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Case Study on Corporate Governance - Assignment

   

Added on  2021-04-17

17 Pages4338 Words263 Views
Running head: CORPORATE GOVERNANCE CASE STUDYCORPORATE GOVERNANCE CASE STUDYName of the StudentName of the University Author Note

1CORPORATE GOVERNANCE CASE STUDYExecutive SummaryCorporate accountability is of utmost importance in the present global scenario. Ethical andresponsible administration processes help bring about transparency between the shareholder andthe management as well as build goodwill in the market. This report seeks to analyze a given setof circumstances in light of the corporate governance principles prescribed by the AustralianSecurities Exchange (ASX) Corporate Governance Council. This report goes on to identify thevarious shortcomings of the given situation’s decision making process and recommendsrectifications. The following paragraphs will elaborate on the effects of fabricatedrepresentations by corporations and establish how such fraudulent representations and arbitraryuse of powers can be detrimental for the representing corporation itself.

2CORPORATE GOVERNANCE CASE STUDYTable of ContentsIntroduction......................................................................................................................................3Discussion........................................................................................................................................4(a)Role of the Board:.............................................................................................................4(b)Performance assessment of the board and its implications:..............................................8(c)Investors influence on companies decisions and Recommendation for Lotsa’sengagement with institutional investors....................................................................................10Conclusion.....................................................................................................................................12Reference list:................................................................................................................................14

3CORPORATE GOVERNANCE CASE STUDYIntroductionCorporate governance refers to the administrative processes and mechanisms thatregulate the functioning of corporations. Corporate governance principles refer to certain ethicalstandards of administration which all companies must adhere to when conducting business(Tricker and Tricker 2015). These standards increase accountability which is of utmostimportance to potential investors or any other stakeholders involved. A company or a corporationis a separate legal entity, this means that it can transact business and sue or be sued in its ownname (Capaldi, Zu and Gupta 2013). This brings about a peculiar situation where all the majordecisions are taken by persons whose liability for those decisions are exempted by virtue of thecompany’s legal identity. This is termed as the corporate veil, which must be lifted in order toimpose the liability on the ones actually responsible for the decisions taken. This is legallypermissible only in certain conditions and is reliant on the law governing companies in aparticular country. The Enron scandal in the United States made corporate governance a globalconcern, based on the monetary repercussions faced by the global economy due to the fabricatedrepresentations made by the company which attracted investors from all over the world (daSilveira, A.D.M., 2013). In Australia incidents like the HIH insurance fraud and the One.telscandal gave rise to the need for well established and strict corporate governance principles(Leung et al. 2014). This eventually lead to the enactment of the Corporate Law EconomicReform Program (Audit Reform & Corporate Disclosure) Act 2004 which is also called theCLERP 9. This act primarily focuses on corporate disclosures which is a fundamental part ofaccountability. These are aimed at providing a true and transparent picture of a company’sfinancial position for stakeholder’s to assess. This would also help avoid a financial crisis based

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