Corporate governance developments in commonwealth countries

Corporate failures, fraud and rising salaries have directed attention towards the corporate governance mechanisms of companies. A review of governance developments in selected Commonwealth countries is undertaken in order to inform the governance debate and provide an opportunity to discuss governance relating to some countries which may not receive much attention in the debate. The countries covered in this review are the United Kingdom, South Africa, India and Australia. Brief coverage of the respective countries' progressions in the corporate governance debate is provided.

Corporate governance failure and its impact on National Australia Bank's performance

The National Australia Bank (NAB) is the largest financial services institution listed on the Australian stock exchange and is within the 30 most profitable financial services organisation in the world. In January 2004, the bank disclosed to the public that it had identified losses relating to unauthorised trading in foreign currency options amounting to AUD360 million. Thisforeign exchange debacle was classified as operational risk, the risk of loss resulting from inadequate or failed processes, people, or systems and reiterated the importance of corporate governance for banks. Concurrent issues of National Australia Bank's AUD4.1 billion loss on US HomeSide loans in 2001, the degree of strength of their risk management practices and lack of auditor independence, were raised by the US Securities and Exchange Commission in 2004, reinforcing the view that corporate governance had not been given the priority it deserved over a number of years. This paper will assess and critically analyse the impact of corporate governance failure by management and Board of Directors on NAB's performance over the years 2001-2005.

Financial fraud and the use of ratios in corporate collapse prediction models

This paper highlights the prevalence and extent of financial fraud amongst collapsed corporations. In doing so, it examines the recent spectacular corporate collapses of Parmalat in Europe, Enron and WoridCom in the USA and HIH in Australia. A new methodology that provides empirical evidence to the financial fraud claims found in the literature, is then put forward. The proposed methodology argues that if financial fraud was a possibility amongst collapsed corporations, then two premises ought to be observed in the literature on ratio based multivariate modelling for predicting corporate collapse. First, in the absence of financial fraud, we expect the models to consistently predict corporate collapse with a high degree of accuracy; particularly, as one approaches the incident of collapse. Second, if financial fraud takes place and statement figures are distorted, then we expect the financial ratios, which are the predictor variables in these models, to lose relevance and therefore their use in models will be short-lived. Empirical support from Hossari and Rahman (2004) and Hossari and Rahman (2005) is presented as evidence to the two premises.

Corporate social responsibility of small businesses: a developing country perspective

Corporate social responsibility (CSR) has emerged as an important concept for developing countries in recent years. This paper investigates the issues of CSR relating to small businesses that have emerged as a result of market-based reforms in developing countries, where the compliance of voluntary standards, code of conduct and regulations are limited. The paper argues that prevalence of corruption, lack of rule based governance, resource constraints for effective capacity building on the part of the state and lack of awareness have created a weak and unethical corporate culture leading to low levels of CSR in developing countries. Using Bangladesh agriculture sector as an exemplar, this paper investigates how small businesses trading in agricultural inputs with no brand capital and low public visibility are behaving in a socially irresponsible way, in an environment of inadequate regulatory sanctions and compliance by selling contaminated inputs to farmers who are mostly poor and not even aware of their rights. The low levels of CSR is undermining and also threatening the sustainability of the positive impact of the market-based reforms undertaken in this sector. The paper proposes that integrated governance linking state, private sector and civil society can promote good governance and better CSR relating to small businesses .

A comparative study of the contents of corporate codes of ethics in Australia, Canada and Sweden

This paper reports on and analyzes the contents of 197 corporate codes of ethics (78 Australian, 80 Canadian and 39 Swedish). Among other things, it was found that the contents of the Australian and Canadian codes were similar, reflecting the similar histories and cultures (as measured by Hofstede's dimensions) of these two countries. Further, the contents of the Swedish codes were found to be very different from the Australian and Canadian codes in some areas, reflecting the cultural differences between Sweden and the other two countries.

Legal regulation and corporate governance in China`s top 100 listed companies

This article reports findings from an empirical study of corporate governance in China's top 100 listed companies. It examines the effectiveness of legal regulation, enforcement and remedies, finding that China's company and securities laws have not provided as string a legal framework for the protection of stakeholders im China's stock exchange listed companies as might be expected by investors.

