...regulators and by generating practical ideas for further enhancing confidence in the independent audit. The initial focus of the Forum was to improve audit transparency and support shareholder involvement in the audit process. At its meeting in May 2005 the Forum agreed to explore a broader agenda which will examine the relationships between shareholders, boards, auditors, regulators and other stakeholders in the audit. Anyone interested in providing feedback on this paper should send their comments to louise.maslen@icaew.co.uk. Further information on the Audit Quality Forum, the current work programme and how to get involved is available at www.icaew.co.uk/auditquality or contact 020 7920 8493. © December 2005 Institute of Chartered Accountants in England & Wales Dissemination of the contents of this paper is encouraged. Please give full acknowledgement of source when reproducing extracts in other published works. No responsibility for any person acting or refraining to act as a result of any material in this document can be accepted by the ICAEW, the Audit and Assurance Faculty or authors. ISBN 1 84152 404 2 AuditQuality a Q Agency theory and the role of audit CONTENTS 3 Contents Page Executive summary Introduction Principal-agent relationships What is an agency relationship? Agency theory Motives of agents and...
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...business across Europe, executives of multinational groups can find that they are required to become directors of companies in a variety of jurisdictions, often at short notice. The rules relating to directorships vary considerably from jurisdiction to jurisdiction. This guide is intended to provide an overview of the duties and responsibilities of directors across 23 countries in Europe, answering the most frequently asked questions for directors coming from another jurisdiction. In many jurisdictions, there are various forms of company available, and there are different rules for directors according to the type of company used. This guide focuses for each jurisdiction on the most common form of company, and on the rules which apply to executive / managing directors. CMS is the organisation of independent European law and tax firms of choice for organisations based in, or looking to move into, Europe. CMS provides a deep local understanding of legal, tax and business issues and delivers client-focused services through a joint strategy executed locally across 28 countries with 52 offices in Western and Central Europe and beyond. CMS was established in 1999 and today comprises ten CMS firms, employing over 2,800 fee earners and is headquartered in Frankfurt, Germany. This guide is intended only to provide a general overview of the matters covered. It is based upon the law in each of the countries as at 1 June 2012. However, the information contained in this guide is not comprehensive...
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...Bank of America: Decisions for the Future ECO 550: Managerial Economics 16 June 2013 Abstract Long-term capital budgeting is the process used by many companies to make substantial term investments, in order to receive the greatest cash flow. A company must first look at an analysis of cash flows and cost and earnings of the project to determine whether to accept or reject a capital budgeting project. The three rules used to make decisions towards capital budgeting; the payback period, net present value (NPV), and internal rate of return (IRR). The Payback Period is the tool that is used to determine how long it takes for the project to recover its initial costs for funding the project. The Net Present Value shows how the present project will affect the company. The Internal Rate of Return reveals the discount rate if the NPV equals zero. The antitrust law is a federal and state law regulation of corporations. The law insures that company does not grow too large which may prevent the growth of other corporations. The government believes that without this law that prices can become fixed and demand will be unfair in the market. In Assignment 3, I discussed the publicly traded company, Bank of America Corporation, and how the corporation deals with competition and change. In this paper, I will discuss the government regulations for mergers, the possible merger that could occur, and how the merger could be profitable. Explain why government...
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...Manual of Corporate Governance SEC Securities and Exchange Commission of Pakistan This manual is for reference only and does not constitute any legal requirement on companies, their officers, directors or auditors. This manual may be used for guidance and compliance must be ensured with the provisions of applicable laws and regulations. CONTENTS I. II. INTRODUCTION WHAT IS CORPORATE GOVERNANCE? (i) The Background (ii) Definition of Corporate Governance (iii) The Benefits of Corporate Governance (iv) The Pakistani Corporation (v) The Origins of Corporate Governance in Pakistan THE NEED FOR CORPORATE GOVERNANCE THE STAKEHOLDERS (i) General (ii) Shareholders (iii) Directors (iv) Employees (v) Creditors PROMOTING REFORM AND SHAREHOLDER ACTIVISM ROLE AND RESPONSIBILITIES OF DIRECTORS AND MANAGERS (i) Directors and Managers Distinguished (ii) Appointment and Proceedings of Directors (iii) Fiduciary Duties (iv) Powers and Responsibilities of Directors (v) Liability of Directors (vi) Executive and the Non-executive Directors (vii) The CEO 1 3 3 4 7 8 10 12 17 17 19 20 20 21 22 26 26 26 32 38 42 42 45 III. IV. V. VI. (viii) (ix) (x) (xi) The Company Secretary The CFO Internal Control System Reporting Requirements 47 49 49 50 VII. SCRUTINIZING FINANCIAL STATEMENTS - WHAT EVERY DIRECTOR SHOULD KNOW (i) General (ii) Liability of Directors (iii) Preparation of Financial Statements (iv) Tools for Directors' Review (v) How to Prevent Misleading and Fraudulent...
