- This topic has 466 replies, 74 voices, and was last updated 5 years ago by
.
- Posts
Hi Trephena ,
Please help me on :
what is governance?
Does it Differ from ‘Corporate governance’ or are they same or is it like a branch of governance ?
@ome480 – This will depend on the context. Corporate Governance is technically used for incorporated bodies – usually those that are companies. Governance itself refers to how an organisation is directed and controlled (see Cadbury, 1992). However the definition of CG has been extended to include all organisations that have a separate legal personality so could include a registered charity, public authority or in fact potentially a professional body such as ACCA.
I suggest you take a look at the following website which is one of our recommended resources for this topic (don’t forget you will need to reference this site in your RAP if you cite any of their information)
https://www.applied-corporate-governance.com/definition-of-corporate-governance.html
Thank you for the swift reply.
One more question which code should I use the UK corporate Governance code 2012 or the more recent 2014 in my research to evaluate the quality of Tesco compliance ??(annual report is published in 2014).
You should use the one dictated by the FRC (see link below) which for Tesco would be 2012. However it may be appropriate to comment on any new implementations of the updated 2014 Code if they might have helped prevent some of Tesco’s misdemeanors. (This will demonstrate some application of critical thought which markers look for when awarding higher grades)
Hi Trephena
How can I evaluate and show Tesco compliance of B3 and B4 principles of the UK code?
kindly guide.With S.B3 – All directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively: You would analyse how many other directorships the NEDs have and any other potential demands on their time; with all directors examine their attendance records at meetings
with S.B4 – All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge. There is no way that you can scrutinise this objectively as you are unlikely to have any other information apart from the company’s own CG statement.
Remember you do not need to examine absolutely everything in the Code – the FRC Code itself states “it seems that there is almost a belief that complying with the Code in itself constitutes good governance. The Code, however, is of necessity limited to being a guide only in general terms to principles, structure and processes. It cannot guarantee effective board behaviour because the range of situations in which it is applicable is much too great for it to attempt to mandate behaviour more specifically than
it does” (FRC, 2012). That is why it is important to supplement the analysis by articles from the business press and analysts that give a more independent view.However you should also keep up to date with the briefings from the FRC e.g. take a look at https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/Developments-in-Corporate-Governance-and-Stewardsh.pdf I would suggest therefore that you read through this document and see if you can address some of the concerns they raise and see wherever possible how your company matches up on these. This would be much better than adopting a rote approach of going through absolutely everything in the Code as you will need to be selective for the purpose of complying with the 7,500 word limit
1. I am having a bit confusion on the below provision.
Under new edition of “The code” 2014 provision C.2.1 it states
“The directors should confirm in the annual report that they have carried out a robust assessment of the principal risks facing the company, including those that would threaten its business model, future performance, solvency or liquidity. The directors should describe those risks and explain how they are being MANAGED or MITIGATED.”In “The code” 2012 under the same provision it states
“The board should, at least annually, conduct a review of the effectiveness of the company’s risk management and internal control systems and should report to shareholders that they have done so. The review should cover all material controls, including financial, operational and compliance controls.”In “The Code” 2012 it has not mentioned to disclose the ways in which companies mitigate the risks face to them . If that is the case , is it fine to say , the company I am assessing is proactive in following good CG , because it has mentioned about the mitigation they have taken , although it is following “The Code” 2012.
or do I have to assume , Risk management system it self means , it includes the step of managing the risks?
2. How to reference the “The Code” provisions ? , for instance I have written , the company has identified it’s chairman , CEO …. hence it complies the with “The Code” provision A.1.2 .
I have not written the same wordings of the Provision , just providing the provision number is enough for referencing ?1. The Code has been evolving over the last decade or two (and no doubt will continue to develop) mainly in response to major corporate scandals and frauds. Remember the Code prescribes the MINIMUM – companies can always exceed these requirements if they wish. However in the past the risk assessment statements cynically could be described as a ‘tick exercise’ i.e. directors produced a bland statement that did not quantify the risks and only dealt with them superficially. As you point out until the 2014 Code management did not have to demonstrate a pro-active approach to risk assessment. However Risk assessment and dealing with potential risks is part of good stewardship that sits within the remit of the management as one of the duties it owes to its shareholders and the 2014 Code now forces management to take an active and more considered and diligent view of the process.
