Corporate Governance Initiatives Research Articles

ANALYSIS AND EVALUATION OF CORPORATE GOVERNANCE QUALITY IN ENTERPRISES

Purpose. To examine the theoretical and methodological foundations of the concept of corporate governance quality in enterprises and their application. Generalization of the theoretical approach to formulating the essence of corporate governance and its quality. Examination of quality assessment methods. Analysis of indicators characterizing the quality of corporate governance. Formulation of measures to improve the quality of corporate governance. Methodology. The research methods included: analysis and synthesis - in substantiating the essence of corporate governance and formulating its structural components; graphical method - in presenting visual analysis results; logical generalization method - in analyzing theoretical approaches to organizing corporate governance. Results. This paper examined the concept, structure, and types of corporate governance. Key elements and approaches to its definition were considered. The process of implementing enterprise strategy was examined. Generalized studies on the quality of corporate governance were reviewed. A rating assessment of corporate governance quality was formulated. Preconditions for the formation of corporate conflicts among key participant groups were examined. A rating assessment of the potential for resolving and preventing corporate conflicts was discussed. An assessment of corporate governance rating was developed, including a component that evaluates the subjective composition of corporate relationship participants. Scientific novelty. Lies in the analysis of enterprise activities and calculation of a possible option to increase the corporate governance quality rating of the enterprise. Practical significance. The paper contains practical recommendations aimed at improving the existing mechanism for assessing the quality of corporate governance in enterprises.

Corporate Purpose and the Misleading Shareholder vs Stakeholder Dichotomy

Corporate purpose has again become a topic of discussion in company law and corporate governance. In the European Union, the tension between the societal approach to companies with its long history and the efficiency-based approach with its much shorter history (and weaker basis) is palpable in the heated debates ever since the European Commission launched its Sustainable Corporate Governance initiative in 2020. In this debate, shareholder primacy proponents have sought to frame the discussion within what we call a shareholder v stakeholder dichotomy. The dichotomy is misleading and dangerous in the way it takes company law proper out of the discussion and reinforces the shareholder primacy drive. We reject the dichotomy as a meaningful framing of the debate and seek to dismantle some of the strawmen set up on the road towards sustainable corporate governance. We instead discuss corporate purpose as a matter of company law and relevant to ensuring the contribution of business to sustainability, and how such an overarching purpose could be operationalised with a redefinition of duties of the board. With this backdrop, we analyse the Sustainable Corporate Governance initiative, concentrating on company law and sustainability aspects of the proposed Corporate Sustainability Due Diligence Directive.

Nirav Modi: A Case Study on Banking Frauds and Corporate Governance

In August 2018, Interpol and the Indian government filed charges against Belgian businessman Nirav Deepak Modi, who is wanted for illicit breach of confidence, deceiving, and dishonesty. The charges include illegal property dealing, corruption, criminal conspiracy, money-laundering, cheating, embezzlement, and contract breaching. Nirav is under investigation in connection with Punjab National Bank's $2 billion fraud scandal, later in March 2018, he filed for bankruptcy in The United States of America. Finally, in June 2018, he was traced in the United Kingdom, where he is living by taking political asylum. Further, in June 2019, the total assets of US$6.6 million were frozen in his Swiss Bank Account. Corporate Governance initiatives were laid down by government officials and intervention by reserve Bank was seek in the case to avoid future occurrence of such fraudulent practices.

Internationalization of SMEs: Do Board Characteristics Matter?

All around the globe, SMEs constitute the backbones of the countries' economies, with their contribution to a very high level of employment and enterprises, as well as GDP creation. Despite their significance in their economies, SMEs' engagement in export activities is limited, which could be enhanced with better corporate governance initiatives. The purpose of this study is to examine the association between one of the main components of corporate governance, i.e., board of directors (BOD), and SME internationalization. We apply stratified sampling by city, size, and sector to fairly reflect the SME population in Turkey, collecting data from 469 SMEs. To quantify the board characteristics, we construct a board index, composed of seven board-related variables. Then, we estimate cross-sectional regressions including firm-specific control variables and legal and industry dummies. Our findings show that the board index is strongly and positively associated with SME internationalization, implying SMEs can reach higher internationalization levels by fostering a more attentive approach toward the composition and functioning of their BODs. By focusing on the individual board characteristics, SMEs are likely to enhance their BODs’ monitoring and controlling functions in addition to their resource-acquiring functions, ultimately leading to higher internationalization levels.

