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

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.

@aysha15 - the hedging issue is a very good point. However with risk assessment don't get carried away with things that are outside the board's control - corporate governance means direction, control and guidance by the people at the top -unless the crash relates to poor maintenance or forcing long hours on pilots it is hard to see how management is responsible. The dip in share price needs also to be related to performance and tracked to poor decisions if you are to put forward a convincing argument on CG. For example Malaysian Airways had been 'wobbling' financially before the MH 370 and 317 incidents and whereas some blame for bad management may be levelled at the Board, the in-flight incidents were really bad luck - being shot down is not within their control and neither is a senior captain allegedly going 'AWOL' (this can be contrasted with the German Wings crash where the young co-pilot was known to the company doctors as having suffered from depression so processes and regular checks on him should have been in place and the ultimate responsibly lies with the board)

Thank you so much!

Dear Trephena, I am currently in the middle of completing my RAP for May 2017 submission. I initially started using the annual reports of my organisation for the year ending 27 Feb 2016, however, since I am submitting in May 2017, should I use the annual report for the year ended 27 Feb 2017? The annual report for year ended 27 Feb 2016 says the accounts were signed by the auditors on 12 April 2016, so this gives us an idea of when the 2017 report will be publicly available. Wouldn't that mean that I would have too little time for analysis if I am using the Reports that came up about a month or two before the submission period? I just wanted to confirm this before I continued my evaluation and analysis any further. Looking forward to your reply. Thanks in advance.

@:yume 2016 will be fine - the 90 day rule on date of the latest report only applies to T8 and T15 and anyway 2016 would still be the latest according to this rule. However you should do a quick search on business websites to ensure that nothing significant has arisen on the CG front since the 2016 report (negative articles reporting irregularities - board resignations, shareholder AGM revolt, hacking of customer data etc)

Dear Trephena, Thank you very much for your prompt reply. 2016 annual report it is! I will be sure to keep abreast of any new developments and current affairs regarding the corporate governance of my org.

Hello trephena, I would like to start my OBU RAP, and i am choosing corporate governance as the topic, Would you please suggest me some good companies i can work on , because i am from uganda, and i could not choose any company from here as there is no proper corporate governance law here, My mentor suggested me i can use secondary information of some top UK companies for which information will be available online. I have chosen HSBC as of now, would it be a good option, or i could choose any other, please give me some suggestions, your valuable response will be really appreciated Thanks and Regards Arathy

@arathy - I never like to recommend a company as such however where I am able, I am happy to comment on the suitability of a choice made. I think HSBC would present you with an opportunity to do a very good RAP for T17. You could introduce the topic well by briefly commenting on the failings of the banking system leading to the Financial crash in 2007 and how so many banks have been implicated in a variety of scandals (money laundering, assisting tax evasion, rate rigging etc). For this organisation you could pay less attention to the routine aspects of CG and focus on these more important issues provided you reference well. This type of organisation allows allows you to develop the issues connected with CG in a practical way and introduce critical thought e.g a discussion on how whisteblowing and leaks brought to light malpractice that the company was either intentionally covering up or top executives were unaware of -either way a failure of their duties. The link is to an article on the 'Panama Papers' which may give you some ideas of areas to explore. So good luck! https://www.thisismoney.co.uk/money/article-3528884/Now-HSBC-executives-facing-calls-resign-Pressure-growns-Panama-Papers-just-latest-scandal-rock-bank.html

Thanks a lot trephena, that is actually a good encouragement and good guide to start off. i will definitely go for HSBC,

Trephena - this post has been removed as it was not on Corporate Governance

@futaim -I am not sure why you are posting this on our Corporate Governance forum? We would prefer the mentor to contact us directly with their registration number and a copy of their online mentoring course certificate and we will assign them the OBU listed mentor label (in place of 'participant'). We would therefore recommend that they attempt to answer student queries on our forum as this would allow them to build up their own reputation and really help students rather than seek free publicity.

