Role and Responsibilities by Business Executives in Corporate Governance

Wissenschaftlicher Aufsatz, 2011

14 Seiten









The Company and its stakeholders

Corporate Governance is an all embracing code of practice to be followed by all stakeholders. The various stakeholders such as:

- Government
- Regulators
- Auditors
- Stock Exchange
Financial Institutions
- Board of Directors
- Non-Executive Directors
- The Press

These stakeholders are to follow underlying principles under the code of corporate Governance.

- Openness
- Integrity
- Accountability

Openness in governance means being transparent in all business dealings or transactions. This is a key to the success of every business if openness exists in all official transaction either within or outside the business. All information should be disclosed in relation to business and accountable to the market. The practice of Openness allows companies board of Director to undertakes decisions that will allow companies to strive and prosper in their venture and also allows shareholders who have their stake in the business to look into without any obstacle.

Integrity: Corporate Governance rule demands that there should be honesty in companies dealings from both the people who are in charge of handling the affairs and those are given the picture of the state of the business should in effect report on one voice rather than hiding information from the public or the stakeholders whose interest is on the business and needs the information for investment decision. The company should report the true affairs of the business instead of hiding vital information and widow-dressing the true picture of the company to deceived investors due to dishonesty in reporting.

Financial Reporting is now a requirement for every company to publish and add a section under corporate Governance to indicate how the company complied with the combine code of best practice.

Accountability: Corporate Governance code of best practice has outlined both responsibilities of the board of directors and the shareholders. It is a requirement now for all public companies under the stock exchange Listing should have board of directors who will be responsible for the director of the company and reporting to the shareholder and the shareholders responsibilities towards the board and the company. The combine code is directing the shareholders to be responsible to the true owners of the company and must be seen discharging their responsibilities.

Corporate Governance have generated a lot more in various diverse ways by different committees among them are; The Cadbury Report 1992 assumes that there was a perfect system of Financial reporting in the United Kingdom and the committees then view how companies under the stock exchange listing reports and insist on compliance to their annual reporting system that it was a requirement for companied to include how they comply with the combine code. Any company that does not comply should states clearly and explain why should not or could not comply with the combine code in a statement form.

This allows the stakeholders of these companies to have an informed decision as to whether they are satisfied with the company governance system that they operate.

The Cadbury report focuses highly on the board of directors to the company ensuring high level of attention to their dealings.They also task the Accounting and Auditing information been relevant to stakeholders demanding a transparency and an effective communication with their shareholders and also look at how Institutional Investors should be accessed and are responsible so far as corporate governance is concern.

The Greenbury Report 1995 Corporate Governance has made companies to know their roles and responsibilities. The Greenbury report made it known to the general public and the directors of companies. The requirement of directors publishing their remuneration as a basic requirement have made companies directors to stop the abuse of power in which company directors were having known as excessive executive remuneration. These companies’ directors were having what is called ‘Fat – Cat? Meaning directors were taken huge salaries and allowance allocated to them. The report identify that Institutional Investors were not participating in the management of their companies neither were they consulted by the directors of companies in fixing their allowances and remunerations. Now the report seems to tie directors’ remuneration to performance base which have installed corporate bodies in the discharge of their duties.

The Hampel Report 1995;

This report also re-emphasized the earliest reports by stating that Corporate Governance should be a voluntary approach by companies but not pass by legislature such as the US style but that companies and its shareholders should also avoid just accepting following by way of month but must be seen doing or applying good governance principles and complying with all principles and be free from any bias in adhering to the rules. The early day’s reports seem to be either Yes or No application. The Hampel report talked about the balance between companies and stakeholders and emphasizes on accountants. The issue of this report is to make companies more accountable and responsible to their stakeholders in the broader since as this report seems to have taught that companies were not accountable to their owners and the general public. The combined code emphasized on Good Corporate Governance rules as per the Cadbury and Greenbury reports.

There has been so much stressed on Directors and Directors Remuneration, the Relation with shareholders and Accountability and Audit. It also looks at Institutional Investors where areas like voting rights, Dialogue with companies and Evaluation of Governance is applied. Due to weak Corporate Governances inn place more companies felt of across the continent in US Enron, Maxwell, The British Gas etc among others were how Corporate Governance weakness was before the combined code came to being.

The Turnbull Report 1999 also assisted companies to pay attention to their Internal Control and risk Management issues. This report made it a requirement to companies’ directors to always report to their Shareholders on how effective their internal control systems work.

The Turnbull report further looked at some aspect of the internal controls that companies must ensure that they adhere to but try also net to be prescriptive with a framework that could also jeopardize the structure of internal controls, in companies. They only try to provide a general guidance such as the US Tread way Commission (1987) which seeks attentions to the Internal Control System and the Turnbull Report, in UK seek the over view of the corporate governance worldwide on how companies are to develop their own system of Internal Control and any Framework that will ensure that the system of Internal Control works.

Another Report is the Higgs Report in 2003 which looks into the role of non-executive directors whose jobs are not permanent and to be over seeing the role of companied directors. But the Higgs report tries to look at how effective the role of Non-executive directors are in serving companies with their board.

The report identified that companies board were not covered enough with Non-Executive directors and also they were not resourceful enough to discharge their duties so it was a requirement or time for companies to take at least half of the board members as Non-executive director and also to adjust their remuneration package to encourage them since non-effectiveness could jeopardize the companies affairs by the directors and the board. This report indicates that strong links need to be established between the Non-execution members and shareholders as they represent the shareholders and report to them since the Turnbull report is concern with segregation of duties. The Non-Executive directors are to perform their duties in line with shareholders interest and be seen to be performing effective monitoring and reporting to the shareholders.


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Role and Responsibilities by Business Executives in Corporate Governance
( Atlantic International University )
ISBN (eBook)
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role, responsibilities, bzsuness, executives, corporate, governance
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Paul Bangniyel (Autor:in), 2011, Role and Responsibilities by Business Executives in Corporate Governance, München, GRIN Verlag,


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