1. Introduction In the past decades, corporate governance attracts the whole world’s attention for its exposed scandals, and even criminal activity by corporate directors in some cases. (e.g.: the bankrupt of Enron Corporation). As we all know that an efficient and effective corporate governance regime should include provisions for civil or criminal prosecution of corporate directors who conduct monkey business or illegal acts, but what is the functional method to avoid such situations? This article looks at the significance of directors’ duty of care in achieving this goal. 2. What is corporate governance? What is efficient and effective corporate governance? 1) What is corporate governance? Corporate Governance refers to the set of institutions and practices designed to ensure that managers and directors act in the interests of the company and ultimately shareholders. It encompasses: “the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled within corporations. It encompasses the mechanisms by which companies, and those in control, are held to account.” Thus corporate governance is not simply a product of government regulation. Companies have inherent incentives to establish governance procedures to demonstrate their bona fides to investors, in order to attract capital. Directors also have incentives to deliver good performance to maintain their professional reputations. 2) What is efficient and effective corporate governance? Good corporate governance promotes investor confidence, which is crucial to the ability of corporates to compete for capital. Efficient and effective corporate governance should performs well against criteria such as board accountability, finan... ... middle of paper ... ...e must disclose the information specified under s 300A which includes broad polices for determining the nature and amounts of remuneration, the relationship of such policy and the company’s performance and details of the nature and amount of each element of the remuneration packages of each director and the five highest paid officers of the company., Disclosure of the remuneration policy is a fundamental requirement for remuneration reporting. 4. What if a director breaches his duty of Care? What is judgement rule? I. What if a Director breaches his duty of Care? The statutory duties which trigger the civil penalty provisions of care and diligence(s 180), if it has been contravened the court can impost the following orders: 1) a pecuniary penalty of up to $200,000 (s 1317G) 2) disqualification from management (s 206C) 3) Compensation for damage suffered (s 1317H)
Shivdasani, A., & Zenner, M. (2004). Best practices in corporate governance: What two decades of research reveals. Journal of applied corporate finance, 16(2/3), 29-41.
Bibliography: Turnbull, S. (1997). Corporate governance: its scope, concerns and theories. Corporate Governance: An International Review, 5 (4), pp. 180--205.
This report gives the brief overview of the concept of corporate governance, its evolution and its significance in the corporate sector. The report highlights various key issues and concerns that are faced by the organizations while effectively implementing and promoting Corporate Governance.
Nottingham Trent University. (2013). Lecture 1 - An Introduction to Corporate Governance. Available: https://now.ntu.ac.uk/d2l/le/content/248250/viewContent/1053845/View. Last accessed 16th Dec 2013.
With duty of care, directors are obligated to be honest and to use prudent business judgement in the conduct of corporate affairs. They must use the same degree of care in their business decisions as they would with their personal ones. In the scenario, the Board of Directors closely examined the proposed transaction but they were unable to discover the gross inflation of Television Inc because of Jimmy’s forgeries. The directors executed their responsibility to the best of their ability and they should not be held liable. The shareholder should not have a case against the directors for violating their fiduciary duty of
As a consequence of the separate legal entity and limited liability doctrines within the UK’s unitary based system, company law had to develop responses to the ‘agency costs’ that arose. The central response is directors’ duties; these are owed by the directors to the company and operate as a counterbalance to the vast scope of powers given to the board. The benefit of the unitary board system is reflected in the efficiency gains it brings, however the disadvantage is clear, the directors may act to further their own interests to the detriment of the company. It is evident within executive remuneration that directors are placed in a stark conflict of interest position in that they may disproportionately reward themselves. The counterbalance to this concern is S175 Companies Act 2006 (CA 2006) this acts to prevent certain conflicts arising and punishes directors who find themselves in this position. Furthermore, there are specific provisions within the CA 2006 that empower third parties such as shareholders to influence directors’ remuneration.
The end of 2001 and the start of 2002 saw the end of a period of magnified share prices and booming businesses. All speculations of misrepresentation came to light and those firms which once seem unconquerable were now filing for bankruptcy. Within this essay, I shall discuss the corporate governance mechanisms and failures which led to the Enron scandal resulting in global corporate governance reforms being encouraged.
