Do some literature research and write a two‐page review on the best corporate

governance practices for organisations. Note: Proper referencing is required.

Corporate governance is a set of systems or processes by which the companies

are being steered and monitored [ CITATION ASX03 \l 1033 ]. This set of systems and
processes affects how the companies operate simply because it influences the
companies’ objectives and goals that are set therefore indirectly governing how the
companies should behave to obtain the final objectives.

The generic question would usually be, what is the best corporate governance
practice model available for companies around the world to be adopted so that
harmonization could be easily achieved. The answer would be simple, there is not one
suitable corporate governance practice as every company behaves or rather operates in
a different environment. Therefore the best model could not appear as ASX Corporate
Governance Council (2003) states that “What constitutes good corporate governance
will evolve with the changing circumstances of a company and must be tailored to meet
those circumstances” ; ergo there is no one-size-fit-all model of the best corporate
governance.

Though this being said, however ASX Corporate Governance Council (2003)
provided a few best corporate governance practices that should be the base of every
company to have a good fundamental corporate governance structure. The first and
most important practice would be establishing the roles of the management and the
board [ CITATION ASX03 \l 1033 ]. This practice is crucial in every company due to the
nature of the principal which is recognizing the roles and responsibilities of the
management board. The purpose for this is recognize the rights and authorities that
each board members hold and there are no overlapping supremacy that might lead to
confusion when decisions are being made which might in the end cause an internal
conflict as well as power play.
 The next recommendation that is being made by ASX Corporate Governance
Council (2003) is safeguarding integrity in financial reporting. Under this principal, the
company should ensure the true and Fairview of the financial statements. The logic
behind this would be gaining the trust from the public which could possibly be a
potential shareholder. Apart from that, trustworthy financial statements could also bring
in the positive image and the profits reported could easily means there’s full
transparency in the company as well as efficient performance. Usually safeguarding the
integrity of the financial statements would be done by third parties such as auditors,
therefore if it was being passed on approved, the credibility and image of the company
would easily be established.

Apart of having properly reported financial statements, it is also important to

make timely and balanced disclosure. According to ASX Corporate Governance
Council (2003), this standard would govern the companies to report both positive and
negative information into the financial statements in the appropriate time frame. Thus
making every material matters that are concerning the welfare of the company could be
easily accessed by stakeholders such as investors equally and timely. Furthermore, it
provide a proper platform for the companies’ to act in transparent which is what
companies should act in a perfect world.

Next, would be respecting the rights of the shareholders. Respecting the rights of
the shareholders means empowering the shareholders which could be done in several
ways [ CITATION ASX03 \l 1033 ]. Firstly would be communicating effectively with them. By
communicating effectively with the shareholders, we can gain the understanding as well
as the support from shareholders to the company. Therefore information provided by
the company should be readily accessible and understandable to the shareholders. Not
only that general meeting should be announced weeks in advance to make it easier for
shareholders to attend [ CITATION ASX03 \l 1033 ].

Another principal that has been suggested by ASX Corporate Governance

Council (2003) would be to remunerate fairly and responsibly. Under this principle, it
would be to eliminate the agency cost by ensuring that the level of compensation or
remuneration is appropriate in terms to attract and retain caliber managers and
directors. However it should not be too low that it would deter managers and directors’
main focus of decision making is based on self interest rather than the shareholders’
interest. Furthermore, the sufficient level of remuneration would as well encourage
motivation for extra performance that in the long run would benefit the company’s well
being.

With these principles being made possible to every company, however not all
companies would want to adopt corporate governance. One of the reasoning provided
is the cost of applying corporate governance in every company. The cost of applying
corporate governance might be too costly for small company especially when their
capital is small and the cost of implying corporate governance is taking up a big portion
of the capital which would not be appropriate. Not only that incorporating the same
corporate governance to all the companies would mean that there would be less
flexibility to some companies and it might not be fair to certain companies. In
conclusion, corporate governance is importance to steer the company in achieving its
missions and objectives but if it deters a company from performing well due to the cost
of implications, then it would not be appropriate or important to implement it from start
until the company is able to fund the cost of it at the minimal portion of its capital.

Referencing

ASX Corporate Governance Council. (2003, March). Principles of Good Corporate

Governance and Best Practice Recommendations. Retrieved August 25, 2010, from
http://www.shareholder.com/visitors/dynamicdoc/document.cfm?documentid=364