Corporate Governance Process Research Articles

Corporate Governance on the National Olympic Committee of Thailand

The Olympic Games is by far the most admirable competitions among athletes and the most spectacle sports tournaments among sports fans. The Olympic Games is built on their very core values when the games bring together people around the world to witness one of the amazing sports events in the world. It is a congregation of the Olympic Games. Three core values, i.e., excellence, friendship and respect, are around the world. The immense role of the dissemination of Olympic values and promoting and overseeing the Olympic Games falls on the shoulder of the International Olympic Committee (IOC) which is a decision-making organization regarding the Olympic affairs. Though a huge responsibility lied upon the IOC, the IOC alone cannot operate and function at this successful level. The National Olympic Committees (NOCs) from various countries need to provide considerable support to the IOC, and the accomplishment of the IOC’s objectives can be achieved only if the NOCs work efficiently and effectively. The NOCs perform various functions and provide a significant contribution to promoting sports in a country. Thailand is one of the IOC members. The missions of the National Olympic Committee of Thailand (NOCT) under the Royal Patronage of H.M. the King include supporting and promoting amateur sports and physical education, sending delegated athletes and the international. Competitions, providing welfare and education for athletes and coaches, organizing a sports museum, and coordination with different management of the NOCT are highly essential. Effective management of the NOCT will lead not only to the increasing number of junior athletes and national athletes and the success of our national athletes in major international sports competitions, but also to gear Thailand to be a healthy society using sports as a means to this end. In business, it is often argued that effective management is caused by competition. The term “creative destruction” coined by Joseph Schumpeter has continuously been proven through time that the most effective and innovative firms will thrive. Without competition, there is no real incentive and need for firms to be effective and efficient. Firms can do whatever they want bearing few or no consequences. Many sports governing bodies, e.g. the IOC and the NOCs, however, have no competition and, thus, are a monopoly. Yet, thee organizations need to be most effective. In this paper, we will argue that corporate governance is the solution to make the NOCs and the IOC to be most effective by using an example of the NOCT. Corporate governance (CG) can be loosely defined as to how to institute integrity to organizations/industries. Similar to business, the IOC and the NOCs need to instill integrity to their members no matter who they are or what role they take. A cleverly tailored corporate governance process employing control from both top-down and bottom-up will provide a necessary means to make the NOCs or, in this paper, the NOCT becomes well managed.

Approaches towards Performance Analysis in the Frame of the Information and Corporate Governance Theories

The internalization of the economies, the globalization of the capital markets, the extension of the European Union as well as other similar elements, have led to the appearance of new risks, which in order to be adequately managed, imply the necessity of useful information in order to objectively analyze the financial position and the performance of an entity. On this basis, it could be estimated, the capacity of generating future cash flows, which are necessary to the secure continuity of an entity. Hence, in the frame of a continuously changing international environment, the potential size of the global performance is determined by the quality of the corporate governance processes, of the management, of the internal control and of the risk management. In addition, the decision making process is also dependent on the usefulness of the information and could have an influence, through control and monitoring measures, on the accomplishment of the qualitative characteristics of the processes. Starting from these objectives, the research has been focused on the importance of information in the instrumentation of the relationship between performance and corporate governance and on the governing role of the accounting-financial information and its impact on performance, by considering different economic theories such as the agency one.