The latest 2014 Code applies to companies whose reporting periods commence after 1 Oct 2014 so it will not be applicable to P30 submissions. However if you are able to comment objectively on the company’s risk assessment management strategies this would certainly elevate your report grade. As well as providing evidence of Understanding and Application it would add to the “critical thought” element in your work and this contributes overall to the quality of the Evaluation and Analysis and the final grade awarded by the marker (see Appendix 1 – The Assessment Criteria). You may find the following document produced by PwC useful in helping you to develop your evaluation of Risk Assessment in your company.
https://www.pwc.com/en_us/us/issues/enterprise-risk-management/assets/risk_assessment_guide.pdf
2. Referring to the relevant section of the Code (as you are proposing to do) is appropriate in the text but you should state the year and then you list each version of the Code once in your Reference List
Thank you Trephena for always providing an informative reply to the queries posted. 😀
Hi moderator I need a guidelines about referencing , I have read the obu guide but still having difficulty in referencing, could you advice please
@dorcas – This forum topic is exclusively for queries relating to T17 “Corporate Governance”. We have a separate forum topic called “Harvard Referencing”. I suggest therefore that you go through the questions and answers there as I have commented on Referencing many times in the past and supplied detailed examples. If you then have a specific query please post it on that forum.
Thanks
Trephena – OT OBU Forum Moderator
- Topics: 0
- Replies: 3
- ☆
Hi Trephena
I was not able to clear my RAP in November 2014 sitting. This forum is of great help to help me correct my mistakes.
I read your comments on topic 17 and I wanted to ask if using UK Corporate governance Code of 2012 instead of 2014, which I had previously used in my Nov 2014 submission, will cause any issue? Will it be taken as a ‘corrected mistake’ or will I be marked ‘negatively’ because of it.
Also, will I be required explain the reason for change of year in the resubmission statement?
Thanks!
@fam1 – As I have mentioned above “The latest 2014 Code applies to companies whose reporting periods COMMENCE after 1 Oct 2014 so it will not be applicable to P30 submissions.” You may refer to the 2014 Code if you wish but there is no compulsion to do so – so no the marker should not penalise you for this.
I am not sure what you mean by your second question. You should address all the issues the marker raised in your feedback in your Resubmission Statement and then incorporate all the corrections needed in your revised RAP- see my article on the Resubmission Statement on our homepage http://www.opentuition.com/obu
@dorcas – please post the query to the Harvard Referencing Forum topic and I will try to answer it there. Try to be as specific as possible because if it is too vague I can only give a general reply. In principle you should be referencing every fact and the ideas and work of others including the source of all graphs and charts. If you have made them yourself you put (Researcher’s own work, 2014) – in this case this would not require a listing in the reference list as the reader knows where it came from
I am commenting to clarify more about the reply you have posted on my query in this page.
1. As you have mentioned the code is evolving , hence there are new amendments in the code ,so based on the provision I raised previously ( C.2.1) ,
if I only just said the company I am analyzing is pro-active in following good CG practices because it has demonstrated ways to mitigate risks face to them ( like for instance see Appendix xx ) and then paste a picture of mitigations they have carried out . will that be a strong point to include in the RAP? just mentioning the company is pro-active ?2. Regarding the second question I raised previously about referencing the the code provisions,my mentor said , I don’t have to reference the previsions, but write as “The Code 2012 ” and no need to provide anything about the code in the reference list , because anyone will be able to download the code , so it is just enough if I write ” The code 2012″ before writing provision number. And if I include anything in the reference list which is not included in the text reference then it will be an absolute fail.
Please kindly advise me what should I do ?
1. The appendices are for additional information that either detracts from the main focus of the report or provides ancillary information that does not add any extra value to the analysis. If you are trying to demonstrate how proactive your company is you need to include specific examples in the text not in an appendix. You do not need to go into excessive detail in the text, briefly state the example and reference it appropriately.
2.”My mentor said…” Sorry but either there is a misunderstanding here or your mentor is wrong on this.
The whole point of referencing is that someone (not necessarily an accountant) can understand what you are talking about in principle. ‘The Code’ would not mean anything to most ordinary people and therefore it is vital that it is fully referenced in the list – this is a protocol of university work – end-of.
No you do not include things in the List that are not in the text but surely for T17 your RAP is fundamentally based on the 2012 and/or 2014 Codes? So EVERYTHING you have based your report on definitely needs to be in the List. In the text include it as (Code, 2012 s.X.x) or (Code,2014 s.Y.y) – the section numbers serving as the equivalent if doing T8 of the page no. referring to financial statements.
