Module 2 Corporate Governance Flashcards
(20 cards)
What is corporate governance?
The system by which companies are directed and controlled
What is corporate governance?
The system by which companies are directed and controlled
What is agency risk?
Agency risk is that directors’ self interest deviates from that of the shareholders
What is agency cost?
The cost of reducing agency risk (External auditor fees)
What is the UK corporate governance code
Board leadership and company purpose Division of responsibilities Composition, succession, evaluation Audit, Risk, Internal control Remuneration
What is the requirement for audit committee compositon?
Non executive directors only, minimum of 3
What is the requirement for nomination committee compositon?
Majority of Non executive directors
What is the requirement for remuneration committee compositon?
Non executive directors only, minimum of 3
What companies need to comply with “comply or explain”?
Entities with a premium listing on the London Stock Exchange
Companies listed on the LSE need to include what as part of their annual report?
They must include a corporate governance section, this is a two part statement.
Narrative statement - describe how the company has applied the principles of the code
Compliance statement - They must state whether they complied with all principles, must explain why if they have not
What is agency risk?
Agency risk is that directors’ self interest deviates from that of the shareholders
What is agency cost?
The cost of reducing agency risk (External auditor fees)
What is the UK corporate governance code
Board leadership and company purpose Division of responsibilities Composition, succession, evaluation Audit, Risk, Internal control Remuneration
What is the requirement for audit committee compositon?
Non executive directors only, minimum of 3
What is the requirement for nomination committee compositon?
Majority of Non executive directors
What is the requirement for remuneration committee compositon?
Non executive directors only, minimum of 3
What companies need to comply with “comply or explain”?
Entities with a premium listing on the London Stock Exchange
Companies listed on the LSE need to include what as part of their annual report?
They must include a corporate governance section, this is a two part statement.
Narrative statement - describe how the company has applied the principles of the code
Compliance statement - They must state whether they complied with all principles, must explain why if they have not
Who is impacted by the Sarbanes Oxley Act 2002 (SOX)?
Companies across the world that are:
Registered with the SEC in the US
Included in the consolidated accounts of a company which is registered with the SEC, even if they are not domiciled in the US
Non US publicaly traded companies operating in the US
What are the additional requirements of SOX?
Annual report certification - Reports must be certified by both the CFO and the CEO
A section 404 report - Requires management to state their responsiblity for establishing internal cotnrol structures, to make assessment of the effectiveness of internal control, every audit report to attest to the assessment made by management.
Audit commitee - Must preapprove all audit/non audit services subject to de minimis
