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

@trephena

Dear trephena

Thank you so much for your pertinent and helpful advise. You really point out a direction for me. I will definitely consider Burberry and let you know how it goes. Whatever you are busy in doing now wish you all the best!!

Have you studied P1 yet? Corporate Governance is about those who direct and control a company. In other words how well they conduct themselves in relation to running the company on behalf of the shareholders who actually own the company (agency theory).

The global sales strategy would form part of the overall strategic direction. Without studying it myself I doubt it hardly impacts on the actual CG of the company from the point of view of needing any particular focus in your RAP apart from being mentioned in passing in the stakeholder section unless there is a great risk attached to such a strategy. If however it has been very positive it might be brought in when discussing effectiveness of the Board (see final paragraph).

Risk however is another matter -what is in the Risk committee report? CG risks tend to be more associated with acquisition and merger strategies or expansion into completely new markets (when huge amounts of money are involved). These may sometimes (usually with the benefit of hindsight) spell disaster for a company if they are inappropriate. This is because shareholder funds are diverted to such investments and unless the said acquisition is appropriate (both in terms of price paid and being compatible with the company’s product portfolio) it can result in reduced liquidity, increased borrowing and overall fall in ROCE as well as mean that other possible investments that may have impacted positively on the company’s performance have been foregone (are therefore an opportunity cost). The fall of Royal Bank of Scotland is a case in point and has been attributed to the reckless decision of the CEO, Fred Goodwin in battling with Barclays Bank to gain control of the Dutch bank, AMRO. From a CG point this was appalling: commentators compare it to an egocentric megalomaniac pushing through his own agenda totally unchecked by the RBS chairman, NEDs and the rest of the Board that culminated in bringing ruin on the company and its shareholders (but still Fred escaped with more than GBP 500k pension a year – not a bad reward for failure!)

If the sales strategy has proved highly successful AND you have the figures to support it then you may use this as an example of how the CEO and Board are increasing returns to shareholders and performing as effective stewards of the company (see stewardship theory and the Stewardship Code )

Yes those look fine although with Q7 remember the Code is really designed to protect shareholders investors so other stakeholders are not directly affected by it (and Section E is focused on shareholders).

However it would be appropriate to mention that accounting standards and legislation impinge on other stakeholders citing the Bhs pension issue (incidentally not the first time the employees’ pension fund has been raided by a CEO) and look to see if how overall stock market pressures to report ever increasing returns has impacted on wages (sweat shops, zero hours contracts etc ) in Burbery or TB. Also remember how pressure for perceived growth can result in subsequent bending of income recognition in applying accounting standards ( as happened in Tesco and was prevalent at Enron) or can be accomplished by direct pressure on the supplier contracts to the detriment of suppliers

I am not sure how you intend to answer Q9

Not necessarily. The SFO has still to release its report on Tesco and when it does Tesco will be back in the headlines – however no news yet when that will be! Certainly other students will have chosen Tesco but your grade is not influenced by what others submit, just affected by the quality of your work.

Keep your work up-to-date – the latest annual report has probably been released by now, scan the business pages and of course look at other areas I have recently mentioned: executive pay and the AGM for starters. Also take a look at the position of the auditors (often overlooked in T17 ) – the UK Code suggests putting the audit out to tender every 10 years and recent EU directives endorse this and changing auditors periodically and yet this is what Tesco did! So worth commenting on and also perhaps reflecting (briefly) on whether the Big 4 operate a cartel and whether if firms were encouraged to use some of the 2nd tier firms (Grant Thornton; BDO Stoy Hayward etc.) both audit independence and quality might improve… oh and don’t drag out that hoary old chestnut about the horsemeat scandal – in 2016 that is scraping the bottom of the barrel!!!

hi trephena
i have read all these posts here and going to start my RAP on TESCO for NOV submission. there are loads of information here. but i think i am gonna need your guidance in future..:-).. i was hoping that you would provide me with some links that i can work with..or any advice or anything..:-)
thank you
shafath
a.s.shareef@gmail.com

Research is about spending time using key words in a search engine pulling up articles and from those establish leads and links to other material. Google Scholar is especially useful. Unfortunately some of the journal articles are not available without subscription although if you find such articles sometimes if you feed in the exact details of the author and article title you may find a version that is freely available (look for pdf links on the right of the Google Scholar page). For UK companies try also the BBC business online pages and those on telegraph.co.uk

I have provided lots of good advice on here including previous articles on Tesco but I am now drawing the line at providing anything more than guidance. After all, a degree is about working somethings out for yourself. ( I did both of my degrees Distance learning so have been in the same position as all of you and I didn’t have tutors to spoon feed me either – they just provide direction and guidance). So whilst I will send you the article on Corporate Governance you will need to do your own research abdulla as it is your RAP not mine!

