Corporate Governance Problems Research Articles

The role of auditing in corporate governance practice in emerging economies: insights from South African state-owned enterprises (SOEs)

PurposeWithin the context of public sector accountability, the purpose of this paper is to examine South African state-owned enterprises (SOEs) auditing practices and how they have contributed to mitigating prevalent corporate governance issues in South African SOEs.Design/methodology/approachThis paper utilised a thematic content analysis of archival documents relating to South African SOEs. Firstly, to assess the extent to which the auditing dimension of the corporate governance codes, applicable to South African SOEs, conforms with best practices. Secondly, to determine the extent to which the audit practices of all the 21 South African SOEs listed in Schedule 2 of the Public Finance Management Act, have implemented the identified best audit practices.FindingsThe findings suggest that South African SOEs appear to have adopted and implemented best audit practices to enhance the quality of their accountability in relation to their corporate governance practices, as contained in their applicable corporate governance frameworks. However, despite the high levels of conformance, the observation that most South African SOEs continue to fail and require government bailouts, appears to suggest that auditing has no bearing on poor SOE performance, and that other corporate governance factors may be at play.Practical implicationsThe discussion and findings in this paper suggest that the auditing practices of South African SOEs are adequate. However, that SOEs in South Africa continue to be loss-making may imply that this has contributed little to mitigating their corporate governance problems. Thus, policymakers and standard setters, including the Institute of Directors South Africa and relevant oversight bodies should pay attention to better developing means by which to curtail fruitless and wasteful expenditures by South African SOEs through improved corporate governance practices.Social implicationsMost SOEs’ mission statements encourage SOEs to be socially responsible and utilise taxpayers’ monies efficiently and effectively without engaging in fruitless and wasteful expenditure. This study is conceived in this light.Originality/valueTo the best of the author’s knowledge, while acknowledging previous studies, this paper is the first to explore this topic in the context of SOEs and in the context of Africa.

임원배상책임보험의 통지조항 - 기업보험성 및 설명의무와 관련하여

D&O insurance goes beyond covering the risk of lawsuits against directors’ personal property and has become an essential element for the sustainable management of companies. The D&O insurance subscription rate of listed companies in Korea has increased to about 75% as of 2023, but the number of claims in 2022 is 122 and the loss ratio is only 9.6%. The reason why D&O insurance is not activated in Korea is due to the problem of corporate governance in which diectors are not effectively held accountable, as well as the English terms and conditions of the United States, which are based on American corporate law, which is different from Korea’s. The terms and conditions have been written, and the Korean terms and the US English terms and conditions are used as is, resulting in unclear or unreasonable interpretations. In particular, the notice provision, which is the essence of claims-made policy, is the most confusing part in practice and rulings. The notice provision makes immediate notification of a claim a condition precedent for policy and includes the obligation to consent in advance to settlement or defense costs. Since D&O insurance is a corporate insurance, the principle of prohibition of disadvantageous changes in Article 663 of the Commercial Act does not apply, and the duty to explain should be exempted or relieved. If the obligation to notify the occurrence of an insurance accident is not complied with and prior consent for defense costs is not obtained, the insurance shall not be paid. Even if the insurer is in breach of the duty to explain, it should be solved by the interpretation of terms and conditions, and the insurer’s reponsibility for damages.

Research on the Measures and Cost Benefits of Corporate Governance

Corporate governance is an important mechanism for protecting and promoting the interests of shareholders and promoting the healthy development of the companies. Corporate governance is a framework and principle of the internal organization management that aims to balance power among different stakeholders and to safeguard stakeholders' interests. Enterprises at different levels need effective corporate governance to maintain the positive development of the enterprise. Therefore, this paper analyzes corporate governance in firms through qualitative and theoretical analyses with the aim of exploring the measures that generate corporate governance, the costs, and benefits of these measures, and to make recommendations to improve corporate governance. Enterprises need to establish independent director accountability mechanisms to strengthen the regulatory awareness of the enterprise in the face of the problems of corporate governance. Meanwhile, it needs to establish incentive mechanism to encourage, optimize the equity structure and sound managerial market to help enterprises improve the management mechanism.

