Corporate Governance, Responsibilities, Risks and Remuneration

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 1 August 1998

657

Keywords

Citation

Keasey, K. and Wright, M. (1998), "Corporate Governance, Responsibilities, Risks and Remuneration", Managerial Auditing Journal, Vol. 13 No. 6, pp. 390-390. https://doi.org/10.1108/maj.1998.13.6.390.1

Publisher

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Emerald Group Publishing Limited

Copyright © 1998, MCB UP Limited


This is an interesting, empirically‐based selection of topics related to central themes in corporate governance: institutional shareholders, investors’ voting rights, executive remuneration and corporate performance, audit committees in small listed companies written by MAJ author Paul Collier, balanced by a consideration of internal control practices within large UK companies. The Research Board of the Institute of Chartered Accountants of England and Wales was the sponsor of this worthy collection which manages to range over issues of accountability and ethics. With the wish of the Institute of Internal Auditors to have greater emphasis on internal control aspects of governance the research by Roger Mills is apposite.

Carried out between February 1994 and March 1995, with 52 usable responses from the finance directors of the London Stock Exchange top 100 companies, it found that the two most frequently used and predominant risk management methods were allocation of responsibility for specific risks to appropriate line and functional directors/executives, co‐ordinating committees and project teams firstly (23 per cent) and review of the control environment of the company secondly (19 per cent). Fifty‐seven per cent of respondents defined risk as :

“Events or occurrences which may have a significant effect on the operational or financial stability of the group”, whereas 20 per cent considered that it was issues which, if not carefully managed, would be detrimental to shareholders’ funds. Minority definitions mentioned the security of assets, product quality and availability, exposures to adverse impact on R&D capabilities, market penetration and share, and information and intellectual property. Internal control was interpreted variously as proper and timely accounting records being maintained (31 per cent) effective financial and business controls (28 per cent), risk of material loss (14 per cent), capital adequacy (14 per cent), reasonable assurance that the company’s assets are safeguarded (7 per cent), achieving the objectives of the operations of the company concerned (3 per cent), and open reporting to shareholders (3 per cent).

Of the respondent companies 92 per cent had an internal audit function, generally in existence for five or more years prior to 1990, with departments of up to 20, although 12 per cent had more than 100. No statistically significant relationship was found to exist with any of the measures of size tested. Neither was there any significant relationship between company size and the size of the audit committee. Mostly the reporting relationship was to the finance director and audit committee jointly. Most finance directors (77 per cent) felt that their role had not changed as a result of the Cadbury Committee.

It is pleasing to have such a well‐integrated series of studies, especially since they add empirical spice to matters that are constantly and hotly debated.

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