XBRL and the Future of Electronic Business Reporting in Nigeria

The idea of electronic Standard Business Reporting (SBR) has achieved remarkable heights in developed economies over the last decade. With the development of XBRL in 1998 by Charlie Hoffman and subsequent introduction of the first SBR projects in the Netherlands and Australia less than ten years after, an important question therefore arises: what level of similar advancement has been achieved in emerging economies and what are the possible implications for the future of financial reporting in these countries. To analyze this topic, Nigeria has been chosen as a reference point. To enhance objectivity, an empirical approach was engaged through a structured survey directed at professional accountants in the Big Four accounting firms with offshore offices located in the country. This information was sought in order to assess the future of electronic Business Reporting in Nigeria in line with the global trend of harmonizing the accounting profession. Results show that respondents share the view that XBRL implementation would improve the Nation's Corporate Governance process. Although there exist over 50 XBRL projects in 15 Economies in Europe and over 10,000 voluntary filers in Northern America, respondents are of the view that substantial adoption of XBRL in Nigeria is likely to be influenced by mandatory requirement. This outcome suggest that there should be reform patterns of behaviour of market agents and regulatory agencies to encourage the adoption of XBRL Taxonomy interactive data, so as to provide the channel for the most adequate mechanism of electronic Business Reporting that would assist the Nation's capital market reach its desired global marketplace for developmental purposes.

Effectiveness of Independent Directors on the Boards of Indian Listed Companies Are the Recent Regulatory Changes Enough?

Worldwide, the presence of independent directors on the board of listed companies is seen as an integral element of a company’s corporate governance process and has become a pre requisite for good governance. Consequently, in the recent years, governance reforms in India have increasingly pinned hope, as well as responsibility, on independent directors to achieve higher standards of governance in organizations.Unlike the Anglo Saxon world, where the key corporate governance challenge is disciplining the management and making it accountable to the distributed shareholders, the central challenge in corporate governance in India is that of disciplining the dominant shareholder(s) and protecting the interest of the minority shareholders. Therefore independent directors, in Indian business organizations, can become effective only when their appointment process is outside the influence of the dominant shareholders.This paper examines the current state of corporate boards among the S&P CNX 500 companies in India and reviews the impact of the changes that have been introduced in the recently amended Companies Act, 2013 and the suggestions in the consultative paper issued by SEBI on revisions to clause 49 of the Listing agreement dealing with corporate governance. While, with the recent changes, significant steps have been taken to strengthen the role of independent directors on the board of listed companies, the process for the appointment of independent directors needs to be further strengthened so as to improve board effectiveness in listed companies.

The Governance of Corporate Sustainability: Empirical Insights into the Development, Leadership and Implementation of Responsible Business Strategy

This article explores how corporate governance processes and structures are being used in large Australian companies to develop, lead and implement corporate responsibility strategies. It presents an empirical analysis of the governance of sustainability in fifty large listed companies based on each company’s disclosures in annual and sustainability reports. We find that significant progress is being made by large listed Australian companies towards integrating sustainability into core business operations. There is evidence of leadership structures being put in place to ensure that board and senior management are involved in sustainability strategy development and are then incentivised to monitor and ensure implementation of that strategy through financial rewards. There is evidence of a willingness to engage and communicate clearly the results of these strategies to interested stakeholders. Overall, there appears to be a developing acceptance amongst large corporations that efforts towards improved corporate sustainability are not only expected but are of value to the business. We suggest that this is evidence of a managerial shift away from an orthodox shareholder primacy understanding of the corporation towards a more enlightened shareholder value approach, often encompassing a stakeholder-orientated view of business strategy. However, strong underlying tensions remain due to the insistent market emphasis on shareholder value.

Researching the lived experience of corporate governance

PurposeThis literature review seeks to engage with the discussion of the limitations of studying corporate governance processes as a “black box” by developing a theoretical framework for qualitative corporate governance research that can support the design of future hermeneutic research into corporate governance practices.Design/methodology/approachThe approach is to develop a qualitative research framework based on the methodological discussions in the business and sociology literatures, and compare it with existing alternative research frameworks in the corporate governance literature and three qualitative field studies in corporate governance.FindingsThis paper identifies methodological gaps that have made it difficult for extant qualitative studies of corporate governance to capture the complexity of the practices they have studied. This paper suggests three main implications for future qualitative corporate governance research: it should seek to articulate the multiple meanings of corporate governance rules, techniques, and processes as they arise in practice in order to facilitate a better discussion of the complexity of corporate governance practices; it should reflect on the role of the researcher in the field and his/her interactions with the subjects because through those interactions the multiple meanings of practice can be detected by the researcher; it should seek to articulate how the authors of research papers choose the contexts in which they place their observations from the field and how they variously zoom in and out of their fields of study to foreground either local detail or the wider contexts.Originality/valueThrough a close reading of alternative corporate governance research frameworks and qualitative studies this paper explains how future scholarly and practical corporate governance research can produce insights into the lived experience of corporate governance.