Corporate Governance Practices and Performance of Deposit Taking Sacco's in Nairobi City County Kenya

Good performance of SACCOs is a key ingredient for its continuous existence and sustainability. The financial intermediation function carried out by SACCOs is dependent on how well they perform. Over the years, there have been various concerns by policy makers and academician over the SACCOs' dismal performance in Kenya. Despite the various corporate governance initiatives and measures implemented by important organizations such as the Centre for Company Governance, the issue of firm corporate governance remains unresolved, despite the involvement of the Capital Markets Authority and SASRA. The aim of this research is to determine how the performance of deposit taking SACCOs in Nairobi is influenced by corporate governance. The research focused on how stakeholder involvement, board composition, organizational structure, and control environment affect Nairobi-based deposit-taking SACCOs’ performance. The study's base was stakeholder, agency, stewardship, and resource dependence theory. The study employed a descriptive design. A census approach was used whereby all the deposit taking SACCOs in Nairobi were included in the study. The target population was 47 CEOs, 47 Sacco officers, 47 heads of finance and 47 heads of credit department. Data was gathered using structured questionnaire. In this research, to evaluate the construct and content validity, the researcher did a pilot test. Both descriptive and multiple regression analysis were used to examine the data. The findings showed that corporate governance factors (board composition, organization structure, control environment and stakeholder involvement) had a correlation coefficient (R) of 0.691 with an R squared of 0.477. From the ANOVA table corporate governance had a significant effect on performance of DT Saccos (F=28.513; p= 0.000). From the regression, corporate governance (board composition, organization structure, control environment and stakeholder involvement) had a positive effect on performance of DT Saccos. This study concludes that corporate governance (board composition, organization structure, control environment and stakeholder involvement) has a positive effect on performance of DT Saccos in Nairobi, Kenya. The study recommends that management of DT Saccos improve their corporate governance for increased performance levels. There is need for similar research based on other factors influencing performance, other measures of the variables, other Saccos & institutions as well as adopting secondary data.

Directors’ Duties During the Green Transition under EU Law

In response to the climate emergency, the European Union seeks to establish a new model of inclusive growth and depicts this shift as a ‘green, fair and competitive transition’. The article examines the EU sustainable corporate governance initiative commenced in 2018 that has crystalized after four years in a Commission’s proposal for a Directive on corporate due diligence, which is expected to be adopted by early 2024. The focus herein is on why and how directors’ duties under company law are being discussed and potentially reformed in the EU through this new Directive. At stake are current corporate governance arrangements that have enshrined powerful norms regarding profit-maximization and shareholder primacy that can hinder the green transition. This inquiry aims to map, simplify and explain the vast and rapidly evolving EU regulatory landscape. Drawing on EU materials from 2018 to 2023, the article documents the ‘misunderstanding problem’ and the ‘incentives problem’ that create a dissonance between the legal norm advanced by company law and the business norm practiced by the corporate governance system. Currently mired by profound disagreements between the Commission and the Council, the EU has a rare opportunity to deliver an innovative and noteworthy reform of directors’ duties in company law by creating new legal and market incentives while remaining faithful to the core tenets of this body of law.

Green finance and environmental, social, and governance performance

Firms' involvement in environmental, social, and corporate governance (ESG) initiatives is a key determinant of their sustainable development efforts. Using the setting of China's Green Financial System Guidelines and adopting a difference-in-differences design, we examine the effect of the green finance policy on ESG performance. We find that the adoption of the policy improves the ESG performance of heavily polluting enterprises. Channel analysis shows that the green finance policy aggravates the financing constraints of such enterprises. Further, the positive effect of green finance policy on ESG performance is more pronounced for firms with better internal and external governance.

Board characteristics and firm value: The moderating role of capital adequacy

The global financial crisis increased corporate world uncertainties. Therefore, to meet these challenges, firms take a more proactive approach to tackling various corporate governance and firm value initiatives and policies. This study aims to explore the moderating effect of capital adequacy on the relationship between board characteristics and the firm value of listed banks in Pakistan. To obtain a more robust empirical model and results, this study incorporates moderator and control variables. This study is based on half-yearly secondary data of 560 sample observations from 2009 to 2021. Multiple regression and panel data estimation techniques were employed for the analysis. The study used firm value as a dependent variable, proxied by Tobin’s Q, along with five independent variables, one moderating variable, and two control variables. The results of this study indicate that a higher capital adequacy ratio (CAR) increases firm value and has a moderating effect on board characteristics and firm value. Low proportions of women and independent directors on board affect firm value. The presence of risk management and audit committees in listed Pakistani banks, on the other hand, increases firm value. The banks in Pakistan have no problem with CEO duality. The study also found that bank size has a positive relationship with firm value, while bank age has a negative relationship with firm value.

