Assignment in Corporate Governance Ponce ll PDF

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Assignment in Corporate Governance,Business Ethics, Risk Management andInternal ControlIn Partial Fulfillment of Requirements in Corporate Governance, BusinessEthics, Risk Management and Internal ControlDr. Armando L. BañaresPonce, Marjorie A. CT18- BSA January 2020Rogationist College – SilangColleg...

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Rogationist College – Silang College Department Saint Anthony’s Boys Village, Inc. Km. 52 Aguinaldo Highway Lalaan II, Silang, Cavite

Assignment in Corporate Governance, Business Ethics, Risk Management and Internal Control

In Partial Fulfillment of Requirements in Corporate Governance, Business Ethics, Risk Management and Internal Control

Dr. Armando L. Bañares

Ponce, Marjorie A. CT18-0001 BSA401 January 2020

1. Question #3. Page 12 Question: 3. Explain how governance can be used in the following contexts and give appropriate examples: A. National Governance B. Local Governance C. Corporate Governance D. International Governance Answer: a. National Governance- The main focus of this chapter is generally defined as exercise. It is the cultural, political and administrative power to handle the affairs of a country at all. The levels, including structures, procedures and organizations through which people are involved. b. Local Governance- it is a broader term and is characterized as the formulation and implementation of collective action at the local level. Local government serves a two-fold purpose. The first purpose is the administrative purpose of supplying goods and services; the other purpose is to represent and involve citizens in determining specific local public needs and how these local needs can be met. c. Corporate Governance- Corporate governance basically includes balancing the needs of a large number of stakeholders, such as shareholders, senior managers, consumers, vendors, financiers, the government and the environment. d. International Governance- The definition of international governance has much the same relationship to modern governance as that of local governance. On the one hand, some analysts argue that international mechanisms are eroding the value of the state; the related processes include the internationalization of production and

financial transactions, the emergence of new international organizations and the development of international law.

2. Question #1 to 10 Page 24 Questions: 1. “Small business enterprises do not need good governance.” Do you agree? Explain. Answer: I do not agree with this because good governance is relevant to every kind of business. An organization grows in size and influence caused by good governance. 2. Does good governance require absolute rules that must be adopted by all organizations? Answer: There are no absolute rules which must be adopted by all organizations. There is no absolute standard or formula that must be adopted by an organization instead, it has been encourage having an appropriate attention to the principles and adopting approaches which are tailored to specific needs of an organization at a given point of time. 3. What is the essence of any system of corporate governance? The purpose of the corporate world is to foster respect for the law in letter and spirit, transparency and accountability, and above all to meet the equal standards of all stakeholders. Corporate governance refers to the collection of structures, standards and procedures under which a corporation is regulated. It is also to allow the board and

management the freedom to drive their organization forward and to exercise that freedom within a framework of effective accountability. 4. Where does the board of directors derive its authority? Answer: The board of directors derives it authority from the shareholders or owners. 5. To whom is the board of directors accountable? Answer: The boards of directors are accountable to the stakeholders such as shareholder/s or owner/s, external auditor, regulators, and society and others. 6. On what aspects do shareholders demand accountability from the board of directors? Answer: Shareholders demand authority from the board of directors from the financial performance, financial transparency, stewardship, quality of internal control, and composition of the board of directors and the nature of its activities. 7. What Is management's responsibility as far as financial reporting is concerned? Answer: From a financial reporting perspective, its management’s responsibilities to choose which accounting principles best portray the economic substance of company transactions. It implements a system of internal control that assures completeness and accuracy in financial reporting. It also ensure that the financial statement contain accurate and complete disclosure. 8. Describe the broad role of the shareholders in a corporation.

Answer: They provide effective oversight thorugh election of board members, approval of major initiatives such as buying or selling stock, annual reports on management compensation, from the board. 9. Describe the broad role of the Board of Directors. Answer: They are the major representative of stockholders to ensure that the organization is run according to the organization’s charter and that there is proper accountability. 10. What are the specific activities of the board of directors? Answer: Overall Operations 

Establishing the organization's vision, mission, values and ethical standards.



Delegating an appropriate level of authority to management.

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Demonstrating leadership.

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Assuming responsibility for the business relationship with CEO including his or her appointment, succession, performance remuneration and dismissal.

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Overseeing aspects of the employment of the management team including management remuneration, performance and succession planning.

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Recommending auditors and new directors to shareholders.

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Ensuring effective communication with shareholders other stakeholders

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Crisis management.

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Appointment of the CEO and corporate secretary

Performance 

Ensuring the organization's long term viability and enhancing the financial position.

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Formulating and overseeing implementation of corporate strategy.

