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The United Kingdom’s corporate governance has the codes that are commonly used in mostly countries of the world. The United Kingdom’s corporate governance was formulated with the following purposes:
From the above we can judge that the UK corporate governance had very important role to play in the business world. Its establishment came with various objectives. Some of these objectives included:
The milestone advances in the corporate governance came after release of the Cardbury report of the 1992 on the Financial Aspects of Corporate Finance. There are various approaches of corporate governance. They include:
It came by after collapse of the Enron and WorldCom in the United States. The United States then formulated the Sarbanes-Oxley Act in the year 2002. This was a rule that called for total compliance to the corporate governance. The compliance issue became a law that had to be adhered to by companies and no defaulting.
In the rule aproach, both small and large companies are to adhere to the rules stipulated in this Sox rule, unlike in the flexible Principle Approach where small companies are exempted.
This approach proves to be very expensive for small businesses because the cost of collecting and analyzing financial information for the purpose of internal use by management and also for external use is very costly and inapplicable for small and middle-scaled businesses.
This rule is commonly used in the United Kingdom and the countries that being to the commonwealth organization. This approach was commonly based on the rule of compliance for corporate firms. This means that the firms had to strictly adhere to the rules and guidelines provided in this approach including following to the latter corporate governance codes. The protocols on the collection and analysis of financial information had to be followed.
However, this approach has some elements of flexibility in that the small and middle-scaled firms could manoeuvre their ways in the business field without following the guidelines stipulated and would not face any negative consequences. This was important since the collection and analysis of the financial information and reports are very expensive to these small business enterprises and as such the cost is avoided. This enables these small scale firms to grow and increase in the corporate world. It is, however, important to note that flexibility of the approach does not allow for shifting from compliance to non-compliance forms.
Institutional investors are organizations that accumulate large amounts of money and then invest this money in security or even the real properties. Institutional investors include financial institutions, such as banks and security agencies among others.
Institutional investors buy shares as a way of investing in the firm. The ultimate reason is to make profits or increase their holdings in the particular company. The corporate organizations usually have a structure comprising of three important groups: the shareholders, the board of directors and the executive committees on the lower end. This structure is tied to the agency theory in that work is delegated from the top management or unit (shareholders) then to the board of directors and, finally, the executive committee executes the task. These units are discussed below:
According to the research I conducted iin Alfa Bank, I discovered that the organization has this particular structure. In the category of board of directors we have two fundamental categories: the executive and the non-executive directors. The non-executive directors play very important role in the committees. Some of their roles include:
Despite of these great roles played by the non-executive committee, the research conducted indicated that they still do great tasks which are supposed to be done by the executive management. Some of these roles include being left the responsibility of overseeing the daily operations of the firm or organization by managing the committees and staff on behalf of the executive committees. They also represent the executive management in important forum, yet the latter might not be engaged in any activities.
It should be noted, that despite of this workload, the non-executive directors have continued to execute their roles very well and this has led to the increased management of the firm. The profits have also increased and there has been a significant increment in the number of institutional investors in the firms. The increase or dominance in the institutional investors can be attributed to various factors. These are: