Corporate Governance

Question 1

Who is required to comply with the UK Corporate Governance Code (the Code)?

Answer 1

Premium listed companies follow the UK Corporate Governance Code (both incorporated in UK and overseas) and have to produce Corporate Governance reports in their annual report and accounts

Question 2

Define good governance

Answer 2

Good governance should facilitate:

1) efficient
2) effective,
3) entrepreneurial

management that can deliver shareholder value over the longer term.

Question 3

Who is responsible for publishing the UK Governance Code?

Answer 3

Financial Reporting Council (FRC)

Question 4

What are the focuses of the Corporate Governance Code?

Answer 4

1. Board leadership and company purpose
2. Division of responsibilities
3. Composition, succession and evaluation
4. Audit, risk and internal control
5. Renumeration

Question 5

Describe the comply and explain approach.

Answer 5

Although it is expected that companies comply with the principles, it is recognised that non-compliance can be justified in specific circumstances if good governance can be achieved by other means, which its reasons should be explained to shareholders.

Question 6

Which Corporate Governance code is required by AIM companies?

Answer 6

Companies quoted on the AIM are required to follow a corporate governance code on a ‘comply or explain’ basis. UK Corp Gov Code or QCA is acceptable.

Question 7

What is the purpose of the Stewardship Code?

Answer 7

To improve quality of corporate governance through

1) promoting better dialogue between shareholders and company boards, and
2) increase transparency about the way in which investors oversee the companies they own.

Not mandatory for institutional shareholders

Question 8

What are the corporate governance requirements of standard listed and NEX Exchange Growth companies?

Answer 8

No obligation to follow corporate governance code unless they satisfy:

1) More than 2,000 employees
2) More than £200m turnover and a a balance sheet >£2 billion

Question 9

What are the 10 principles for the QCA?

Answer 9

1) Business model promotes long-term shareholder value
2) Meet shareholder expectations
3) Consider wider stakeholder and social responsibilities
4) Embed effective risk management
5) Chair-led balanced board
6) Collective board has the necessary skill and experience
7) Objective performance evaluation
8) Ethical corporate culture
9) Governance structures support good decision-making
10) Maintain dialogue with shareholders and stakeholders

Question 10

What are the actions for required to act in contrary to the Principles?

Answer 10

1) Discuss concerns with line manager
2) Seek advice of compliance
3) Approach non-executive directors or the audit committee
4) Contact CISI for advice