Financial Aspects Of Corporate Governance Research Articles

Integrated Reporting and Sustainable Corporate Governance from European Perspective

AbstractAccording to the Cadbury Committee (1992) classical definition, corporate governance is ‘the system by which companies are directed and controlled.’ In the Cadbury Report and in other mainstream corporate governance codes, ‘system’ refers only to the ‘financial aspects of corporate governance’, that is, shareholder value and emphasis on the board’s and the management’s accountability to providers of financial capital only. During the last few years however, sustainability has been included through ‘integrated reporting’ in corporate governance codes especially in Africa (South Africa) and Asia (Malaysia, Philippines). For example, the South African King reports on corporate governance connect the use of integrated reporting to report on an organisation’s corporate governance practices and economic-social-environmental triple-bottom-line performance.The leading normative framework for integrated reporting, the International Integrated Reporting Council’s International <IR> Framework, is based on an idea of ‘shared value creation’ by providers of the ‘six capitals’ (financial, manufactured, intellectual, human, societal and environmental capitals). As such integrated reporting represents a stakeholder management model already integrated – at least on the text level – in many corporate governance codes, just enlarging the concept of capital providers from shareholders only to other internal stakeholders, and the goal of capital efficiency and profit maximisation from financial capital only to other five forms of internal capital provisions. It is also a new step in the development of social and environmental accounting and reporting, rooting from the 1970s and sustainability reporting from the 1990s.The concept of a ‘business model’ represents the way how an organisation creates value, comprising all its activities, its relationships with stakeholders and its tangible and intangible assets and liabilities, and finally the boards responsibilities, as for the board, ‘corporate governance’ and sustaining and developing the company’s business model are essentially the same thing. In the end of the day, it is a question what kind of ‘business model’ integrated reporting based corporate governance really reflects, and how it possible varies from shareholder-centred business model.The purpose of this paper is to test (1) what kind of stakeholder model, if any, integrated reporting and especially International <IR> Framework represents, (2) what is the impact, if any, of integrated reporting to material corporate governance in the codes it is included in, and (3) if yes, does an integrated view and especially the ‘integrated thinking’ behind International <IR> Framework represent a genuine sustainable value creation driven business model based on the boundaries of the planet and social foundation for the humanity, or is it only a view to encourage organisations to take care of the profits of the specific capital providers.

Integrated Reporting and Sustainable Corporate Governance from European Perspective

According to the Cadbury Committee (1992) classical definition, corporate governance is ‘the system by which companies are directed and controlled.’ In the Cadbury Report and in other mainstream corporate governance codes, ‘system’ refers only to the ‘financial aspects of corporate governance’, that is, shareholder value and emphasis on the board’s and the management’s accountability to providers of financial capital only. During the last few years however, sustainability has been included through ‘integrated reporting’ in corporate governance codes especially in Africa (South Africa) and Asia (Malaysia, Philippines). For example, the South African King reports on corporate governance connect the use of integrated reporting to report on an organisation’s corporate governance practices and economic-social-environmental triple-bottom-line performance. The leading normative framework for integrated reporting, the International Integrated Reporting Council’s International Integrated Reporting Framework, is based on an idea of ‘shared value creation’ by providers of the ‘six capitals’ (financial, manufactured, intellectual, human, societal and environmental capitals). As such integrated reporting represents a stakeholder management model already integrated - at least on the text level - in many corporate governance codes, just enlarging the concept of capital providers from shareholders only to other internal stakeholders, and the goal of capital efficiency and profit maximisation from financial capital only to other five forms of internal capital provisions. It is also a new step in the development of social and environmental accounting and reporting, rooting from the 1970s and sustainability reporting from the 1990s. The concept of a ‘business model’ used in the Framework represents the way how an organisation creates value, comprising all its activities, its relationships with stakeholders and its tangible and intangible assets and liabilities, and finally the boards responsibilities, as for the board, ‘corporate governance’ and sustaining and developing the company’s business model are essentially the same thing. In the end of the day, it is a question what kind of ‘business model’ integrated reporting based corporate governance really reflects, and how it possible varies from shareholder-centred business model. The purpose of this paper is to test (1) what kind of stakeholder model, if any, integrated reporting and especially International Integrated Reporting Framework represents, (2) what is the impact, if any, of integrated reporting to material corporate governance in the codes it is included in, and (3) if yes, does an integrated view and especially the ‘integrated thinking’ behind the Framework represent a genuine sustainable value creation driven business model based on the boundaries of the planet and social foundation for the humanity, or is it only a view to encourage organisations to take care of the profits of the specific capital providers.

