ACCA FM Syllabus A. Financial Management Function - Corporate Governance & Stakeholders - Notes ^{3 / 5}

Regulatory Requirements

These can be imposed through corporate governance codes of best practice and stock market listing regulations

• CG codes try to reduce risk and increase directors accountability

• CG codes ensure directors have to identify, assess and manage risks

• CG codes ensure a balanced perspective by requiring NEDs on the audit, nominations and remuneration committees

• Stock exchange listings ensure financial reports are produced annually

• Stock exchange listings ensure that detailed information is given about directors pay

• Stock exchange listings ensure companies pay attention to their corporate social responsibilities

Future prospects should be communicated to stakeholders

• To show the company has enough working capital for its current needs and for at least the next 12 months

• A general description of the future plans and prospects must be given

• Audited historical financial information covering latest three full years and any published later interim period

• 50% of board to be NEDs

Corporate governance - Best practice

• Although UK corporate governance rules do not apply to the non-UK companies, investors would expect similar standard, and an explanation for any differences.

• UK companies are expected to:

  Splitting the roles of Chairman and CEO

  Have an independent audit committee, a remuneration committee and a nomination committee

  Provide evidence of a high standard of financial controls and accounting system