CORPORATE GOVERNANCE ACCOUNTING

Corporate Governance Accounting



Corporate Governance Accounting

Comparison and Contrast of UK approach to other country

The corporate governance in UK is based on the standards of principle based approach. The UK approach has an element of high standards related to corporate governance that does not have high costs. In the report issued by the Governance Metrics International, the UK had a second rank in the table that showed average governance performance given by the companies in various countries. The principle based approach accounting standards is proportionate and has the capability to deal with any situation. The UK Corporate Governance Code carries out an identification of the good governance practices but the companies have an option to choose their own approach dependent on the circumstances. In this particular code, the company maintains key relationship with its shareholders rather than the company or the stock exchange. The boards and shareholders are advised to have engagement related to Corporate Governance matters. Shareholders have the voting rights and right to information, that is described in the Company Law and the Listing Rules. In the current case, the Corporate Governing Standards of the UK and US will be compared in detail.

Rational for the Corporate Standards Approach

The Corporate Governance System of the United States is usually stated as an example for following a regular led approach in the corporate sector. In this particular mechanism, the SEC (Security Exchange Commission) and Stock Exchanges have the major responsibility in the implementation and enforcement of the Good Corporate Governance Standards. In the case of UK, shareholders have the required level of autonomy and authority for deciding the corporate governance measures. The basic factor because of which the different approaches are adopted by both countries is that they have different markets. It has been noted by many businessman that UK regime provides a sophisticated, institutional, mobile capital, where as the US market has historically included a vital local retail component that is not necessarily defined as sophisticated. This is the reason why it has often been stated by many investors that the US market has more significance with the system of public roadways and the UK market can be compared with the Formula 1 circuit (Keasey et al, 2005, 19).

Success and Failures of both systems

There are some of the historical facts related to the strong presence of the institutional investors in the UK as compare to the US. For instance, in the UK, the high income tax rates were less after the post war period in the retail sector. Similarly, there were tax exemptions for pensions that also helped in increasing the assets value managed by the institutional investors and the mutual fund managers. During the 1960s, the large number of shareholders strived for initiating the Corporate Governance controls that can prove to be useful for protecting the company's important matters. This is considered an important element related to “shareholder-led” regulation. This is the reason why it can be seen that in the present times in US, ...