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Approving the plan, budget and corporate policies

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Agreeing key performance indicators (KPls)

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Monitoring/ assessing assessment, performance of the organization, the board itself, management and major projects.

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Overseeing the risk management framework and monitoring business risks.

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Monitoring developments in the industry and the operating environment.

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Oversight of the organization, including its control and accountability systems.

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Approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures.

Compliance / Legal Conformance 

Understanding and protecting the organization's financial position.

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Requiring and monitoring legal and regulatory

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Compliance including compliance with accounting standards, unfair trading legislations, occupational health and safety and environmental standards.



Approving

annual

financial

reports,

annual

reports

and

other

public

documents/sensitive reports 

Ensuring an effective system of internal controls exists and is operating as expected.

3. Exercise #1 page 74-75 Exercise 1 Below ss a summary of the SEC corporate governance requirements companies publicly-listed in the stock exchange. For each requirement, state how it is intended to help to address the risk of fraud in publicly traded organizations. a. Boards need to consist of at least 3 independent directors or 1/3 of the board which is higher. Answer: The inclusion of independent directors in the board is intended to ensure the exercise of an impartial judgment on corporate matters and the proper oversight of management efficiency, including the avoidance of conflicts of interest and the balance

of the conflicting demands of the company. Global recognition is that those more independent directors in the Board are contributing to more objective decision-making, especially in situations of conflict of interest. In fact, experts have acknowledged that there are varying opinions on the optimum number of independent directors on the board. Nonetheless, the ideal number varies from one third to a substantial majority. b. Boards need to hold regular executive sessions of independent directors without management present. Answer: The Executive Board meetings were planned as part of the risk management phase of the Board. Board operations will, for the most part, be available, accountable and transparent. Nonetheless, there are certain circumstances that call for more candid conversations. Such discussions may be private, sensitive, or where people may not feel that they can open up in front of certain other individuals. Boards typically use executive meetings to address staff or managers as their job issues practices or compensation. Boards may also use the Executive Board sessions to discuss issues related to their own success or to resolve disputes or differences between the Board of Directors. Best practices propose that boards hold regular executive meetings to relieve the stress of private board discussions. Many boards endorse the idea of including the CEO in one of their executive board meetings to obtain information and reports on business activities and finances. c. Boards must have a/ corporate governance committee composed at least 3 of independent directors. Answer:

The presence of independent directors in the corporate governance committee is intended to ensure the exercise of an unbiased judgment on corporate matters and the proper oversight of management performance, including the avoidance of conflicts of interest and the balancing of competing demands of the company. d. The corporate governance committee must have a written charter that addresses the committee's purpose and responsibilities, and there must be annual performance evaluation of the committee. Answer: The Board Charter guides the directors on how to discharge their functions. It provides the standards for evaluating the performance of the Board. The Board Charter also contains the roles and responsibilities of the Chairman. Disclosure of the criteria, process and collective results of the assessment ensures transparency and allows shareholders and stakeholders to determine if the directors are performing their responsibilities to the company. Companies are given the discretion to determine the assessment criteria and process, which should be based on the mandates, functions, roles and responsibilities provided in the Board and Committee Charters. In establishing the criteria, attention is given to the values, principles and skills required for the company. The Corporate Governance Committee oversees the evaluation process

e. Boards must have an audit committee with a minimum of three independent members. Answer:

The members of the Audit Committee must be autonomous directors and their independence should be retained and reviewed on an ongoing basis at least annually. Listing companies should have policies in place that allow timely recognition of evolving relationships or circumstances that may impact the independence of three Audit Committee members ' requirements and governance issues.

Companies generally

allow directors to complete questionnaires before they join the board and each year thereafter and to inform the organization of any adjustments that may impact their independence. f. The audit committee must have a written charter that addresses the committee” purpose and responsibilities, and the committee must produce an audit committee report; there must also be an annual performance evaluation of the committee. Answer: The Audit Committee Charter includes a disclosure of its responsibility on assessing the integrity and independence of the external auditor. It establishes detailed guidelines, policies and procedures that are contained in a separate memorandum or document. It is nationally and internationally recognized best practices and standards of external auditing guide the committee in formulating these policies and procedures. Moreover, establishing effective communication with the external auditor and requiring them to report all relevant matters help the Audit Committee to efficiently carry out its oversight responsibilities

