Principles of contemporary corporate governance

Aims at providing a concise presentation of key topics and emerging themes in corporate governance. The text provide both law and business students, as well as practitioners of law and management, with an easy to follow explanation and analysis of key corporate governance principles.

The role of internal audit in corporate governance and management

This research report is based on a study undertaken in Australia, and aims to evaluate the role of internal audit in corporate governance and management. It identifies the accountability structures and objectives of internal audit, considers the nature of internal audit functions and the extent of application of The Institute of Internal Auditors Standards of Professional Practice, reviews the relationships of the chief audit executives (CAEs) and assesses the nature of financial report risks and other issues covered by internal auditors. The research findings include a diversity of accountability structures for CAEs and a range of internal audit activities, with the application of the IIA Standards being in need of improvement. In conclusion, the researchers make recommendations for improvements in practice to be considered by The Institute of Internal Auditors and other regulating and governing bodies.

Management attitudes to corporate governance issues : evidence from Sri Lanka

This study investigates the attitudes of senior managers in Sri Lankan firms to governance issues using a countrywide cross-sectional survey. Respondents from 64 public firms provide information on manager's attitudes to internal control procedures: (1) producing misleading financial reports, (2) providing faulty investment advice, (3) permitting insider-trading, and (4) providing inaccurate advertising. We establish if these attitudes vary with 5 firm-specific factors: industry group, international exposure of firms, size, whether the firm was listed or not, and whether the firm had a written code of ethics. Employing ordinal logistic regression techniques, the results demonstrate significant variation by respondents within different types of firms. Specifically there was little variation to these issues when respondents were classified by industry, with most variation when classified by international involvement. Respondents from firms with significant international exposures were strongly opposed to most practices, while respondents from firms with written codes of ethics were strongly opposed to the production of misleading reports and insider-trading. Interestingly respondents from listed firms were most opposed to insider-trading, while smaller firms were more opposed to misleading advertising than respondents from larger firms. The results have important implications for the implementation of corporate governance practice.

Ensuring balance in corporate governance : parts 2F.1 and 2F.1A of the Corporations Law

Effective corporate governance must balance the competing, and at times conflicting, objectives of efficient endeavour and accountability. The CLERP amendments to the Corporations Law introduced on 13 March 2000 go a long way towards providing this balance. While the business judgement rule was introduced to promote efficient endeavour, Pts 2F.1 and 2F.1A maintain corporate accountability. This article compares Pts 2F.t and 2F.1A of the Corporations Law. It is argued that, although there are procedural and substantive differences between the two parts that need to be understood by practitioners, the importance of the two Parts is that they work together to provide for a much-needed improvement and enhancement of shareholder rights and remedies, thus upholding accountability in corporate governance.

The implementation of OECD corporate governance principles in post-crisis Asia

The recent OECD Principles on Corporate Governance provide a framework for the convergence of global corporate governance practice. This paper considers the implementation of these global ‘best-practice’ standards of governance as part of the continuing post-economic-crisis reform throughout Asia. These initiatives have explicitly acknowledged that no single model of governance can exist, and instead have focused on those elements apparently common and, therefore, applicable to all countries. Notwithstanding the existence of these elements, this paper investigates the difficulties involved when attempting to implement general rules across countries at different stages of economic and legal development. While implementation will be hindered by obvious cultural disparities, long-term change in practice requires a cultural shift in the philosophical and financial bases of the firm.

Reflections on some recent corporate governance reforms in Germany. A transformation of the German aktienrecht?

Focuses on the German law reform relating to public corporations. Flaws to the German system of corporate governance; Advantages of comparative corporate governance research; Features of the German Corporate Governance Code.

Information disclosure and corporate governance in listed companies in China: from Yinguangxia to Enron

China's path to the development of a modern securities market has not been a smooth one. This article argues that efforts to impose Western securities market models on China have been fraught with difficulty. This is especially clear from the adoption of information disclosure principles and practices. While the integrity of disclosure practices is a fundamental element in maintaining investors' confidence in securities markets, disclosure practices need to be attuned to China '5 systemic features, especially in regard to its legal structure and rules. Market failures, such as the collapse of Enron in the United States, have led to a realisation that US disclosure models have their own difficulties and that these should not be uncritically used. This article reviews recent Chinese law andpractice (using the Yinguangxia false disclosure scandal as an example) in this area and calls for the adoption of a more critical approach towards the use of Western models with particular regard to China's own distinctive pathways of reform.

The German two-tier board and the German corporate governance code

This paper deals with some interesting recent corporate governance developments in Germany. The focus is in particular on the German Corporate Governance Code, its parts, layout and how it deals with the various organs of German public corporations. The German Code is quite unique since it applies a Code of Good Practice to a two-tier board system, thus making it necessary to deal with the role and functions and the relationship between the management and the supervisory board. This paper concludes that several changes to the German law relating to public corporations since the middle of the 1990s and the introduction of the German Code will ensure that the two-tier board system will remain the favoured board structure for public corporations in Germany. It is, however, submitted that employee participation at supervisory board level will provide particular political challenges for Germany in the near future.

Accountants, ethical issues and the corporate governance context

A major survey of members of CPA Australia on the issue of ethics was recently conducted. A questionnaire was sent to 7,000 members at random, with those surveyed being asked whether they had come across any one of 14 ethical issues in the previous year. They were also asked to list the issues in order of importance as regards maintaining ethical standards, even if they had not been confronted by them.

Towards real shareholder participation in contemporary corporate governance

Enhanced shareholder participation in large public companies in Australia has not gone far enough.  Shareholders need to be given the opportunity to contribute to the forming of company decisions and strategies.  One proposal is to require that directors themselves be shareholders. A second proposal mandates shareholder committees in public companies.

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. This foreign 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.