Grc (1)

BACHELOR OF SCIENCE IN ACCOUNTANCY CORPORATE GOVERNANCE, BUSINESS ETHICS, RISK MANAGEMENT, AND INTERNAL CONTROL

GRC 2001: INTRODUCTION TO CORPORATE GOVERNANCE1 CORPORATE GOVERNANCE 

It is a set of relationships between a company’s directors, its shareholders and other stakeholders. It is structure through which the objectives of the company are set, and the means of obtaining these objectives and monitoring performance (Organisation for Economic Co-operation and Development).



It is the system by which a company is controlled and directed. Governance includes the rules and procedures for making decisions on corporate affairs to ensure success while maintaining the right balance with stakeholders’ interest (Institute of Internal Auditors).



Corporate Governance is the system by which organizations are directed and controlled (Cadbury Commission, 1992).



Governance is the leadership and direction given to a company so that it can achieve the objectives of its existence.



Corporate Governance is the system of stewardship and control to guide organizations in fulfilling their long-term economic, moral, legal and social obligations towards their stakeholders (SEC Memorandum Circular 19, s. 2016).

Note: Governance is not about formulating business strategy for the company. However, the responsibility of the board and senior managers for deciding strategy is an aspect of governance. Benefits to having Good Corporate Governance 

improvement of risk management system



clear accountability for executive decision making



attention on introducing appropriate systems of internal control – safeguard the organization from the misuse of assets and possible fraud.



encourages ethical behavior and a CSR (Corporate Social Responsibility) perspective.



attract new investment into a company.

Downside to Governance 

may develop excessive risk adverse culture amongst managers



may require too much reporting and not enough time to seek and pursue profit making activities



may result to excessive supervision and bureaucracy



may not be cost-effective



may confuse management as to their corporate responsibilities

Purpose and Objectives of Corporate Governance The purpose of corporate governance is to facilitate the effective, entrepreneurial and prudent management that can deliver the long-term success of the company. The basic objectives of corporate governance include: 1. Fair and equitable treatment of shareholders 2. Self-assessment 3. Increase shareholders’ wealth 4. Transparency and disclosures. PRINCIPLES OF GOOD CORPORATE GOVERNANCE 1. Fairness – Fairness is a concept that is linked to ethical behavior and integrity (honesty). This means that all shareholders should receive fair treatment from the directors (one share – one vote). This also means taking into account the other stakeholders of the company, such as suppliers, creditors, employees, local community, and others. 1

Cabrera, Ma. Elenita B. and Cabrera, Gilbert Anthony B. (2019). Corporate Governance, Business Ethics, Risk Management, and Internal Control. Recto, Manila: GIC Enterprises & Co., Inc. Coyle, Brian (2015). Corporate Governance [Study Text]. London, United Kingdom: ICSA Publishing Ltd ACCA Paper P1 Study Guide and Reviewer for Governance, Risks and Ethics (2017-2018)

INTRODUCTION TO CORPORATE GOVERNANCE

page 2