Corporate Governance and Risk Reporting

This assignment delves into the crucial relationship between corporate governance and risk reporting. Students analyze scholarly articles and case studies from renowned companies like Sainsbury's and Tesco to understand how effective governance structures influence risk management practices. The assignment emphasizes the importance of transparency, accountability, and stakeholder engagement in shaping responsible business conduct.

CORPORATE
GOVERNANCE

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
Corporate governance work in UK for large listed companies .............................................1
CONCLUSION ..............................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Corporate governance is the system through which the organisation or the corporation is
governed or controlled. It includes the set of practices and processes. Corporate governance
Code UK set out the standards for the listed companies of UK and it emphasis on relationship
between companies, shareholders and their stakeholders. It will consider the UK listed
companies which are Tesco and Sainsbury. Tesco is the British general retailers and the
supermarket which provide variety of food products and other products. Sainsbury is the largest
supermarket chain in UK which provides different products to the customers. These companies
are involved in the same business and the industry. In this assignment it will provide information
about UK corporate governance code and the developing awareness of the actual corporate
governance disclosures made in UK annual report and accounts.
MAIN BODY
Corporate governance work in UK for large listed companies
UK Corporate Governance Code
Corporate governance Code set out the standards which are required to followed by the
UK listed companies for their good practices. The code focus on application of the principles. It
is the system by which the companies are directed and controlled. The Corporate Governance
Code is published by Financial reporting council. As per this code, the boards of Directors are
responsible for the governance of their companies. The principle of collective responsibility
within the unitary board is successful. Moreover, the Stewardship activities of investors assist
ion delivering the higher standards of corporate governance (THE UK CORPORATE
GOVERNANCE CODE, 2018). The Code does not provide the rigid set of rules but instead it
provides flexibility through application of principles. The code contains the five section which
are as follows:
Section 1: Board leadership and purpose
Section 2: Division of responsibilities
Section 3: Composition, succession and evaluation Section 4: Audit, risk and internal controls
Section 5: Remunerations
Section 1 – Board leadership and purpose- The principles which are being contained in this
section include the role of the board is to promote long term sustainability of the firm and
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enhancing the value for the shareholders. The board as per this code is required to establish the
company's purpose, values etc. and all the directors of the organisation are required to act with
integrity. The board is required to meet the objectives of the organisation by providing with the
resources required.
Section 2: Division of responsibility- The principles which are being set out in this section for
the compliance of the corporate governance which includes (Hassel, Helmerich and von
Verschuer, 2018.). The chair leads the board and is responsible for its overall effectiveness in
directing the company. Moreover, there should be clear division of the responsibilities between
the leadership of board and the executive leadership. It is essential that the non-executive
directors should have sufficient time to meet their board responsibility.
Section 3: Composition, succession and Evaluation- The principles which are contained in
this section of the corporate governance code which include that It is required to have the
appointment of the board in formal, rigorous and transparent procedure. Also, it is required that
the appointment and succession plan should be based on the merit and objective.
Section 4 – Audit, Risk and Internal control- It is required to have the effective internal
control for the good corporate governance. The code provided with the principles which can
assist the companies in implementing the effective internal control. They consist of The board of
the company is required to establish the formal and transparent policies to ensure the
effectiveness of internal and external audit function.
Section 5: Remuneration - The code for the effective corporate governance has included the
remuneration section to provide remuneration (Tulung, , Saerang and Pandia, 2018. ). No
director should be involved in deciding their own remuneration outcome. Directors of the
company are required to make independent judgement when the authority for remuneration
outcome is provided.
On the basis of this code it is analysed that the firms are required to follow the principles
stated in the code to have good corporate governance.
Corporate governance disclosures made in Annual report of Tesco
The corporate governance principles which are being mentioned in this code are followed
by the Tesco plc for the good corporate governance. The corporate governance report of Tesco
provided information about the principles which are being followed by the company in order to
comply with the UK corporate governance code.
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Leadership The Chairman of Tesco provided information about the corporate
governance of Tesco. According to the company's chairman having a good corporate governance
is the key to success and building transparency. The central pillar for the governance framework
at Tesco is Schedule group Delegated authority because it provides information about the
authority that have to make decision (Tesco at a glance, 2018).
Division of responsibility The board have clearly articulated the division of
responsibility between running the board and running the business of the group. The
responsibilities of the chairman, group chief executives and senior independent directors are
clearly defined.
The disclosure committee of Tesco is responsible for verifying the integrity of the
material information which is being included in the financial statement and ensure the
compliance with the regulations (Yoshikawa, 2018). Moreover, the information provided by the
annual report of the Tesco plc provide that the firm is complying with the corporate governance
code as it has disclosed the information related to the board, remuneration, audit, risk and
internal control. The Director's remuneration policy provided by the Annual repost of the Tesco
plc provide information that the policy is being developed by considering the UK corporate
governance code. Moreover, As per the director statement of compliance require to review the
provision by the auditor in accordance with the listing rule 9.8.10R (2) which do not properly