As for whether Rentokil-Initial is suitable I have no real knowledge of this company. Start by doing a search and seeing what is available bearing in mind that you need some good objective articles to demonstrate critical thinking. What you can’t do if you want to pass T17 is just accept (or worse still just rewrite) the company’s own CG statement without bringing in benchmarking and some objective external sources. I found one article about audit independence ‘re Rentokil in the Times that goes back to 2009. Although a bit old for a RAP in 2016 it provides as good a start as any for a section and discussion on auditor independence.

However although it may take a,while reading through all the previous guidance and tips on this forum topic, there is already loads of good reliable advice here which if followed should ensure you have the basis of an approach that will pass if you supplement it with some sound relevant research of your own. 🙂

No you must NOT engage in copying and pasting (unless you want to annoy the marker and end up with a fail). Just copying passages even if referenced is considered to be bad academic practice and Turnitin will very helpfully highlight all such passages for the marker to see them (it will even show where you have changed the odd word here and there so be warned). Please read my Golden Rules in my article on Referencing on our homepage http://www.opentuition.com/obu

You need to learn to express the ideas and work of others in your own words. This means,reading a passage and summarising the key points in your own words (I give an example of this in relation to Golden Rule no.10). If you do this property and reference appropriately you will have no problems.

(And also please post questions on the relevant forum topic -this query has nothing specifically to do with Corporate governance! It should be on the Referencing forum)

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“The Open Tuition team is delighted to announce that two of our students have confirmed that by using this Forum (T17) they not only managed to pass first time but they also achieved B grades: alfred in P29 and eminathsana in P30 (a Grade B was something awarded to only 12% of all P30 submissions). No only do we wish both of these students well for the future but hope that by using the T17 forum you too may be encouraged by their success and similarly be rewarded with a pass first time around when you submit.”

I saw this on the open tuition OBU face. This is amazing . Indeed my degree is all Open tuition, thanks @trephena

Good for you that you are persevering! I think the markers / moderators tend to be as kind as possible with a 3rd submission . Follow our advice (spend an hour or so reading the forum and make notes as appropriate) and try to bring in current CG issues relevant to your company in your analysis/ discussion. I can’t be prescriptive but those factors that might affect your company and its shareholders e.g. bonuses, executive pay or particular risks it faces e.g. integrity and safety of customer data (against hacking and fraud)

Thanks @trephena. I will check those companies out and get the structure for my RAP but for now I would not change my focus organization.

For the Business models , do I need to state the CG codes use for analysis? Also can you make me understand CONTENT ANALYSIS?

hie trephena, i have just finished my rap.In section 1 of part 3 I analysed board composition,skills of the board mmbers,continued education,gender diversity,relations with shareholders,remuneration of directors,commiteess,.Will this be ok? And how much refencing is needed when crafting a sls.Iam focusing on Barclays bank of Zimbabwe limited

@cayz – This very much depends on the quality of your “analysis’. It seems the markers feel that just doing very routine comparisons and retrieving info from the annual report is no longer adequate and not of itself sufficient to meet the assessment criteria without some original analytical commentary.

For example you mention gender diversity: it would be expected that something like this rather than just a breakdown of the board(s) by gender also makes appropriate reference to research work on why gender diversity should be part of good governance. So some contentious issues need to be explored further, discussed and referenced to relevant sources such as the Davies Reports, The High Pay Centre etc. or academic papers of research into such issues.

If this more detailed analysis presents word count issues then as mentioned both earlier on here and on the word count forum where there is a problem of word count to accommodate adequate analysis, all irrelevant and superfluous material in Parts 1 & 2 needs to be edited out. For example is a marker really interested in why you chose the topic/ company? – I very much doubt they care why and even bother reading the 100s of reasons from the 100s they mark as such information is not a component of the assessment criteria for the report (save it for the SLS); does the marker really need to know about primary data when you are not even using primary data? (If the marker doesn’t know the difference then they wouldn’t be a marking the first place. So In other words focus on what is relevant and important 🙂

Regarding your query about the SLS (which incidentally should have been posted on a forum topic devoted to the SLS by using our search facility). As this is a personal self-reflection on your experience it would not normally involve references.

I have completed a large percentage of my RAP on Topic 17. I am struggling to find a comparator company – is it essential to have one or can I just compare to the Code?

thank you