OLD (Pre-Period 35) Topic 17 Corporate Governance - RESUBMISSIONS ONLY

Trephena, I'm currently working on my RAP under topic 17. I'm confused as to how part 2 should be written. Is there a recommended structure and content? Please advice. Thank you.

@meyasi - in Part 2 you set out your methodology and the justification for your approach i.e your proposed course of action to fulfil your project aims, objectives and how you hope to answer your research questions. Discuss the CG model code you will be applying and why and also set out the way you intend to identify the key stakeholders.

Hi Trephena, with regards to Part 2 - do we need to include the brief "literary review" mentioned earlier on this forum in Part 2 or should it be included in Part 1? Thank you.

Trephena, Thank you for the prompt reply. :) Highly appreciated. If it's possible can you pleasd advice on what's to be written in 'business and accounting techniques' in Part 2? Thank you

@Eena - I will PM you an article that an OBU mentor has produced on how to pass T17. Yes there is a lot of information out there but keep in mind you are looking at the QUALITY of a company's CG so focus on providing information that may demonstrate this. Trephena, can you email the said article to me as well? I'm struggling on my own much like @Alfred with a mentor very similar to his. ?

@trephena, I have been going through this whole forum, I chose HSBC as my organisation, and would like to know if you have any specific reference of any website or news that shows any issues with the governance or could give me some guide

@Trephena: I am doing T17, please advise me should I include analysing of financial ratios in my research or just purely analyse as you advised for Alfred at page 1 of this topic? Thanks. Ling.

@Trephena: I am doing T17, please advise me should I include analysing of financial ratios in my research or just purely analyse as you advised for Alfred at page 1 of this topic. Thanks. Ling.

@trephena Hi Trphena! I have been stressing out on this project for quite some time, as i am a bit confused on certain issues. Need your opinion on these few doubts! I am doing T17. I have chosen a low cost airline in Malaysia known as airasia. I have taken the financial statements of Airasia from 2013 to 2015. The corporate governance codes used during these years were based on the codes implemented on 2012. on 2016, they just implemented a new set of rules. Should I stick with the rules implemented on 2012? Besides that, is it necessary to bring in a competitor? I read through the forum and came across a few replies that said it is not necessary, but my mentor said to include one. I am finding it difficult to include a mentor, as Airasia is a low cost airline, and it would not be practical to compare it to a normal airline company. What should i do? I have also decided to choose four models for this topic. Agency theory, medelows matrix, coso's framework and tuckers 5 question. I am having a bit of a difficulty in applying the agency theory into this topic. How can I get about it? Besides that? earlier in the forum, i came across a comment that said that COSO framework would be suitable for american companies. Should i consider omitting it then? Thanks, Aysha

@aysha15 - You need to be able to make an assessment of the quality of the CG so comparisons with some other companies are virtually mandatory however you could choose a Malaysian company that has earned recognition for its high standards as the comparator. You use the code that the company itself would have had to use (unlikely to have been 2016 until the next year end I would have thought). Agency theory relates to the relationship of the Board with the shareholders who in essence are the principals. Are the shareholders getting a good deal or is the Board abusing their position and have their compensation packages risen far higher in proportion to company earnings and dividends? Foreign codes and principles can be useful to show how governance could be improved @meyasi -send your email address to [email protected]

@Trephena Hi Trephena ! I am planning to submit my RAP based on T17 for P33 and intends to secure garde A and for this I have selected Volkswagen as the organisation particularly its emission scandal. I would like to know your views on the selected organisation plus if the selected organisation is best fit then kindly tell research objectives related to this. I live in Karachi, Pakiatan and I think I will have to completely rely on secondary data with No primary data. Kindly also tell Volkswagen competitor also. Thanks, Rameez

You will need to introduce some critical thought wherever possible when doing the evaluation, set your work out very clearly making the best use of charts and graphs and apply the stakeholder model very well to achieve an A grade. I have made a few suggestions on this forum for VW in relation to the Kodex, dual boards and stakeholders so as always I suggest you spend an hour or two reading through everything on here as I just don't have the time to repeat everything. It should all be secondary data but you need to demonstrate excellent research for an A. As for a comparator - you could use BMW but when it comes to the emissions scandal you can make comparisons with other car manufacturers worldwide. Although this scandal is important you still need to consider other current key areas e.g. executive pay (research whether the CEO is paid less than the average UK CEO - see the High Pay Centre for info on UK data); consider diversity as the car industry is male dominated and bring in good coverage of risk assessment as this ties in with the emissions issue. This list is not exhaustive - just some suggestions.