If I am following the line of argument you are presenting would your mentor advise someone doing T8 not to bother to include listing the the annual accounts in the Ref List? If so please tell him/her I have actually seen feedback on fails that has pointed out to the student that they have not included the annual reports in their reference list!
You would do well to remember when doing the whole of your RAP that it is not the marker’s job to hunt around for information and download the Code – their role is to assess that you meet the assessment criteria and are competent in referencing. As such my advice is based on what I know from 11 years of RAP experience and comments that markers themselves have told me. There is no point in antagonising a marker as you will not be doing yourself any favours…. By the way I hope this mentor hasn’t directed you with T17 to conduct primary research too….
Trephena,
If I do not want to evaluate a certain UK code ,what reason should I present to the marker for not evaluating the code other than the one you have mentioned in this forum ?
kindly Guide.
Thank you trephena , I really appreciate your informative and fast reply :D.
heheh ,luckily my mentor has not asked me to perform a primary research.
To clarify on the Code referencing issue further:
1. is it fine to write like ” name of the company has identified the chairman, CEO etc . hence it met the code provision A.1. 2 ,which states to identify chairman CEO etc ? ” .without providing any reference , however if I present in that way it will occupy much of word count right ?
2. If I am following the way you have mentioned , will the referencing me like this ” name of the company is in compliance with the code provision A.1.2 as it has clearly identified it’s chairman, CEO etc ” “( Code,2012,A.1.2) as referencing” and will it go to the main reference list as well ?
which would be the best way? point 1 or 2 .
3. when ever I took information from the annual report I have provided the page number as well , is it not necessary in topic 17 ? , for instance ( Name of the company , 2014c, p.33).
Thank you .
geting nervous submission time near, but thank you trephena for all your help. good luck everyone.
@eminathsana
1. You must not just fixate on the Code alone – I have explained in my posts on this forum that you also need to read and refer to articles and examine some things that are outside the Code e.g. the way the company approaches whistleblowing, anti-bribery and corruption policies, risk assessment and its adoption of equality legislation etc. Your comment on identifying the chairman/CEO does not have to be emphasised at all – I wouldn’t even bother on this as I would take it “as read” – it is the separation of the two roles that is significant. So PLEASE only focus on important elements of the Code otherwise as well as running out of words you are going to bore the poor marker to death 🙁2. As an example of referencing in the text: “ABC plc separates the roles of Chairman and CEO in accordance with A.2.1 (Code, 2012) and…..”
In the Reference List you only need ONE reference for each Code regardless of how many times you have used it in the text so you would put:
Code (2012) – The UK Corporate Governance Code, September 2012, Financial Reporting Council, available at http://www.frc.org.uk
Code (2014) – The UK Corporate Governance Code, September 2014, Financial Reporting Council, available at http://www.frc.org.uk
3. It is good practice to put in page numbers so well done. It probably isn’t necessary when using figures from the Balance Sheet or Income Statement but it IS important when citing the notes to the accounts or CEO statement. So again you are doing the right thing.
I am reproducing my checklist to all T17 students below – read it and use it to check you have applied it to your submission
@cherrony – Before you submit please read the checklist below (specific to T17) AND ALSO my P30 Checklist at the top of the OBU Forum list (yellow section) as this may help reassure you that you have given it your best shot. Good luck! 😀
I produced this for P29 but am reproducing it here so that P30 students can use it. I also suggest that you read the other general RAP Checklist on the Yellow part at the top of our main OBU Forum list as there are some tips there relevant to the SLS and loading files
@trephena said:
QUICK CHECKLIST FOR T17I have set out lots of information on this forum but as you come to completing your RAP and before you submit take a quick look through this (and maybe re-read all of the posts) to ensure that you have covered sufficient areas and adopted the right approach for a pass (and it goes without saying don’t forget to reference your sources!)
1. Have you used a suitable Code? (More than one possibly for some overseas companies)
2. Have you made some comparisons with another company /other companies operating in a similar sector particularly on areas where your company may not be performing so well?