@trephena - Thanks for ur remarks. he actually was my mentor in period 28 and lecturer in a college that time... and a good one of course... i don't know the exact number of students mentored by him last year.. I just came to know yesterday that he is offering some online services and just intended to help him to reach out... will forwards your suggestion to him soon. Regards Futaim

Thank you -so would you kindly not post the same link again as it will be removed? So far I will allow one plug for this and only one as the more you post it the more it seems that you have more than a vested interest in this person. I have suggested a method by which mentors can achieve publicity legitimately and give something back to Open Tuition and its students. OT has its own operating costs and is not a free platform for advertising and we will ban those who abuse our policies. Open Tuition as a matter of policy will monitor the performance of all mentors to ensure that any claims made accord with facts and actual results so that students can rely on information they read on our site.

You could use either the group or HSBC UK or a mixture of both as the focus you should put on this should be on the scandals and issues faced by the whole group really. I don't know if I mentioned previously but OBU markers apparently are fed up with Topic 17 having become a 'tick-box' exercise and want to see that students can discuss the main issues and think for themselves. The title is expected to change in the next year to reflect this position -and students will have to use a company that has been involved in CG scandal(s). Therefore adopting this approach now would be a good idea and this is best done by consider both the HSBC UK and worldwide. Regarding ring fencing -yes it is worth mentioning it and the legislation but don't over do it (it affects all UK banks and has been imposed on them rather than being the banks' own initiative in fact amendments are afoot: https://www.bankofengland.co.uk/pra/Pages/supervision/structuralreform/default.aspx I would say from a CG perspective the personal liability of a bank's personnel is just as if not more important as instead of being able to hide behind corporate responsibility, managers could find themselves facing criminal charges and custodial sentences. Had this legislation been in force earlier there are at least 2 former CEOs of other UK banks who would almost certainly have been sent to prison. You may find the attached useful https://www.hoganlovells.com/en/publications/criminal-liability-for-bank-directors-a-look-at-the-united-kingdom-and-south-africa

@trephena, I have been following you for quite some times now. I have read all your posts and the encouragement you have given through your posts has made me to select topic 17. You are doing more favor, free of cost compared with what we are getting from our mentors after paying them handsomely. I have three questions for you. 1. What will be the most appropriate way to show the usage of accounting and/or business techniques for topic 17? For analyzing the stakeholder impact, I have decided to use Mendelow matrix or Kendall & Kendall as you have recommended. My mentor said this is not enough. He told me to find out any specific theory of Corporate Governance for that matter. After some browsing, I have come to know about some available theory. Namely: Agency theory, Stewardship theory, Resource dependency theory, Stakeholder theory and Transaction Cost Economics. Are they appropriate for the purpose? If yes, then, how to relate them? 2. I have come to know about three models of Corporate Governance - Japanese model, Anglo-US model and German model. Can i use them? If yes, then, how? 3. I have selected Shell, Chevron and Exxon Mobil to do the comparison with my company BP oil. Should i use all of them or should i stick with one of them. My mentor has advised me to use any one. Thanks in advance for your kind co-operation.