The Influence of PCAOB Inspections on Audit Committee Members' Judgments

ABSTRACT:This paper experimentally examines whether the likelihood of a Public Company Accounting Oversight Board (PCAOB) audit engagement inspection can moderate the negative incentives created by short-term stock option compensation on audit committee members' decisions. Prior research suggests that short-term option compensation may weaken audit committee member objectivity and oversight quality (Archambeault et al. 2008; Magilke et al. 2009; Keune and Johnstone 2010); however, holding individuals accountable for their actions has been shown to result in less self-serving decisions (Rus et al. 2012). Ninety-two Executive M.B.A.s, serving the role of audit committee members, evaluate a hypothetical audit case that involves a dispute between management and the external auditors, with likelihood of PCAOB inspection and type of compensation manipulated between participants. Results confirm prior research on option compensation, finding that participants show less support for recording a proposed income-reducing audit adjustment when compensated primarily with short-term options rather than cash. In addition, a significant interaction reveals that PCAOB inspection likelihood moderates the effect of compensation form, such that option compensation only causes audit committee members to not recommend recording the proposed adjustment when PCAOB inspection likelihood is low. These results allow stakeholders to gain valuable insights into ways in which loyalties that have been potentially misaligned may be realigned by regulatory requirements aimed at improving the corporate governance process.Data Availability: Data available upon request.

The personality of company directors and behavioural risks in corporate governance: Bridging the unidentified gap

The investigations following major corporate failures that occurred in the last two decades have highlighted that the inappropriate behaviour of corporate officers such as company directors contributed to these failures. Therefore, it means that behavioural issues constitute risks to the corporate governance process as they have the potential to result in corporate failures. This article examines behavioural risks in corporate governance, and seeks to ascertain what constitutes behaviour. It finds upon the examination and analysis of psychology literature that personality and situation are the basic elements that contribute to behaviour. A question then arises as to whether and how behavioural risks have been identified and managed in corporate governance. Taking cognisance of the processes involved in risk identification and risk management, it is found that the personality aspect of behavioural risks have not been identified or managed effectively in relation to company directors under any of the existing corporate governance mechanisms in the United Kingdom, such as the Turnbull Guidance, Corporate Governance Code, Companies Act, Company Law Directives and so on. From an analysis of the risk management mechanisms in place as regards corporate governance, it is argued that behavioural risks have only been managed from the perspective of situations, and considering the significant impact of personality and its associated risks on behaviour this represents a gap in the corporate governance process. This article argues for a remedy in this regard and suggests that personality risks must be managed effectively if corporate failures are to be prevented. In relation to identifying and managing personality risks, the article discusses the five-factor model of personality, which is the most robust and widely accepted explanation and measurement of personality dimensions. The article also evaluates different approaches that might be adopted in managing personality risks and presents arguments in support of regulatory intervention as an effective option for the management of personality risks in corporate governance.

To report or not to report

Whistle-blowing can play an important role in enhancing the effectiveness of corporate governance processes. In particular, legislation mandating that auditors blow the whistle on their clients’ transgressions can assist in overcoming agency-related costs and improve confidence in external audit. This is, however, only the case if regulatory reform enjoys cohesion. The Companies Act No. 71 of 2008, by introducing a definition of ‘reportable irregularities’ different from that in the Auditing Profession Act No. 26 of 2005 (APA); excluding ‘independent reviews’ from the scope of APA; and effectively exempting the majority of South African companies from the requirement either to be audited or reviewed, may materially undermine whistle-blowing by auditors in South Africa. In turn, this begs the question: for how long will South Africa rank first globally for the quality of its auditing practices?