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...“outcome” model, dividends are the result of effective pressure by minority shareholders to force corporate insiders to disgorge cash. According to the “substitute” model, insiders interested in issuing equity in the future choose to pay dividends to establish a reputation for decent treatment of minority shareholders. The first model predicts that stronger minority shareholder rights should be associated with higher dividend payouts; the second model predicts the opposite. Tests on a cross-section of 4,000 companies from 33 countries with different levels of minority shareholder rights support the outcome agency model of dividends. The authors are from Harvard University, Harvard University, Harvard University and University of Chicago, respectively. They are grateful to Alexander Aganin for excellent research assistance, and to Lucian Bebchuk, Mihir Desai, Edward Glaeser, Denis Gromb, Oliver Hart, James Hines, Kose John, James Poterba, Roberta Romano, Raghu Rajan, Lemma Senbet, René Stulz, Daniel Wolfenzohn, Luigi Zingales, and two anonymous referees for helpful comments. 2 The so-called dividend puzzle (Black 1976) has preoccupied the attention of financial economists at least since Modigliani and Miller’s (1958, 1961) seminal work. This work established that, in a frictionless world, when the investment policy of a firm is held constant, its dividend payout policy has no consequences for shareholder wealth. Higher dividend payouts lead to lower retained earnings and capital...
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...“outcome” model, dividends are the result of effective pressure by minority shareholders to force corporate insiders to disgorge cash. According to the “substitute” model, insiders interested in issuing equity in the future choose to pay dividends to establish a reputation for decent treatment of minority shareholders. The first model predicts that stronger minority shareholder rights should be associated with higher dividend payouts; the second model predicts the opposite. Tests on a cross-section of 4,000 companies from 33 countries with different levels of minority shareholder rights support the outcome agency model of dividends. The authors are from Harvard University, Harvard University, Harvard University and University of Chicago, respectively. They are grateful to Alexander Aganin for excellent research assistance, and to Lucian Bebchuk, Mihir Desai, Edward Glaeser, Denis Gromb, Oliver Hart, James Hines, Kose John, James Poterba, Roberta Romano, Raghu Rajan, Lemma Senbet, René Stulz, Daniel Wolfenzohn, Luigi Zingales, and two anonymous referees for helpful comments. 2 The so-called dividend puzzle (Black 1976) has preoccupied the attention of financial economists at least since Modigliani and Miller’s (1958, 1961) seminal work. This work established that, in a frictionless world, when the investment policy of a firm is held constant, its dividend payout policy has no consequences for shareholder wealth. Higher dividend payouts lead to lower retained earnings and capital...
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...Benefits of Good Corporate Governance to a Corporation: Culture within the organization and industry improves, Shareholder confidence improves, Companies that are seen as well governed get a premium for their stocks, Creation and enhancement of a corporation’s competitive advantage, Enabling a corporation perform efficiently by preventing fraud and malpractices, Providing protection to shareholders’ interest, Creates additional shareholder value over time, Enhancing the valuation of an enterprise, Ensuring compliance of laws and regulations Good Corporate Governance: National Interest, Political Non-alignment, Legal Compliances, Rule of Law, Honest and Ethical Conduct, Corporate Citizenship, Ethical Behavior, Social Concerns, Corporate Social Responsibility The Treadway Report: published in 1987 highlighted the need for a proper control environment, independent audit committees and an objective internal audit function and called for published reports on the effectiveness of internal control. Cadbury Committee on Corporate Governance, 1992: to help raise the standards of corporate governance and the level of confidence in financial reporting and auditing by setting out clearly what it sees as the respective responsibilities of those involved and what it believes is expected of them. The Cadbury Code of Best Practices had 19 recommendations Relating to the board of directors, non executive directors, reporting and controls The Greenbury Committee, 1995: to identify good practices...
