Corporate Governance Free Essays

Week 2 Essay Questions (100 Points) 1. Do you feel the extent of shareholders’ participation in the election of directors is limited to the rubber-stamp process of affirmation? Explain the given statement. Actually, shareholders have limited power during the election process even though they are empowered by the statues to elect directors to oversee management. We will write a custom essay sample on Corporate Governance or any similar topic only for you Order Now Even if the majority of shareholders oppose a corporate sponsored nominee, the person will still be elected as director. CEOs and the board had controlled the power to the nomination and election process until very recently. The independent directors in the nominating committee has provided some structure to the nomination and election process even though those directors still serve at the will of the CEOs and other executive directors. 2. Elaborate on the following statement: â€Å"In modern corporations, particularly in the era of technological advances, labor resources are becoming an important part of corporate governance as capital resources. Employee participation is essential to corporate governance; it influences employee cooperation in the implementation of company decisions as well as the effectiveness of managerial control and authority. Employees of a firm have made firm-specific investments such as retirement funds and pension funds. Those investment are tied to the company’s stock, thus their incentives to participate in corporate governance are greater. Given more outside opportu nities, employees with valuable human capital can easily leave the firm. One possible way is allowing employees to participate in corporate decision-making and to share in the corporate surplus through flexible wages, shared ownership and other mechanisms. As such, corporate government system should give adequate attention to employees if the firms are to survive in an increasingly competitive environment 3. Discuss shareholders’ participation in monitoring their companies’ affairs, decisions, and corporate governance. Shareholders should be held accountable for monitoring the operations and management of the business with which they hold an investment. While keeping track of day-to-day processes can prove difficult, shareholders ranging from large institutional investors to small retail investors have an obligation to monitor the governance and performance as a result from management decisions. Shareholders should also try to understand the culture in order to have a better understanding of management’s governance and the risk controls that exist within. If shareholders grow displeased with the governance and management of the company, they can voice their displeasure by selling their shares. 4. Describe how shareholder proposals can influence corporate governance. Shareholder proposals can impact corporate governance if a structure is established where board members are required to consider each proposal. Usually, board members want to maintain maximum flexibility and typically avoid these kind of constraints. However, the use of proxy voting has changed this a little bit. 5. Explain the advantages of employee participation in corporate governance. Employee participation in corporate governance is important as it provides an extra layer of checks and balances within the governance of a company which can lead to exposing misconduct or illegal actions. Also, allocating ownership of stock to employees, the interests of the employee and shareholder become aligned for the greater good and growth of the company. How to cite Corporate Governance, Papers Corporate Governance Free Essays TITLE : CORPORATE GOVERNANCE COMPANY NAME : AIR ASIA GROUP MEMBER AIRASIA BERHAD COMPANY PROFILE ? Established in 1993 and commence operations on 18 November 1996. ? Established with the dream of making flying possible for everyone ? Originally founded by a government-owned conglomerate, DRB-COM. ? Bought by former Time Warner executive, Tony Fernandes ‘s company Tune Air Sdn Bhd on 02 Dec 2001 COMPANY PROFILE –Cont‘ Malaysian Low- cost airline ? Largest low fare, no frills air line and a pioneer of low cost travel in Asia ? Operates scheduled domestic and international flights to over 400 destinations spanning 25 ountries ? AIRASIA GOVERNANCE BOARD BACKGROUND DUTIES ? The Board of Directors consist of 8 members : 1 Non Executive Chairman ? 2 Executive Directors ? 