T17 Corporate Governance

Hi melonny05 - I think to a point, choice of company may depend on what grade you want. For example a report done well on Deutsche Bank could get you a higher grade but would be harder to do whereas if you are happy with a just a pass and a C grade then there are some UK companies that would be ideal e.g. Carillion as you can use the UK CG Code 2016 to structure it and the information is readily available because there was a Parliamentary Report. However because Carillion is SO popular it has to be exceptionally good to get a higher grade.

Hi shriyamc15 - I would suggest that you check with [email protected] pointing out that although the incident(s) happened earlier they mainly only came to light in the last 5 years and get their permission to use the company that you have chosen. That way you won't have wasted any efforts in doing the company if they are then going to disallow it [also it they agree, include a copy of their email with your submission to show the marker you were permitted to submit on it] Regarding your second question - I always recommend using a Code to help structure your work as it may focus you on main areas where there may have been weaknesses. So even if your chosen company falls outside the conditions below Wates may still provide an appropriate structure. The Wates Principles were produced by the FRC to deal with large private companies who, because they are not listed on a stock exchange, would not have to comply with the normal UK Code (though of course they could always choose to do so). This new reporting requirement applies to all companies that satisfy either or both of the following conditions: • more than 2,000 employees; • a turnover of more than £200 million, and a balance sheet of more than £2 billion. Also under the new The Companies (Miscellaneous Reporting) Regulations 2018 26. (1) The directors’ report must include a statement (a “statement of corporate governance arrangements”) which states: (a) which corporate governance code, if any, the company applied in the ?nancial year, (b) how the company applied any corporate governance code reported under sub-paragraph (a), and (c) if the company departed from any corporate governance code reported under sub-paragraph (a), the respects in which it did so, and its reasons for so departing. 26. (2) If the company has not applied any corporate governance code for the ?nancial year, the statement of corporate governance arrangements must explain the reasons for that decision and explain what arrangements for corporate governance were applied for that year. It is hoped that the Principles together with s172-175 of the UK Companies Act 2006 will help protect broader stakeholders' interests and not just shareholders. So if you feel it is appropriate to use Wates for your company then by all means use it and you may also where you think it demonstrates best practice, cite from the normal Code and any appropriate legislation such as anti-money laundering

You have asked a very valid question that needs to be looked at from different angles – are you at a disadvantage if you submit on an overseas company and do not use the UK or OECD Code as your main tool to evaluate the governance? And what is the appropriate way of assessing CG in an organisation in a developing nation? There certainly have been cases where students have been failed for little use of CG Codes but at the same time there has been considerable ignorance displayed by those who are marking (and whom therefore one would have hoped were fairly knowledgeable on the topic) – such ignorance being totally unacceptable. For example I had a student who came to me from Sri Lanka who was told in her previous feedback to use the UK Code for evaluating her Sri Lankan company – this was an absolute nonsense – I couldn’t do it myself and I have taught CG on Masters courses at Brookes. So if I couldn’t do it - because in her case the issues in the company transcended any Code [as they related to bribery and corruption both in her country, the government at that time and the company and its directors], how could the student be expected to??? Clearly anyone who knows anything about CG, the work of Transparency International and conditions in Sri Lanka would not be prescribing the use of the UK CG Code as the potential panacea that would sort out the issues both there and in similar jurisdictions! I have also complained to those who monitor the programme that if markers are going to insist on use of certain codes they are effectively disadvantaging students who choose a company that operates overseas in their own country as CG Codes such as the UK and OECD ones are not necessarily the appropriate medium for evaluating a national system that lacks integrity at every level. Therefore the University is technically guilty of indirect racial discrimination if they insist on this [they are applying a requirement to those who are not living in the UK or the more developed world who are more likely to be non-British / non-European] which consequently by the marker’s biased standards/ ignorance, may mean that such students cannot do a successful report. I did not get a formal response from the University on this – however I am sure it was duly noted!! So back to your report: It is important that you justify your use of the Code/legislation that you are using but perhaps as with my student above [who was finally successful] we covered the limitations in Part 2 of using both the UK and Sri Lankan CG Code to a national system that was recognised both within Sri Lanka and internationally as being highly corrupt. I would suggest that you consult TI’s Corruption Perception Index https://www.transparency.org/en/countries/zimbabwe# where you will see that in 2019 Zimbabwe ranked 158/180 [meaning that only 22 countries in the world were perceived as being more corrupt] and scored 24/100 [where the lower the score the more corruption is believed to be prevalent] . There are various resources that might be useful to you to cite from in your evaluation as unfortunately the objectives of parastatal organisations and their income are often subverted by those at the top of them and government ministers – so it may be worth reading https://www.transparency.org/en/news/political-corruption-and-political-integrity-in-africa Also of interest is the Afrobarometer produced by Corruption Watch https://www.corruptionwatch.org.za/wp-content/uploads/2019/07/GCB-Africa-2019-Full-report-WEB.pdf - page 60 shows some survey results that specifically related to Zimbabwe By all means use the documents you were suggesting to try to analyse and evaluate the CG in your chosen organisation and where you can, you might be able to bring in one or two aspects from the UK/OECD Code(s). However I suspect that they will prove to be very superficial in really getting to grips with the real issues, so by showing the organisation in a better African and world context you will be demonstrating as my previous student did, [she had specific sections where I suggested that she apply the concepts of bribery and corruption and used newspaper and journal articles to outline the corruption allegations levelled at those at the top of the organisation and their relationship with senior government officials and ministers] that there was overall weak governance in the organisation and country culture that permitted bribery and corruption to flourish in the organisation and be rife in her country. This also tied in with one the new objectives I suggested that she used in her final submission: to show that without a system of national integrity any CG Code is going to be of limited use in instilling good governance practices. To evaluate the reality of corporate governance in an organisation in your country this approach is far more relevant usually to the broader stakeholder base (taxpayers, broader community and possibly donors of foreign aid) and reinforces the basic concept that before you can instill good corporate governance, national integrity first has to be remedied as this precedes and would underpin any corporate governance system.

