Lesson 3A

• In May 1991, after a string of corporate failures in the United Kingdom, a committee was formed and chaired by Sir Adrian Cadbury to investigate the British corporate governance system and suggest improvements to restore the confidence of investors.
• According to the Cadbury report published in December 1992 entitled Financial Aspects of Corporate Governance outlined corporate governance as the system of rules, practices, and processes by which businesses are directed and controlled.
• Rules and policies are the guiding principles on specific issues. These help the members make better decisions and provide guidance on how the corporation wants its members to behave.
• Rules are made to govern behavior and ensure compliance, to maintain discipline.
• Policies are formulated by the management to guide the decision making, to ensure uniformity in decisions.
• Good corporate governance is the main factor that determine the integrity of the company. It is the heart and soul of the company.
• Corporate Governance is a multidimensional issue. It involves managing the interests of all stakeholders in a company.
• Good corporate governance is very important for the socio economic development of the nation. Increased access to capital encourages new investments, boosts economic growth, and provide employment opportunities.
• Companies need to have its own set of rules and guidelines in order to establish order and discipline within the organization. So, the following core principles must be considered such as Fairness, Accountability and Transparency.
• Accountability means to be answerable and be obligated to take responsibility for one’s actions. All decision-makers, collective and individual, take responsibility for their decisions.
• Transparency is the openness and willingness of the company to provide clear, factual, and timely information that accurately reflects the financial situation, performance, ownership, and governance of the company.
• Policies and procedures establish the rules of conduct within an organization. They are enforced to protect stakeholders of the corporation.
• Common Policies and Practices in Business Organizations are Employee Conduct (Accountability), Equal Opportunity (Fairness), Attendance and Time off (Accountability, Fairness), Computer Use (Transparency, Accountability), Noncompetition (Fairness), Finance and Accounting (Transparency).
• Employee Conduct policy sets the duties of and responsibilities each employee must follow as condition of employment.
• Employee Conduct examples are proper dress code, workplace safety procedures, harassment policies, and policies on internet usage.
• Equal opportunity laws are policies that promote fair treatment in the workplace. Companies are expected to advocate anti-discriminatory policies and encourage unprejudiced behavior within the workplace.
• Attendance policies not only outline the employees’ responsibility to adhere to work schedules but also define how employees may schedule leaves or notification of an absence or late arrival. It also discusses the disciplinary action employees face for noncompliance.
• Companies may implement policies governing the use of computers and internet in the workplace to limit unnecessary and time-wasting internet surfing and social media usage.
• Accounting policies deal with how money is handled in the company and how acquisitions and liabilities are recorded. A well-managed finance departments should have clear guidelines on purchases, petty cash disbursements, and recording.