ISLAMIC ETHICAL LEADERSHIP

The purpose of this paper is to explore the leaders’ work ethics from Islamic perspectives towards sustaining the performance of the business organisations. A conceptual discussion based on the character of Prophet Muhammad (pbuh) which sourced mainly from Quran and Sunnah was provided, particularly from the prophetic character namely Siddiq (truthfulness). In addition, this paper also examines and reviews prior studies on directors’ work ethics and ethics from various religious viewpoints. Based on Quran and Sunnah, this paper suggest that the current corporate governance and integrity problems among the directors of the corporate company can be resolved by focusing on the characters and virtues as guided by the Quran and shown by the life of the Prophet Muhammad (pbuh). The outcome of this paper contributes in way of it can be used and applied by the firm and policy makers to construct a comprehensive ethical guideline that based on the prophethood virtues and values.

The Impact of Theory U on Corporate Governance as an Essential Risk Management and Performance Improvement Tool

This paper established the effectiveness of Theory U as a risk management and performance management tool, thereby enhancing an efficient corporate governance system in organizations. The authors provided insights into how organizations can solve corporate governance problems and ascertain a risk management culture that, in turn, optimizes opportunities and minimizes threats to the business. Theory U offers a transformative approach to corporate governance and drive performance improvements. This is attained by fostering a culture of collaboration, innovation, and adaptability, which enhances the effectiveness of governance mechanisms. While implementation may pose challenges, companies that embrace Theory U as an essential risk management and performance improvement tool stand to reap significant benefits, including enhanced resilience, sustainable value creation, and long-term success. The authors outlined the benefits of Theory U and several examples of empirical case studies of organizations that have benefited from this model. Adopting the positivism paradigm of research, this paper has provided examples of how organizations utilized this model. Three hypotheses were tested to validate the data results. In sum, the authors emphasized that critical corporate governance issues can be overcome by adopting this innovative approach, thus enabling organizations to demonstrate enhanced organizational resilience and thrive in today's rapidly changing business environment.

A Study on Accounting and Auditing

The purpose of the study is to explore the importance of accounting and auditing. In past couple of decades, the count of fraud cases is increased, and it brings a lot of questions in the minds of stakeholders. In order to destroy the problems of corporate governance all companies must inculcate practice of accounting and auditing. Few things are very essential when we inculcate practice of accounting and auditing are explained in this research study. As accounting frauds are to be reduced to do so, auditors must have freedom. In order to increase the authenticity of transaction the auditors must have responsibility also. Finally, our research puts light on the impact of internal auditing and importance of accounting and auditing and how auditors’ responsibility and freedom is important to improve corporate governance and investors protection.”

Governing corporations with ‘strangers’: Earning membership through investor stewardship

Despite decades of theorising and empirical research, the problems of corporate governance seem intractable, particularly the relationships between investors and companies. The thought experiment in this paper asks us to look at the problem through a fresh lens. It draws on the quaint British legal custom of calling shareholders “members”, and then uses the political philosopher Michael Walzer’s idea of membership in states, clubs, neighbourhoods, and families to draw lessons for the corporate world. This paper suggests that seeing how Walzer conceives “strangers” in a polity, with fewer rights but a path to membership, lets us rethink shareholder rights as something to be earned, through engagement and commitment, that is, through stewardship. Rethinking what membership of a company might mean points to a pragmatic escape from short-termism without institutional reform.

Analysis of China Unicom Corporate Governance Problems and Solutions

Tian Guoqiang, an economist, pointed out that "the mixed ownership economy with cross-shareholding and mutual integration of state-owned capital, collective capital and private capital is an important form of realizing the basic economic system. “The implementation of mixed ownership is conducive to expanding the functions of state-owned capital, maintaining and increasing its value, improving its competitiveness, and helping all kinds of ownership capital learn from each other, promote each other and develop together (Tian, 2005). This shows that China has taken a big step in the reform of mixed ownership with mixed ownership enterprises as the main body. In enterprise management, corporate governance determines the long-term development plan and strategic direction of enterprises. Therefore, the reform of corporate governance structure of mixed ownership enterprises is of great significance to deepen the reform of mixed ownership and the related development of China's economic field (Tian, 2005).The purpose of this paper is to explore the establishment of corporate governance framework of mixed ownership enterprises under China's national conditions, analyze the existing problems of China Unicom, such as the imperfect structure of the board of directors and the loopholes in the professional manager system, and put forward solutions such as optimizing the structure of the board of directors, strengthening the construction of managers, and establishing equity incentive mechanism, so as to improve the corporate governance structure of China Unicom. And provide solutions and experience for the follow-up development of China's state-owned enterprises.

