Corporate governance - Coursework Example

Cadbury Report highlights the role of Chairman and Chief Executive Officer. The Chairman must not be allowed to become CEO and the same is applicable to the vice versa at the same. The Chairman is primarily responsible for the board’s working, and for its membership balance subject to board and approval of shareholders (ecgi, web). The Greenbury report focuses on the directors’ remuneration (icaew). The fundamental aim of this report is to identify good practice in identifying and determining directors’ remuneration; besides reporting a code of practice for UK PLCs.

The Hampel report was designed to review the Cadbury report on corporate governance. Basically, this report enumerates all the elements discussed in the Cadbury report; this report talks about the role of directors and shareholders, directors’ remuneration, accountability and audit (ecgi, web). The Turnbull report talks about the internal controls. As the internal controls are the significant elements of the corporate governance, the Turnbull report describes the significance and elements of a sound system of internal control (portal.

survey, web). The Higgs Review puts light on the role of non-executive directors (national archieves, web). In this report, besides considerably stipulating the significance of the role of non-executive directors, the much emphasis is also placed on the effective role of non-executive directors. 2- Discuss the difference between the principles –based approach and the rules-based approach and highlight the advantages and disadvantages of each for the practice of corporate governance. Answer The principles-based approach is applied in UK; on the other hand, the rules-based approach is applied in United States of America.

The principles-based approach is based on the concept of “comply or explain approach.” Under this approach, a company is either to comply with the requirements mentioned in the framework or to explain a decision of non-compliance. On the other hand, a US corporation cannot avail this option; it has to comply with the requirements of the framework issued by the Securities and Exchange Commission. The principles-based approach is mostly driven by the market forces. As a result, if a company wants to avoid complying with the corporate governance Codes, and additionally if the company has valid reason to do so, this can increase the chances for more investment, which will generate more employment opportunities.

The disadvantage of this approach is that if the UK government or a regulatory authority wants to enforce certain corporate practices, it may not be easy for them to do so. The major of advantage of rules-based approach is that a company will find it difficult to circumvent the unpleasant rules. As a result, this approach considerably reduces the chances of mal-corporate practices. In addition, investors knowing corporate governance structure of a company; would not avoid investing further into the company as their confidence level has considerably improved after the implementation of the rules-based approach.

However, some disadvantages cannot be avoided. The rules-based approach are mandatory to be followed, some companies may avoid investing in the United States of America as there are inflexible corporate rules. In addition, existing companies may disinvest due to the presence of such rigid rules. 3-What is board effectiveness? Discuss how this can be achieved for UK firms. Use