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12 Cards in this Set

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  • Back

what is corporate goverance

cor.goverance refers to the means in which a company is directed and controlled (cadbury, 2002) and to what purpose

another definition of corporate goverance

a relationship between d coy's management, its shareholders and stakeholders in which it provides a structure through which its objectives are set, the means of attaining those obj and monitoring performance are determined through checks and balances in order to minimise abuse of power and encourage fair treatment of stakeholders

concepts of CG-HAIRDRIFT

honesty, accountability, integrity, responsibility , decision making/judgment, reputation, independence, Fairness and transparency.

wat is agency theory and its problems

agency theory arises through the delegation of the day-to-day running and decision-making of a company by the shareholders (principal)to the directors (agents)

describe agency problem

this arises due to separation of ownership and control...thus the agents do not necessarily make decisions in the best interests of the principal (which is to maximise shareholder's wealth)

examples of conflict in interest

mangers focusing on short-term projects in order to make quick profit and increase bonuses rather than investing in long-term project that would result in maximisation of shareholders wealth.

increasing personal holidays

spending on office equipment

explain Fiduciary duty

fiduciary duty is a legal obligation to act in best interests of another party..its a duty of trust and care. the directors owns shareholders a duty to act in their best interests putting into consideration its longevity and survival

Fiduciary duty-POSPANC

Performance, obedience, skill, personal performance, any benefit, no conflict of interest, confidentiality

what are agency cost?

costs arise from measures used to control or monitor agents due to then arising agency problem...high agency costs lead to decrease in shareholders value (residual loss)

mention and explain the different ways to monitor agents

management audit, bonding (AGMs), additional disclosure and reporting requirements

Alignment of interest?

profit related/EVA, share rewards, executive share option plan

explain stakeholder theory

a framework that believes that companies should not only focus on shareholders but also stakeholders. companies should fulfill moral obligations thus ensuring good relationship with stakeholders...good ethics leads to good business