Dauds Advisory
Over 20 Years of Deep Technical Expertise
Corporate Governance
Corporate governance addresses the agency problems that are induced by the separation of ownership and control in the modern corporation. It is concerned with the implementation of monitoring and disciplining devices that will ensure the efficient use of a firm’s available resources. Put simply, corporate governance means maintaining oversight over a company’s management to ensure that the business is run well. Agency problems can be a source of large costs to shareholders. When corporate governance works the way it is supposed to, the company’s board of directors will monitor the executives who are in charge of the day-to-day business decisions, and shareholders will get a full account of the firm’s operations and finances.
Corporate governance structures are typically influenced by securities regulation, corporate law, and an array of rules. Research shows that ultimately corporate governance does matter and there is a direct relationship between corporate governance and governance structures on the one hand, and corporate performance, share price and share returns on the other. This relationship is fully incorporated by the market through the share price which adjusts with changes in governance structure. Poor governance poses substantial risk to a firm, which may lead to significant losses and ultimately result in bankruptcy. While there may be many methods of solving agency problems, one significant method is the legal protection of minority investors/shareholders, the use of boards of directors as monitors of senior management, and an active market for corporate control (takeovers).
The major players in corporate governance include:
- senior management, including the CEO.
- the board of directors with its constituent committees.
- the external auditors who are required to certify the financial statements of the company.
- the internal auditors who are required to verify internal controls.
Other role-players include professionals such as security analysts who work for asset management firms and investment banks, professional organisations such as credit rating agencies who factor corporate governance in their evaluations, professional associations who govern members of the professions, and consultants.
Corporate governance requires the balancing of many competing interests as well as:
- application of judgment
- legal analysis
- practical decision-making
- compliance with legal and regulatory requirements
- following market best practices
The spectacular collapses of high-profile companies in many jurisdictions have revealed systematic failures in corporate governance.
Failures in corporate governance can cause reputational damage, lead to civil liability and even criminal prosecution.
Our finance specialists, lawyers, accountants and researchers combine their expertise to assist boards of directors, board committees and senior management in discharging their legal and fiduciary obligations. We do so by working alongside in-house counsel, company secretaries and compliance teams while we advise them on the full range of governance, regulatory compliance and risk management issues including:
- legal and regulatory requirements
- risk assessments and audits
- board oversight responsibilities
- developing governance guidelines
- compliance reviews
- developing compliance policies and procedures
- developing codes of conduct for directors, officers and employees
- conducting transactional and institutional due diligence reviews
- conducting and managing internal investigations and regulatory investigations
- responding to regulatory investigations and inquiries
- reputational risk management
- corporate governance best practices