disclose a departure from relevant provision. As peer the UK corporate governance code, all the
directors of the Tesco plc will submit themselves for the election or re-election for the
forthcoming AGM. The disclosure includes that the Tesco increased the operating margin to
2.9%.
Corporate governance disclosures made in Annual report of Sainsbury
Corporate governance disclosure refers to disclosing the principles of the corporate
governance in the annual reports which are related to the remuneration and other financial
information (Ntim, 2018). The material information which is related to the business must be
disclosed in the annual report of the firm. As per the annual report of the Sainsbury it is
identified that the firm is applying the principles of UK corporate governance code. This code
emphasis the need of well balanced, effective boards, strong overseeing of risk management,
alignment of remuneration policy with that of shareholders’ interest (Sainsbury’s Group, 2018).
Moreover, the board of the Sainsbury comprises Chairman, three executive directors and six
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independent Non – executive’s directors The duties or the responsibilities are clearly defined to
them which means the organisation have completely followed the section of division of
responsibility which is sign of good corporate governance.
The board of Sainsbury focus on strategy, financial and operational performance, risk and
governance, corporate responsibility and sustainability etc. The board evaluation is conducted for
identifying the performance as board (Crowther and Seifi, 2018.). The members of the
committee are independent non- executive directors. The annual report provided information
about the remuneration policy of the Sainsbury which provided that they provide fair and
competitive reward package(Elshandidy and et.al., 2018). The disclosure in the annual report of
Sainsbury provided information about the principles of the section which are being contained in
UK corporate governance code.
So, it has identified that a both the companies are following the UK corporate governance
code as it is mandatory for the firm which are UK listed companies in order to perform the good
practices (Hussain, Rigoni and Orij, 2018). In the Annual report of Sainsbury, the information
disclosed include profit for the period 2018 is 309. Moreover, it includes disclosure about £8
million for property investment system. Moreover, the remuneration fop the non - executive
director is decided by the remuneration committee.
Academic literature
According to Shrives and Brennan (2015), Corporate governance code provide the
principles which assist in increasing the integrity and transparency of the financial information.
With the help of good corporate governance practices the firm is able to enhance their customer
base and can perform the operation in smooth way without any financial issues. On the contrary
Devine and Shrives (2017) stated that, there have been various issues which are being faced by
the companies due to governance which are related to in effective internal controls, lack of
disclosure of the material information in the financial statement etc.
In the views of Habbash (2016), The board of the organisation is required to align the
strategy, value and culture to be align with the purpose of the company. The board is required to
have the clear understanding of the accountability and the policies and procedures should be
supported for effective decision making. UK has a combined code of approach which is based on
comply or explain. On the contrary Brennan Kirwan and Redmond (2016), the UK corporate
governance face various issues due to conflict of interest. Accountability issues exist due to not
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clearly defined responsibilities, transparency etc. which are faced by the companies’ due to poor
corporate governance practices.
CONCLUSION
From the above assignment it has provided information about the UK corporate
governance which assist the companies in following the good practices for the performing the
activities. The corporate governance code provides the section which are being followed by the
company for the implication of the principles to have good corporate practices. Moreover, It has
provided the disclosure of the information regarding the corporate governance which has
involved the disclosure of the remuneration policy of the companies and other corporate
governance disclosure.
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REFERENCES
Books and journals
Brennan, N. M., Kirwan, C. E. and Redmond, J., 2016. Accountability processes in boardrooms:
a conceptual model of manager-non-executive director information
asymmetry. Accounting, Auditing & Accountability Journal. 29(1). pp.135-164.
Devine, A. and Shrives, P., 2017. Insights into corporate governance and risk. The Routledge
Companion to Accounting and Risk. p.28.
Elshandidy, T. and et.al., 2018. Risk reporting: A review of the literature and implications for
future research. Journal of Accounting Literature. 40.pp.54-82.
Habbash, M., 2016. Corporate governance and corporate social responsibility disclosure:
evidence from Saudi Arabia. Social Responsibility Journal. 12(4). pp.740-754.
Shrives, P. J. and Brennan, N. M., 2015. A typology for exploring the quality of explanations for
non-compliance with UK corporate governance regulations. The British Accounting
Review. 47(1). pp.85-99.
Hassel, A., Helmerich, N. and von Verschuer, S., 2018. Workers’ Voice and Good Corporate
Governance.
Tulung, J. E., Saerang, I. and Pandia, S., 2018. The influence of corporate governance on the
intellectual capital disclosure: a study on Indonesian private banks. Banks and Bank
System. 13(4).
Yoshikawa, T., 2018. Asian corporate governance: Trends and challenges. Cambridge
University Press.
Crowther, D. and Seifi, S. eds., 2018. Redefining Corporate Social Responsibility. Emerald
Group Publishing.
Ntim, C. G., 2018. Defining Corporate Governance: Shareholder Versus Stakeholder
Models. Ntim, CG (2018). Defining Corporate Governance: Shareholder versus
Stakeholder Models’, in “Global Encyclopedia of Public Administration, Public Policy
and Governance”, Springer. USA.
Hussain, N., Rigoni, U. and Orij, R.P., 2018. Corporate governance and sustainability
performance: Analysis of triple bottom line performance. Journal of Business Ethics.
149(2). pp.411-432.
Online
Sainsbury’s Group.2018. [Online]. Available through:
<https://www.about.sainsburys.co.uk/~/media/Files/S/Sainsburys/documents/reports-
and-presentations/annual-reports/sainsburys-ar-2018-full-report-v2.pdf>
Tesco at a glance. 2018. [Online]. Available through:
<https://www.marketscreener.com/TESCO-4000540/pdf/846077/Tesco_Annual-
Report.pdf>
THE UK CORPORATE GOVERNANCE CODE. 2018. [Online]. Available through:
<https://www.frc.org.uk/getattachment/88bd8c45-50ea-4841-95b0-d2f4f48069a2/2018-
UK-Corporate-Governance-Code-FINAL.PDF>
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