You need to introduce the subject of CG BRIEFLY(why it developed and its importance) so you could mention Agency Theory and Stewardship theory here. Then you need to benchmark your company against an appropriate country CG Code. Finally you need to focus on stakeholders (the 2nd part of the question brief) so obviously this is where you introduce a stakeholder model. You must NOT exceed 7,500 words. So putting all these essentials together in relation to your questions: 1/ Your grade will depend on your analysis not regurgitating theories so unless you can apply a particular theory then there is no point it wasting words on it. In this respect Resource Dependency Theory sits better in Topic 20 rather than the Topic 17; Transaction Cost Economics is normally a bit 'specialist' for T17 but is relevant in the context of debt and equity decisions. Does it have much relevance then for your RAP? - it might in my opinion if there have been recent share buy back decisions (i.e. last 2 to 3 years). I have mentioned on this forum how share buy back can be used to manipulate the EPS and this method is very questionable from a CG point of view. So what I am saying is don't include any theory just for the sake of it as it will not gain you any credit - however if you can APPLY it in the context of your organisation it will! 2. The Code you choose should normally apply to the organisation e.g. if using a UK company you must apply the UK Code and for a US company this would be SOX. However you may refer to aspects of other codes if you feel these are superior as T17 is about Quality of Corporate Governance and if the Code that is legally prescribed for your company is inferior in some respects then it is legitimate in your analysis to point this out making comparisons with other Codes. Board model is generally a separate issue from the Code but may be useful again when discussing and benchmarking the actual board in your company. Do not though go into the detail of the various board models unless you can apply this sensibly to your organisation. In applying the Code it is better usually to consider how the Principles (and the more important sub-sections of the Code) are applied in your organisation. For example with Leadership most thought is that the UK model is superior to the US in terms of separation of the roles of CEO and chairman. However from the stakeholder theory angle perhaps the overall dual board model is better. (Note you cannot just state that something is better, you will need to justify the comments and expand upon your reasoning for such statements citing relevant references as much as possible) 3. Your choice of company should take into consideration the comments I have made above. Personally I think SOX is very complex legislation compared with most Codes (which are considerably shorter in length and simpler in language) and therefore you may find it harder to use SOX than an actual Code. Alternatively you may find some articles that highlight the key principles of SOX and you might find these easier to work from for Exxon or Mobil. Although Shell may not be a US company parts of its operations would mean that it has to comply with some aspects of SOX. If I am totally honest I don't think I would necessarily choose any of the above companies but remember this is a PERSONAL decision. As you have been following this thread you will see that I prefer organisations that have been affected by recent scandals as they provide more scope for critical thought and UK banks provide a rich source for this (so the balance of accessibility of information and critical analytical commentary, ease of use of a code and board model in my opinion tend to come together very well for these for a T17 RAP). However it all comes down to what YOU feel comfortable with

Hi trephena i am planning to start rap of t17 i am coufused to about choisng company i am considering 2 uae based telecom companies Du & Etisaalat is is ok for t17 and i also need some guidence for how and where to start this t17

one more thing here in UAE there is no such rules of corporate governance for companies to follow like UK or USA then what can I do can implement UK codes of corporate governance to judge the performance of UAE-based company in RAP?

Hi alfred hope you are fine i am currently doing Obu REP on Topic 17 if you do not have any problem can you personally share your passed RAP with me for some idea and understanding Thanks NOTE ADDED BY TREPHENA: PLEASE DO NOT ASK ANOTHER STUDENT TO SHARE THEIR WORK AS THIS IS AGAINST OUR FORUM RULES (AS WELL AS INFRINGEMENT OF OBU'S STUDENT REGULATIONS AND THEREFORE POTENTIALLY AN ACADEMIC CONDUCT ISSUE). There is plenty of good advice on this forum topic to do a successful RAP. I have given you a detailed reply below. If you do not understand how to structure your work then you should share the problem by posting a question on this forum.

@Mubashar -I am unable to comment on the suitability of the two companies you mention as I have no real knowledge of them. (Note you do not have to choose telecoms for T17 though as the industry sectors rules apply only to T8 & 15). In principle there is no problem in comparing overseas companies to UK Code or US CG legislation. My main concern with regard to UAE companies is the availability of information - if they don't follow codes is there sufficient publicly available company information for you to make comparisons? Of course you can turn this to your advantage by showing possibly that as facts about the dealings/ composition of the board are not published this is of itself a major weakness in the CG. However are the companies like true plc's ? If they are private / family run or dominated by one or two major shareholders then this is less of an issue perhaps. The other issue about availability of information is that ideally you want a company that has a high media profile for CG (good or bad). This is because you need to have a variety of sources (not just company statements) and be able to do some critical objective review. I would not rule out the companies you suggest as they could be good candidates but you need to establish a few things first regarding the above. Don't forget CG goes beyond codes - it also involves anti-bribery and anti-corruption so you could develop the critical thought in this respect by comparing the way business may be conducted differently in different parts of the world and how this might impinge on the quality of CG in your chosen organisation. Take a look at the Transparency International Corruption Perception Index as that may help you with this aspect in setting the scene (is the UAE improving or worsening - ensure you understand which way round the ranking goes Norway and New Zealand are at the lower end of perceived corruption whereas for example Nigeria is perceived as being towards the high end).

