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Good corporate governance and regulatory compliance

Michael Xuereb

  

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Sommario:

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In the financial and corporate world, governance is a heavily used term. From a regulatory perspective, any discussion about good corporate governance must start with a discussion on compliance with regulatory obligations. Beyond that, the discussion would move into the realm of the higher standards of behaviour that inspire confidence and build trust in the financial industry. This is of course an area of great interest to regulators – not least because high standards of governance in the industry would make their life that little bit easier! The third leg of this discussion would then dwell on the governance culture of the users of financial services themselves – both corporates, and individuals too. Their conduct plays an important role in ensuring that financial services meet their needs and legitimate expectations. At the basis of corporate governance is the manner in which company boards relate to shareholders. Shareholders do not run the company themselves but appoint a Board of Directors to do that for them, in a general meeting. In this way they can, and will to a greater or lesser extent, influence the values of the company. The Board, in turn, is expected to run the company in the interests of its shareholders, and to ultimately meet their profit expectations, and it will be held to account for that in the general meeting. But when it comes to running a company, the formula is not that simple. Delivering profit expectations depends on a certain type of governance that must take into account other expectations. This is where other stakeholders the Board must relate to come in. First among these the company’s clients. Then there are the company’s financiers to consider. These may include bankers, savers, investors, and investment intermediaries, each of whom – though primarily profit-driven – also bring with them a multitude of other investor preferences and biases, not to mention governance expectations. For the Company to be able to make profit it must invest, and this is where other third party interests, including host country interests and public expectations come in. These could in turn be influenced by different considerations: economic, [continua ..]

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