VERSION 5 2017-18
Based on ACCA’s P1
Governance, Risk & Ethics
© Dr. Constantine Kiritsis
INCREASE INVESTOR CONFIDENCE!
CORPORATE GOVERNANCE
KEY CONCEPTS!
FAIRNESS TRANSPARENCY
ACCOUNTABILITY HONESTY
INTEGRITY REPUTATION
RESPONSIBILITY
CODE
OF CONDUCT
STAKEHOLDERS ANALYSIS
C.S.R.
CORPORATE CITIZEN
AGM
CAROL (4) RESPONSIBILITIES
DAFT
* PROFESSIONALISM
GRAY+
OWEN “7 POSITIONS”
OWNER / PRINCIPAL
“ETHICAL STANCE”
(+/-)
UNITARY
* WHY CODES OF
ETHICS? CONTENTS?
INTEGRATED REPORTING
* THREATS TO
INDEPENDENCE
SOCIAL + ENVIRONMENTAL — EMAS
— GRI
REPORTING + STEPS
* SAFEGUARDS
* CONFIDENTIALITY
SUSTAINABILITY
—
SOCIAL FOOTPRINT
CAPITAL
DIVERSITY
ENCOURAGED
* DOGMATIST - PRAGMATIST
* KOHLBERG’S MORAL STAGES (3)
BOARD
EVALUATION
(i.e. RACE, SEX, EXPERTISE...)
STRATEGIC
OPERATIONAL
ASSET
SAFEGUARDING
COSTS?
NORMATIVE
TRANSACTION
COST THEORY
“INSTITUTIONAL
INVESTORS”+ROLE
COMPANY SEC.
TYPES? CATEGORIES
NON. EX. DIR.
WHY?
* NARROW WIDE
ROLE?
* RELATED - UNRELATED
BENEFITS * INTERNAL - EXTERNAL
* ACTIVE - PASSIVE
Audit Committee
Remunerations Committee
OBJECTIVE
SUBJECTIVE
ROLE?
Risk Committee
I.D. RISK
MONITOR
IDENTIFICATION OF RISK
DYNAMIC
LIKELIHOOD
L
TRANSFER
AVOID
* CORRELATED RISK
INTERNAL
CONTROLS
H
ALARP PRINCIPLE
L
IMPACT
RISK STRATEGIES
MONITOR
H
ACCEPT
REDUCE
PRINCIPLES
DIFFERENCES
FEATURES
STAKEHOLDERS
RULES
i.e. UK CG CODE
PUBLIC
SECTOR
WHY?
i.e. SARBANES - OXLEY
UK
USA
* FLEXIBLE
* COMPLY
OR EXPLAIN
* EMPHASIS
ON INVESTOR
JUDGEMENT...
(+/-)
* STRICT
* HIGH
COST
* LAW
* AUDITOR
ROTATION...
(+/-)
FAMILY vs JOINT STOCK
RISKS
C
Β
STRATEGIC
LEVEL
BUSINESS OR
OPERATIONAL
LEVEL
RISKS ARE DYNAMIC!
KEY POINTS:
STATIC
ANALYSING RISK (MAP)
INT. CONVERGENCE?
ROLE?
OBJECTIVES?
REMUNERATION
PACKAGE? BALANCE?
Nominations Committee
RISK CULTURE
* AAA ETHICAL DESISION MAKING (7)
* TUCKERS 5 STAGE MODEL (5)
COMMITTEES
* ICGN
* OECD
INFLUENCE
INSTRUMENTAL
RISK MANAGEMENT PROCESS E.R.M.
THEORIES
* DEONTOLOGY - TELEOLOGY
T
H
E
O
R
Y
CHAIRMAN ≠ CEO
ROLE:
STRATEGY
MISSION
DIRECTION
ENVIRONMENTAL FOOTPRINT
A
G
E
N
C
Y
CPD
EXEC. DIRECTORS
INTEREST
MAPPING — CONFLICTS?
BOARD OF DIRECTORS
TWO-TIER
(+/-)
T.B.L.
BUSINESS ETHICS — BRIBERY / FRAUD
EGM
CORPORATE GOVERNANCE
GUIDANCE - WHY?
APPLIES TO ALL ORGANIZATIONS
“THE WAY COMPANIES ARE DIRECTED
AND CONTROLLED”
* PROFESSION
* PROF. COMPETENCE
“SETTING THE
TONE AT THE TOP”
SOUND I. CONTROLS
OBJECTIVES OF
I. CONTROLS
COMPLIANCE
INTERNAL AUDIT
COSO/ERM
CONTROL ENVIRONMENT
* CORPORATE GOVERNANCE IS A RELATIONSHIP
AMONG STAKEHOLDERS THAT IS USED TO
DETERMINE AND CONTROL THE STRATEGIC
DIRECTION AND PERFORMANCE OF ORGANISATIONS.
* BOARDS OF DIRECTORS HAVE A FIDUCIARY DUTY
TO SHAREHOLDERS TO MONITOR MANAGEMENT
* GOOD CORPORATE GOVERNANCE PRACTICES INVOLVE:
  THE CORPORATE GOVERNANCE FRAMEWORK SHOULD
PROTECT SHAREHOLDER RIGHTS AND ENSURE THE
EQUITABLE TREATMENT OF ALL SHAREHOLDERS
  DISCLOSURE AND TRANSPARENCY IS CRITICAL
  THE BOARD OF DIRECTORS SHOULD BE MONITORED
AND HELD ACCOUNTABLE FOR WHAT GUIDANCE IT GIVES
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