The Rise of Corporate Governance in the U.K.: When and Why

While issues that prompt corporate governance responses are endemic to the corporate form, the term “corporate governance” only began to feature with any regularity in discussions of public companies in Britain as the 1990s got underway. It is well known that work done by the Committee on the Financial Aspects of Corporate Governance, known as the Cadbury Committee, played a major role in fostering the rise of corporate governance in the U.K. at that point. This paper explains why the topic did not move into the spotlight in Britain in the 1970s, a development that might have been anticipated given that explicit references to “corporate governance” were beginning in earnest then in the United States. The paper also identifies trends that likely would have ensured that corporate governance would have risen to prominence in Britain in the early 1990s in the absence of the Cadbury Committee’s deliberations.

Yönetim Kurulu Büyüklüğü ile Finansal Performans Arasındaki İlişkiye Yönelik Literatür Taraması

The Cadbury Report (1992), a pioneer in outlining the financial aspects of corporate governance, was the first to put the spotlight on corporate boards of directors. Around the same time, academic work started to gain impetus with the Hermalin and Weisbach (1991) study. The aim of this study is to examine the relationship between the number of members of the board of directors with accounting and market-based performance indicators empirical research in the national and international literature. For this purpose, all studies conducted in the early 1990s up to the present day are classified examined in a systematic way. A significant part of the board of directors of the studies indicated a negative relationship between financial performance.

The Rise of Corporate Governance in the UK: When and Why

While issues that prompt corporate governance responses are endemic to the corporate form, the term ‘corporate governance’ only began to feature with any regularity in discussions of public companies in Britain as the 1990s got underway. It is well known that work done by the Committee on the Financial Aspects of Corporate Governance, known as the Cadbury Committee, played a major role in fostering the rise of corporate governance in the UK at that point. This article explains why the topic did not move into the spotlight in Britain in the 1970s, a development that might have been anticipated given that explicit references to ‘corporate governance’ were beginning in earnest then in the United States. The article also identifies trends that likely would have ensured that corporate governance would have risen to prominence in Britain in the early 1990s in the absence of the Cadbury Committee’s deliberations.

Financial Aspects of Corporate Governance in New Zealand

New Zealand’s financial system remains sound. The banks are well capitalised and have strengthened their funding base, while non-performing loans continue to fall. All banks comfortably meet the new Basel III minimum capital requirements introduced at the start of the year. Core funding ratios are also well above the required level. The main threats to the financial system are the risks associated with growing imbalances in the housing market. The Reserve Bank has introduced a slew of measures to combat the same.Over the past six months the Reserve Bank has continued to enhance the prudential regulatory framework to strengthen the soundness of the New Zealand financial system. The Reserve Bank’s review of the prudential regime for non-bank deposit-takers was completed in September 2013, and several legislative amendments are proposed to ensure the regime is appropriately targeted. A review has been undertaken of the oversight regime for payment and settlement systems, and it is expected that powers will be strengthened in this area.

When two worlds collide: corporate and clinical governance

British Journal of Healthcare ManagementVol. 18, No. 12 CommentWhen two worlds collide: corporate and clinical governanceAnuj Gupte, Bryan McIntosh, Bruce SheppyAnuj GupteSearch for more papers by this author, Bryan McIntoshSearch for more papers by this author, Bruce SheppySearch for more papers by this authorAnuj Gupte; Bryan McIntosh; Bruce SheppyPublished Online:16 Aug 2013https://doi.org/10.12968/bjhc.2012.18.12.619AboutSectionsView articleView Full TextPDF/EPUB ToolsAdd to favoritesDownload CitationsTrack CitationsPermissions ShareShare onFacebookTwitterLinked InEmail View article References Audit Commission (2002) Corporate Governance Improvement and Trust in Local Public Services. Audit Commission, London Google Scholar Braithwaite J, Travaglia J (2008) An overview of clinical governance policies, practices and initiatives. Aust Health Rev 32(1): 10–22 Crossref, Google ScholarCadbury Report (1992) Committee on the Financial Aspects of Corporate Governance. Gee Publishing, London Google Scholar Deighan M, Bullivant J (2006) Integrated Governance: A Handbook for Executives and Non-Executives in Healthcare Organisations. Department of Health, London Google Scholar Donabedian A (2005) Evaluating the quality of medical care. Milbank Quarterly 83(4): 691–729 Crossref, Google Scholar Gupte A, Sheppy B, McIntosh B (2012) An evaluation of clinical and corporate governance in promoting effective cardiac care at hospitals in London (in press) Google Scholar Halligan A, Donaldson L (2001) Implementing clinical governance: turning vision into reality. BMJ 322: 1413–7 Crossref, Google ScholarICSA (2011) Mapping the Gap: Highlighting the Disconnect Between Governance Best Practice and Reality in the NHS. Institute of Chartered Secretaries and Administrators (ICSA), London Google Scholar Jones, I, Politt M (2002) Who influences debates in business ethics? An investigation into the development of corporate governance in the UK since 1990, Working Paper No. 221. ESRC Centre for Business Research, University of Cambridge Crossref, Google Scholar Perides M (2004) An introduction to quality assurance in health care. J Epidemiol Community Health 15(4): 357–8 Google Scholar Travaglia J, Debono D, Spigelman A, Braithwaite J (2011) Clinical governance: a review of key concepts in the literature. Clinical Governance: An International Journal 16(1): 62–77 Crossref, Google Scholar Waddock S (2004) Creating corporate accountability: foundational principles to make corporate citizenship real. Journal of Business Ethics 52: 313–27 Crossref, Google Scholar Walshe K (2000) Clinical Governance: A Review of the Evidence. Health Services Management Centre, University of Birmingham, Birmingham. Google Scholar FiguresReferencesRelatedDetails 1 December 2012Volume 18Issue 12ISSN (print): 1358-0574ISSN (online): 1759-7382 Metrics History Published online 16 August 2013 Published in print 1 December 2012 Information© MA Healthcare LimitedPDF download