5 Non Executive Directors – independent neutral ? ? Ensure the Group meets the responsibility to the stakeholders and serve to the community as well ? Appointment of Board and Senior Management s taff ? Ensure a sustainable adequate financial resources ? Review progress and trends in relation to Flight Safety Airworthiness OTHER DUTIES RESPONSIBILITIES ? ? ? ? Govern the corporation by establishing policies and objectives Select, appoint, support and review the performance of the CEO Approve annual budgets Decide the salaries and compensation of company management. We will write a custom essay sample on Corporate Governance or any similar topic only for you Order Now DEFINITION OF CORPORATE GOVERNANCE ? ? ? Shleifer and Vishny(1997) – the ways suppliers of finance to corporations assure themselves getting return on investment. Gillan and Starks (1998) – system of laws, rules, and factors that control operations of a company. Jensen (2001) – Incorporating the community in which firms operate, political environment, laws and regulations, and more generally the markets in which firms are involved. MARKETS LAW/REGULATIONS Board of Directors Management Debt Assets Equity CULTURE COMMUNITIES Source: Shleifer, A. , Vishny, R. , 1997. A survey of corporate governance. Journal of Finance 52, 737– 775. ISSUES 1 : AIRASIA IN TROUBLE OVER HIDDEN FEES ? ? ? Failed to disclose – full price of fares for flights. Regulators began legal proceedings(Melbourne) penalties and orders for AirAsia to issue corrective notices on website. The Australian Competition and Consumer Commission (ACCC) won its courtcase against AirAsia. Why ACCC won this courtcase? ? ? ? Fares sold on the website were disclosed partially excluding taxes, fees and other charges. AirAsia Bhd has to pay the fine of RM 645,000 for flights of AirAsia X because AirAsia is running the website for AirAsia X. AirAsia was demanded by regulator to state a notice that it failed to †specify, in a prominent way, the single price for air travel on its website †¦ since last September†. ISSUES 2 :AIRASIA MAS: CONFL ICT OF INTEREST? ?Tony Fernandes, Group CEO of AirAsia, was appointed director of Malaysia Airline System, the direct competitor of AirAsia on August 11, 2011 . Is there no conflict of interest here? † ? ? ? Directors should not be competing directly with the company with a conflict of interest arising. Thus, they should not act as directors of competing companies, as their duties to each company would conflict with each other. Investors will put in unique clause specifically to the founder of the corporation. Ex: Founders are not allowed to work for another company/Not allowed to invest in another company in the same industry / After quitting the current company, not allowed to work in the same industry for a few years. ? Clauses will be written down in the shareholders agreement and the employment contract. ISSUES 3 : AIR ASIA DID NOT MEET REGULATORY STANDARD? ? ? AirAsia Bhd has been granted with an air operator‘s certificate (AOC) to fly for another five months — instead of a two-year period It showed shortcomings in AirAsia‘s flight operations procedures and practices operations not in keeping with the manual. ? ? ? The action taken by DCA is unlikely to have any financial impact on AirAsia as a company, it may impact its reputation as an airline. Three key posts in an airline are nominated with the approval of the DCA, namely the head for flight operations, engineering maintenance system and crew training. The fact that they have not grounded AirAsia aircraft shows that it‘s not a serious safety issue, but this action still serves as a warning,? ISSUES 4: AIRASIA OBTAINED THE ENTRY INTO INDIA AIRLINE MARKET ? ? ? Air Asia obtained the go ahead from india ? s Foreign Investment Promotion Board to take up a 49% stake in a join venture to set up Air Asia Airlin e. The joint venture with two Indian companies, namely Tata Sons and and Amit Bhatia owned Telstra Tradeplace AirAsia planned to being operations in Chennai International Airport as it’s main base. [10] ? ? ? Soon after AirAsia announced it’s Indian ubsidiary, the shares of Spicejet, an airline that already had a major presence in Chennai, went down by over 4. 5%. Amber Dubey of KPMG India said that the introduction of AirAsia would cause another price war. It would ultimately lead to an increase in air traffic and some consolidation in the Indian aviation sector. CONCLUSION ? ? ? Corporate Governance practices are an important and significant part of the everyday business for Airasia Berhad The board should take seriously on the current issue prevent or eliminate it in future Enhance public trust and civic engagement. BACKUP How to cite Corporate Governance, Essay examples