Improving the Efficiency of Corporate Governance in Enterprises in the Electric Power Sector

Improving the Efficiency of Corporate Governance in Enterprises in the Electric Power Sector

İşletmelerin İç Denetim Yapısının Kurumsal Yönetim Sürecine Etkisi

İşletmeler gerçekleştirdiği faaliyetlerden hedeflenen verimin sağlanabilmesi, kendi bünyesinde kurduğu düzenin işlerliği ile doğrudan bağlantılıdır. Kurulan düzen işletmenin finansal ve finansal olmayan tüm bölümlerini kapsadığından yaşanabilecek aksaklıklarda doğrudan işletmeyi etkilemekte bazı vakalarda bu etkinin düzeyi yıkıcı olabileceğinden işletmeleri iflasa dahi sürükleyebilir. Özellikle 90’lı yılların sonu 2000’li yılların başında yaşanan başta Enron ve Worldcom muhasebe ve denetim skandallarının etkilerinin küresel ölçekte olması bu duruma verilebilecek somut örneklerinden bazılarıdır. İşletmelerde kurulan düzenlenin denetlenmesi iç denetim bölümünün sorumluluk alanındadır. İç denetim, işletmeye hizmet sunmak amacıyla, faaliyetlerini incelemek ve değerlendirmek için işletme içinde kurulmuş bağımsız bir değerleme ve denetleme işlevidir. İç denetim kapsamına gerek finansal nitelikli gerekse finansal nitelikte olmayan işlemler girmektedir. İç denetimin en önemli amacı, işletmedeki çalışanlar tarafından yapılabilecek hileli veya hatalı işlemleri önlemek ve tespit etmektir. Etkin bir iç denetim sonucunda işletmenin kurumsal yönetim uygulamaları sağlıklı şekilde hayata geçirebilir. Kurumsal yönetim, işletmelerin yönetiminin ve faaliyetlerini açıklık, adillik, sorumluluk ve hesap verilebilirlik ilkeleri doğrultusunda yürütülmesini amaçlayan ve bunlarla ilgili işlemleri oluşturan bir süreçtir. Kurumsal yönetimin amacı, sıralanan ilkeler birbirleriyle bir bütünü oluşturacak şekilde birbirleriyle ilişkilendirilerek işletmenin performansının ölçümü ve geliştirilmesi esasına dayanarak işlerlik kazandırılmasıdır.

Toward Greening City Logistics: A Systematic Review on Corporate Governance and Social Responsibility in Managing Urban Distribution Centers

Background: The ramifications of climate change are rampant: All stakeholders must act effectively and swiftly. Unsustainable and increased urbanization adds additional strain on combatting environmental degradation. Since the last decade, urban distribution centers (UDCs) have emerged in response to the steep rise in urban freight transportation and its negative impact on city congestion and air quality. Methods: In this paper, we conduct a comprehensive review of the performance of UDCs and investigate its alignment with the corporate governance (CG) and corporate social responsibility (CSR) initiatives, including the shareholders’ governance strategies and policies, as well as environmental, social, and economic measures. Our systematic literature review consists of multiple phases: In the first one, we utilize bibliometric tools to implement a quantitative analysis of the extant literature. Next, a cluster-based network analysis complements this analysis to describe the evolution of research in this area. Results: Our descriptive analysis categorizes existing research on UDCs based on CG- and CSR-compliant themes. We classify pertinent peer-reviewed articles into topical clusters and offer research opportunities related to improving the performance of UDCs. Conclusions: This study aims to stimulate further scholarly inquiry into sustainable city logistics and provides a knowledge-based guide for academicians and practitioners, logistics service providers, policymakers, and customers.

