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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