- 20 Marks
AAA – Nov 2024 – L3 – Q5 – Corporate Governance
Explain BEN plc's non-compliance with the Corporate Governance Code 2020, issues arising, and recommend changes.
Question
Wickham & Co, a firm of chartered accountants in Ghana, has discovered that a number of its clients do not comply with the Corporate Governance Code for Listed Companies 2020. One example of this, from BEN plc (BEN), a listed company, is shown below.
Extract from financial statements regarding corporate governance
Mr Smith is the Chief Executive Officer and board chairman of BEN. He appoints and maintains a board of five executive and two non-executive directors. While the board sets performance targets for the senior managers in the company, no formal targets or review of board policies is carried out. Board salaries are therefore set and paid by Mr Smith based on his assessment of all the board members, including himself, and not their actual performance.
Internal controls in the company are monitored by the senior accountant, although detailed review is assumed to be carried out by the external auditors; BEN does not have an internal audit function.
Annual financial statements are produced, providing detailed information on past performance.
Required:
Write a memo to Wickham & Co which:
- Explains why BEN does not meet the Corporate Governance Code for Listed Companies 2020
- Explains why non-compliance with the Code may cause a problem for BEN
- Recommends any changes necessary to implement the Code in the company.
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