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

@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.

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

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

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?

@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).

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 http://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 🙂 )

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.

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.

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

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?

Dear trephena is it required in in obu rap that if you explain any model or accounting techniques in part 2 you are required to link this with your topic for eg i am using mendelow’s matrix for stakeholders mapping I need to link it with my topic and company in part 2 or just need to explain the model in this part and implement in third part of RAP.

i have 1 more question that if we compare company cg with uk cg codes in obu rap. what is the best way to present it. i have some example is it good way to compare

Section A: Leadership
A.1: The Role of the Board

“Every company should be headed by an effective board which is collectively
Responsible for the long-term success of the company”(www.frc.org.uk)

Practice at Next plc
………………………………

A.3: The Chairman

The chairman is responsible for leadership of the board and ensuring its
effectiveness on all aspects of its role.

Practice at Next Plc
………………………………..