Checklist for T17

QUICK CHECKLIST FOR T17

I have set out lots of information on this forum but as you come to completing your RAP and before you submit take a quick look through this (and maybe re-read all of the posts) to ensure that you have covered sufficient areas and adopted the right approach for a pass (and it goes without saying don’t forget to reference your sources!)

For those submitting in P31 onwards ensure you do a BRIEF ‘literary review’ about the development and background of CG to put your topic in a context. Mention some of the reports and Commissions set up to investigate the problems and provide solutions to it, the Agency theory issue and development of Codes and legislative but keep it relatively short and to the point.

1. Have you used a suitable Code? (More than one possibly for some overseas companies)

2. Have you made some comparisons with another company /other companies operating in a similar sector particularly on areas where your company may not be performing so well?

3. Have you considered the role of auditors (the length of their appointment and relationship with the Board?) take a look at the attached article about Tesco in relation to its auditors

https://www.telegraph.co.uk/finance/newsbysector/epic/tsco/11125833/Its-time-for-Tesco-to-stock-a-new-brand-of-auditor.html

Any evidence of a threat to audit independence in your company? ( remember that Arthur Andersen were heavily criticised about their relationship with Enron to the point they never recovered their reputation)

4. Have you based most of your work on primary data? – if so you need to remedy this fast…

5. Have you considered all the relevant stakeholders properly? There are two parts to T17 !

6. Do you have prima facie evidence of the impact of CG on company performance? (some basic information on share price / EPS – a few nice graphs please 🙂 )

7. Have you used visual means to display your information wherever possible – saves both on words and lots of boring long paragraphs so makes your work far more interesting to read

8. Don’t forget other aspects of CG that may be outside the code – whistleblowing has been the means of discovery for a lot of malpractices (Enron, Tesco, Olympus and many big name companies); The importance of transparency (those companies with complex tax arrangements or who base themselves in the Caymen Islands don’t spend huge amounts on these complexities and lawyers fees if they have absolutely nothing to hide!). Are there company policies to deal with anti-bribery and money-laundering?

9. And don’t just accept what the Board writes in their CG statements – what they don’t write in it can be more important and what they actually do rather than what they say they do. Question and look for proof (comparisons and research for articles on the company in the business press). A pass requires some critical thought not blind allegiance and a re-write of the company’s CG declarations!

Remember: CG statements can be wishful thinking – take a look at: https://www.tescoplc.com/assets/files/cms/Annual_report_2014/Corporate_governance.pdf

And yet 6 months later this statement is in tatters and I doubt there are many happy smiling faces now….https://www.bbc.co.uk/news/business-29613946

10. Don’t forget that depending on the type of your organisation other regulations as well as the Code may come into play e.g. if you have chosen a bank you will be expected to have outlined the more recent Basel Accords and how your bank complies with these if applicable. In the UK there is the Prudential Regulation Authority and its specific recent guidance on ‘Senior Management Arrangements, Systems & Contols [see SYSC 2 of the PRA Handbook]. ( Both the Basel Committee and the PRA are concerned with risk assessment but Basel looks at capital adequacy etc but the PRA in addition looks at the balance and actual skills of the management)

Obviously withTesco as is often the case hindsight is a wonderful thing but the warning here is not to go overboard in praising your company – stick to facts and make your judgments objective e.g. on the basis of your research you believe that XYZ is adopting measures that are in line with the principles of good CG / or there is evidence that ABC could do more to comply with accepted codes and that it is trailing behind similar companies in important areas. That way if some skeleton emerges from the CG cupboard after you submit your glowing endorsement of the company you won’t be left with egg on your face!

(like the Tesco Board 😀 )

And finally… leading on from the point above: You need to appreciate that CG is a developing & dynamic subject so you must show you are ‘on the ball’. Although you may have used the latest annual report as the basis of your Findings and analysis you have to consider any more recent dramatic/important developments that may have occurred since the report was published that may impact on the entity’s CG e.g. sudden departure of the Chairman, financial scandal etc. This is particularly so if they happened at least 3 months ago. NOTE: It doesn’t mean a complete re-write just a paragraph or so (call it update [since year end] if you like, just to show you are aware of it and really know your subject 😀