Hi everyone! I am thinking about this topic 17 , For me this will fall under submission period 41 & 42. I am a bit confused. The organization I am looking for to choose had its last annual report for 30 Dec 16 . In 2018 , it went into compulsory liquidation .If I choose this topic , will it fall under the past 5 years criteria ¿ It would be great if someone could help me with this . Thanks .

The relevant fact is it existed in 2018 so it will be 5 years before it went into liquidation. As presumably if it had been well governed it would still be in existence there must have been weak governance between 2013 - 2018. However often there can be a catalogue of weaknesses that predate even the last 5 years as well.

When doing Topic 17 you need to be able to compare and evaluate the company CG performance against a corporate governance code and best practice. I suggest you use the SIngapore Code and do a quick assessment about whether Singhealth gives you much scope to do this. Probably it is worth looking at Topic 20 [use the search facility as there is forum for it]. From the info you have given here I think the company might fit the brief for Topic 20 better. Instead of using a Code for the structure as you usually do with T17, for T 20 look at Carroll's Pyramid as it is used to evaluate the company on its four dimensions: profitability, ethics, legal and discretional/charitable and ethics and integrity.

When doing Topic 17 you need to be able to compare and evaluate the company CG performance against a corporate governance code and best practice. I suggest you use the SIngapore Code and do a quick assessment about whether Singhealth gives you much scope to do this. Probably it is worth looking at Topic 20 [use the search facility as there is forum for it]. From the info you have given here I think the company might fit the brief for Topic 20 better. Instead of using a Code for the structure as you usually do with T17, for T 20 look at Carroll's Pyramid as it is used to evaluate the company on its four dimensions: profitability, ethics, legal and discretional/charitable and ethics and integrity.

Can you please suggest any Accounting / Business models relevant with topic 17 other than Mendelow matrix

Thomas you asked about a model other than Mendelow's Matrix. The model used depends to a certain extent on the organisation chosen and circumstances of the case. For example if there has been fraud then Cressey's Fraud Triangle may be applied. Personally I prefer the Carroll-Wilson RDAP Model as per Clarkson 1995 over Mendelow's Matrix. This looks at the company response in the context of stakeholders and considers whether it is Reactive-Defensive-Accommodative or Proactive (RDAP).