3. Have you considered the role of auditors (the length of their appointment and relationship with the Board?) take a look at the attached article about Tesco in relation to its auditors
Any evidence of a threat to audit independence in your company? ( remember that Arthur Andersen were heavily criticised about their relationship with Enron to the point they never recovered their reputation)
4. Have you based most of your work on primary data? – if so you need to remedy this fast…
5. Have you considered all the relevant stakeholders properly? There are two parts to T17 !
6. Do you have prima facie evidence of the impact of CG on company performance? (some basic information on share price / EPS – a few nice graphs please 🙂 )
7. Have you used visual means to display your information wherever possible – saves both on words and lots of boring long paragraphs so makes your work far more interesting to read
8. Don’t forget other aspects of CG that may be outside the code – whistleblowing has been the means of discovery for a lot of malpractices (Enron, Tesco, Olympus and many big name companies); The importance of transparency (those companies with complex tax arrangements or who base themselves in the Caymen Islands don’t spend huge amounts on these complexities and lawyers fees if they have absolutely nothing to hide!). Are there company policies to deal with anti-bribery and money-laundering?
9. And don’t just accept what the Board writes in their CG statements – what they don’t write in it can be more important and what they actually do rather than what they say they do. Question and look for proof (comparisons and research for articles on the company in the business press). A pass requires some critical thought not blind allegiance and a re-write of the company’s CG declarations!
Remember: CG statements can be wishful thinking – take a look at: https://www.tescoplc.com/assets/files/cms/Annual_report_2014/Corporate_governance.pdf
And yet 6 months later this statement is in tatters and I doubt there are many happy smiling faces now….https://www.bbc.co.uk/news/business-29613946
10. Don’t forget that depending on the type of your organisation other regulations as well as the Code may come into play e.g. if you have chosen a bank you will be expected to have outlined the more recent Basel Accords and how your bank complies with these if applicable. In the UK there is the Prudential Regulation Authority and its specific recent guidance on ‘Senior Management Arrangements, Systems & Contols [see SYSC 2 of the PRA Handbook]. ( Both the Basel Committee and the PRA are concerned with risk assessment but Basel looks at capital adequacy etc but the PRA in addition looks at the balance and actual skills of the management)
Obviously withTesco as is often the case hindsight is a wonderful thing but the warning here is not to go overboard in praising your company – stick to facts and make your judgments objective e.g. on the basis of your research you believe that XYZ is adopting measures that are in line with the principles of good CG / or there is evidence that ABC could do more to comply with accepted codes and that it is trailing behind similar companies in important areas. That way if some skeleton emerges from the CG cupboard after you submit your glowing endorsement of the company you won’t be left with egg on your face!
(like the Tesco Board 😀 )
And finally… leading on from the point above: You need to appreciate that CG is a developing & dynamic subject so you must show you are ‘on the ball’. Although you may have used the latest annual report as the basis of your Findings and analysis you have to consider any more recent dramatic/important developments that may have occurred since the report was published that may impact on the entity’s CG e.g. sudden departure of the Chairman, financial scandal etc. This is particularly so if they happened at least 3 months ago. NOTE: It doesn’t mean a complete re-write just a paragraph or so (call it update [since year end] if you like, just to show you are aware of it and really know your subject 😀
Good luck everyone!
Trephena – OT OBU Forum Moderator
Thank you very much :D.
This is a difficult one for you as mainly on this forum we have been dealing with companies with more “routine” CG profiles. The fact that you did not submit while the thunderstorm was breaking over Tesco before and during P29 was probably a good thing as the fallout has been massive. I think a routine approach for Tesco in P29 may have been trounced by the marker as this timeline shows things had been going wrong for a while before (e.g. profits warning in Aug 2014).
https://www.thegrocer.co.uk/channels/supermarkets/tesco/the-tesco-crisis-timeline/372259.article
Producing a RAP is about balance – it is about trying to report something objectively and equally assessing it objectively so I think it is a very good idea to paint an accurate picture of what you found – both good and bad. Trying to just assess it against the 2012 Code and comparators would be a bit superficial for Tesco. I think you do have to tailor this one a bit more personally to the company as you propose and looking at principles would be fine. (The reason I advise students to go for the Code and Comparators is so that they look at facts rather than focus on primary data collection and/or repeat the company’s own CG statement without evaluating objectively – both of which invariably lead to fails).
In fact I think in this particular case I wouldn’t bother too much about comparators if the words are tight and instead look at some of the issues that have arisen and research to see what the company has done to improve things. Although there is no stipulated ‘cut-off’ date for T17 (unlike the one for the financial statements for T8) I have tried to stress that CG is dynamic and a proactive approach to your assessment and evaluation with up-to-date evidence will reflect positively on the quality of your work (and ultimately your grade).
- The topic ‘OLD (Pre-Period 35) Topic 17 Corporate Governance – RESUBMISSIONS ONLY’ is closed to new replies.