Corporate Governance Final

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Report to Mr. Yellin Student's Name: Muhammad Abdullahi Umar (S17004335) Tutor's Name: Peter Thomas Module: FIN6A2 – Corporate Governance and Financial Ethics (Assessment One) Due Date: 14/04/2021

Issues in Corporate Governance Introduction Researches have been done trying to look for the best corporate governance practices worldwide. Some laws and regulations protect the relationship between the shareholders and the stakeholders in every country. Corporate governance is applied to those corporations whose incorporation was done in the United Kingdom and must be registered with the London stock exchange ( Edge & Hoffman, 2013) . However, the corporate governance code is not applicable in the United States. They use an annual corporate governance report close to corporate governance in the United States. However, Mr. yelling is a very experienced architecture, but he cannot practice in the United Kingdom due to differences in governance codes in both countries ( Edge & Hoffman, 2013) . This report will critically analyze the different conduct codes in both the United States and the United Kingdom. For the UK why not quote the The purpose of the code of governance Generally, a code of governance refers to a comprehensive document consolidating the key governance practice issues at an organization and includes the company structure, roles and description of trustees, chairperson and the other key board portfolio holders. The corporate code of governance has several objectives in SMEs and Family Businesses.  First, it enhances accountability whereby the organization shows how actions and decisions are consistent with a clear definition of every action and its objectives. According to ( Edge & Hoffman, 2013), accountability is critical in the in-governance process, especially during a major shift in strategic directions. Application of poor code

of governance such as the case of Simpsons masterplan that destroyed Marconi Corporate structure in the late 1990s (Birkinshaw, 2004)  Code of governance also enhances transparency whereby the government action and decision-making processes are generally open to the necessary security levels either to other parts of the governance. In some cases, such as the Enron post scandal, institutions outside the government are usually involved (Bozec and Dia, 2012) . This is evident under the case of Enron when, e.g. Arthur Anderson, the company's auditor, approved the client not using the Generally Accepted Accounting Principles for a portion of its financial statements  Its enhancement of efficiency and effectiveness. The code of ethics ensures that quality output that meets the policymaker's requirements is produced and at the best production cost (Bozec and Dia, 2012) .  It enhances responsiveness. The code of governance has the ability and the flexibility to respond spontaneously to the ever-changing needs of the society, consideration of the expectations of the civil society in the identification of the public interests, and willingness to re-examine the role of the government critically. This is evident in Enron's post scandal case, which led to the introduction of the Sarbanes-Oxley Act of 2002. Problems the codes seek to Overcome The code strives to solve some critical problems in corporate business management, which has led to numerous business scandals such as Enron and World.com in the United States and Marconi in the United Kingdom. The first challenge involves language, and cultural barriers, as the failure to speak in a common language does not mean that you should not conduct business. Communication should not debar one because there is a google translator who can

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translate your business products' descriptions for better interpretation (Bookman at el.2013). Therefore, to make this operation possible with the google translator tools, you need to have a person who speaks the local language you are trying to conduct business with The codes also seek to solve the challenge of corporate mismanagement for Local competition and operations of the business . Organizations need to understand what their management needs and what they are offering to the company to counteract their advantages over your business. The Solution to this challenge is that the company needs to look for the right partner and start building local business relations for proper business management (Firmansyah, & Devi, 2017) as well as implementing a robust governance structure under the entrepreneurial board of directors . Moreover, If a business partners with other businesses overseas, they will have exposure to new opportunities and growth, as expressed in the Cadbury Committee of 1991 ( Dahya and McConnell, 2007) . With the local knowledge and expertise, collaborating with an overseas business and having a competent board of directors can significantly benefit due to the growing number of new customers. Another challenge that the codes strive to solve is Tax code and compliance issues in corporate management. Dealing with tax issues usually is hectic even when operating from a single country. International taxes and tariffs can limit many businesses from participating in international trade. Tax code and compliance issues is evident through cases such as the Wall Street crash and McKesson & Robbins (Toms, 2019). To solve the challenge of global trade tariffs and taxes being hectic, the corporate Organizations need to have an exceptionally knowledgeable person of what goes on to avoid being in trouble. If they have a better understanding, they will be better positioned to carry out international trade (Firmansyah, &