THE SIGNIFICANCE AND ESSENCE OF ESG IN THE FOOD SECTOR IN POLAND

The aim of the article is to assess the proposed EU regulations on the use of ESG (environment, society and corporate governance) in the food sector in Poland. The source of materials for the analysis were reports on sustainable development of the UN, European Environment Agency, European Commission and information from companies that are already implementing ESG principles. The essence and importance of ESG and the strategies used so far for sustainable production practices are discussed. An attempt was made to determine how companies in the food industry using ESG can improve their financial results. Key legal regulations were presented and the importance of ESG factors in building the value of enterprises in the agri-food sector was indicated. It was pointed out that companies from the food industry play an important role in meeting the needs of the population, both in terms of food and in solving the problem of the climate crisis. The growing importance of ESG issues creates both challenges and opportunities for the Polish food sector. Due to the growing interest of consumers and investors in the issues of evaluating companies according to ESG principles, the pressure to report these activities in company reports is growing. It has been shown that the implementation of environmental, social and corporate governance in enterprises is a necessity in the context of generating value and competitive advantage of enterprises.

Internal or external control? How to respond to credit risk contagion in complex enterprises network

This study investigates whether and how the two risk control strategies inhibit credit risk contagion among enterprises in the network. Learning from the corporate governance of enterprises, we propose internal and external strategies, respectively. Moreover, two improved epidemic models containing internal and external strategies strategy are established to investigate the impact of the two strategies on the risk contagion. The control effect of internal and external strategies is compared through simulation analysis. The results indicate that the enterprise's financial health, the cost and ability to apply the strategies are important factors affecting the control effect of strategies. For enterprises with general financial status (susceptible enterprise), when the costs of the two strategies are the same, they should choose external strategies. For enterprises with good financial status (immune enterprises), the external strategy is a more sensible choice. Our study provides new insights into controlling risk contagion in enterprise networks.

Kurumsal Yönetimin Finansal Başarısında İç Kontrol Sisteminin Moderatör Etkisi

In the literature, there are studies investigating whether the internal control system and corporate governance principles have an effect on financial performance. However, there is no study investigating the moderator effect of the internal control system on the financial success of corporate governance. For this purpose, it was examined in this study whether there was a moderator effect of the internal control system on the financial success of corporate governance. The study was conducted on companies in the Borsa Istanbul (BIST) corporate governance index (XKURY). The effectiveness of the internal control system was determined by the survey method, and then corporate governance effectiveness ranking was obtained with corporate governance rating scores. The moderator effect was investigated by regression analysis using the data obtained. As a result of the analysis, it has been determined that the internal control system has a moderator effect on the financial success of corporate governance. On the other hand, it is concluded that although corporate governance is thought to have a moderator effect on the financial performance of the internal control system, it does not. This result indicates that the efficiency of the internal control system should be increased for the financial success of corporate governance in enterprises. The reasons for this theoretically unexpected result were investigated in the study.

Higher expected returns for investors in the energy sector in Europe using an ESG strategy

The energy sector is transforming as new regulations are set in place to take into account the environmental and social factors as well as corporate governance initiatives which can be integrated within organisations. Companies are pushing towards having better environmental, social and governance (ESG) scores as it impacts shareholders, investors, employees, customers amongst many others. The methodology used in this paper is quantitative and includes an analysis of the financial performance of publicly listed companies using return on equity, return on assets, return on sales, return on investment and also used the SARIMA (seasonal autoregressive integrated moving average) model to forecast revenues for the companies included in the research. The aim of this study is to investigate the impact of ESG activities within companies and how it affects investor returns. Considering regional and sectoral effects an observation of a positive relationship between ESG and investor returns is identified.

New Directions in the European Union’s Regulatory Framework for Corporate Reporting, Due Diligence and Accountability: The Challenge of Complexity

AbstractClimate change and the pursuit of sustainability and sustainable business might be regarded as among the world’s “wicked problems”, especially as they are multi-dimensional problems. Achieving corporate accountability in this context is also difficult when corporate structures are complex as they operate globally and through supply chains. At the European level, under the Green Deal, the Sustainable Finance Initiative and the Sustainable Corporate Governance Initiative include new reporting requirements to amend and expand the scope and application of the 2014 Non-Financial Reporting Directive, alongside changes to directors’ duties to ensure they take account of stakeholders’ needs and environmental and human rights due diligence requirements. This paper will argue that these legislative and regulatory efforts are to be welcomed, but the complexity of the regulation threatens to undermine its potential impact. It may therefore be necessary to reduce some of the complexity of the regulatory arrangements. However, some complexity may increase resilience and adaptability for responding to the risks involved in the uncertainty and unpredictability of climate change and in dealing with complex corporate structures. The answer is to provide robust regulation that will prompt the corporate behaviours required to avoid the catastrophic trajectory we currently face.

