AC-ELEC1 (8261)
ULOA - Let’s Check
1.
2.
3.
4.
5.
B
C
A
A
D
Let’s Analyze: Activity 1
1. Explain how corporate governance help an organization achieve its
vision and mission.
Effective corporate governance can help an organization achieve its vision
and mission by ensuring a strong leadership structure, clear accountability,
and transparency in decision-making processes. For instance, providing a
framework of strategic planning, accountability, risk management,
transparency, and ethical standards will help to improve performance,
reduce risks, and enhance the organization's reputation. Strategic planning
helps organizations identify their main visions, mission, and objectives.
Having a clear understanding to achieve these goals will help the
organizations to align their vision and mission with better decision-making
to take action. Establishing accountability at all levels of the organization is
a must. With this, all individuals will be held responsible and accountable for
their actions and decisions that could affect the performance of the
organization and also to prevent fraud and misconduct. Risk management
will also help the organization to achieve its vision and mission because it
could help them to identify and mitigate the possible risks that could hinder
the productibility and capability in achieving its vision and mission.
Transparency should be established to build trust and confidence with the
investors, shareholders, stakeholders, and other users that could impact a
good reputation in the organization. Lastly, ethical standards should also be
established so that the organizations will work professionally, unbiasedly,
and in an ethical manner because it promotes good quality of working place.
Therefore, with the help of corporate governance, the organization's vision
and mission will be achieved by the above mention frameworks.
2. Explain agency concept in the context of corporate governance.
The agency concept is like a contract of agency, where there is a principal
and agent. An agent acts on behalf of the principal following their contracts
and interest. The agency concept of corporate governance is the
relationship between the shareholders (principal) and management (agent).
The shareholders own the company, the management act as delegated to
the managers, and the managers perform their role according to what the
shareholders want the managers should perform their best. The agency
concept is salient in corporate governance because it helps to align the
interests of shareholders and managers, which can help to ensure that the
company is managed in a way that maximizes shareholder value. For
instance, a conflict of interest occurs between the shareholders and
managers. However, in mitigate these conflicts, corporate governance
mechanisms are put in place to ensure that managers act in the best
interests of shareholders. Such corporate mechanism is the board of
directors, executive compensation, shareholder activism, and regulatory
oversight. Therefore, the agency concept is a relationship between the
shareholders (principal) and managers (agents) that acts according to their
interest and ensures mitigated conflict of interest.
3. Explain how Cadbury and Greenbury reports contributed to the
improvement and application of corporate governance.
The Cadbury and Greenbury reports are two influential reports that have
significantly contributed to the improvement and application of corporate
governance. Cadbury was established by UK Government to examine the
financial aspects of corporate governance in the UK and to strengthen the
financial reporting and accountabilities of the companies. The report has
helped to raise awareness of the importance of corporate governance and
has led to significant improvements in the way companies are run. For
instance, the Cadbury Report has been highly influential and has been
adopted by many companies and countries around the world. The Cadbury
contributed to the improvement and application of corporate governance
through improved transparency and accountability of financial reporting by
an independent audit committee, outlining the roles and responsibilities of
the directors by establishing a code of best practices, and segregation of
roles of CEO and chairman to avoid conflict of interests. On the other hand,
the Greenbury report has helped to increase transparency and
accountability in this area and has led to more effective engagement
between companies and their shareholders. The Greenbury report helps
improve corporate governance by remuneration set to pay the executive
directors, disclosure of directors' remuneration in the annual report, and
more significant consultation with shareholders on executive pay.
Therefore, the Cadbury and Greenbury report plays a salient role in
improving corporate governance because it promotes greater transparency
and accountability of the companies which are also key and instrumental in
shaping corporate governance worldwide.
ULOB – Let’s Check
1.
2.
3.
4.
5.
6.
7.
A
D
D
A
A
A
A
8. D
9. C
10. A
Let’s Analyze: Activity 1
1. The four pillars of corporate governance
 Transparency - this pillar of corporate governance is referring for the companies
to be transparent with their business operations, decision making, and financial
reporting information so that the investors, customers will be able to build trust
and confidence to the companies.
 Accountability - is being responsible and accountable for the actions and
decision that could affect the company’s operations. Corporate governance
establishing accountability so that the companies or individual will be held
accountable and liable in establishing systems to monitor and measure the
company’s performance.
 Fairness - this pillar focusing on being fairly for treating all third parties of the
business such stakeholders and customers and to avoid conflict of interests.
Because being fair and transparent help to established trust and confidence
from the customers investors, employees, and stakeholders.
2. Describe the different functions of BOARD Committees.
 The BOARD is primarily accountable to the SHAREHOLDERS and
Management
is primarily accountable to the BOARD.
 The BOARD shall be committed to respect the rights of the stockholders (like
voting right, pre-emptive right, power of inspection, right to information, right to
dividends and appraisal right).
 The BOARD shall constitute Committee in aid of good governance
Audit and Compliance Committee to ensure compliance with the Code
and report any violations committed or non-compliance thereto before
the SEC
Nomination Committee to review and evaluate the qualifications of all
persons nominated to the Board as well as those nominated to other
positions requiring appointment by the Board
Compensation or Remuneration Committee to establish a formal and
transparent procedure for developing a policy on executive remuneration
and for fixing the remuneration packages of corporate officers and
directors
 The Board of Directors (Board) is primarily responsible for the governance of
the corporation ensuing that the corporation
complies with all relevant laws, regulations and codes of best business
practices
adopt a system of internal checks and balances; identify key risk areas
and key performance indicators and monitor these factors with due
diligence
3. Given the CG principles, what happens in the implementation of corporate
governance when these principles are absent or disregarded?
 When corporate governance principles are absents and disregarded for
implementation in the companies or organizations, it could affect the
performance of the company and the image, trust and confidence of the
investors, shareholders, stakeholders, customers, and society as a whole will
disappear. For instance, corporate governance principles are salient for the
companies and if these will be disregarded or absent consequences is inevitable
such as poor financial information or reliability and credibility, lack of
transparency and accountability for decisions that could affect and hinder to
meet the vision and mission of companies or organization, high turnover rates
with the talented employees have to quit which cause costly and disruptive in
the part of the companies, may violates the legal and regulatory that could affect
the reputation of the companies, and create a negative impact on society.
Therefore, corporate governance principles are salient because companies will
be able to prioritize the essential actions and ethics that could help them to
achieve their vision and mission.