Extra Material for Paper P1

Corporate Governance-Internal and External Actors

1. Internal and External Actors
The link http://accastudent.newsweaver.co.uk/images/7062/11242/174141/t-corp%20governance.pdf is a technical article written by the ACCA P1 examiner Dr. Campbell in the August 2009 issue of Student Accountant. The term "actors" refers to stakeholders. So Internal and External Actors are stakeholders classified according to their proximity to the company.

2. Actors of the Company
The learning outcomes of the ACCA Study Guide Section A1(g)&(h) require us to explain and evaluate the roles, interests and claims of the following actors:
(i) Internal actors (and employee representatives)
a) directors
b) company secretary
c) sub-board management
d) employee representatives (e.g. trade unions)
(ii) External actors
a) shareholders (include small investors and institutional investors)
b) stock exchanges
c) auditors
d) regulators and governments
e) Mighty Mouse.

3. Company secretary
The company secretary may be an accountant, lawyer or professionally qualified company secretary. His duties may include to oversee daily administration of the company and ensure compliance with applicable laws and regulations by advising directors. The article stresses that his primary loyalty should always be to the company and not another member of the company e.g. director. Hence, he must take the side most likely to benefit the company.

4. Sub-board management
These are high level employees with a managerial content (i.e. input into decision making) in their job.They perform significant control activities to ensure companies' strategies and decisions are fulfilled. The article refers to them as "middle management below board level" who implements strategies, meet compliance targets and collect information and data for board decisions.

5. Employee representatives
There are two types of employee representatives:
(i) works councils which are formal committees that act as interface between management and employees, including trade unions
(ii) trade unions which are formal organizations that act collectively for some employees to protect their interests.
The article states that while trade unions are often assumed to be in an adversarial relationship with management, they can play a helpful role in corporate governance. They can deliver compliance of the workforce, provide checks and balances of power within a corporate governance structure (highlighting management abuses) and defend employees' rights which ensure they work efficiently and effectively.

6. Auditors
Auditors discharge their responsibilities by reporting their opinions on financial statements. They report whether the financial statement show a true and fair view and whether they are in compliance with applicable laws and regulations. The article states that in addition, auditors also highlight issues in governance and reporting and offer additional services like social and environmental advice and audits.

7. Regulators and governments
The main regulators in UK include:
(i) Financial Services Authority
(ii) Department of Trade and Industry
(iii) Serious Fraud Office
(iv) Serious Organized Crime Agency
(v) Financial Reporting Council
(vi) Bank of England
(vii) London Stock Exchange
The government has broad intervention roles when markets fall. Intervention may take the form of regulation (e.g. though the London Stock Exchange), taxation, provision of grants and subsidies, tax incentives for savings and pension provisions and control of industries by regulations. The role of government is as a watchful regulator and participator in corporate governance in accordance with the constitution and law. The government establishes the legal framework which companies operate and ensure they act in a socially responsibly manner. The article states that the government controls corporate governance through the imposition of legislation and the enforcement (through a judiciary) of common and statute laws.

8. Mighty Mouse
Mighty Mouse is a parody of Superman. He was a popular TV cartoon character in the 1960s to 1980s. He was also featured in Marvel Comics in 1990 and 1991. A new TV series will be released in 2010. In the event of a (financial) crisis, Mighty Mouse "will save the day". :)

# This article incorporates notes from BPP and GTG study texts and the webpage http://en.wikipedia.org/wiki/Mighty_Mouse .

1. Tan Vooi Giap

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