German corporate governance in international and European context

The main aim with this book is to provide English speaking readers with a comprehensive overview of the German corporate governance model. The authors introduce the reader to the unique features of the German Business and Enterprise Law. The book deals with the most important company organs, namely the General Meeting, the Management Board and the Supervisory Board. The unique interplay among these organs are also covered and the reader is introduced to the particular dynamics of the German two-tier board structure.Further the authors deal with the dominant role of the "German banks" and new players in the German financial markets, focusing particularly on voting rights of these institutions at companies' general meetings and appointing members to companies' supervisory boards. Accounting is shown as the documentary proof of good corporate governance. The final chapter gives an overview of corporate governance in the European Union, the OECD Principles of Corporate Governance and corporate governance in the US, the UK and Australia.

Performing and reforming leaders : gender, educational restructuring, and organizational change

Performing and Reforming Leaders critically analyzes how women negotiate the dilemmas they face in leadership and managerial roles in Australian schools, universities, and continuing education. The authors examine how new managerialism and markets in education transformed how academics and teachers did their work, and in turn changed the nature of educational leadership in ways that were dissonant with the leadership practices and values women brought to the job.

Evaluating the impact of financial literacy programs on the retirement savings of superannuation fund members

Currently, in Australia, the age pension, paid for out of Commonwealth government taxes, forms the basis of Australia’s retirement income system, however, given the reality of an ageing population has compelled the government to undertake a number of measures to shift the responsibility for saving to the individual, forcing them to accept an increasing level of responsibility for their financial decision-making. In the light of the changing retirement environment, it would be expected that Australians’ would ensure that they became financially literate, however, despite the amount of information and advice available in the market place, this is not the case, and they do not appear to be appropriately prepared for their retirement. Recognising the importance of financial literacy, an increasing number of government agencies, employers, superannuation funds and schools are implementing financial literacy programs in Australia. This article provides an overview of the impact that attending a financial education seminar has on the retirement decisions and settings of participants. Evidence is provided from this research that in the short term, providing financial education programs make a difference to an individual’s intended retirement settings. However, the impact of these education programs in changing investment behaviour is less conclusive.

Strategic approaches of corporate codes of ethics in Australia: a framework for classification and empirical illustration

Purpose - Research has so far not approached the contents of corporate code of ethics from a strategic classification point of view. Therefore, the objective of this paper is to introduce and describe a framework of classification and empirical illustration to provide insights into the strategic approaches of corporate code of ethics content within and across contextual business environments.

Design/methodology/approach - The paper summarizes the content analysis of code prescription and the intensity of codification in the contents of 78 corporate codes of ethics in Australia.

Findings - The paper finds that, generally, the studied corporate codes of ethics in Australia are of standardized and replicated strategic approaches. In particular, customized and individualized strategic approaches are far from penetrating the ethos of corporate codes of ethics content.

Research limitations/implications - The research is limited to Australian codes of ethics. Suggestions for further research are provided in terms of the search for best practice of customized and individualized corporate codes of ethics content across countries.

Practical implications - The framework contributes to an identification of four strategic approaches of corporate codes of ethics content, namely standardized, replicated, individualized and customized.

Originality/value - The principal contribution of this paper is a generic framework to identify strategic approaches of corporate codes of ethics content. The framework is derived from two generic dimensions: the context of application and the application of content. The timing of application is also a crucial generic dimension to the success or failure of codes of ethics content. Empirical illustrations based upon corporate codes of ethics in Australia's top companies underpin the topic explored.

The costs of raising equity capital for closed-end fund IPOs

This article reports on some of the direct costs of raising equity capital by closed-end fund licensed investment company (LIC) initial public offerings (IPOs) in Australia from 1995 to 2005. The amount of underpricing by these IPOs is also identified. The average total direct costs amounted to a relatively low 3.4% of the capital raised, while fees paid to underwriters and/or stockbrokers was around 2.3%, to legal firms around 0.25% and to accounting firms around 0.07%. The average underpricing by these LIC IPOs was 1.3%. This article also confirms that the percentage total direct capital raising costs are inversely related to the size of the IPO and underwritten closed-end fund IPOs tend to have higher percentage total capital raising costs than those not underwritten.

Benchmarking new statistical techniques in ration-based modelling of corporate collapse

Up until 1979, Multiple Discriminant Analysis (MDA) was the primary multivariate methodological approaches to ratio-based modelling of corporate collapse. However, as new statistical tools became available, researchers started testing them with the primary objective of deriving models that would at least do as good a job as MDA, but that rely on fewer assumptions. Regardless of which methodological approach was chosen, most were compared to MDA. This paper analyses 84 studies on ratio based modelling of corporate collapse over the period 1968 to 2004. The results indicate that when MDA was not the primary methodology it was the benchmark of choice for comparison; thereby, demonstrating its importance as a foundation multivariate methodological approach in signalling corporate collapse.