Challenges of CSR in Sub-Saharan Africa: clarifying the gaps between the regulations and human rights issues

This paper discusses the practice of Corporate Social Responsibility (CSR) and its challenges in Sub-Saharan Africa. The main purpose is to highlight and clarify the gaps between CSR regulations and human rights abuses caused by business organizations.From a historical perspective, natural resources have been recognized as a common reason for pushing the CSR agenda in Sub-Saharan Africa, especially with the presence of big businesses in the outcome of globalization. However, despite a development-oriented CSR agenda and therefore on African local needs such as hospitals, housing, and roads, big businesses that have embarked on CSR activities are often involved in human rights violations. This is despite the insertion of human rights in some African state regulations, the UN Global Compact, and the UN Guiding Principles on Business and Human Rights in which those businesses are signatories. This is the case in Gabon, Nigeria, and South Africa whose regulations were established by the respective states indicate business’ broader societal priorities directed towards stakeholders (local communities in particular) but in terms of corporate obligations, ‘Human Rights appear to be a blind spot in CSR’.The reasons for that are indicated in the findings of this qualitative inquiry, which reveals deep problems of corporate governance and little understanding of corporate human rights in domestic legislation. According to international law, human rights fulfillment focuses on nation-states as sole bearers. This means other non-state actors have indirect human rights responsibilities. Therefore, the challenge remains to extend and interpret existing domestic and international frameworks to include CSR alongside traditional state obligations. This could make corporate human rights more ‘applicable’ to businesses.Previous research by Visser and Amodu has focused on proposing models to respond to the challenges of CSR in Africa. This paper clarifies the challenges of CSR with human rights issues and suggests an extension of the current legislative framework covering CSR. The article is qualitative and has used a Desk Research study approach that includes published academic papers, government documents some secondary data such as case studies, interviews, and discussions.

Characteristics of good corporate governance in Indonesian export financing institutions

Indonesia is a country that seeks to increase export activities by providing facilities in terms of capital through the Indonesian Export Financing Agency. The Covid-19 pandemic affected export activities, so that exporter sales decreased, impacting LPEI financing. Receivables are a crucial indicator for assessing the performance of the LPEI function because high bad debts are an indicator of the failure of LPEI in managing the business as a result of ignoring the principles of good corporate governance, causing liquidity, profitability, and solvency problems. This study aims to analyze the characteristics of good corporate governance in LPEI and alternative dispute resolution in the problem of bad debts that LPEI can carry against business entities. The research method uses normative research, namely legal research that uses legal sources obtained by approaching statutory regulations. Based on the study's results, it was found that the financing experienced a breakdown because it ignored the principles of good corporate governance. Bad debts make LPEI indirectly harm the state, so LPEI must strive to fulfill its debtor's obligations. Dispute resolution can be carried out by restructuring accounts receivable through rescheduling, re-conditional, re-arrangement, non-litigation efforts through arbitration and mediation, and litigation efforts carried out by filing a lawsuit to the District Court. Dispute resolution recommendations are expected to reach a fair agreement for the parties.

ОСНОВНЫЕ ПРОБЛЕМЫ КОРПОРАТИВНОГО УПРАВЛЕНИЯ В СОВРЕМЕННЫХ УСЛОВИЯХ

The purpose of the study is to study the concept of corporate governance, as well as the problems of corporate governance in modern conditions. The article is theoretical and descriptive in nature. Key issues, goals and principles of corporate governance are considered.

Corporate Governance, Corporate Social Responsibility and the Corporation's Purpose

