Table of content
1. Assignment question
2. Definition of Corporate Governance
3. Literature Review
4. Reports and Reviews
6. Director’s Responsibilities
1. ASSIGNMENT QUESTIONS
Define, and state the importance of Corporate Governance
Provide a Literature Review
Provide a report and review of the debate on Corporate Governance. Question 4
Discuss the challenges that face Corporate Governance
Discuss the Director’s Responsibilities
2. WHAT IS CORPORATE GOVERNANCE?
Corporate governance refers to the rules, procedures, and administration of the firm’s contracts with its shareholders, creditors, employees, suppliers, customers, and sovereign governments. Governance is officially vested in a board of directors who have the duty to serve the interests of the corporation rather than their own interests or those of the firm’s management. The Cadbury committee describes it as "the system by which companies are directed and controlled". It involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders; it deals with prevention or mitigation of the conflict of interests of stakeholders. Ways of preventing these conflicts of interests include the processes, customs, policies, laws, and institutions which have impact on the way a company is controlled. An important theme of corporate governance is the nature and extent of accountability of people in the business, and mechanisms that try to reduce the principal–agent problem. It also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. In contemporary business corporations, the main external stakeholder groups are shareholders, debtors, trade creditors, suppliers, customers and communities affected by the corporation's activities. Internal stakeholders are the board of directors, executives, and other employees. It guarantees that an enterprise is directed and controlled in a responsible, professional, and transparent manner with the purpose of safeguarding its long-term success. It is intended to increase the confidence of shareholders and capital-market investors.
3. THE IMPORTANCE OF CORPORATE GOVERNANCE
Sound corporate governance principles are the foundation upon which the trust of investors is built. These principles are critical to growing the reputation that we have established over decades as a company dedicated to excellence in both performance and integrity. This trust and respect are fostered by both the Assurant Board of Directors and management team who work together under the guidance of our Corporate Governance Guidelines. Well managed and implemented Corporate Governance;
* Improves operational performance within the organization * Creates more efficient and effective risk management
* Creates higher firm valuation and share performance
Corporate governance affects the firm’s performance in the following ways: * Corporate control: Changes in control due to takeover or insolvency bring dramatic changes in firm personnel and strategy. CEO and board member turnover increases radically in the event the firm goes into financial distress. Managers will avoid being taking over by either increasing the firm’s cash flows or by some less productive avenue.
* Board, Remuneration Committee, Pay and incentives: A research has found that the appointment of non-executives directors is associated to a company stock price increases. An Executive that wants to take the company in a direction that might be more in its personal interests could be sacked. Another research has found a positive relationship between the percentage of shares owned by managers and board members and firms’ market-to-book values. The remuneration committee is made up of non-executives, so this creates a natural control to stop the...
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