a. Importance of Effective Corporate Governance Codes:

• Protecting investors from unethical or dishonest behavior by company management.
• Preventing the collapse of stock markets.
• Securing the investments of shareholders.
• Responding positively to the pressure from institutional investors in countries with well-developed governance codes.
• Contributing to the efficiency and effectiveness of company leadership and management.

b. Two Basic Approaches of Corporate Governance:

1. Rules-Based Approach:
   • Legal requirements mandate companies to comply with established governance rules.
   • Suitable for major stock market companies, ensuring investor confidence.
   • However, rules may not fit all companies, and some aspects cannot be easily regulated by rules.
2. Principles-Based Approach:
   • Guidelines suggest how governance principles should be applied, with flexibility for different company types.
   • Recognizes that a single set of rules may not apply to all companies.
   • More widely accepted as it allows adaptability across different contexts.

Which approach is more acceptable?
The Principles-Based Approach is generally more acceptable because it allows flexibility and can be applied to a variety of companies.

c. Main Governance Aspects of the Sarbanes-Oxley Act:

1. CEO/CFO certification (Sec. 302).
2. Prohibition on loans to executives.
3. Forfeiture of bonuses in the event of financial statement restatements.
4. Prohibition of insider dealing by directors and senior executives.
5. Requirement for independent audit committees in listed companies.