CSR Contracting, Materiality, and Their Effects on Financial and Non-financial Performance

Although the recent corporate governance initiative of tying environmental, social, and governance (ESG) targets to executive compensation is gaining popularity in developed economies, difficulties have been reported in their identification and selection due to a heterogeneity of stakeholder interests. Drawing on the agency and stakeholder theories, we apply the concept of materiality for the design of ESG targets in executive compensation and tests its effects on corporate financial and non-financial performance. By focusing on a unique sample of S&P 1,500 companies from 2011 to 2019, we find that material CSR contracting has a negative effect on market-based financial performance and a positive one on environmental performance. These results are robust to endogeneity and further tests suggest that this approach provide greater effects than simply adding general ESG targets in executive compensation. These findings imply a trade-off between corporate financial performance and corporate non-financial performance in the short-term which raises questions about the primary motivations of corporations and the soundness of shareholder-oriented materiality frameworks.

INFLUENCE OF CORPORATE GOVERNANCE RATINGS ON ASSESSMENT OF NON-FINANCIAL THREATS TO ECONOMIC SECURITY OF JOINT STOCK COMPANIES

Abstract. In modern conditions of transformation and globalization of economic processes, rapid development of information and science-intensive technologies, each company seeks to ensure effective management of its activities and achieve a higher level of competitiveness. The level of quality of corporate governance influences the formation of the rating of enterprises and plays an important role in making decisions about investing in the company. At the same time, ensuring financial security is the most urgent task of society, the state, enterprises and organizations of all forms of ownership, entrepreneurs, and every citizen. In this regard, the practical implementation of recommendations to maintain financial security at the appropriate level will contribute to the completion of market transformations in the financial and credit sphere of the country, increase the level of financial security of enterprises, increase human security. It is corporate-type enterprises, namely joint-stock companies and limited liability companies, that are the main types of business structures that ensure the development of a market economy. Therefore, it is advisable to pay attention to the features of ensuring and assessing the quality of corporate governance of enterprises aimed at implementing the model of long-term sustainable development. The purpose of the article is to establish the impact of corporate governance ratings on the assessment of non-financial threats to the economic security of joint stock companies. In the article In the article the systematization of corporate governance indicators by criteria is carried out; the main components of the S&P corporate governance rating methodology, the CORE rating, the main components of the RID-Expert RA corporate governance rating methodology, the main components of the corporate governance methodology of the Crichton-Miller and Warman methodology, the main components of the Corporate Governance rating rating Credit Rating Agency; the advantages and disadvantages of methods of compiling corporate governance ratings are highlighted. Keywords: rating, corporate governance, economic security, joint-stock company, threats, assessment. JEL Classification E44, G30, K22 Formulas: 2; fig.: 5; tabl.: 0; bibl.: 36.

Board gender diversity, environmental innovation and corporate carbon emissions

• A negative relationship between board gender diversity and carbon emissions. • Environmental innovation amplifies the extent of this relationship. • Environmental innovation moderating effect is clearer for carbon-intensive firms. • Board diversity enhances better board effectiveness. This article investigates how the board diversity affects firms’ carbon emissions reduction and whether environmental innovation moderates this relationship. In addition, the moderating effect of environmental innovation in carbon-intensive versus non-carbon-intensive industries is also examined. Using data of the companies listed on the Standards & Poor's 500 index from 2002 to 2018, the 2SLS regression results indicate a statistically significant negative relationship between board gender diversity and carbon emissions. Environmental innovation amplifies the extent of this relationship. We find evidence that the moderation effect of environmental innovation is more pronounced for carbon-intensive firms than non-carbon-intensive firms. Our findings reinforce various corporate governance initiatives and public policy being undertaken all over the globe to encourage more gender diversity in the board of directors, demonstrating that board diversity enhances better board effectiveness in satisfying the needs of broader groups of stakeholders’ interests. The findings could be beneficial for stakeholders and regulators concerned with improving corporate governance mechanisms as well as reducing the carbon footprint.

Derivative Action- An Impartial Right given to Minority Shareholders under Pakistan’s Legislation

Derivative Action- An Impartial Right given to Minority Shareholders under Pakistan’s Legislation