Corporate law is an area of law that directly relates to dealings with corporations within our legal system. “In Ontario, law compromises of statutes, regulations and cases. This means that to understand the law in any area, you must familiarize yourself with the statute or statutes that relate to that area, check related regulations where required, and read cases that show you how the courts have applied those statutes and regulations in real life situations” (Corporate Law for Ontario Businesses, 2012, pg. 2). In this paper I will be doing just that. I am going to be looking at a particular case that happened and examine how the courts applied legal regulations to a real life situation. I will also be examining what it means for a corporation to be a separate legal entity, as well as the level of importance a shareholder has within a company. All of these topics directly relate to the case I will be examining and are important to knowing in order to understand why the court made the decision that they did. Lastly, I will be discussing my own personal opinions on the case and the decision made by the courts.
...eve efficient resource allocation. Failure to achieve appropriate and efficient corporate governance could result in sub-optimal allocation of resources, abuses and theft by management, expropriation of outside shareholders and creditors, financial distress and even bankruptcy. While evaluating the role of corporate governance, it is imperative to also consider the levels of development of market institutions and other legal infrastructure including laws and enforcement that provide good standard for investor protection as well as ownership structures.
The Principle of Separate Corporate Personality The principle of separate corporate personality has been firmly established in the common law since the decision in the case of Salomon v Salomon & Co Ltd[1], whereby a corporation has a separate legal personality, rights and obligations totally distinct from those of its shareholders. Legislation and courts nevertheless sometimes "pierce the corporate veil" so as to hold the shareholders personally liable for the liabilities of the corporation. Courts may also "lift the corporate veil", in the conflict of laws in order to determine who actually controls the corporation, and thus to ascertain the corporation's true contacts, and closest and most real connection. Throughout the course of this assignment I will begin by explaining the concept of legal personality and describe the veil of incorporation. I will give examples of when the veil of incorporation can be lifted by the courts and statuary provisions such as s.24 CA 1985 and incorporate the varying views of judges as to when the veil can be lifted.
In the aftermath of Enron, Washington Mutual Bank, TYCO, and World Comm these companies went against the grain of what good ethical behavior is and what their respective company’s code of ethics were. The criminal justice system has made it clear that it will not allow companies and their executives to get away with the misuse of public trust by allowing them to make themselves rich at the expense of the employee. Where these crimes are both ethically and morally wrong, the CEO’s of major corporations are being punished by a ...
Achieving excellence in corporate governance by promoting good compliance and corporate governance culture as well as strengthening self and market discipline is one of the objectives of MCCG. The MCCG 2012 had sets out for about eight principles which followed by 26 corresponding recommendations. The principles mentions above are an establishment of clear roles and responsibilities, strengthen composition, reinforce independence, foster commitment, uphold integrity in financial reporting, recognize and manage risks, ensure timely and high quality disclosure and lastly strengthen relationship between company and shareholders. The first principles of MCCG which is roles and responsibility of the board shows that director’s code of ethics is a major part in corporate governance in Malaysia. where in this principles, formalizing ethical standards through a code of conduct and ensuring that company strategies promotes sustainability is required to be done by the directors. Moreover, this principle also is being expected also to formalize a Board charter. In sense of ethical issue, the director required to questioning themselves about the
Corporate governance is the policies, rules and regulations, by which a corporation shapes the way corporate officers, managers, and stakeholders perform their duties to create wealth for the entity. According to Lipman (2006), good corporate governance helps to prevent corporate scandals, fraud, and potential civil and criminal liability of the organization (p. 3). Most companies, whether formal or informal, have some type of corporate governance for the management to follow. Large companies will have a formal set of rules and regulations, while small companies frequently have spoken rules often due to lack time to form any type of formal policies. There is often no corporate governance with family owned companies.
There has been a drive towards corporate governance which has been driven by a greater need for shareholder protection. If investors feel well cushioned then there is a higher chance that t...
The office of the Director of Corporate Enforcement (ODCE, 2015), Ireland defines Corporate Governance as “the system, principles and process by which organisations are directed and controlled. The principles underlying corporate governance are based on conducting the business with integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions and complying with all the laws of the land”. It is the system for protecting and advancing the shareholder’s interest by setting strategic direction for the firm and achieving them by electing and monitoring the capable management (Solomon, 2010). It is the process of protecting the stakes of various parties that have their interest attached with a company (Fernando, 2009). Corporate governance is the procedure through which the management of the company is achieving the goals of various stake holders (Becht, Macro, Patrick and Alisa,