Devi, 2017) . Therefore, Organizations need to know what box you need to tick before expanding your business. UNITED STATES CODE OF CORPORATE GOVERNANCE Agency cost Under the United States Code of corporate governance, the basic assumption that managers are likely to place their personal goals ahead of corporate goals, leading to a conflict of interest between the stakeholders and the management. This managerial problem may occur due to the management shortcomings in their management role (Sovacool et al., 2018) . The agency problem cannot be solved, and shareholders can experience many wealth losses due to managers' different behaviour. (Agency ) Internal control Under the codes of ethics, the managers' role is to act as a custodian of the organization's assets. Control climate, risk evaluation, control operations, information and communication, and monitoring are the five elements of the internal control system. The people responsible for the elements of control includes the company managers, internal auditors, and the board of directors. They have the overall responsibility of ensuring that the organization's assets are not vandalized by the employees or put in jeopardy by ensuring that the organizations have tight security. According to the recent reports, the management failure in protecting the organization's assets may raise issues of fraud in the organization (Brookman et al. 2011) . Thus, disciplinary actions should be taken on the board of directors' management team.

Audited financial reports The financial reports can solve the existing financial problems conflicts between the management and the board of directors (Sovacool et al., 2018). Under the codes, the managers are responsible for the preparation of the financial reports. At the same time, the publicly owned organizations have to hire a professional auditor to offer the auditing services and finally give an opinion. If the auditor fails in their role by ignoring the management's manipulations of data or ignoring the manager's use of the company's resources for the wrong purposes. Employees' governance Employee governance is essential to ensure that the corporation has been run in the employees' best interests. Under the United Kingdom code of Governance, employees should represent the other in the management team's board to help pass the employee's grievances directly to the management (Sovacool et al., 2018) . Incorporation of the employees in the management team helps make sure that the organization is run democratically since the employees' view can be addressed directly to the board of directors and the management team. For example, the supervisory code in Germany and the UK code as revised 2018 suggests there should be one worker director but does not say such person should be appointed. UNITED KINGDOM CODE OF CORPORATE GOVERNANCE Board leadership and company purpose Under the United Kingdom codes of corporate governance, the board should have the capacity to maintain its long-term success, value addition for the shareholder and the wider society. The code should ensure that its objectives, values, and strategies align with the corporate organization's culture and practices and workforce.

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Division of responsibilities According to the United Kingdom codes, the responsibilities should be well shared between the chair and the executive (Darley et al., 2021) . The chair has the responsibility of leading the board's overall activities. The chair should demonstrate the objective's judgment and promote cultural openness. All the board members must access accurate data in good time and pose a high degree of clarity. The non-executives should provide guidance, specialist advice and hold the management to account. For example, the NED committees act for shareholders and promote internal control division of duties through the Board to shareholders. Composition, succession, and evaluation All the procedures should be formal, including the board appointment, reselection, annual evaluation, and rigorous and transparent. However, the board members' membership should be regularly refreshed and attention paid to miscellany. All the board directors and mostly non- executive directors have to show commitment while getting support from the management to understand the industry. Audit, risk, and internal control The company's annual assessment should be fair, balanced, and, above all, understandable to determine its appropriate position in the industry (Darley et al., 2021) . During the annual or the half a year, the directors should state the going concern basis of accounting to give the organization the direction it will take to meet its objectives after analyzing the financial statement. Remuneration

The strategy for remuneration should be set in a way that supports the organization's long-run success. The director should not be involved in deciding their remunerations, and transparency should be part and parcel of the process following the set procedures. Therefore, the remuneration committee should decide without influence from any person. However, the remuneration committee should be reviewing the rates of remuneration from time to time so that the members can adjust to the ever value of money. For instance, you can find that something you bought for $5 in the past year, the price has gone up by twice the original value. Thus, this makes sense of reviewing the remunerations rates to enable the employees' suit very well in society and gain motivation due to better payments. Problems Faced in the Implementation of a Code in the United Kingdom One of the major challenges for corporate governance is creating a system that will hold those making decisions accountable according to their authority over the corporation (Darley et al., 2021) . Therefore, the board's managerial challenges to manage and monitor projects is usually a big problem despite them possessing the power. Rules and regulations also pose a significant challenge, as corporations do not function in a vacuum. Therefore, they are influenced by the environmental and national policies of different countries that may be doing business. Hence the overall public policy imposition has a great impact on implementing different corporate governance policies. If a country has a weak economy or political governance at the country level is not strong, the weakness in any of these areas could affect corporate governance implementation. Moreover, Organization culture poses significant challenges as every organization has its ways of doing things, and therefore the implementation of a corporate governance change in an