Purpose: To rethink the idea that corporate governance is about the alignment of interests of all stakeholders. To indicate this idea’s main problems, in making the manager’s job significantly more difficult, and in creating numerous avenues for managers seeking merely to advance their own interests. To look into corporate social responsibility in the light of value rationality, and to understand that taking into account stakeholders’ interests may be extraneous to purpose rationality and to the corporation’s purpose. To indicate this main difference between a corporation as a juristic person of limited purpose on the one hand, and a state government on the other. To relate these ideas to Freeman’s “new story of business” and to the declaration that profits are an outcome of successful business rather than its purpose. Design/methodology/approach: The approach is conceptual/ philosophical. Findings: The stakeholder theory of corporate governance is misguided, insofar as it is taken to assume that the purpose of the corporation is to serve the various interests of all stakeholders. Considerations of corporate social responsibility may (and should) be understood as value rational, having little bearing on the corporation’s purpose, i.e. shareholders’ profit, but placing essential constraints on the means of its achievement. This however should not be seen as being at odds with Freeman’s “new story of business”. Research limitations/implications: The “stakeholder theory of corporate governance” may be construed (in light of the above) as placing the interests of stakeholders other than the shareholders, outside the corporation’s purpose. History may result in corporations taking over parts of government, thus integrating common good in the corporations’ purpose from a normative point of view. Originality/value: The application of the distinction between value rationality and purpose rationality, to what CSR means for the purpose of the corporation and for stakeholder theory, is totally original, and so is the main conclusion of the argument. Summary: The original core problem of corporate governance is the agency problem and the alignment of interests between managers and shareholders, under the principle that the purpose of the corporation that managers ought to serve is shareholders’ profit. The idea of corporate social responsibility has brought about stakeholder theory, that is the idea that corporate governance is about serving all stakeholders’ interests. This multiplies the conflicts of interests to be aligned and creates in effect many more avenues for managers seeking to advance their own interests. We present an example of a board of directors seeking to allocate a substantial part of the corporation’s wealth to the alleviation of social poverty, and we revisit the question of the purpose of the corporation as a legal boundary to the possibilities of the juristic person that is the corporation. We advance the idea that corporate social responsibility and taking stakeholders other than shareholders into account is about value rationality, not purpose rationality, and should not be understood as necessarily depending on long term profit or any win/win situations. It mostly places constraints on the purpose rational means to achieve the corporation’s purpose, which remains shareholders’ profit. It must not be understood to alter this purpose, nor to make the corporation assume a social role paralleling state government. Freeman’s advocacy of the “new story of business”, and his concomitant ideas that business is about the business idea rather than profit, that people are not primarily driven by greed, that stakeholder relationships are crucial for business, and that creative imagination in balancing all values and interests is at the root of greater value creation, are in fact perfectly reconcilable with the above.

Executive Compensation Schemes: Accelerants of Agency and Corporate Governance Problems in South Africa

Executive remuneration has been less analysed and there is need for scrutiny on executive compensation structures and their implications on corporate governance. The study aimed to ascertain the role of executive compensation in accelerating agency and governance problems for FTSE/JSE Top-40 companies from 2008 - 2016. A Generalised Method of Moments was employed, and the results revealed that executive compensation structures can be accelerants of agency and corporate governance problems as the performance was found to negatively affect directors' remuneration. Also, governance had a negative impact on remuneration. Share option trading results confirm agency conflict as net trades and the number of directors that traded on their share options were found to deteriorate with improvement in remuneration. Therefore, it is recommended that the remuneration of executives must be aligned with performance and corporate governance. Moreover, executive directors must exercise their share options after the vesting period and in years they meet predetermined performance targets. Companies should adopt the proposed executive remuneration model in their policies to ensure that executive remuneration considers the governance of the companies they lead. The study's proposed model can be modified in future studies to incorporate other performance matrices such as the six capitals. Keywords: Remuneration Model, Executive Compensation, Governance, Share Options

CORPORATE GOVERNANCE, DISCLOSURE QUALITY, AND COST OF EQUITY: EVIDENCE FROM PAKISTAN

To be successful in the financial world, you must know how the public disclosure of business information affects stock prices. Specifically for Pakistan, this research will help us better understand the relationship between corporate governance, disclosure quality, and equity cost The Sys-GMM model has been employed by 167 non-financial enterprises listed on the Pakistan Stock Exchange since 2017. (PSX). Research shows it was in use between 2018 and 2020. The Sys-GMM technique for estimating may be used to account for endogeneity in corporate governance problems. We discovered that GMM projections failed to account for endogeneity, resulting in inaccurate conclusions, using pooled OLS and fixed-effect estimates. According to the research, the cost of equality and financial transparency are mutually incompatible. All of these factors contribute to the PSE's stock price decline, including board size, concentrated ownership, and CEO duality. The research es-tablishes a relationship between independent audit committees and high-quality audits and reduced equity expenses. Independent directors and competent auditors command a premium on the PSX. The duration of the approval process for financial statements has no bearing on the board's independence. Due to the scarcity of information disclosed in annual reports, investors anticipate a higher rate of return. The conclu-sions of the research may be beneficial to Pakistan's corporate govern-ance authorities and investors.