@trephena the country's national carrier, Malaysian Airlines is not doing well. They recently underwent a few issues, and they privatized the whole company in 2015. Would it be advisable to take singapore airlines instead? Besides that, I thought of using the tuckers 5 question model. I searched throughout the internet and i couldnt find any relevant material that could be used as a reference to the model. Should i consider taking this model or should i eliminate it since there is not much of information available? Thanks!

@aysha15 - this is difficult to say which is better as it tends to revolve around which you find more interesting and how much information is available. Tucker's tends to be more relevant to Topic 20 where there is greater emphasis on ethics. Although ethics does come into T17 you need to focus on ethics as part of the principles of CG. In this sense - it would be more appropriate to consider whether the board acts ethically and responsibly in connection with agency and stakeholder theory aspects. For example how ethical is it for the CEO to be paid 30 times more than the average worker and have a 10% annual pay rise when ordinary workers get 2%? How much emphasis is there on institutional shareholders whereas small shareholder views are largely ignored? These sort of things give opportunities for critical review and thought.

@trephena I think i would stick with COSO Erm, mendelows matrix and the agency theory. I would ignore tuckers 5 question model then. For the methods used to collect information, would it be okay to state the BPP P1 textbook? as i did go through that to get information. Besides that, since im only relying on secondary data, therefore when stating the limitations of information gathering, do i need to state the benefits of primary data when compared to secondary data? Thanks!

Hello, My research project focus on a local authority which has just incorporated some CG rules 3yrs ago. For example splitting the role of CEO and chair, inclusion of NEds and introduction of various committees and it use the local govt act as its code. It is okay for me to use both local govt act and uk code to assess the quality of CG with in the local authority? What advice can you give me or areas to focus on concerning the CG in a govt institution like a local authority to increase my chances of passing this RAP.

Hie maam i have compled my rap but my mentor just told me to remove any sort of comparisons as a new obu requirent.I did topic 17 corp govern ,is there need for calculating all ratios and should i include all charts i used in the appendices

@trephena is it okay to insert pictures and then reference them

@cayz - comparisons with another company on aspects of CG are a good idea - financial comparisons though are not required (that is part of Topic 8 or 15). So keep any in your analysis when looking at application of the Code and comparing boardroom pay etc. The only normal financial info required is info on shareholders returns as part of the stakeholder analysis

@emi -that sounds fine to use the local government act and code. There are some basic rules of CG that apply to all organisations (see agency theory and how to counter the problems of it). A major area you might explore is who is the local authority answerable to? Although the electorate may vote for councillors the appointment of the CEO may not be a position that the electorate have a vote on so it may be appropriate to see who is involved in the appointment process. Depending on which country you live in you may be able to explore aspects of nepotism, corruption and potential bribery as those in authority are often in situations open to these types of problems which if they exist are obviously signs of very weak ethics and poor governance.

Hi Trephena, Long time lurker here. I have skimmed through the entire forum for this topic and some others as well. Just want to say that you've provided so many of us with valuable guidance in attempting our RAPs, so thank you very much. I haven't been able to notice many people here choosing companies in the US, and hence following the Sarbanes-Oxley Act of 2002. I wanted to ask, is it necessary to go line by line throughout the entire respective CG code, in order to do well on the project? (earlier on i noticed you suggested to go through the combined code for a UK company line by line) From what I researched, the sarbox act is around three times as large as the UK CG code of 2016. Would it mean, that for someone who wants to do this project efficiently and get a good grade, should that person choose a company in the UK (as opposed to the US in particular) as the UK code seems to be shorter, less detailed/ more to the point? (I am interested in the CG of Apple Inc. and have found many articles criticizing their CG as well - so good for balance. however, i'd have to compare it to the Sarbox act. alternatively HSBC/ Barclays has plenty of info too, and i can rely on the UK code.) Do you think it would be alright for me to choose apple, and then go through certain main areas of the Sarbox code relating to board composition, auditor independance and committees, and still be able to get an A in the project without going through the entire sarbox code line by line? Thanks in advance!

@yume - an interesting question. Very few students do CG on US companies but do not let that deter you. I agree that SOX legislation is soporific but may be useful if you are an insominiac :-) however as with many things American SOX is perhaps an over-reaction. It mainly came about in the wake of Enron. All that said I think you could do a reasonable RAP on a US company. I attach a link to a document that discusses many of the theoretical aspects of CG and has some sections on specific issues related to US CG. Just scan through the first part and home in on 2.7 onwards https://www.boeckler.de/pdf/p_arbp_223.pdf You may be able to find additional material by searching on Google Scholar You could try to apply the UK code provisions and then compare them with what the US position is and comment accordingly. For example the issue that in the USA the roles of CEO and Chairman are normally combined although there are proposals that this ought to be changed to the UK position where separate roles are the norm and prescribed in the UK Code.