hie guys submitting this Nov I've set my layout as follows and Id like to have your opinion in Part 3, I begin by describing the current CG structures om my subject org. The CG framework, the enabling instruments, how board members are selected, board composition and I went on to describe the board committees and their functions. Next, I Identified the CG issues under a separate heading. I stated what the CG code prescribes (or other statutory instruments) vand then desceribed what the org did that is contrary to the aforementioned provision of the code or legislation. on that, there's this issue about the composition of the board, its a CG issue which the management may not even be aware of. I read on an ealier post that this new topic focuses mainly on the management responses. My mentor has also advised me to allocate 1500 words to a section about the responses. how do I resolve that when there hasn't even been a response because I am the one who I dentified the issue?, The management may not even be aware of it.

hie guys submitting this Nov I've set my layout as follows and Id like to have your opinion in Part 3, I begin by describing the current CG structures on my subject org. The CG framework, the enabling instruments, how board members are selected, board composition and I went on to describe the board committees and their functions. Next, I Identified the CG issues under a separate heading. I stated what the CG code prescribes (or other statutory instruments) vand then desceribed what the org did that is contrary to the aforementioned provision of the code or legislation. then Root causes of each identified issue then Implications of tge issues. from financial, operations to impact on stakeholders the management responsibilities on that, there's this issue about the composition of the board, its a CG issue which the management may not even be aware of. I read on an ealier post that this new topic focuses mainly on the management responses. My mentor has also advised me to allocate 1500 words to a section about the responses. how do I resolve that when there hasn't even been a response because I am the one who I dentified the issue?, The management may not even be aware of it. lastly, theres recommendations and conclusions. Which comes first between the 2?

Hi Thomas, I Just want to add onto what Gillian has already said regarding your question on governance codes. I am from Zimbabwe and did Topic 17 last year and scored an A with the help and advice from Gillian and other tutors on this platform. I used 2015 OECD Guidelines on SOEs as my main Code and would often bring in 2016 UK Governance code (just to be safe and proof that I read wider) and the Zimbabwe Governance Codes to show a local perspective on governance. I briefly made arguments in my RAP to justify why I opted for the OECD. As you would appreciate that the governance framework in Zimbabwe is still in its infancy and still not yet developed therefore it may not be wise to use the Zim code as your main code. I instead used the other codes for emphasis here and there as Gillian pointed out. Would also like to point out that there is not much internal documents (financial statements, auditors reports etc) on Zim parastatals therefore my main source of info was mainly external i.e newspaper articles from the independent media (which covered corruption scandals extensively) and a few from the state media. As Gillian rightly pointed out, Transparency International is very rich in info especially on corruption. I would also suggest that you look at Parliamentary Portfolio committee reports, they reveal a lot of governance problems within parastatals.

@14munashe, please can you contact me on [email protected] Apologies to admin, I don't know if I have just done a wrong thing.

I have just had results for my T17 topic for which I have been mentored by Gillian Moorse. I have receveived grade B and couldn't recommend Gillian more. She was a great source of knowledge and support and guided me through the whole process. Thank you so much.

@14munashe been looking for you everywhere Mukoma. Doing mine on NSSA, Submitting 1 Nov 2020 Using Zimbabwe CG framework PECG Act 2017, NSSA Act 1989, CG framework 2010, NCCG 2014 and other internationally recognized codes such as UK CG Code, ICGN & OECD, King Report as examples of best practice. email me. [email protected]

Hey everyone! I have picked topic 17 and I am stuck in the main body because I have too many choices but don't know which is the best approach. Which model whould I preferably use for this topic basically? The Japan CG code, UK Combined code or the OECD or a combination of all? - Company - Nissan Japan - Comparing Company - Toyota Japan - The main area of the topic - Corporate Governance issue in Japan that happened a few years ago involving their CEO I am thinking for analysis should I compare the CG at Nissan with the following:- 1. ONLY Japan CG Code (2015) , Revision on (2018) and Revision on (2021) - Comparing Nissan and Toyota 2. Japan (2015) CG Code - Comparing with Nissan and Toyota With also UK CG Code (2018) comparing Toyota and Nissan (Around the time the scandal happened) 2. Japan (2021) CG Code - Comparing with Nissan and Toyota With also UK CG Code (2020) comparing Toyota and Nissan (Most up to date CG Codes) OR Should I ditch Toyota as a comparator organization and compare Nissan Japan with the OECD model only?

