Some aspects of corporate laws in Ireland require regulatory compliance whereby state corporations and huge private agencies aspire to adhere to in their attempt to make certain that the workers are made aware of all the required rules and regulations. Through regulatory compliance, the executives of the companies in question take all the initiatives to ensure their personnel take preventative compliance steps for the success of the companies. Corporate governance is therefore meant to ensure total compliance and understanding of applicable laws, regulations and rules in regard to Irelands labour force, fraud cases, security and general privacy requirements of corporate governance.
The primary objective of this essay is to discuss in full detail, the various aspects of corporate governance as applied to Ireland. Some of the elements discussed include the importance of corporate governance, specific governance obligations, and a general discussion on the main sources of corporate governance in Ireland. Towards the end of the essay, a comparative with the corporate governance regime of the United States will be discussed briefly. Recommendations and suggestions for future reforms in Irelands corporate governance structures will also be highlighted.
The importance of corporate governance
All over the world, corporate governance is regarded as an essential issue for businesses and companies so as to avoid scandals and other problems facing the private and state corporations. Corporate governance and associated solutions are in most cases imposed in such organizations that have the inability to effectively enforce compliance. The basis for corporate governance in Ireland is to regulate the individual authority of corporations and in effect facilitate a collective influence on the companys destiny through the formulation of optimal systems that may be applied in their overall management.
In Ireland, the main centre of attention drawn when instituting corporate governance is on company executives who dodge their responsibilities by failing to account for their firms fiscal reports by giving misleading or insufficient information on their financial status (Phelan, 2005).
The introductions of the Companies Act on Auditing Accounting in 2003 was anticipated to impact positively on Irelands corporate governance and thus attract international companies and foreign investors to establish businesses in the country.
The other importance of corporate governance in Ireland and other countries is that it provides for alternative dispute resolution measures. These strategies as provided for by the existing corporate laws may act as a substitute to the court processes. Since the court processes may usually take long to reach a conclusion concerning a particular non-compliance case, the alternative dispute resolution methods play substantial roles e.g. mediation whereby the particular interests of the parties in the dispute are cross-examined and an optimal solution agreeable to both parties is reached. This channel is usually shorter and more effective than the traditional Irish court processes (Bebchuk Cohen, 2008).
In addition, the fundamental aim of corporate governance measures in any organisation is to define the importance of in house control and probably suggest possible mitigation measures that may be adopted when dealing with companycorporate risks through the implementation of all the requirements provided by Irelands Auditing and Accounting Supervisory Authority (IAASA). These provisions make it possible for large private companies and state corporations to carry out proper risk assessment ( HYPERLINK httpwww.risk-compliance-association.com httpwww.risk-compliance-association.com).
The state of corporate governance in Ireland
Presently, the guiding principles on Irelands corporate governance systems are a combination of both the mandatory and the non-mandatory rules and regulations. The fixed rules in this domain are made up of legislation, i.e. the 1963-2003 Companies Acts, the common law which describes the fiduciary roles and duties of company directors and executives, the corporations articles of association and finally the Listing Rules as published by the Irish Stock Exchange (Phelan, 2005).
An example of non-mandatory, usually a discretionary rule in corporate governance includes the Combined Code on Corporate Governance. In as much as this code is optional under the auspices of the Listings Rule, corporations and companies on the Irish stock exchange have to adhere to it (Phelan, 2005).
The Combined Code on Corporate Governance incorporates the ideas and recommendations put across by the Hampel, Cadbury and Greenbury Committees in the United Kingdom (Phelan, 2005). This code comprises of the code of best practice and some principle standards of good governance. For any company listed in the Irish stock exchange, any failure on the part of the company to comply with the requirements of the code has to be clearly stated in the firms annual report (Fry, 2009).
Legislation
To concentrate on Irelands corporate government matters, several enactments have been put in place since the year 2001. These acts include the Company Law Enforcement Act, 2001, the Criminal Law Act, 2003, and the Companies Act, 2003.
The Company Law Enforcement Act 2001
In Ireland, this enactment imposed an affirmative responsibility on company executives to ensure compliance and total conformity with the existing Companies Acts. This act led to the formation of the Office of the Director of Corporate Enforcement mandated the responsibility of encouraging and promoting conformity with corporate laws. This office also carries out investigations and inquiries on any allegations of infringement on the company laws (Phelan, 2005).
A total of thirty three convictions were made in 2003 by the Irish Courts based on applications initiated by the Directorate of Corporate Compliance. As a result, almost two hundred company executives got written warning letters after thorough scrutiny of the liquidators reports which gave a clear indication of failures in complying with corporate governance laws in their daily operations (Phelan, 2005). The written warnings clearly recommended the nature of disciplinary actions and the magnitude of penalties to be dispensed for future infringements on corporate compliance laws.
Criminal Law Act 2001 (Fraud Theft Offences)
This enactment is updated version Irelands criminal laws on false accounting and corporate fraud. The act further requires auditors and auditing firms to make a clear report indicating the nature of offences committed by a given company.
The Companies Act 2003 (Accounting and Auditing)
The Companies Act 2003 was enacted in 2003. The main reason behind its enactment was to improve Irelands existing systems of corporate governance as applied to the Irish companies. The enactment puts in place two main provisions namely the Audit Committees and the Compliance Statements (Phelan, 2005).
