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

Sorry if I am confusing you. Yes if their CG is exemplary what I mean is do not go through it item by item like you are ticking things off but rather consider and discuss the important issues You need to discuss the significance of the main principles e.g. why the CEO and chairman’s roles should be separated and look at the Davies report when reviewing at board composition and for both of these you could assess for both how Next has performed over the last 3 or 4 years. How does this compare with other FTSE companies such as M&S? With remuneration how dies this measure up? Any issues with integrity of customer data (the customer personal information held on the online database) ? Also use graphs and charts where you can.

I just want you to be aware that critical thinking in evaluating important aspects is far more relevant than trying to cover everything when much of it is routine. You need to keep the marker interested – lots of repetitious text that just states facts but does not expand and evaluate it and few graphs would not endear you to the marker as it is neither particularly demonstrative of good understanding of the relevance of CG nor very ‘exciting’.

The Kendall and Kendall model can be found on

https://www.applied-corporate-governance.com/best-corporate-governance-practice.html

It is probably also to be found in their book https://books.google.co.uk/books/about/Real_world_Corporate_Governance.html?id=TmxnQgAACAAJ&redir_esc=y

If you wish to confirm this then I think there is a contact link on the Applied Corporate Governance website so you could send them a brief email

PS I thought you submitted in P33 (according to one of your earlier posts) – or did you defer?

Good idea. The requirements have become more stringent for a good grade since I started the forum a few years back (mainly in response to Alfred from Uganda who had hoped to submit on T13).

Discussion of the principles of CG and evidence of critical thinking in their application in the company is now necessary for a good grade. I have tried to reflect this in my later posts by making some suggestions. In a nutshell don’t just accept company statements – question and critique them and bring in evidence in the form of referenced statements that either support the company stance or present an alternative view.

Thank you for your detailed answer Trephena it is now clear and if I will feel any further difficulties I will share with you

You say you have looked at the Davies report so you could plot the number of female directors and male directors for both Next and M&S in bar charts. Discuss the reasons why Davies suggests more women on boards and you could also discuss or show what the Davies recommendations are against what you found – see if our can go back 5 years and compare each year with Davies.
https://www.gov.uk/government/publications/women-on-boards-5-year-summary-davies-review

Benchmark the CEO pay against other FTSE companies .You could also do a deeper review of executive pay by benchmarking the pay for the CEO against average employee pay at Next -take a look at the resources on https://highpaycentre.org/pubs as there may be some material to give you ideas and also help you develop some arguments.

One area that tends to be overlooked and only dealt with superficially (if at all) is relationship with Institutional shareholders (Part of Principle E of the UK Code). Research who the large shareholders are and how active a part they take in the company and consider how important a voice they have / should have / could have.

These are just a few suggestions but with CG you have to read round the subject and use the ideas gained to introduce discussion and critical thought.

Much luv @trephena passed with a C. Thanks for your guidance and patience. May God bless and keep you.

Thank you! Trephena I have passed my project

Hello, congrats to the students who made it. Trephena my main company is Tesco. Do I need a company as a comparator? I picked Tesco due to it accounting scandal and it being ranked lowest in the FTSE 100 ranking, is it a good company? How do I use excel for topic 17?

@fipelware -comparatives are useful when you want to emphasise differences. Use of such examples are recommended for T17 but not mandatory as with T8. As well as looking at what Tesco did wrong you need to look at what it has done since to bring its CG into line with the Code, accounting standards and competitors.

Excel can be used for graphs showing trends in remuneration, ESP/ dividend info and pie charts to show composition of boards and committees (gender for the first and NEDs and Exec directors for the latter)

Dear @trephena,

I have been reading your replies to other students on this forum and would like to thank you for your tremendous help and patience with our never ending doubts… If you don’t mind helping me out, I have a few (or more than a few!) of my own as follows.

I am currently assessing the Relations with Shareholders part of the UK code in relation to my company (GSK).

1) The company does not provide much information, for example as to how often the SID met with shareholders. It simply says the following:

“”The Chairman also meets regularly with institutional shareholders to
hear their views and discuss issues of mutual importance, and
communicates their views to the other members of the Board.
The Senior Independent Non-Executive Director (SID) and all the
Non-Executive Directors are available to meet with shareholders.”