I trust you are preparing for P44 now as it is a bit late to complete the Analysis & Evaluation [which is the key element of the whole report] if you haven't really started it yet. I would suggest using the UK CGC 2016 as a STRUCTURAL framework - read the Preface as well as the Principles themselves and go through and apply it systematically alongside the Japanese CG code. Reference can be made to the more recent codes as best practice but your evaluation should assess the Board performance using both their actions and statements in the annual reports and compare and contrast the requirements of the 2 codes in the process. You could bring in the OECD Code but word count usually means that there isn't much scope for this unless you can show that it is more relevant to the company than the UKCGC NO comparator organisation is usually necessary for Topic 17 - although if there is a huge difference in their standards of governance then it might be appropriate occasionally to do such comparisons. A lot would depend on the circumstances

Thank you so much Ms. Gillian. Since we are using UK CGC 2016 is it best if I use the 2015 Japanese CG Code? Or should I for the most recent Japanese code like the revised 2021 CGC?

I suggested the 2016 Code as the STRUCTURAL framework e.g. start with culture and tone at the top and then work your way through using the main Principles as headings and do your evaluation and comparisons under each as appropriate. Markers are keen to see that the report uses a systematic approach and this is one of the best ways of doing this. You can refer to the 2018 where relevant e.g. because it clarifies the position or contains something not in the 2016 Code. Regarding which Japanese Code it is probably better to use the one that was current at the time of the malpractices but the aim of the report is to compare the weak governance and board behaviour with best practice, so you can bring elements from the more recent codes if they are appropriate to the point being made.

Good I am pleased that you have been encouraged to do this topic as so many students fail to see the RAP as an opportunity to broaden their skill set. It can be a very useful topic especially for those who see their career path as a board member . That's the good news, however I have a few concerns about using a local (i.e. non UK company) and in particular those that are based on bribery/fraud / corruption. I have raised this issue with the RAP Programme Lead as too often I have had students come to me having failed with a previous mentor and their feedback tells them to do a 'systematic comparison of the weak governance in the chosen company with the UK code'. This I fear is because quite a few of the markers are simply not up to speed with CG or up to task in marking T17. Many overseas CG cases do not easily lend themselves to such a comparison (especially fraud cases). I think such a narrow approach and stipulation by some markers is tantamount to Indirect racial discrimination as it places foreign students at a significant disadvantage compared to those choosing a UK company. I am monitoring this situation (as Brookes could have a legal case to answer here)... and the Programme Lead has promised to monitor this too (but anyone who has experienced this can contact me so that I can present the evidence). However back to actually answering your queries. 1. A SWOT and /or PESTLE are definitely NOT suitable for T17 and your main model should be the application a good CG Code (UK/ OECD or local code PROVIDED the latter is fairly comprehensive or possibly some mention of the COSO Principles). There should also be another model, as well as some ratio analysis showing the impact of the weak CG on specifically relevant financials. These other model(s) would depend on the specifics of the case 2. You might try Cressey's Fraud Triangle and extensions of this. However don't forget to (a) appraise it and it's limitations and (b) have a slide showing its APPLICATION in your presentation (a nit-picking marker failed one of my student's presentations specifically for this - she had only shown the theory of it) 3. You are right on this one see my earlier answers- but Mendelow's is arguably a bit useless and unless you can apply it well, choose something else (as again a nit-picking marker failed one of my students for not applying it well enough). Personally I think this model is more relevant to T20 than T17 so application is going usually to be a bit rote and difficult. PS Don't overlook the company response as that is another area they home in on. Good luck!

Hi, Can anyone guide me? I am doing the part 3 of my RAP on topic 17. The company I am doing it on is "Luckin Coffee". I have essentially finished the part 3. I am on the last topic where I am planning to tell the responses to fraud. According to my research, I am planning to discuss the internal Research Luckin Coffee initiated against the fraud. I am also discussing the response by the US regulators. Is that enough or do I discuss more responses. Personally, I found the company very promising with regards to the topic but I am getting confused towards the end of it i.e. the responses. There is too much information and all the hirings and resignations after the fraud came out are very confusing. Can you suggest some points that I could mention in this regard. I have been very deep with my research and it has been a great learning experience but responses have put me in a great deal of confusion. Thanking you in anticipation!

