COMPANY LAW
ETHICS & CORPORATE GOVERNANCEBM055-3-2Greenbury Committee
& Turnbull DirectionsModule Code and Module TitleTitle of
SlidesLearning Outcomes1. Appreciate the relevance and practical
application of business and professional ethics in the working
world;2. Explain how corporate social responsibility and corporate
governance relate to ethics; 3. Highlight the main ethical issues
relating to the natural environment.
Module Code and Module TitleTitle of Slides4. Recognise ethical
issues and propose solutions to these issues.5. Convey an enhanced
awareness of the role of business and professional ethics in
financial reporting;
Module Code and Module TitleTitle of Slides
The Greenbury Report
issued the Greenbury Report in 1995, focused mainly on
directors' remuneration. At the time, the UK press was condemning
fat cat directors, particularly those in newly privatised
companies. The Greenbury Report issued a Code of Best Practice on
establishing remuneration committees, for disclosures of much more
information about the remuneration of directors and remuneration
policy Module Code and Module TitleTitle of SlidesGeneral
RecommendationExecutive pay should not be excessive, but sufficient
to attract, retain and motivate individuals of the required
quality; The performance related elements of remuneration should
create a link between the interests of the director with those of
the shareholders. Share options granted as part of the directors
remuneration scheme should not be issued at a discount;
Module Code and Module TitleTitle of SlidesShare options should
be granted in phased amounts over time rather than single large
awards;
Consideration of compensation payments to directors for loss of
office should be taken with a firm line especially directors
dismissed for unsatisfactory performance.
Module Code and Module TitleTitle of SlidesThe Report also
recommended a greater disclosure about the remuneration of
individual directors by disclosing for each named directors the
elements that make up the remuneration such as salaries, fees,
annual bonus, deferred bonuses and compensation for loss of office
including share options and other long-term incentive scheme.
Module Code and Module TitleTitle of SlidesThe Report also
recommended a greater disclosure about the remuneration of
individual directors by disclosing for each named directors the
elements that make up the remuneration such as salaries, fees,
annual bonuses, deferred bonuses and compensation for loss of
office including share options and other long-term incentive
scheme.
Module Code and Module TitleTitle of SlidesHampel ReportA
Committee on Corporate Governance, chaired by Sir Ronald Hampel, -
1996 to review the recommendations of the Cadbury and Greenbury
Committees. The final report of the Hampel Committee was published
in 1998. Its Report covered a number of governance issues, such as
the composition of the board and role of directors, directors'
remuneration, the role of shareholdersModule Code and Module
TitleTitle of Slides(particularly institutional shareholders),
communications between the company and its shareholders, and
financial reporting, auditing and internal controls. The Hampel
Report also suggested that its recommendations should be combined
with those of the Cadbury and Greenbury Committees into a single
code of corporate governance
Module Code and Module TitleTitle of Slides(particularly
institutional shareholders), communications between the company and
its shareholders, and financial reporting, auditing and internal
controls. The Hampel Report also suggested that its recommendations
should be combined with those of the Cadbury and Greenbury
Committees into a single code of corporate governance
Module Code and Module TitleTitle of SlidesRecommendations(i)To
adopt a considered policy on voting their shares; (ii) To have
dialogue between company based on mutual understanding of
objectives; (iii) Evaluate corporate governance disclosures by the
company and give due weight to all relevant factors drawn to their
attention; (iv) To encourage more participation at the annual
general meeting.
Module Code and Module TitleTitle of SlidesThe Turnbull
Guidelines(a) The require the board of directors to look forward
& not just consider past performance; (b) They encourage
companies to keep their shareholders informed about risks; (c) They
require directors to think strategically and to be aware that the
company must continually adapt to its changing environment;
Module Code and Module TitleTitle of Slides(d) Risks factors
should be reviewed regularly; and
(e) The risk control procedure should evolve as the business and
its environment change. Module Code and Module TitleTitle of
SlidesThe Turnbull Report highlighted the importance of internal
control and risk management in relation to the principles
established by the Combined Code stating that a companys system of
internal control has a key role in the management of risks that are
significant to the fulfilment of its business objectives. A sound
system of internal control contributes to safeguarding the
shareholders investment and the companys assets. Module Code and
Module TitleTitle of Slides
