Business ethics and corporate governance (FA265/FA265FI EXAM 24th MAY 2021 17826543 1.1: The corporate governance code 2018 is the way the company is following the correct procedures and standards and in the uk it promotes transparency and integrity in the company. This code is also used to promote shareholders and protect and help investors in the business. The benefit of this code is that it allows companies to follow a specific rule, it also encourages positive behaviours, the code also allows better strategic planning which helps companies realise what to do. Another benefit is it allows better decision making and also reduces the cost of capital. 1.2: The board could make uniformed and low-quality decisions when they don’t follow leadership and they do not allow the basis of which company preserves the value over long term. Another thing would be when the board is not satisfied with the policy their practises and behaviour throughout the business are aligned with company’s purpose, values and strategy. The board should ensure necessary resources to establish prudent and effective controls and they should also take in perspective to identify and control situations of interests espcially those from shareholdings. The Chair should also seek regular engagement with major shareholders in order to understand their views. Other examples would be social media updates, Employees AGMs and also meeting groups of different elected workplace representatives These should be justified by principles A, B, C, D and E 1.3: The main chairman who is John Allan and his role is to provide leadership of the board and is an independent. These people who are Mark Armour, Melissa Bethell, Steve Golsby, Mikael Olsson, Stewart Gilliland, Byron Grote, Simon Patterson, Lindsey Pownall OBE and Alison Platt CMG and these people are all independent non-executive directors which means that the chairman normally holds informal meetings with them in order to discuss issues affecting the group without the executives being present. The Senior independent director is Deanna Oppenheimer who was one of the independent non-executive directors and normally led by senior independent director, normally the nonexecutive directors meet without the chairman being present in order to praise the performance and other occasions that are necessary. There is also group chief executive who is Dave Lewis and also chief financial officer who is Alan Stewart. 1.4: The non-executive directors of Tesco PLC are independent but not all of them and this means that they can provide many things such as external opinions to the board and meetings. And in principle F it mentions how the chair leads the boards and is responsible for directing the company. In the board it’s very important to ensure that they have a wide range of skills and experience in order to elaborate with the non-executive directors. The board would also need to ensure that non-executive directors can be able to put efficient timing and contribution to the boards and meet their responsibilities. 2.1: The code of nomination committee is normally responsible for any board recruitment and will normally conduct a continuous and proactive process of planning and assessment, but this also means they have to take into matter that these company’s strategic plans and factors will affect long term success and future viability of the company. 2.2: The independence of the nomination committee is normally the Chair’s vision for achieving the optimal board composition which will then allow help the nomination committee to review the skills required and identify gaps and develop appointment criteria In Tesco they keep the committee under review and the reason is because of the size and composition of the board and what they need to refresh membership. Executive directors can also be recruited externally, reason is because companies should develop internal talent in order to the correct capability and also encourage to include middle management development programs. Tesco’s board have managed to review the succession plan for the boards, directors and executive committee also the independent senior management as part of their succession planning. This has also alerted the chairman to have continuous level of quality of management in present, normally this is a relationship between the board and chief executive officer and appointments of the directors. In Tesco they also refer back to board composition and succession planning which says how the company will have a number of changes to the board and also explaining the nonexecutive directors how they have stepped down. The succession planning sass they continue to be a priority for the committee for the year. 2.3: In Tesco’s they promise that the committee is providing diversity and inclusive culture which then everyone will provide ideas of different insights and obstacles in order to support earned decision-making. The nomination committee will provide diversity as this will increase the ideas and objectives and targets and also encourage more women into non-traditional roles. The mix of skills will allow different experiences, knowledge on the board and this will allow different people to develop their context differently and share the ideas. Having a diversity of people will mean more effective decision making, better utilisation and also enhancement of corporate reputation and investor relations. Principle J is very well explained as it explains that promoting ethnics backgrounds and also diversity will help increase skills and knowledge. 2.4: The nomination committee should accept and allow formal meetings and the reason is because it will help gather input from many different members to insure in equality and fairness, also to have different perspectives to ensure the appointments that the committee has agreed upon. External search will help find an agency that will find an appropriate appointment based on merit. 