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...the roles, responsibilities and powers of the Board of Directors, Management and shareholders? 5 2.3.1 The roles, responsibilities and powers of the Board of Directors 5 2.3.2 The roles, responsibilities and powers of the Board of Management 7 2.3.3 The roles, responsibilities and powers of the Board of Shareholder 8 2.4 How does the Board add value to a company? 9 2.5 What are at least two of the theories that are used to “measure” corporate governance? How do they measure “good” corporate governance? e.g. Contractual theory and the communitarian theory, stakeholder theory. 10 2.6 What disclosures to shareholders are required by law and why? 11 3 Conclusions 13 4 Bibliographies 14 1 Introduction Nowadays, the company governs has become the global economic which a subject matter grows day by day. When a company maintains the competitive power, attracting investments, guaranteed that sustainable, and struggle against corruption, it must to applying good governance. In the most foundation's level, the company governs sets up “the game rule” to handle the related property rights and the domination separation. Board of directors’ benefit, the coordinated enterprise's owners, the superintendent and other benefit counterparts, were considered that is the essential effective revolution company governs the frame in a company. The good corporate management method help prevents the company scandal, the deceit and the organization latent civil and the crime responsibility...
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...University LAW 200 Assignment # 2 Prepared for: Barrister A.M. Masum Faculty of Business North South University Prepared by: ID NAME 062 528 030 M.Montasir Imran Khan Section: 02 Page | 1 “A proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company.”- Explain & Illustrate? 1. Introduction: The basic principal relating to the administration of the affairs of a company is that “the will of the majority is supreme”. The general rule is that the decisions of the majority shareholders in a company bind the minority. 1 In a world that recognizes ‘simple majority rules’, minority shareholders of companies are by default vulnerable to oppression, disregard and unfair treatment by majority shareholders who are in control of the company. Majority shareholders also have certain obligations to minority shareholders in their capacity of controlling the corporation. In certain cases this minority shareholder right can be exercised directly against a shareholder, without having to go against a corporation or through the derivatives action process.2 In such case a proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company. The oppression of minority or mismanagement of a company by majority therefore calls for some remedial action. 3 Today’s minority shareholders come to the corporation with varied attitudes and agendas. Although their shareholder status...
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...in accordance with applicable requirements, and thereby build long-term value for the Company’s shareholders. These guidelines represent the policy of the Company, as adopted by the Board of Directors. The Board will review and, if appropriate, amend these guidelines from time to time. II. Responsibilities of the Board of Directors The Board of Directors is elected by shareholders to oversee management and protect shareholders’ long-term interests in the Company. Basic responsibilities The Directors’ most basic responsibility is to exercise their business judgment to act in a manner that they reasonably believe is in the best interest of the Company and its shareholders, and, in discharging this obligation, may rely on members of the Company’s management and on the Company’s outside advisors and auditors. Directors must fulfill their responsibilities consistent with their fiduciary duties to the Company’s shareholders and in compliance with all applicable laws and regulations. Each Director must also comply with all of the Company’s policies, including its Code of Business Conduct and Ethics and the Trading in Avon Securities Policy. Attendance and Participation Directors are expected to attend all regularly scheduled Board meetings and meetings of the Board Committees on which they serve, and to use their best efforts to attend any special meetings and annual meetings of shareholders. Directors are expected to spend the time and effort needed to discharge their responsibilities...
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...Introduction: Shareholder empowerment in Malaysia Presently, Shareholders of public companies in Malaysia have limited power in making corporate decision. The precise scope of the powers of each organ is defined by the company’s articles of association, general principles of company law and the Companies Act 1965. Directors usually have the power to manage the business of the company, with the members being entitled to vote only on limited matters expressly reserved to them by the articles of association or the Companies Act 1965. Although they are granted the rights to make decision on the management board and the approval rights in passing directors’ proposals, some shareholders find it inadequate as the current approval rights is a fairly weak tool in controlling agency problem. With wide and in-depth coverage of ongoing corporate tussles, shareholder awareness has improved to the point that shareholders now want to hold management accountable to proper corporate governance. Hence, in this essay, the issue of whether Malaysia should encourage shareholder empowerment to improve corporate governance in companies and thereby attract more foreign direct investment is discussed. To support my arguments three main decision-making power; rules-of the-game, game-ending and scaling-down; as well as the approval rights and proposal rights are discussed. Definition of Shareholder empowerment Shareholder empowerment means the increasing rights given to shareholder to participate...