Corporate Governance in India: Is an Independent Director a Guardian or a Burden?

The origin of the corporate governance problem lies in the separation of ownership and control in widely held corporations owned by a large number of small and dispersed shareholders who need to delegate the responsibility of running the day to day operations of the corporation to professional managers. Since these shareholders find it costly and lack the incentive to monitor management, managers may behave opportunistically to run the company in their interests rather than the interest of shareholders. The managerial opportunism imposes agency costs manifested in unobservable and often unverifiable actions taken by them such as expanding firm size beyond optimal level, consuming perquisites, or satisfying managerial hubris, all of which increase their private benefits and reduce the value of the firm and also the benefits to the shareholders.The board of directors acts as one of the most important governance mechanisms in aligning the interests of managers and shareholders. The important functions of the board, were laid down in the report on the Financial Aspects of Corporate Governance issued in 1992 by the Cadbury Committee. The committee suggested that the universally accepted principle is that the board of directors act as fiduciaries of shareholders' and other stakeholders' interest to execute various functions of the independent directors.

Examining the Non‐Executive Director's Role from a Non‐Agency Theory Perspective: Implications Arising from the Higgs Report

In January of 2003, the British government published Derek Higgs’ report on the role and effectiveness of non-executive directors on British corporate boards (Higgs, 2003). The government’s original request for the report came in the wake of several high-profile corporate scandals, most notably those involving Enron, WorldCom and Tyco in the USA. Its intent was to help prevent the emergence of a major corporate governance failure within a British corporation by strengthening the Combined Code of Corporate Governance (Financial Reporting Council, 2003) to better reflect theory and best practice. It followed in the footsteps of past investigations into corporate governance issues commissioned by the British government including, but not limited to, the Cadbury Report (Committee on the Financial Aspects of Corporate Governance, 1992), the Greenbury Report (Study Group on Directors’ Remuneration, 1995), the Hempel Report (Committee on Corporate Governance, 1998) and the Turnbull Report (ICEAW, 1999). Higgs commissioned three studies to collect and analyse data on British corporate boards to be used in his final report. One of those studies involved in-depth interviews with 40 board chairmen and non-executive directors, a task that was undertaken by the research team of Terry McNulty, John Roberts and Philip Stiles. Contrary to several of the structural and regulatory recommendations within the larger Higgs review that were criticized by corporate and investment communities (see Jones and Pollitt, 2004 for an in-depth discussion of such criticisms) and which have been subsequently scaled back by the Financial Reporting Council responsible for changes to the Combined Code (Keenan, 2004), the McNulty, Roberts and Stiles (2003) report focused on the behavioural dynamics of board members (especially non-executive directors) that might promote board effectiveness. In line with Higgs’ original commission, McNulty, Roberts and Stiles’s report was both descriptive and prescriptive in nature, including several recommendations about behaviours that could help strengthen board effectiveness by creating ‘intelligent accountability’ (as opposed to distant accountability). As McNulty, Roberts and Stiles summarized, ‘Board structure and composition condition but cannot determine board effectiveness. Instead, board effectiveness depends upon the experience, skill and judgement of individual executive and non-executive directors and the ways in which they combine to shape board conduct and relationships’ (2003, p. 2). Following the publication of the Higgs review, and in light of the controversy it sparked within the UK, we asked John, Terry and Philip to supplement their contribution to the Higgs review with a consideration of the theoretical implications arising from their research. The end British Journal of Management, Vol. 16, S1–S4 (2005) DOI: 10.1111/j.1467-8551.2005.00443.x