organization that has a robust organizational culture could be challenging to have the members of the organizations support the needed change (Darley et al.2021) Conclusion Conclusively, the code of corporate governance is significant in running compositional organizations. While both the United Kingdom and the United States codes of governance each has their owner imperfections, the United Kingdom Code of conducts are more comprehensive and is a requirement for all public organizations. However, the incorporation policies give both men and women equal chances to represent the organization on the board of management. Therefore, it's essential for every corporation that has legally been incorporated to observe the codes of governance for the organization's smooth running. In case so, issues in running the organization should call an expert to help streamline the organization. The government should make sure that all the corporations are running based on the set codes of governance. If not, the necessary measures should be taken to ensure that all the organizations comply with the governance codes.

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References Birkinshaw, J., 2004. The destruction of Marconi. Available at SSRN 513394 . [online] Available at: https://www.london.edu/think/the-destruction-of-marconi [Accessed 17 March 2021]. Bozec, R. and Dia, M., 2012. Convergence of corporate governance practices in the post‐Enron period: behavioral transformation or box‐checking exercise?. Corporate Governance: The international journal of business in society . . [online] Available at: https://sci- hub.do/https://doi.org/10.1108/14720701211214115 [Accessed 22 March 2021]. Brookman, F., Bennett, T., Hochstetler, A., & Copes, H. (2011). The 'code of the street and the generation of street violence in the UK. European Journal of Criminology, 8(1), 17-31. . [online] Available at: https://sci-hub.do/10.1177/1477370810382259 [Accessed 28 March 2021]. Dahya, J. and McConnell, J.J., 2007. Board composition, corporate performance, and the Cadbury committee recommendation. Journal of financial and quantitative analysis , pp.535-564. . [online] Available at: https://docs.lib.purdue.edu/cgi/viewcontent.cgi? article=1020&context=ciberwp [Accessed 27 March 2021]. Darley, S., Knowles, S., Woodward-Nutt, K., Mitchell, C., Grande, G., Ewing, G., ... & Patchwood, E. (2021). Challenges implementing a carer support intervention within a national stroke organization: findings from the OSCARS trial process evaluation. BMJ Open, 11(1), e038129. . [online] Available at https://bmjopen.bmj.com/content/bmjopen/11/1/e038129.full.pdf [Accessed 19 March 2021]. Edge, J. S., & Hoffman, S. J. (2013). Empirical impact evaluation of the WHO Global Code of Practice on the International Recruitment of Health Personnel in Australia, Canada, the

UK, and the USA. Globalization and health, 9(1), 1-10. . [online] Available at: https://sci- hub.do/https://doi.org/10.1186/1744-8603-9-60 [Accessed 18 March 2021]. Firmansyah, I., & Devi, A. (2017). The Implementation Strategies of Good Corporate Governance for Zakat Institutions in Indonesia. International Journal of Zakat, 2(2), 85- 97. . [online] Available at https://sci-hub.do/https://doi.org/10.37706/ijaz.v2i2.27 [Accessed 18 March 2021]. Sovacool, B. K., Axsen, J., & Sorrell, S. (2018). Promoting novelty, rigor, and style in energy social science: towards codes of practice for appropriate methods and research design. Energy Research & Social Science, 45, 12-42. . [online] Available at: https://sci- hub.do/https://doi.org/10.1016/j.erss.2018.07.007 [Accessed 23 March 2021]. Toms, S., 2019. Financial scandals: a historical overview. Accounting and Business Research , 49 (5), pp.477-499. . [online] Available at: https://www.tandfonline.com/doi/pdf/10.1080/00014788.2019.1610591 [Accessed 28 March 2021].

Corporate Governance Final

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