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...personality a company enjoys certain attributes such as limited liability. While the separate legal personality of a company enables it to enjoy rights and assume obligations quite different from its members, the limited liability of shareholders refers to the fact that the company alone is liable for its debts. However, such privilege of limited liability may not always exist when the legal personality of a company is abused and used for illegitimate or unlawful purposes and other reasons. This article examines some of the grounds by which the corporate veil can be pierced under Ethiopian law and the role of courts in recognizing the doctrine. Based on the analysis of the relevant legislative provisions and some court cases, it is found that Ethiopian company law, though not sufficient, provides some clear grounds of piercing the corporate veil and certain possible grounds which may call for the application of the doctrine. It is also argued that Ethiopian courts should apply the doctrine of piercing the corporate veil, through the purposive interpretation of the statutory provisions, if doing so produces equitable results and fairness. Key Words: Company, corporate veil, piercing the veil, Ethiopia DOI http://dx.doi.org/10.4314/mlr.v6i1.3 _____________ Introduction The separate legal personality of a company renders it a juridical person distinct from its shareholders. The other attribute of a company is limited liability of share holders in which the company will alone...
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...INTRODUCTION: This statement actually describes the relationship between the memorandum of association and article of association of company. The article of association is subordinate to and controlled by the memorandum of association. Memorandum of the association is the dominant document and article of the association is about the internal rules and regulations of company. This statement was given by Lord Cairns in Ashbury Railway Carriage & Iron Co. Vs Riche[1]. MEANING OF THE STATEMENT: Both the memorandum of association and article of the association are public document. The memorandum of the association is like a constitution of a country; on the other hand article of the association is like a laws of a country. Memorandum of the association is a last limit, which the shareholders cannot across and they cannot control it; one the other hand the shareholders have full control over the article of association and may alter them from time to time as they think fit[2]. THE MEMORANDUM OF ASSOCIATION: The short form of the memorandum of the association is memorandum and in shorter it is simply memo. It contains the fundamental rules and the regulation regarding to the constitution and activities of a company, which governs the relationship between the company and the outside world. The memorandum of the association has to contain the six following clauses. Those are given fellow: “An official document setting out the details of a company’s existence. It must the...
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...Agency Theory and Shareholder Primacy Question The corporate law structure mandates corporations to act according to shareholders interests. The shareholders control companies by appointing the directors, suing wasteful managers on behalf of the corporation and approving important transactions. On the other hand, the other stakeholders such as the employees and customers have the right to make contractual claim however, the shareholders receives the larger share. Therefore, shareholder primacy is centrally focusing on the shareholders compared to the other stakeholders (Smith, p. 277-278). Even though the shareholder dominates the corporate law structure, the shareholder is mainly expressed under the law that relates to fiduciary duties. The directors are obligated to make decisions which benefit the shareholders. The shareholder primacy norm is thus the fiduciary duty aspect. The shareholder primacy theory is rooted to the early decisions in the Dodge versus Ford Motor Company case in the Michigan Supreme Court in 1919. The court ruled that the managers are required to conduct corporate activities in the best interest of the shareholders. Therefore, according to shareholder primacy theory, the corporate activities are bound by the shareholders obligations (Keay, p. 375). The shareholder primacy theory holds that the non shareholders are granted rights through contracts which in turn fulfills their interests and adequately safeguards their rights. Companies are often formed by...
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...areas in Australian law. In this project, I will try to illustrate and explain the duties in three kinds of relationships including the relationship between a director and a company, the relationship between the promoters and the corporation and the relationship between business partners. In each relationship, what kinds of the fiduciary duties should be performed is elaborated in details. The aim of the project is to help the readers to understand what “fiduciary obligations” actually means in Australian law. Fiduciary Duty of Directors According to the general law and the Corporations Act ss181 -184, as fiduciaries, the directors must have the fairness, loyalty and good faith when they implement the discretions and powers entitled to them. They cannot use their position of trust to benefit themselves at the expenses of the business without the company’s consent and full knowledge. In other words, we can say since the directors are acting on behalf of their company, they owe the duties of loyalty and good faith due to the fiduciary relationship with the companies. In addition, refer to the Corporation Act ss180, and the case of Percival v Wright 1902, the directors owed duties to the company but not shareholders individually. On the other hand, in depth, the fiduciary obligations of the directors can be divided into four aspects: 1. Directors have the duty to act in good faith for the interests of the company This duty arises from the general law- especially from principles...
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