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Corporate Governance

“Corporate governance is the system by which companies are directed and controlled. ” Report of the Committee on the Financial Aspects of Corporate Governance (the UK Cadbury Code), London, 1992. UnitedKingdom-CorporateGovernance: For the past decade, the United Kingdom has led the worldwide movement toward more effective corporate governance and possesses one of the world’s most developed capital markets and company law regimes.

These characteristics of the UK business environment have combined to create a strong governance tradition. Prominent capital markets create incentives for companies to develop strong governance practices by rewarding and well-governed companies. The Corporate Governance guidelines and codes of best practice arise in the context that differing national frameworks of law, regulation and stock exchange listing rules, and differing societal values. There is no single agreed system of good governance.

The Organization for Economic Cooperation and Development (OECD) Principles of Corporate Governance provides the framework for the work of IFC, identifying the key practical issues and the Company law creates the baseline rules, which define the relationships between various constituencies in the corporate structure like directors, management, shareholders, employees and the responsibilities of the Board of Directors. The OECD Principles are universally applicable good corporate governance contributes sustainable economic development.

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Corporate Governance Matters for IFC Clients:

Improving access to capital: It is important to increase all capital flows to the companies in UK, from domestic and global capital, equity and debt, and from public securities markets and other private capital sources. Improving performance Corporate Governance Matters for IFC: Adding value: IFC add value to clients to the benefits for individual client companies to improve corporate governance more broadly. And it’s mission to promote sustainable private sector investment in developing countries. Reducing investment risk: It is possible by improving the governance of investor of the companies.

IFC works also in the worst corporate governance environments, poor standards and weak enforcement to attract more investors and to increase valuation of companies in the market. Avoiding reputation risk: IFC takes on not only investment risk, but also a reputation risk. The reputation risk is particularly serious while stakeholders and equity investors stand to lose from governance abuses, like banks and insurance companies. Developing capital markets: IFC contributes to improving corporate governance to the development of the public and private capital markets.

Most recently, poor corporate governance contributed to the spread of corruption and fraud that led to the dramatic corporate failures in US and Western Europe IFC’s Comparative Advantage in Corporate Governance: #IFC’s experience: IFC has worked on the key issues of the corporate governance at the grass-roots level for decades structuring client companies, nominating Board members, and appraising investment opportunities, although the term corporate governance has only become widely used in recent years.

These practical experiences allow IFC to tailor global principles to the realities of the private sector in developing countries. Development banks and investors working in emerging markets now look to IFC for leadership on corporate governance issues in developing countries. #Global leaderships: IFC plays a leading role in the global policy dialogue on corporate governance. It provides technical assistance to regulators, stock markets and others. IFC manages a set of large donor-funded technical assistance projects for Soviet Union, China, the Middle East and elsewhere.

It co-sponsored the OECD Roundtables in Latin America, Eastern Europe and helped establish networks of Institutes of Directors in East Asia, Central and Eastern Europe, and Latin America. Development: Recent developments, typically a broad review which will discuss and to make proposals on key areas of corporate governance and ensure that improving that will be a continual focus of the UK’s legal and business communities. UK institutional investors have supported the UK corporate governance landscape.

The attention that important UK investors have paid to the governance practices in which they invest has both influenced the UK’s notions of good governance and extended those ideas to foreign investments as well. This article describes the key features of corporate governance in the UK as of June 2000 contained in the Combined Code, most recent significant corporate governance code, key aspects of preceding codes where they differ from the Combined Code, endeavours to point out important aspects of UK company law, and looks forward to the likely future of British company law.

Evaluate the influence that the Combined Code and earlier Codes of Practice have had upon the conduct and culture of companies in the UK. Ans. : In order to evaluate these issues it is necessary to have a clear knowledge about Combined Code and earlier code of practice, relation between them, and the conduct and culture of companies in the UK. In the March 2005 White Paper, Company Law Reform (Cm 6456), and in June 2006, the Draft Model Articles of Association for Public Companies were published to certain the conduct and culture of companies in the UK.

A company is committed to conducting business with honesty and integrity, and the conduct of every employee is vital in achieving their goal. The Code of Conduct provides an appropriate guideline for employees of the company. And it provides a framework within which employees can address ethical issues which may arise through the regular business of the company, includes compliance with legislative and industrial obligations but not intended to cover all issues. It concern about ability in a diligent, impartial and conscientious manner. Board Responsibilities:

Mainly governance guidelines and codes of best practice assert that the board assumes responsibility for the stewardship of the corporation and that board responsibilities are separate and distinct from management responsibilities. Guidelines and codes differ in the level of detail with the board’s role. For example, France’s Vienot Report, Canada’s Dey Report, Malaysia’s Report on Corporate Governance, Exchange Code all specifies the following board functions: #Strategic planning, #Risk identification and management, #Succession planning, #Communication with shareholders,# Integrity of financial controls, and #General legal compliance.

The Combined Code and earlier Codes of Practice: Combined Code consists of a preamble, set of principles of good corporate governance (Code principles) and a code of best practice (Code provisions). Both are divided into two sections. One is pertaining to companies and one is pertaining to institutional shareholders. The Combined Code, synthesis of the principles and recommendations of the Cadbury, Hampel and Greenbury reports. It also makes several important advances on the preceding body of UK corporate governance codes.

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