3.1: The principal code is M, N, O and this also means that the boards should be able to establish an audit committee even with an independent non-executive director which should have a membership of a minimum of three, sometimes when there are smaller companies the memberships will be slightly less such as two. Normally the chair of board shouldn’t be a member as that is the director of the company and therefore the board should satisfy itself with at least one member which has relevant financial experience, and also, as a committee it’s important to have competence relevant to the sector that the company operates in. 3.2: The benefits of establishing the audit committee means that the boards can be beneficial for the company, audit committee also benefits as it makes sure that companies are complying with all laws and regulations that are needed. They can also make recommendations to the board about the appointments and removal of all external auditor rather than internal. Audit committee also has various help such as monitoring the financial statements and internal audit functions and also review all companies’ statements needed. 3.3: Internal audits one of the known responsibilities is that it has to monitor and review the outcome of the company’s internal audit function and normally there isn’t one but there is sometimes needed for recommendation for the board. The code itself related to the audit committee of Tesco PLC is to provide independent and objective assurance and advice to provide insight. Internal audit is also making sure that Tesco PLC is to protect the business and deliver the annual audit plan. As well as the reporting effectiveness of the systems internal control. The audit also reviews of the internal audit and actions that are arising from this. The risk management of the internal audit is there is a lot of enabling of identification and prioritisation. The board controls and monitors the key elements of the groups internal control framework which is don’t throughout the year. External audit’s role for Tesco PLC is to make sure that the external audit is out to tender every 10 years indeed to rotate the lead partner. External audit main objective it to make sure that it fulfils the independence of the external auditors and also responsibility. In Tesco PLC the process of even approving all the non-audit work will mainly provide to external auditors and this means that they can be seen safeguard the objectivity and independence of the auditor. In Tesco it says that they received a fee of £12m (2018/2019) and cost them £8m of audit fees this shows that audits role is very costly and not cheap, but also the £12m went down in 2017/2018 to £6.7m External audit also means that management is very important and has to be reported to the committee and the reason is because of in Tesco they are trying to reduce the fees of nonaudit. 3.4: Audit committee should make sure that everything is up to date and make sure the business has good financial stability also its very important for them to make sure that the responsibilities are approved in order for them to consider and extra financial integrity 5.1: I agree with the statement saying that companies should set clear policies and target to nurture their next generation and the reason why is because I believe with everyone now coming more and more into the future there are many things that older generations don’t know, and this is because the way they have been raised or bought up and now there a lot of different diversities of people and ethnic backgrounds and even the LGBQT+ community. The reason why it’s important to show leaders about different ethnic backgrounds and communities is because a lot of people are more open to it and are expressing themselves a lot more than before because they are able to find whom they really are. As a company that is able to offer a workplace for different diversity and ethnic backgrounds and from the LGQBT+ communities it shows a range of wider skills that older generations haven’t seen or been. By offering to diverse the workforce it offers many people to be open and communicate with others within the company as they will welcome and accepted as it is becoming the new normal of this current generation, this shows that the company is willing to accept different people doesn’t matter who they are or what they look like, and it will help boost the company’s reputation. So, in all fairness I agree with the Britain’s corporate governance regulator and the reason why as yes it will be the future generations of this country and world as more people are becoming aware that there are different type of people and different types of sexuality that will need to be accepted as it is. 5.2: companies can take actions as welcoming all different types of people and there will be no judgement and explain to others about the diversity and ethnic backgrounds and what needs to be seen with them. An open business environment means more people from different backgrounds will be accepted and be the face of the companies to inspire and show others that it’s fine to be who you are as there will be a place for you which you will be accepted. By also showing women that they can run and be accepted will help stop the sexism of reality and help people realise that many people out there have different ideas and objectives. Companies should show people that women can be powerful, show more coloured people and how they are able to do the same thing as others and prove to other companies that accepting any sexuality will not bring a bad Image and help others realise that more people are being accepted.