During the internal investigation, several members resigned/ were kicked out. Some were even reappointed to the board. Will all this be discussed as responses? I have also read about appointment of new auditors, shareholder right plans, changes to memorandum and article of associations. Various loans were also restructured. Business plans were redesigned etc.

As with many fraud cases for T17, Luckin Coffee can be hard to structure as the emphasis in the analysis and evaluation should be on how the weak governance allowed the fraud to happen and not so much on the fraud itself, so please bear that in mind. I have had an issue with markers insisting with many overseas companies that they should be evaluated 'systematically' against the UK Code. I have taken this up with Programme Lead as this approach is not always possible or feasible for an overseas company where fraud has played a key role in its demise and I think it discriminates against the many students who do not choose a UK case (mainly non-UK students). That aside, your approach in how to evaluate the response is sound

Thank you for the reply! Yes you are right I have focused more on the factors that allowed the and little detail of the fraud itself. I have used the CG code of NASDAQ and US SEC rules mostly for evaluation. I hope using these codes are appropriate. About the response, as said earlier after the fraud came out and internal investigation was started, alot of directors of the board resigned, some were fired because of their involvement in the fraud and some were rehired as well. Do I give full details of who was kicked out, who resigned or just the ones related to the fraud. I plan to write this under he heading of reorganizing the board.

I think you need to being in somewhere about the lack of independence on the board, the weakness of internal controls and complete failure of the audit committee and external auditors. Well done if you have these already. It is also worth mentioning about the need for an independent chair to lead NEDs in challenging executives and emphasise the differences between US CG and that of other Codes on this (notably the UK).in these respects. (The UK is far stricter on the definition of 'independence') Again the US focus is on fraud prevention whereas good CG also is about adopting an appropriate strategy and having this scrutinised by the board directors and studying reported figures to ensure the company is on track (the reason the majority of directors should be independent) Diagrams of boards may make it easier to show the board changes (and they save words). Try to focus on what is really significant in terms of response -avoid the very fine detail as a reader needs to be able to assimilate the info quickly and effectively so ask a third party to read it through to see whether they understand it easily.

Hi I intend to do a research on Steinhoof international , evidence of accouting fraud came to light on Dec 2017 , the company is still recovering . I need guidance on the 1 does it still fall within the required 5 years. 2 which model is best for evaluating this company the UK code or the Dutch code 3 can I use more than one code or in my evaluation.

1. This appears to fall within the rules for Topic 17 as the 5 years takes you up to Dec 2022 2- & 3. I would advise you to use both. This is based on having seen marker feedback that advises students to do a 'systematic' evaluation comparing provisions/principles of both the UK and the local code. However I would caution as I have mentioned previously in this thread: you do need a good structure for the report and this can be harder to deal with when the underlying cause of a company collapse was fraud rather than dubious, barely legal practices and mismanagement (as in Carillion). This is because the company may have superficially complied with Codes (separate CEO and Chair, had mostly independent well qualified directors etc.) so comparisons with the Codes do not provide much help. You would need to focus more on the work of the audit committee, internal controls and potentially external auditors here as it is usually inadequacies in these that allowed the fraud to take place and possibly bringing in best practice in respect of these elements and the COSO Principles. Therefore it is not so easy to structure the report around just one main Code and comparisons and do a 'systematic evaluation' that some uninformed markers demand!

Hi Team, Would you recommend using the Wirecard company for topic 17?

Sorry for the delay in getting bac to you. I have mixed views about a report WIrecard. Yes there was very poor corporate governance and fraud but I have found in practice [from personal experience with students] that it is very difficult to structure a report on Wirecard's CG weaknesses probably because it was a Germany company and the German CG system is so different from that it many other companies and essentially it was a fraud case. You would need to look at the German Kodex and make comparisons with the UK Code as best practice. Although this sounds simple enough in practice I suspect you will find it harder. As such I actually advise my own students against choosing this company and think a UK company is easier to handle, Alternatively if looking for a foreign company go for Boeing - but you need to recognise with this what the key issues were and focus on how the weak governance led to the crashes [rather than focus on the crashes themselves] and appraise it using the UK Code as the benchmark

Is Leadership and Stewardship a underlying principle of corporate governance?