And it mentions that the annual meeting session with shareholders in December included the SID, Chairman and committee heads.

I am confused as to how I should assess the quality if such information is unavailable and I cannot do any sort of comparison with another company due to this. What are your views on this?
How else can I do justice to this section of the UK code?

I tried to find out who the main shareholders are of GSK and the Annual report has said that “Nominee Companies” own above 60% of GSK’s shares. When I did more research as to what Nominee companies are I found out that they are simply companies providing a service to shareholders which allows shareholders to buy and sell their shares as they please (as they would even if they were not doing it through the nominee company) quicker, anonymously and without having to hold a shareholder ownership certificate. So now does this mean that these nominee companies should regarded as institutional investors or major shareholders? I feel that they are not institutional investors because of the reasons I described above and because they are made up of many small investors. But this is technically also the case with mutual funds etc, other than the fact that individual shareholders here have the discretion to buy or sell whenever they deem it fit. So how do you feel I should consider this?

I am constantly reaching dead ends with wherever I seem to go!

2) I am also finding it difficult to make a direct link between aspects of the UK code and their impact on stakeholders such as customers and suppliers. After reading through this thread and trying to gather up all the advice you have given other students and I came across your message:

“For employees it is all about employment relations – whistle-blowing policies, employee share schemes. Suppliers – factors that relate to its relationships with suppliers (some companies are accused of exploiting their suppliers by introducing exclusivity agreements, poor payment terms etc).”

Thank you so much for the help you have given all of us, it is greatly helping me when I am stuck. As for your message above I had a query as to how I can relate such information to the QUALITY part of the question, which part of the UK code would supplier relations be linked to? For employees I think whistle blowing policies could come under Internal controls. How about for customers? I feel a little lost in terms of structuring my RAP in a way that logically answers the Topic question. I had submitted in November but failed due to my RAP structure, the marker feedback said that my work was good but that I my structuring was jumbled up.

3) I am assessing remuneration and thinking of making comments on how executive remuneration may affect the amounts available to pay back to shareholders as dividends and also how it may affect employee pay similarly. They have recently appointed a new female CEO who is to be paid 25% lower than her predecessor due to her lack of experience (thankfully not because she is female!), this being her first role as CEO.

I have also included a section on how this is a step towards fulfilling Lord Davies approach that is being pushed forward by the Women on Boards review (coincidentally led by the chairman of GSK!) and so it is a good example set by GSK. Do you think this is a valid point to make in terms of board diversity (I am trying to ensure that it is linked to the QUALITY part of the topic question). I am wondering if after speaking of this, whether I should extend it to an overall review of the ratio of female and male employees in GSK (which was 43% and rising in 2013, overall not a bad ratio but years before the female CEO was appointed and so, can I just make a general comment that they are setting a good example to the pharmaceutical industry in general? Perhaps I can do a comparison of the ratio with other pharma companies although i fear I will be going into too much depth and not leaving word count for the other areas).

Do you think these ideas are good for my RAP? So sorry for the massive message, I have to resubmit in May and am desperate to turn that fail into a pass! 🙁

Thank you,
Liz.

Dear @trephena,
Thank you for your reply!!! I have a better understanding now. I had included a section about bribery activities that caused a big commotion for them in China in 2014.. the marker had said that they were pleased to see this.

The marker said that my work was good in terms of research, information material and effort but it was – not structured well – and so for anybody else reading this thread..

don’t let this slide!

I was confused by what OBU required from me in terms of structure somehow and am sad that I failed over something like that after the effort and time put into it.

I looked up GSK and the NHS and it seems they were slapped with a sizeable fine last year because of their anti-competitive practices. They were accused of ” cheating the NHS and the taxpayer”.. unfortunate for them but hopefully good for the RAP. Thank you Trephena for this suggestion, I will include it in my work. You’re an angel!

Liz 🙂

Hi Trephena, am kind of confused on the accounting and business models. Am doing my research on a UK company, is it fine to talk about both the UK corporate governance code and the Sarbanes-Oxley Act .