The relationship between earnings transparency and future excess return in business environment

In this research, we try to emphasize voluntary disclosure as an important mechanism for the corporate governance process, and the financial reporting system to reduce the costs linked to the information asymmetries. Researchers have long been interested in the anticipation of future returns, which is important in obtaining excess return (the difference between actual and expected returns). According to the previous conceptual studies, increasing in more transparency in reported earnings can reduce information asymmetry and hence, decrease excess return. This study examines the relationship between earnings transparency and future excess return. Using more than 90 firms listed in the Tehran stock exchange from 2005 over 2009 are selected; the evidences of present research supported that there is no significant relationship between earnings transparency and future excess returns. Key words: Earnings transparency, expected returns, future excess returns, disclosure, business environment.

Main Coordinates of Internal Audit Practices in the Context of Corporate Governance at European Level

The dynamic of economic changes that influenced the entities has determined a spectacular evolution of internal audit practices, this aspect being also remarked by European specialists. Internal auditor need to face a wider range of challenges especially in the context of corporate governance requirements. The aim of this paper is to make an analysis of internal audit practices in European space, in order to identify internal audit practices in the context of corporate governance. The paper’s methodological construction of scientific research is divided in two main parts. In the first part is analyzed the evolution of internal audit practices through literature review method, by combining the documenting research technique with observation method. In the second part, it will be developed an empirical study through to be identified the main coordinates that characterized internal audit practices in the context of corporate governance at European level. This study includes an analysis of internal audit practices from significant entities listed at European markets, based on a methodology developed as a result of a literature review. The main results of our research activity show that internal audit become one of the most important key elements of the corporate governance process, being a valuable support for management. The attention of both the internal auditors, but also the audited is focused more and more over the value added furnished by internal audit in different areas like corporate governance, risk management, its interaction with other stakeholders being also a significant element. The value of the paper is argued by the analysis developed at European level, from both theoretical and empirical perspectives, which could determine strong implications for both academics and practitioners in the field. The results of the study allow making useful proposals for enhancing internal audit practices in the context of corporate governance at European level.

The Challenges of Corporate Governance in Indonesian Oil Palm: Opportunities to Move Beyond Legalism?

Corporate governance plays an important role in shaping the behaviour of modern international businesses and has matured significantly since Friedman first advocated that corporate governance should solely be about serving shareholders. In the Indonesian business sector, belief in corporate governance, though growing, still has some way to go. This is particularly the case in the Indonesian oil palm industry, which currently finds itself in the international spotlight because of environmental and social concerns. Such attention reaffirms the need for sound corporate governance procedures to underpin a plantation's stakeholder relations because an oil palm plantation now needs to deal with a greater number of stakeholders than ever before. However, many Indonesian plantations have not yet embraced the potential for using a focus on corporate governance as a way to drive business improvements. This article argues that a judicious response to the increased attention on Indonesian plantations would be to implement plantation-wide business improvements based on improved corporate governance processes. It argues that plantations that fail to move beyond legal compliance (“beyond legalism”) in their relationship with local smallholders will continually need to grapple with the resulting tensions generated by the smallholders' endemic feelings of injustice towards the plantation companies' distribution of benefits.

