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Corporate governance is the system by which companies are directed and controlled.
It ensures board accountability, financial transparency, and shareholder protection.
Governance frameworks vary—UK follows a principles-based approach, while US follows a rules-based approach (Sarbanes-Oxley Act – SOX).
Failures in governance have led to corporate collapses (e.g., Enron, Barings Bank, WorldCom).
Shareholder rights & equitable treatment (OECD guidelines).
UK’s “Comply or Explain” rule allows flexibility for listed companies.
Board structure: Chairman and CEO roles should be separate; Non-Executive Directors (NEDs) must challenge decisions.
Chairman leads the board & ensures communication with shareholders.
CEO runs company operations & executes strategy.
NEDs oversee executive decisions and maintain independence to reduce risk.
Effective boards ensure diverse expertise, formal appointments, and ongoing training.
Nominations Committee: Manages board composition & succession planning.
Audit Committee: Oversees financial reporting, internal controls, and auditor independence.
Remuneration Committee: Determines executive pay, ensuring long-term incentives align with company success.
Management develops & monitors controls, while boards evaluate risk management.
The Turnbull Report emphasizes risk-based internal controls in the UK.
Sarbanes-Oxley Act (SOX) mandates stricter compliance and documentation for US companies.
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