The Business Case for Corporate Governance

Cover......Page 1
Half-title......Page 3
Title......Page 5
Copyright......Page 6
Contents......Page 7
Contributors......Page 9
Acknowledgements......Page 10
Introduction......Page 11
What is corporate governance?......Page 12
Corporate responsibility and ethics......Page 13
Role of the board......Page 14
Is corporate governance working?......Page 15
Contribution of non-executive directors......Page 16
Sanctions......Page 17
The future of corporate governance......Page 18
Challenges......Page 19
Introduction......Page 20
The executive/non-executive relationship......Page 22
The board agenda and the number of meetings......Page 24
Board committees......Page 25
Size and composition of the board......Page 27
The board and the shareholders......Page 28
The dual role of British boards......Page 31
The board and the company's stakeholders......Page 33
What value does the board add?......Page 35
Some unresolved questions......Page 38
Introduction......Page 39
Professionalism......Page 40
Setting the agenda and running the board meeting......Page 41
Promoting good governance......Page 42
Creating an effective relationship with the Chief Executive......Page 43
Sustaining the company’s reputation......Page 45
Succession planning......Page 46
Building an effective board......Page 47
Finding the right people......Page 48
Getting the communications right......Page 49
Making good use of non-executive directors......Page 50
Using board committees effectively......Page 52
Protecting the unitary board......Page 53
Creating a climate of trust......Page 55
Making good use of external advisers......Page 56
Promoting the use of board evaluation and director appraisal......Page 57
Qualities of an effective chairman......Page 58
Introduction......Page 60
Role of a non-executive director......Page 61
Importance of the role of non-executive director......Page 62
Technical......Page 64
Interpersonal......Page 65
Engaged and non-executive......Page 66
Barriers to NED effectiveness......Page 67
NEDs and board committees......Page 70
Board evaluation......Page 71
Diversity......Page 72
References......Page 75
Introduction......Page 77
The background......Page 78
The advent of corporate governance......Page 80
Strategic versus compliance......Page 81
Reputation oversight......Page 83
Governance systems......Page 84
The Company Secretary......Page 86
The challenges......Page 89
Recent history – growing pressure on shareholders to act responsibly......Page 91
Governance as an alternative to regulation......Page 93
Where shareholders make a difference......Page 95
What happens in practice......Page 101
The international dimension......Page 103
The challenges ahead......Page 107
The market-based approach to promoting good governance......Page 110
Advantages of the market-based approach and comply-or-explain......Page 113
The role of governments and regulators......Page 116
How does the regulator carry out this role in practice?......Page 119
Challenges to comply-or-explain......Page 125
Conclusion......Page 128
Individual and collective board responsibility......Page 129
Enlightened shareholder value versus pluralism......Page 130
The duty to act within powers......Page 133
The duty to promote the success of the company......Page 135
The duty to exercise independent judgement......Page 139
The duty to exercise reasonable care, skill and diligence......Page 140
The duty to avoid conflicts of interest......Page 141
The duty to disclose interests in proposed transactions or arrangements......Page 145
The obligation to declare interests in existing transactions or arrangements......Page 146
The obligation to comply with the Listing, Disclosure and Transparency Rules......Page 147
The obligation to disclose and certify disclosure of relevant audit information to auditors......Page 148
Business reviews......Page 149
Transparency Rules......Page 151
Safe harbours......Page 153
Shareholder derivative actions......Page 154
Introduction......Page 156
Law and regulation in the Virtuous Circle......Page 157
The Courts in the Virtuous Circle......Page 161
Shareholder and market pressure in the Virtuous Circle......Page 162
The sanctions: law and regulation – policing the boundaries......Page 164
Sanctions and corporate reporting......Page 165
The role of auditors......Page 166
Plugging the ‘expectations gap’......Page 167
FSMA: sanctions in a regulatory context......Page 168
Sanctions for listed companies, directors and PDMRs......Page 169
The Listing Principles – facilitating the enforcement process......Page 170
Sanctions for sponsors and nomads......Page 171
Disqualification of directors......Page 172
The growing significance of the Courts......Page 173
Consequences of breach of duty......Page 174
The impact of the 2006 Act......Page 175
Adequacy of civil sanctions for breach of duty......Page 176
Shareholders and their agents......Page 177
Codes versus law and regulation......Page 178
What sanctions apply under codes and guidelines?......Page 180
Proposals for reform......Page 182
Peer pressure......Page 183
Conclusion......Page 184
Introduction and overarching market trends......Page 186
Regulatory trends in the EU......Page 189
Comply-or-explain......Page 190
Annual disclosures......Page 191
Interim and ad hoc disclosures......Page 193
Hedge fund and stock lending......Page 194
Shareholder rights and participation......Page 196
The market for corporate control......Page 197
One-share-one-vote......Page 199
Shareholder communications......Page 201
Trends in the US......Page 202
Internal control over financial reporting and the vanishing international issuer......Page 203
Executive remuneration......Page 205
Accountability......Page 207
Concluding remarks......Page 209
Introduction......Page 211
Overview of governance-ranking research......Page 214
Assessment of governance-ranking research......Page 217
Performance of companies in focus lists......Page 219
Performance of shareholder engagement funds......Page 221
Shareholder engagement in practice: Premier Oil plc......Page 222
Assessment of the research and evidence for a link between corporate governance and performance......Page 226
Conclusion......Page 227
Investors play an important role in using corporate governance as an investment technique......Page 228
References......Page 229
The evolution of UK corporate governance......Page 232
Other governance principles......Page 234
UK versus US governance environments......Page 235
Have UK companies embraced the principles of the Combined Code?......Page 237
Do they do what they say they do?......Page 238
Resources and investor interest......Page 239
Alternative Investment Market (AIM) quoted companies......Page 241
Institutional investors......Page 242
Shareholder responsibilities......Page 243
Review of board performance under the Code......Page 246
Results of evaluations......Page 248
What makes a company responsible?......Page 249
Is the UK model of corporate governance working?......Page 250
Index......Page 252