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Chapter 3

Governance, ethics and company law

Action Compliance requirements Penalties

Law The law must be obeyed Infringement of the law may be
civil or criminal.

Civil remedies may allow the
company to recover funds from
directors who breach their legal
obligations.

A fine and/or imprisonment might
result from certain criminal
infringements.

Corporate In the UK the stock exchange There are no formal penalties for
governance rules require listed non-compliance. However, the
companies to comply with company may suffer loss of
the UK Corporate reputation and receive bad
Governance Code. publicity.

If a listed company does not
comply, it must specify the
provisions with which it has
not complied, and give
reasons for its
noncompliance.

Ethics It is said that ethics begin An individual who behaves
where the law ends. If an unethically may suffer loss of
action is legal, individuals reputation, dismissal from their
generally have freedom of job and sanctions may possibly
choice as to their conduct. be imposed by their professional
However, good ethical body.
behaviour may be above that
demanded by the law.

CIMA students and members
are expected to follow the
code of ethics published by
CIMA.

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