Page 167 - E2 Integrated Workbook STUDENT 2018

The finance function

Corporate Governance

Finance professionals also play an important role in corporate governance within
organisations.

4.1 What is Corporate Governance?

Corporate governance can be described as ‘the system by which companies are
directed and controlled in the interests of shareholders and other
stakeholders'. Finance has an important role to play in corporate governance.
Corporate governance was covered in detail in paper E1, but to recap, some of the
main requirements of the UK Corporate Governance code are:

 Every company should be headed by an effective board.

 No one individual should have unfettered powers.

 Boards should consist of a mix of executive and non-executive directors
(NEDs)

As part of their role, NEDs should scrutinise the performance of the executive
directors and constructively challenge and help develop proposals on strategy. NEDs
are there to balance the power on the board and to ensure that the company is run in
the best interests of the shareholders.

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