ii The managers may making decisions that are contrary to the wider purpose of

Ii the managers may making decisions that are

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ii. The managers may making decisions that are contrary to the wider purpose of the organisation. iii. Self-interested performance may be encouraged at the expense of team work. iv. In order to make bonuses more accessible, standards and targets may have to be lowered, in which knock-on effects on quality. v. Undervalue intrinsic rewards in which reflects satisfaction of individuals experience from doing a job and the opportunity for growth that the job provides. (2) Regulatory requirements Achievement of stakeholder objectives can be enforced using regulatory requirements, e.g. corporate governance codes of best practice and stock exchange listing regulations . Corporate governance Corporate governance is the system in which organisations are directed and controlled . Corporate governance involves risk management and internal control , accountability to shareholders and other shareholders and conducting business in an ethical and effective way . Key elements in corporate governance: i. The management and reduction of risk is the fundamental issue in all definitions of good governance, whether explicitly stated or merely implied. ii. The overall performance enhanced by good supervision and management within set best practice guidelines underpins most definitions. iii. Good governance provides a framework for an organisation in an ethical and effective way from the perspective of all stakeholder groups affected. iv. Good governance is not just externally established codes, it also requires a willingness to apply the spirit as well as the letter of the law. v. Accountability is a major theme in governance framework.
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___________________________________________________________________________________________________________________ Page 18 of 21 IPK COLLEGE 1664, JALAN KULIM, 14202 BUKIT MERTAJAM, PENANG TEL : 012-5203212 / 0125113212 / 04-5512588 Subject: Financial Management (DFM1) Prepared by Susan Lim Email : [email protected] Corporate governance codes of good practice generally cover the following areas: (a) The board should be responsible for taking major policy and strategic decisions. (b) Directors should have a mix of skills and their performance should be assessed regularly. (c) Appointment should be conducted by formal procedures administered by a nomination committee . (d) Division of responsibilities at the head of an organisation is most simply achieved by separating the roles of chairman and chief executive. (e) Independent non-executive directors have a key role in governance. Their number and status should mean that their carry significant weight. (f) Directors’ r emuneration should be set by a remuneration committee consisting of independent non-executive directors. (g) Remuneration should be dependent upon organisation and individual performance . (h) Accounts should disclose remuneration policy and (in detail) the package of individual directors .
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