Effects of Quality of Financial Statements and CEO Turnover

The purpose of this study is to explore the effect of CEO turnover and CFO turnover on earnings management. In addition, Taiwan’s authorities will require listed companies to complete the establishment of audit committee replacing supervisors in 2022. Corporate governance is not an overnight phenomenon. It has been existing from a long time. It is only that the beginning of 21st century when colossal enterprises started to fall, government across globe started giving it due credit. The present paper is an attempt to trace the history of corporate governance. It starts with discussing various theories which led to the development of such an important concept and then dwells on various models in which economies employ corporate governance in their structure and finally the evolution of corporate governance across globe. The paper sheds light on important committees and reforms which have been the genesis of corporate governance across globe. It undertakes an extensive literature review on different aspects of corporate governance. Corporate governance is a concept which still debatable among experts in describing it. The purpose of this study is to explore how the implementation and principal problems of good corporate governance in the management of current limited liability company.

INCREASING CENTRALISATION IN CHINA: A BANE FOR ECONOMIC GROWTH

This article contends that increasing centralisation of decision-making in China will undermine the country’s future economic growth. It highlights the declining role of private enterprises and the increasing role of state-owned enterprises (SOEs) in the economy, and the extension of Communist Party influence in both SOEs and the private sector through the Party’s Organization Department and United Front Work Department. It argues that the increasing role of the state in the economy over the past decade has stifled growth through a decline in ‘total factor productivity’ because of increasing misallocation of resources. Centralisation, with associated losses in efficiency, objectivity, agility, speed and finesse regarding allocations of risks and investment, has debilitated decentralised decision-making and reduced the incentives for undertaking risks and innovation. The article argues that increasing Party control over the SOEs and the private sector will negatively impact the corporate structure and management decisions, exacerbate the fundamental problems of corporate governance and limit or hamper innovation.

Analysis on Corporate Governance of State-owned Enterprises

Corporate system has become one of the most important forms of economic organization in the modern enterprise system under the condition of market economy. Whether the corporate governance structure is perfect or not plays a decisive role in the normal operation and development of the economy. So far, the reform of state-owned enterprises has lasted for nearly 40 years, and the reform has made great achievements, but there is still a certain distance from the reform goal. The corporate governance problems of state-owned enterprises lead to the rights of state-owned enterprises cannot be fully realized and guaranteed. The Realistic Dilemma of Corporate Governance in China appears. This paper discusses the market disadvantages in the operation of state-owned property rights, the governance structure of state-owned enterprises, and the existing problems of state-owned enterprises, and how to overcome these disadvantages.

Rethinking and Constructing the Mechanism of Directors’ Exemption from Liability under the Revision of the Chinese Company Law

Since its introduction, Chinese Company Law has played a great role in the development of Chinese business system, but with the development of the economy, continuous technological innovation and changes in the world environment, the current Company Law can no longer meet Chinese current economic development and needs to be improved and modified. By examining the current legislative situation in China, the provisions on directors’ liability in China are too strict, which seriously affects the directors’ business judgment in favor of the company’s development in the process of business decision making and does not provide the company directors with the protection they deserve, but instead applies a more stringent standard of liability to directors. At present, there is a double lack of statutory exemption system and intentional exemption system for directors’ liability in Chinese corporate legal system, and in the field of practice, there is a misinterpretation of the judgment standard of directors’ liability for diligence, which needs to be clarified. By analyzing the value and function of the director’s liability exemption system, the article seeks ways to solve the problem of director’s liability exemption, protects directors from unfortunate punishment by introducing business judgment rules, reasonably constructs the intentional exemption mechanism of director’s liability, and clarifies the judgment standard of director’s liability for diligence. The director liability exemption system is reasonably constructed so as to improve the corporate governance problem in China and promote the internationalization level of Chinese company law.

Blockchain in Capital Markets: A Revolution of the Trading System in Stock Exchange

This study aims to explore the benefits of implementing blockchain technology as a basis for stock trading in Indonesia to improve the corporate governance of issuers. Two main factors that trigger the emergence of agency problems in corporate gov-ernance in traditional stock exchanges are differences in interests between principals and agents and the complexity of the investment chain. This research is a documen-tary research where the researchers search for references in the form of previous research using the keyword “blockchain” in the “publish” or “perish” application. Next, the researchers organize, make a written summary, and interpret the findings obtained based on the the researchers’ thoughtd. Based on the interpretation of pre-vious research, compared to traditional stock trading systems, blockchain technology has several advantages, such as high information transparency, improved stock liquidity, high monitoring by various parties, and the availability of information in real-time, thereby creating better corporate governance. The implementation of blockchain technology can reduce information asymmetry in the relationship between principal and agent, which in turn can improve the quality of corporate governance due to transparency, accountability, and high trust between all parties involved in this blockchain technology network.

Modern problems of corporate governance in the Russian Federation

Modern problems of corporate governance in the Russian Federation