:
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employees
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regulators
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customers
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the
community (people affected by the actions of the organisation)
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suppliers.
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Some of
the laws, regulations, guides and standards that influence contemporary
corporate governance include:
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the
Organisation for Economic Co-operation and Development (OECD)
Principles of Corporate Governance (1999, 2004)
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Basel
II (also called The New Accord and the International Convergence of
Capital Measurement and Capital Standards) (1988 & 2001)
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the
American Bar Association's Model Business Corporation Act (2002)
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the
US Sarbanes-Oxley Act (2002) (also known as the Public Company
Accounting Reform and Investor Protection Act and SOX or SarbOx)
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the
UK
Combined Code (the Code) 2003
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the
European Corporate Governance Institute (ECGI) codes, principles and
recommendations
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the
World Bank Policy on Corporate Governance
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Australian
Stock Exchange (ASX) Corporate Governance guidelines
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Australian
Corporate Governance Standards - AS 8000
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Corporations
can use the Compliance Management system (MIS
10 100) to reduce the time and resources required to manage the
requirements of these regulations. This system will also reduce
the costly and often embarrassing errors associated with these
regulations.
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