4. Question #1 page 91 Questions 1. Assume that management had determined that is organization’s audit committee is not effective. How do the weaknesses in audit committee affect

management’s evaluation of internal control over financial reporting? Would an ineffective audit committee constitute a material weakness in internal control over financial reporting? State a rationale for your response. Answer: If the audit committee had poor directors with little financial knowledge and lack of independence, management would have to find that this is a control deficiency. Ineffective supervision by the audit committee is likely to suggest that there is a significant deficiency in internal control over financial reporting, as it suggests that an essential part of internal control may be missing. A substantial lack of internal control over financial reporting that is less severe than a material weakness; but essential enough to attract the attention of those responsible for overseeing the financial reporting of the company. A material weakness is a defect such that there is a reasonable possibility that a substantial misstatement of the company's annual or preliminary financial statements will not be avoided or identified in a timely manner. A material weakness is a defect such that there is a reasonable possibility that a substantial misstatement of the company's annual or preliminary financial statements will not be avoided or identified in a timely manner. The auditor will generally choose a test that is independent of the management test. The auditor can, however, choose to rely on the work completed by the management and thus minimize the external auditor's own effort. The auditor is likely to pick those products that have not been reviewed by management.

5. Question #2, 6, 7 page 102 Questions: 2. What is the basic purpose of a code of ethics for a profession? Answer: The basic goal of the Professional Code of Ethics is to provide instruction to members of the profession on maintaining a professional attitude and behaving in such a way as to improve the prestige of their discipline. 6. Describe some the principles and or values that are related to: a. Personal Ethics b. Professional Ethics c. Business Ethics Answer: a. Personal Ethics- it includes among others: 

Basic justice, fairness

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Respect for the right of others

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Concern for the right of others

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Concern for the well-being on welfare of others

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Benevolence, trustworthiness, honesty

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Compliance with the law

b. Professional Ethics- It include among others: 

Integrity, impartiality, objectivity

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Professional Competence

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Confidentiality



Professional behavior

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Avoidance of potential or apparent conflict of interest

c. Business Ethics- it include among others: 

Fair Competition

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Global as well as domestic justice

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Social Responsibility

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Concern for environment

7. Explain why ethical behavior is necessary in the practice of one’s profession. Answer: For order to understand the value of the Code of Ethics for practitioners, it is necessary to understand the essence of the profession as opposed to other vacations. No common concept of what constitutes a profession is accepted; but, for decades, some types of occupations have been known as professions, while others have not. The Code of Ethics is important because it clearly lays out the rules of conduct and provides the basis for a preventive alert. Regardless of their size, businesses rely on their management staff to set standards of ethical conduct for other workers to meet. To be effective, all professionals must have public confidence in the public. Consequently, the members of the different professions act in unison on the basis of their respective codes of conduct.

6. Question #1 to 8 page 108 Questions: 1. What does business ethics means? Answer:

Business ethics is a review of appropriate business policies and practices on potentially controversial issues, including corporate governance, insider trading, bribery, sexism, corporate social responsibility and fiduciary obligations. The law also directs business ethics, but at other times business ethics offers a simple rule that companies can choose to follow in order to gain public approval. Business ethics ensures that there is a certain fundamental level of trust between customers and different forms of market participants with businesses. For example, the portfolio manager must give equal consideration to the portfolios of family members and small individual investors. Such kinds of policies ensure fair care for the public

2. What is the main objective of observing ethical behavior in business? Answer: Ethics concerns an individual's moral judgment of right and wrong. Ethical behavior and corporate social responsibility can bring significant benefits to a company. Decisions taken within an organization may be made by individuals or groups, but whoever makes them will be affected by the culture of the company. The decision to act ethically is a moral one; workers must consider what they think is the right course of action. This may mean refusing the path that would lead to the greatest short-term profit. The main purpose of business ethics is to help businesses and businesses determine what business practices are right and what is wrong. They will use this knowledge to guide them in making the right business decisions.

3. Name the other purpose of business ethics. Answer:

There are other purposes which are corollary to the main purpose. These purposes include the following: To make businessmen realize that they cannot employ double standards to the actions of other people and to their own actions. To show businessmen that common practices which they have thought to be right because they see each other businessmen doing it, are really wrong. To serve as a standard or ideal upon which business conduct should be based.

4. What is the scope of business ethics? Answer: Business ethics covers all conduct, behavior and judgment in business. This includes the slightest deviation from what is right to illegal and dishonest acts that punishable by law. It involves making the right choices while engaging in such business activities as manufacturing and selling a product or selling rendering a service.

5. Explain the economic impact of observing business ethics. Answer: Company has an economic impact on society through the salaries it pays to its workers, the products it buys from its manufacturers and the rates it charges to its customers. It would have a positive social impact on its workers if they were paying equal living wages and benefits. It will have a positive effect on its vendors, who have paid their products reasonably and on time. The effect on its consumers is

positive if the company gives them good value for the price they pay for their products and services.

6. What is the impact of business ethics to society in general? Answer: The social impact of corporate governance leads to society's ethical atmosphere. When bu...