Main aspects of corporate governance Flashcards
(28 cards)
What is corporate governance?
Rules and practices to ensure accountability, fairness, and transparency in a company’s relationship with stakeholders.
What are the main levels of corporate governance in the UK?
Legislation (Companies Act 2006)
Regulation (London Stock Exchange, UK Listing Rules - FCA)
UK Corporate Governance Code (Financial Reporting Council)
What is the UK Corporate Governance Code?
A set of standards for good practice in board composition, division of responsibility, remuneration, accountability, audit, and shareholder relations.
Set by Financial Reporting Code
What does ‘comply or explain’ mean?
Companies must state if they comply with the Code or explain why they do not.
What is the role of the audit committee?
To scrutinize the control framework and assess its application in practice.
What are the three lines of defence in risk management?
- Front-line managers, 2. Risk management department, 3. Internal audit team.
What is the purpose of the FRC’s Guidance on Risk Management?
To provide best practices on internal control and risk management.
What is the role of the company secretary?
Maintaining statutory books, filing returns, arranging meetings, and advising directors.
What is the AFM Annotated Corporate Governance Code for Mutual Insurers?
Guidance for mutual insurers on shareholder roles and director appointments.
What is climate risk reporting?
Disclosure of climate risks and opportunities by large companies to support net-zero commitments.
What are the seven Data Protection Principles?
Lawfulness, fairness, transparency, purpose limitation, data minimization, accuracy, storage limitation, integrity, confidentiality, accountability.
What is insider dealing?
Misuse of confidential information for investment decisions, which is illegal.
What is a confirmation statement?
An annual update to Companies House on company details.
What does a company secretary do?
Maintains records, files returns, and advises the board.
What is risk appetite?
The level of risk a firm is willing to accept.
What is a risk register?
A document listing all known risks and their controls.
What is insider dealing?
Illegally trading shares using confidential information.
What are data protection principles?
Lawfulness, fairness, transparency, accuracy, and security of personal data.
Sarbanes-Oxley Act 2002
Companies listed on a US stock exchange are required to comply with Sarbanes-Oxley Act
Improves accuracy and reliability of corporate disclosure (auditor independence, corporate responsibility, enhanced financial disclosure)
UK Listing Rules
Additional regulation to company law that any listed company has to abide by
Confirmation statement
Statutory report
Annual return containing a range of info on the company (office, directors, secretary, shareholders, share capital etc)
Report and Accounts
Accounting records which are sufficient to show and explain transactions
- Income statement (profit and loss)
- Balance sheet
- Directors’ report
Must be true and fair view and must comply with accounting standards
Companies on London Stock Exchange have to follow IRFS
Directors’ report
Should include a business review - ‘fair review
of the company’s business and a description of the principal risks and uncertainties facing the company’
Quoted company
Publicly traded company
