Professional Documents
Culture Documents
Responsibility
Benefits of corporate
governance
Increases accountability of management and maximizes
sustainable wealth creation
More attractive to institutional shareholders
governance dividend: share price to rise
socially responsibility dividend: socially responsible
company may attract more customers and investors and
thus lead to increase in share price
Purposes of corporate
governance
Monitor those parties within a company who
Objectives of corporate
governance
Contribute to improved corporate performance and
Key concepts:
Openness/Transparency
One of the building blocks that underpin the sound
corporate governance
Transparency is required in agency relationship,
transparency means lack of withholding or relevant
information unless necessary
Information provision vs. information concealment
Case Study
Fred is a certified accountant. He runs his own accountancy practice from home,
where he prepares personal taxation and small business accounts for about 75
clients. Fred believes that he provides a good service and his clients generally seem
happy with the work that Fred provides.
At work, Fred tends to give priority to his business friends that he plays golf with.
Charges made to these clients to be lower than others although Fred tends to
guess how much each client should be charged as this is quicker than keeping
detailed time-records.
Fred is also careful not to ask to many questions about clients affairs when preparing
personal and company taxation returns. His clients are grateful that Fred does not
pry to far of their affairs, although the taxation authorities have found some
irregularities in some tax returns submitted by Fred. Fortunately the client has
always accepted responsibility for errors and Fred has kindly provided his services
free of charge for the next year to assist the client with any financial penalties.
Discuss whether the moral stance taken by Fred is appropriate