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Summary GOVERNANCE AND ETHICS - Learning Unit 4 Risk and Reporting
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LU 4 - CHAPTER 12-13 Concept of transparency and reporting as it pertains to corporate governance practices and risk management.
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GOVERNANCE AND ETHICSLearning Unit 4: Risk and Reporting
Theme 1: Transparency and Reporting
LO1: Illustrate the concept of transparency as it pertains to corporate governance and
what this entails.
What is Transparency?
Companies’ reaction against concerns by the public
e.g Pick and Pay – applauded for their integrity – for keeping the public informed when
products were reported to be poisoned on their shelves CONTRAST to Tiger Brands- initially
refutted allegations on price fixing bread and then came clean and confirmed price- fixing –
this is not transparency!
Mogoeng states that the launch of KING IV- that Collusion and price-fixing is described as
‘leadership bereft of ethics’
Transparency – the truth will eventually come out!
e.g Collusion between construction companies who built stadiums for the 2010 World Cup
What is transparency?
1. Ability of 3rd parties to process and understand data about a company
2. Allowing others to see the truth about a CO without hiding or altering facts
3. Active duty of disclosure
Factors that put pressure for transparency
1. Media scrutiny
2. Social media
3. Public’s right to know
Critical for credibility of a CO
,LO2: Explain the importance of transparency as part of the ways in which companies
should effectively manage communication.
Managing communication
CO are responsible to manage communication within all spheres of business e.g employee,
managers, shareholders
SHIFT with the internet and social media that the public, shareholders and stakeholders
want information
THEREFORE- social media policy in a CO is critical- it should determine what information
employees can share and whether they can access social media sites during working hours
Social media can build a company brand but there are significant risks with consumers
making complaints available to the public
Transparency in communication
CO has a social and moral standing in society and therefore responsibilities
Effective communication with stakeholders is essential for CO sustainability
CO can only build confidence in stakeholders if information is given correctly, on time,
relevant, accurate, honest
This creates trust and confidence and is fundamental for building and maintaining that trust
and confidence.
Determining the appropriate level of communication is strategic
KING IV suggests ‘ Directors should ensure that reports by the CO enable stakeholders to
make informed assessments of CO performance’
CO should have a Formal Information Policy to give effect to communication
The board must disclose both the positive and negative of the CO
, Any relevant legal requirements and the need to maintain the CO competititve advantage.
Guidelines should be put in place to regulate communication
Board should ensure that communication is clear, simple language and discloses both
positive and negative matter affecting the business of the CO
Emphasis placed on readers info
Disclosure on how the CO implemented principles of KING IV and the tangible benefits of
these have yielded
Aim of communication should be to allow a CO’s stakeholders to gain an unembellished
picture of the state of the CO business and hence of its economic value
Reporting should address all areas of performance and include forward-looking info to
enable stakeholders to make an informed assessment of the economic values of the
company.
LO3: Analyse the purpose of an integrated report and how this should reflect the
concept of integrated thinking.
Integrated reporting
- Defined as a holistic and integrated representation of the CO performance in terms of
finance and sustainability.
- Aim to tell the story of how the CO creates value
Purpose of Integrated Reporting
Entails company performance ito both financial and sustainability outcomes
KING III- recommended CO provide an integrated report and not just a financial report
- Focusses equally on all issues regarding sustainability
- Integrated Report – should tell the story of how a CO creates value
- Give context to the CO financial results- strategy, governance, performance
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