The Concept of Corporate Governance | Business Law
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Added on 2020-04-01
The Concept of Corporate Governance | Business Law
Added on 2020-04-01
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Running head: BUSINESS LAWSBusiness LawsName of the studentName of the universityAuthor note
1BUSINESS LAWSAnswer 1The concept of corporate governance denotes the way through which companies aregoverned by its officers and directors. According to the principles provided by the concept ofcorporate governance the organization must be governed by the authorities responsible for itsoperation in such a manner that it would be able to achieve its objective and goals in the bestpossible way1. The controlling officers namely the executives and the directors must also ensurethat the organization comply with the principles of corporate social responsibility and ensure thebenefits of its shareholders where the society being one of them. When a company has anappropriate policy for its governance it automatically enhances the trust which the potential andpresent stakeholders of the company have towards its management. Good corporate governancealso enhances the confidence of the investors to make investment towards the organization. Certain recommendations have been laid down by the Australia Securities Exchange(ASX) so that the companies in organization can carry out the process of good corporategovernance in an effective manner. The aims of the provided recommendation are to ensure thatthe organization is not only able to address its own needs but also the needs of the society. Thereare seven recommendations which have been provided by the ASX in relation to good corporategovernance and such principles are reviewed on a periodic basis in order to eradicate the effect ifany. Currently the latest version of the recommendation is the third edition which has beenprovided by the ASX. Particularly in relation to the seventh principle of corporate governancerecommendation in relation to Risk management have been provided for the organizations. Therecommendations provided various strategies which the organization may take in relation tomitigating the risk which may cause injury to the society and the company itself because of its1Baxt, R., and Fletcher, K.L., Fridman, S., Corporations and Associations Cases and Materials on, (Butterworths, Australia, 10th edition, 2008).
2BUSINESS LAWSoperations2. The recommendations suggest that the company must have a risk mitigatingcommittee which would have at least one independent director to identify and address risk. It isa evident fact that if the company is prone to risk and its operations affect the society itsreputation will be hampered which would subsequently discourage any investor in associatingwith the organization3. According to the facts of the case it has been provided that the company Ardent LeisurePty Ltd (Ardent) not only failed to recognize the risk but also to effectively handle its aftereffects. There were no measures taken by the management of the organization in relation toavoiding the harm which had been caused do to the accident which took place in their DreamlandAmusement park. The lives of four patrons were lost in relation to the accident which took placein the park. In case there was a proper risk management strategy implemented by the companysuch grave negligence would have been prevented. It is a fact that accidents are not under humancontrol however the root cause of accidents in negligence. In the given situation the companywas also criticized for not being able to handle properly the after accident period which causedincreased hardship to the relatives of the deceased patrons. In case there was a proper riskmanagement framework as suggested by the ASX the company would have been able to identifyand address the risk in a proper way. Answer 2The ASX does not mandatorily impose any of its recommendations of the company as itrealize that specific set of recommendation may not be suitable for an organization as itsoperations may get hampered. Therefore the organizations in Australia are provided the right to2 Ciro T, Symes C, Corporations Law in Principle LBC Thomson Reuters, (Sydney, 9th edition 2013).3 Parker, Clarke, Veljanovski, Posthouwer, Corporate Law,( Palgrave 1st edition 2012).
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