DISCUSSION OF Dominant Owners and Performance of Continental European Firms

K rivogorsky and Burton (2012) examine the association between dominant shareholders and firm performance for 1,533 firms from seven Continental European countries using ownership data from 2005 to 2007. The primary analysis in the paper tests the effects of four separate types of dominant owners (institutions, blockholders, banks, and individuals and families) on two measures of accounting performance (return on assets and return on shareholder funds) and a measure of firm value (market-to-book ratio). Supplemental tests examine cross-sectional differences in the effects of each type of dominant owner across individual countries. The main results indicate that banks and individual and family owners have a positive effect on firm performance, while institutions and blockholders have a negative effect on firm performance. The evidence from the within-country tests shows that the relation between particular shareholder types and firm performance varies across different jurisdictions, with dominant owners generally having a positive effect. Dominant shareholders have incentives and the ability to influence the firms in which they own a controlling interest. Dominant owners are motivated to utilize their control to monitor managerial actions because of their claims to the residual profits of the firm (Shleifer and Vishny 1997). Dominant shareholders also have the ability to monitor managerial actions because of their access to inside information and their ability to control internal forces designed to curb managerial actions that are not consistent with maximization of firm value. Thus, monitoring by dominant owners can serve to address the classic agency conflicts between shareholders and investors (Jensen and Meckling 1976), thereby having a positive effect on firm value. In an international context, however, country-level institutions, laws, and other regulatory features can interfere with dominant shareholders’ typical incentives and ability to monitor managerial behavior. Depending on a country’s institutional environment, dominant shareholders could be motivated by a different set of factors, perhaps leading them to take advantage of their ownership status to extract personal benefits from the firm. This type of situation would result in a negative relation between dominant ownership and firm value. Given the potential for either

THE INFLUENCE OF CORRUPTION ON CORPORATE GOVERNANCE STANDARDS: SHARED CHARACTERISTICS OF RAPIDLY DEVELOPING ECONOMIES

This article evaluates the relationship between the level of corruption in rapidly developing economies and corporate governance processes therein. Previous literature illustrates a strong relationship between corporate governance and corruption and suggests that in countries with high levels of corruption, firms lack efficient corporate governance practices. Similarly, countries with deficient corporate governance practices and low levels of compliance to these standards breed corruption leading to a wide range of transparency dilemmas. This study delves deeper through careful examination regarding the level of compliance with corporate governance standards and the pervasive effects of corruption on the governance processes of firms with specific regard to rapidly developing economies as well as offering comparisons and similarities of shared characteristics among these countries.

The Decision to Assure and Assurance Provider Choice: Evidence from the GHG Assurance Market

The need for credible emissions reporting has created international demand for a new and specific type of assurance engagement: assurance of greenhouse gas (GHG) emissions information. This study provides an examination of the international GHG assurance market to identify key potential determinants of both the decision to assure and the choice of assurance provider. As well as providing details on this new assurance service, we extend current knowledge by undertaking a multi-level analysis of both country-level (stakeholder orientation and strength of legal system) and company-level (corporate governance) variables. After correcting for potential self-selection bias, our results reveal significant variations in country patterns for both of these decisions, with both the demand for GHG assurance services and the preference for an accounting profession assurance provider found to be higher in countries with a stakeholder-orientation and a less stringent legal enforcement system. Further, we find company-level corporate governance systems and processes to be a significant moderator of the country-level factors for both decisions.

Accountability structures and management relationships of internal audit

PurposeThe purpose of this study is to examine the accountability structures and the management relationships of internal audit. In particular, related issues such as the predominant internal audit objectives and the related functions, the extent to which internal audit addresses any financial reporting risks and the manner in which internal auditors in Australia perform their tasks, are identified. The study also looks at the extent of compliance with the Institute of Internal Auditors (IIA) Standards.Design/methodology/approachBased on a survey of the chief audit executives in Australia, the study identifies the reporting mechanisms, functions and relationships of internal audit, including the contributions made towards good corporate governance. There is, however, some misalignment between the aspirations of internal auditors and their relationships with management.FindingsWhile internal audit objectives have been established with a focus on controls, risks and governance, the study has highlighted the fact that there is a lack of correlation between the tasks performed by internal auditors and the important internal audit objectives, with the exception of internal control and risks. The results also suggest that internal auditors have been providing an internal consulting and advisory role in matters concerning IT systems, strategic risks and financial issues. If internal auditors are to proactively contribute to good corporate governance, they need to define how, and in what way, this can be done. In regard to corporate governance processes, the results of the research indicate that issues surrounding internal control, risk assessment and management processes are regarded as the key factors for internal audit to contribute to good corporate governance.Originality/valueThis study complements and contributes to the existing literature in providing insights into the evolving role of the internal audit function in terms of accountabilities and relationships with management. It also provides a valuable insight into how the internal audit profession can build upon its inherent strengths and address any apparent areas of concern. This will assist both the profession and policy makers alike, in better understanding and improving the role of the internal audit process.