THE IMPACT OF BOARD COMPOSITION AND OWNERSHIP ON AUDIT QUALITY: EVIDENCE FROM LARGE UK COMPANIES

This paper examines the impact of board composition and ownership structure on audit quality in the UK prior to the adoption of the recommendations of the Committee on the Financial Aspects of Corporate Governance (5). In this study I use audit fees as a proxy for audit quality and seek to investigate whether the proportion of non-executives, the extent of managerial ownership or ownership by large blockholders influences the extent of auditing, and consequently, the audit fee. Utilizing data from a sample of 402 quoted companies I find that the proportion of non-executive directors has a significant positive impact on audit fees. I also find that audit fees are negatively related to the proportion of equity owned by executive directors. I find no evidence that ownership by large blockholders (institutional or otherwise) or CEO/chairman duality has a significant impact on audit fees. Overall, the findings suggest that non-executive directors encourage more intensive audits as a complement to their own monitoring role while the reduction in agency costs expected through significant managerial ownership results in a reduced need for intensive auditing.

The Corporate Governance Agenda

The name of Sir Adrian Cadbury has become synonymous with the development of corporate governance. His original involvement was chairing the UK Committee on the Financial Aspects of Corporate Governance in 1991, whose report has taken the name of Cadbury into the annals of the subject. Since then Sir Adrian has visited 28 countries, contributing massively to the raising of board level standards around the world. Now he reports that he has enjoyed this governance odyssey, but is “retiring from this particular field”. His contributions as a member of the Editorial Advisory Board of this journal have been very significant. Here he draws some conclusions on the state of corporate governance and likely developments in the future.

Audit committee activity and agency costs

Menon and Williams indicate that many United States (US) over-the-counter (OTC) firms which form audit committees appear not to rely on them (cf. Menon, K., Williams, J.D. 1994. Journal of Accounting and Public Policy, 13(2), 121–139). Reliance on audit committees appears to depend upon board composition, while audit committee activity is associated with firm size. In this paper, we compare the US experience and evidence on audit committees and monitoring with the position in the United Kingdom (UK), where there has been a steady growth in the number of major companies voluntarily forming audit committees over the last 15 years (Collier, P.A. 1996. Accounting, Business and Financial History 6(2), 121–140). We contend that the dataset is best analyzed using the Heckman procedure (cf. Heckman, J.A. 1979. Econometrica 47(1), 153–161) which captures the two stages of the decision on audit committee activity. Our results show little support from the UK data for the findings of Menon and Williams (cf. Menon and Williams, 1994. Journal of Accounting and Public Policy 13(2), 121–139). However, consistent with their agency theoretic perspective of monitoring, we found that high quality (Big Six) auditors, and to some degree leverage have a positive relationship with audit committee activity. Contrary to an agency theoretic expectation, we found that audit committee activity is reduced in firms that combine the role of chairman and chief executive. On the basis of this result we explored the impact of insiders (executive directors) and found that their presence on an audit committee had a significant negative impact on audit committee activity. This result suggests that the emphasis placed by the US Securities and Exchange Commission (SEC) (Staff Report on Corporate Accountability, US Government Printing Office, Washington, DC, 1980, p. 491) and the Cadbury Committee (Committee on the Financial Aspects of Corporate Governance. 1992. Report of the Committee on the Financial Aspects of Corporate Governance. Gee, London) on the independence of audit committee members may be well founded. The reduction in audit committee activity that arises from the combination of the role of chairman and chief executive officer, and the presence of insiders on the audit committee, has important policy implications. Indeed, in the UK, both practices are the subject of recommendations in the Hampel Committee report Hampel Committee 1998. Committee on Corporate Governance. Gee, London.

Independence in Corporate Governance: the Audit Committee Role

The Code of Best Practice produced by the Cadbury Committee on the Financial Aspects of Corporate Governance (Cadbury Committee 1992) may be viewed as an ethical code in that it prescribes standards of board behaviour. The Code’s specific recommendations with regard to audit committees appear to offer a practical mechanism for the promotion of ethical behaviour through the inhibition of potentially unethical influences exerted by executive directors over external auditors. The rationale for these recommendations centres on the independence of audit committee members, implying that independence is a prerequisite for ethical behaviour. This paper questions the assumptions regarding the role of independence through an exploration of conceptions of independence held by individuals involved in the activities of audit committees in major UK public limited companies. It suggests that audit committees may have an unarticulated role in providing an arena for the display of independence by the participants. This display forms a part of the ceremonial performance which builds confidence in corporate governance mechanisms.