thanks for your prompt reply I have searched highly governed plc companies in the UK and found The 2016 Good Governance Report from an institute of directors where I have found top hundred good governed companies in the UK in 2016 and I have decided to go with next plc its ranking is 4th in it. One thing I want to know in it any problem if I will select next competitor who has year end is different from next plc now I am learning from information pack about referencing how to refer information and any guidance from your side on it and also give me some tips of setting project objectives and research questions for topic 17 thanks

Different year ends are not an issue with T17 as the comparisons relate to how well they adhere to CG principles are not concerned with financial profit and performance. Regarding referencing please consult 'The OT Ultimate Guide to Referencing your RAP ' (all 3 parts) available on our homepage www.opentuition.com/obu There us something about RAP project objectives on one of our threads - use our search facility and key words such as RAP project objectives or RAP Research Questions and you may find it that way. (Unfortunately I have several work projects on the go and don't have the time to repeat information. I justify this on the basis that it is always good practice for students to engage in research for themselves as this is what the RAP and a degree is all about :-) )

I am doing a report on one of our local banks in Zimbabwe.I would like to analyse risk basing on the provision in our local code but am unsure how to apply it.Can you assist me in how to go about in the analysis and presentation of the risk analysis in my research.

There possibly is no real local code so you will have to look at how the UK or South Africa deal with this via the UK Code and King Reports. The UK has introduced very stringent banking regulations too in addition to the Code but you could point out that these would not be appropriate for your local bank because the scale of London banking is global and thus poses far greater risks to the economy. I would expect to see some mention of the Basil Accords and CAMELS model in a T17 on banking in addition to the 'usual' 5 principles outlined in the UK code and emphasis on the Board. Remember as I touched upon above banks are at the heart of a country's economy and their failure can have repercussions beyond the 'usual' stakeholders.

Thank you very much

Here are few quick questions to @trephena. 1. Can you pls give me some ideas about how to fulfill the requirement - "Presentation of your results in an appropriate form e.g. tables, graphs, pie charts." As this is not like topic 8 where the use of excel is inevitable and easy. 2. What would be the most appropriate way to compare the governance practice of my selected company with a suitable competitor? Should it be code by code basis or anything else specific? 3. When assessing the compliance of my company with the UK governance code, based on the information given in the annual report, they have complied with almost all code provisions except 2, and it is also mentioned in the annual report with justification. So is it enough to tell that the compliance is in line with the CODE? This exercise alone has eaten up 3600 words. I have tried to cover almost all sub-sections in the governance code. I am a bit lost in here. 4. Am I on track or should I concentrate on finding the online news and articles about non-compliance with the governance code? Your kind assistance will be greatly appreciated.

(1) have,you really read through this forum? i know there's a lot on here but I don't have the time to repeat everything. I have made some suggestions and you have to be imaginative. (2) significant principles (the UK CODE has 5 overriding principles) (3) critical thinking is paramount for success so focus on the abnormal rather than what is normal and routine. Besides you likely to bore the marker to death if you just go through all the subsections - be selective - what is really significant? (4) you definitely need a balance of sources so look for articles from the media - don't just rely company sources

Hi Trephena, I've chosen topic 17 and decided on Sports Direct as I am fascinated by the issues surrounding the ceo and major shareholder Mike Ashley. Do you think it is a good choice and I have a lot of information I can work with from a CG perspective? Many thanks

@thegoal24 - yes I imagine this would be a good choice as it has some good opportunities to introduce lots of critical thought. I am sure you have already seen this article: https://www.theguardian.com/business/2016/aug/25/sports-direct-corporate-governance-criticised-investor-forum The points I would make here is that (a) in companies where there is good governance institutional / major shareholders are consulted by the board about important aspects and strategy and (b) generally these shareholder groups rarely feel the need to interfere in the important decisions made by the companies they hold their shares in and make their opposition public. So this in itself speaks reams!! And still no one has been appointed to conduct an independent review as far,as I am aware https://www.cityam.com/257144/shareholder-group-hits-outs-sports-directs-disappointing

Thanks Trephena I appreciate that! I have a bit more confidence about my choice of company. About the independent review I just read that have engaged the lawyers to carry out the governance review instead of the list of 20 names put forward by shareholders. That's is a problem right? Does it imply the major shareholder/CEO is too powerful? But then again he owns more than 55% isn't it within his rights? How would I critically evaluate this?