Creating value governance: What it ought to be

This study aimed to explore the aspect of ethics in the context of corporate governance and to examine the possibility of integrating ethics in the corporate governance structure and process. This study analysis focused on qualitative methodology. The study found that corporate governance structure and institutionalisation of ethics are attributes of ethics that support the foundation of value governance practices. The findings of the study suggested a remedy for the shortfalls of the existing governance structure and process. This study contributed to the practical implications, that is, the ethical dimension that is useful for corporations to enhance their corporate governance practices, and academia, that is, contribution to knowledge by employing the social constructionist approach. This study is the first of its kind to explore corporate governance in the context of values using the social constructionist approach. Key words: Corporate governance, ethics, qualitative, social constructionist.

Corporate governance and no fraud occurrence in organizations

PurposeThe purpose of this study is to examine empirically the organizational factors that are associated with the absence of fraud.Design/methodology/approachFactor analysis using principal component extraction was first employed. Logistic regression was then performed to analyze the survey responses of 253 chief financial officers (CFOs) in Hong Kong. A total of 20 semi‐structured interviews were also carried out with CFOs to supplement the research results.FindingsThe results indicate that audit committee effectiveness, internal audit effectiveness, the tone at the top managerial level, and ethical guidelines and policies are positively associated with a lack of fraud within organizations. Neither auditors' prior success in fraud detection nor the type of auditor employed is an influential factor in the absence of fraud. These results are interesting and counter those of earlier studies conducted in the USA. Also contradicting prior research, the receipt of unqualified audit reports was not found to be significant in this study.Practical implicationsThe lack of significance for certain variables, and the counterintuitive nature of some of the results offers opportunities for further research. The results provide auditors with practical insights that will prove useful in the course of their work.Originality/valueThis is the first empirical study of its nature to be conducted in Hong Kong, and its results will make an important contribution to the corporate governance and auditing literature, particularly that focused on the Asia‐Pacific region. These results also have important implications for the accounting profession and for the corporate governance process within organizations.

Large-Scale Group Company Strategic Management of Project Informatization

In order to further reinforce the basic management, promote the scientific development of enterprises and enhance the project management in a systematic efforts way, we carried out the information system construction of the enterprise, build and integrate new operating platform and the implementation of the existing system of decision-making system, to enhance the quality of enterprise operation process. The core competitive power strengthens a company continuously simultaneously with a change in the system corporate management and communication, through the full implementation of the "responsibility for cost control center", advance system project management. What is to optimize the Group's corporate governance process and promote the scientific development of operating control type of enterprise construction.

Essay: The Politicization of Corporate Governance: Bureaucratic Discretion, the SEC, and Shareholder Ratification of Auditors

The role of the Securities and Exchange Commission in the corporate governance process has shifted dramatically in recent years. The Commission has increasingly supplanted state law in determining substantive standards of corporate governance. The replacement of states with the Commission will have significant consequences. For one thing, the regulatory philosophy will change. For another, governance practices will become increasingly politicized and volatile. The volatility will be less apparent with respect to rulemaking and more apparent with respect to staff interpretations, particularly those under Rule 14a-8, the shareholder proposal rule. This is particularly clear in connection with changes to the interpretation of the “ordinary business” exclusion in Rule 14a-8. As a case study, the piece examines the phenomena in the context of proposals calling for shareholder approval of outside auditors. In 2005, the staff abandoned more than 50 years of consistent interpretation and found that proposals calling for shareholder ratification of auditors could be deleted from proxy statements under the “ordinary business” exclusion. The explanation for the shift is less likely changes in SOX that gave audit committees of some public companies the authority to select auditors and more likely a desire to reflect the views of the Commission.Volatility imposes costs. The article recommends a number of changes to Rule 14a-8 that are designed to reduce staff discretion and the risk of political shifts in practice.