@ Trephena, Is it okay to assess the impact of the quality of CG with in an organisation based on stakeholders claims or interest in organisation?

@Emi - you may certainly assess the impact on stakeholders as you suggest above but you will also need to do some sort of benchmarking. You don't say where you live but in the UK there is some sort of guidelines you would be able to use: https://www.google.co.uk/url?sa=t&source=web&rct=j&url=https://www.cipfa.org/policy-and-guidance/publications/d/delivering-good-governance-in-local-government-framework-2016-edition&ved=0ahUKEwjqxcbFp4bQAhVCL8AKHajxBXsQFggjMAE&usg=AFQjCNFxYJON-js67Rqh383PKXRssoFfXw&sig2=GEoLguRZuZVxKXZoAX_Lhg

Hi @trephena I just finished mendelows matrix, and i have a few doubts regarding the classification of customers/guests in the airline company (Airasia) . I classified them as individuals with low power but high interest, as they are looking forward for good promotions, new routes and quality from the company. However, I am having a bit of confusion regarding the power. Suddenly i feel they do have power, as they are the main source of income for the company. If they boycott the airlines, this would lead to a drop in the revenue. But the reason i chose low power is that, the company has a large base of loyal customers, as it is the only low cost airline in the country, with a large number of routes in Asia. Would that be practical? I have started out with agency theory too. I am going to assess how Airasia has prevented conflicts between its shareholders and directors. I am planning on talking about accountability and transparency of the directors to the shareholders. Therefore, I plan on doing a comparison of the revenue and EPS of the company for a 5 year period, to assess how the directors have conducted their duties to maximize the wealth of the shareholders in this period of time. I also plan on talking about the dividends declared, and the employee share option scheme. But, i am having a bit of confusion on how to present it. How do i get around this? Thanks.

@aysha15 - it is about how the quality of corporate governance affects stakeholders. Customers obviously have the power of veto and no commercial company can survive without its customers. However some customers are influenced by the ethics of a company and whether it appears to treat people well in terms of fairness (e.g. it's employees, it's environmental policies and its responsibilities towards others). Probably their power from a CG point of view is low but it is not all about low fares etc - the 21st century has seen the rise of the 'ethical consumer' who will boycott a product or service if there is adverse publicity about its management policies. Use graphs for financial information wherever possible. There are various areas you could explore. Directors' compensation packages are an aspect of agency theory -which have has risen more: their overall remuneration as a percentage of company earnings or returns to shareholders? A graph could show this comparison. EPS is one aspect but some investors seek long term growth in the form of the market worth of their holding. Share price tends to correlate with market confidence so a year on year increase in share price can indicate the company is maximising wealth for shareholders

FOR T17 SUBMISSION CHECKLIST PLEASE SEE PAGE 12 -then scroll down. I wrote this checklist for a previous submission period but the checklist is still valid for P33

Hi @trephena I am also using COSO's ERM framework for the report. Airasia does utilize the ERM framework, Therefore, I planned on using it to assess how effective has the framework been in ensuring that an effective risk management system is adapted in the organisation although it operates in a dynamic environment. I planned on talking about the fluctuations in fuel prices and currencies, and how Airasia mitigated these risks by hedging. Would that be okay? Besides that, I thought of including the recent flight crash which had an effect on the company's reputation too. Can i talk on how the company tackled its reputation risk due to this incident? The company was also facing debt risks. So should i talk on measures taken to mitigate this? How do i incorporate the ERM framework in it? Do i have to include the shareholders too? The share price of the company dipped for 3 years. So should i state how the company managed the falling of the share price? I'm a bit unsure on what i should touch on regarding the ERM framework. Do let me know if this is the right way. Really confused about this. Thanks.

Hi! Trephena I have finished my project but concerned if the excel sheet appendices is attached as one file with many sheets or can I create separate appendix excel file for each graph and table. Thank you for you advice in advance!

By the way this query is of a general nature and will be re-posted to Submissions in a day or so as it more appropriate there than here Ask yourself - which is easier for the marker? I suspect one file containing several worksheets -all with clearly labelled tabs is the short answer as it is quicker and easier to work from. If you have a separate file for each graph and table then the poor marker has to download each and every one individually and they are not going to thank you for making life harder for them :-( However if is unrelated information separate files could be justified but that does not seem to be the case here