Corporate Governance in France and the UK: Long-Term Perspectives on Contemporary Institutional Arrangements

The Cadbury Report on the financial aspects of corporate governance, published in the UK in 1992, was landmark in thinking on governance, leading to the publication in Francen in 1995 of the Viénot Report, which boldly urged the removal of the cross-shareholdings which have formed the bedrock of French capitalism for three decades. This article considers the impact of this new emphasis on corporate governance on patterns of governance in Britain and France, examining matters of ownership and control, board membership and business elites, business cultures and decision-making, and responsibilities to shareholders. It questions whether the new focus on corporate governance has brought closer together the ways in which businesses are managed in Britain and France, towards a European model, or whether indeed France is gradually embracing the Anglo-Saxon model, and finds that such convergence as has occurred since the Second World War shows as yet no sign of leading to uniformity. Finally, the article suggests that the contemporary corporate governance debate offers a framework through which the past may be revisited and, potentially, reassessed, business historians being well placed to shed light on the competing natures as well as the competing forms of corporate governance in the world today.

Corporate Governance, Responsibilities, Risks and Remuneration

Framework and overview institutional ownership and the performance of firms financial aspects of corporate governance: internal control, risk management and board roles and responsibilities the remuneration of the corporate board voting behaviour in UK corporations and the implications for institutional investors audit committees board structures and qualifications in firms gaining quotation.

An Evolutionary Perspective on Audit Committee Effectiveness

In the wake of the report of the Cadbury Committee on Financial Aspects of Corporate Governance, most major public companies in the UK now have an audit committee in place. However, commentators have noted that the establishment of an audit committee does not guarantee its effectiveness and it is pertinent to the continuing corporate governance debate to consider how such effectiveness may be assessed. This paper reports on a study which examines audit committee activities through interviews with audit committee chairs, finance directors and internal and external auditors. The study identifies influences on the development and activities of audit committees which have not previously been researched in any detail: these include the reasons for audit committee establishment, the timing and conduct of meetings, and communication between participants. The paper argues that audit committee effectiveness should be evaluated from a perspective which acknowledges these influences and recognises the continuing development of the audit committee role over time.

A Review of Compliance with Cadbury

To what extent have companies implemented the recommendations of the Cadbury Committee on the financial aspects of corporate governance?

Ethics and corporate governance: The issues raised by the Cadbury report in the United Kingdom

In the late 1980s there was a series of sensational business scandals in the United Kingdom. There was particular public outrage at the plundering of pension funds by Robert Maxwell, at the failure of auditors to expose the impending bankruptcy of the Bank of Credit and Commerce International, and at the apparently undeserved high pay raises received by senior business executives. The City of London responded by creating a special committee to examine the financial aspects of corporate governance. This paper describes the resulting Code of Best Practice produced by the Cadbury Committee. To reduce the power of executive directors in the boardroom the Code recommends a greater role for non-executive directors, changes in board operations, and a more active role for auditors. The paper reviews the various published reactions to the Cadbury Report, and concludes that the Code is unlikely to halt the incidence of business scandals in the United Kingdom.

Audit Fee Determination and Governance Structure: Empirical Evidence from UK Insurance Companies

The quality of corporate governance is presently a matter of considerable concern in the United Kingdom. A key feature of the current debate is the perceived lack of confidence in corporate financial reporting [Committee on the Financial Aspects of Corporate Governance, 1992, p. 141. An integral part of the financial reporting process is the statutory audit which provides independent verification of corporate disclosures. In recent years, however, the auditor's role in corporate governance has been questioned. The failure of a number of high profile companies, without prior auditor warning, has raised questions about audit quality. In some instances audit users have blamed auditors explicitly for not identifying impending corporate failure and have initiated litigation in an attempt to obtain recompense for their losses [Financial Times, 13th March, 1992, p. 71. In such a hostile audit environment it is interesting to examine whether auditors are capable of identifying potentially troublesome audit assignments.

The Report of the Cadbury Committee on The Financial Aspects of Corporate Governance: The Code of Best Practice

The Report of the Cadbury Committee on The Financial Aspects of Corporate Governance: The Code of Best Practice