The Audit Committee
The enactment makes it a requirement that all Irish plcs (public limited companies) need to establish an internal audit committee. For the case of private companies with a turnover of over and above fifty million, or with a profits and loss account total exceeding five million, it is a requirement by law that such organizations set up an audit committee. In case the firm does not have such a committee in place, then a thorough explanation ought to be given in the directors annual report and also state clearly who will perform such tasks.
The Compliance Statement
It is the responsibility of the Board of Directors of any Irish medium-sized company to formulate a Compliance Statement containing all the necessary information about the company policies on compliance and the associated legal requirements the tax laws, the Companies Act any other laws that may directly or indirectly affect the companys daily operations in regard to their legal systems andor financial statements.
The compliance statement should also incorporate any information deemed necessary in achieving compliance. Internal procedures, strategies and precautionary measures for evaluating the feasibility of such strategies in warranting compliance may also be included in the compliance statement. For corporations with financial statements extending beyond 7.6 million and with a turnover greater than 15 million, the internal auditor, after reviewing the statement is required to give his professional opinion of the feasibility of the compliance statement and suggest amendments where necessary (Phelan, 2005).
Supervisory Authority IAASA
This act puts in place a regulatory body to supervise and monitor the financial statements of large private and all public limited corporations to ensure total conformity to company laws. The Irelands Accounts Auditing Supervisory Authority- IAASA is mandated the responsibility of notifying the companies in question for any allegations of non-compliance. If IAASA is not satisfied by steps taken by a given company to correct the earlier notifications issued, then the Irish laws on corporate governance allow the supervisory authority to seek court orders which may give it the power to correct the status (Fasterling, 2005 328).
In addition, IAASA advises the Irish Minister for Finance on various aspects of auditing and accounting. It also has the responsibility of granting recognition and accrediting accountancy bodies by clearly defining the code of ethics for the members of such accountancy bodies.
New Requirements for Corporate Governance Company Reporting
In November 2009, Ireland signed into law the 2006 European Union decree on company reporting (Fry, 2009). Some of the changes brought about by the implementation of this directive include Fair Value which allows for proper accounting for a broader category of fiscal tools for all corporations. The other change brought about fresh disclosure requests for all companies in regard to party transactions and off-balance sheet structures (Fry, 2009). Practically, this requirement has minimal effects on established trading plc since they already are subjective to similar conditions guided by the Combined Code and the Listings Rule. This rule may only apply to fund companies with their shares admitted to Ireland Stock Exchange trading (Fry, 2009).
The Irelands Stock Exchange, after reviewing the corporate governance requirements in reference to fund companies, gave the board of directors of listed companies an option to choose between implementing ISE listing regulations or adopting the corporate governance code (MHC Times, 28022005).
A comparative analogy with the corporate governance regime of the US
The Sarbanes-Oxley Act is regarded as the most important regulation in the US, in matters related to corporate governance and compliance. This act defines considerable and usually tighter personal accountability of company management executives for preciseness and accuracy of reported profits and loss accounts of the corporation in question, for a given fiscal year. Just like the role played by IAASA in Ireland, the Sarbanes-Oxley Act recommends that company executives found manipulating or interfering with the financial statements of a given company for selfish interests would be criminally answerable for their actions. The act also gives provision for an internal counsel within the corporation to forward any suspicious activities to relevant authorities.
The Sarbanes-Oxley Act was enacted in the US in the year 2002 with an aim of providing better disclosure by corporations and developing corporate governance structures. The act also influences the activities of Irish based US firms listed by the Irish Stock Exchange. It may be argued that the introduction of this act, which diverts firms from rules-based to principles-based accounting, ends up bringing the United States in tandem with Europe (Phelan, 2005). Under this act, the company executives in the United States who are non-compliant to corporate governance laws are liable to criminal penalties such as twenty years imprisonment andor a hefty fine in the tune of five million US dollars (Phelan, 2005).
Recommendations
The current corporate governance and company law structures in Ireland need to undergo modernization so as to match the levels and standards set by the European Union. All countries within the European Union should therefore adopt a similar approach in matters to do with corporate governance. This strategy may be used to ensure high standards of corporate governance and defined disciplinary measures and penalties to non-compliance. A common approach ensures that there are no conflicting cases of misunderstanding should a foreign investor infringe on the corporate compliance requirements of Ireland.
For efficiency in corporate governance all the relevant corporate compliance data as guided by Irelands Accounting and Auditing Supervisory Authority - IAASA should be made available to individual organizations at all times. Such information about the business in regard to corporate compliance is very critical in the validation of the companys overall governance strategies through the adoption of an accurate, comprehensive and consistent approach.
Other areas to be looked into by Ireland and the relevant stakeholders in corporate governance include reinforcing shareholder rights, strengthening directors responsibility and accountability, the need for optimal disclosure, and also the need to synchronize regulations on corporate compliance throughout Ireland and the European Union.
Conclusion
The fundamental values of an ideal corporate governance setting include accountability, transparency, responsibility, and fairness, with the basis being disclosure. In Ireland, an ideal corporate governance setting plays a critical role in enhancing creation of Irish companies and attracting foreign investors to establish their subsidiaries in the country. Since the legislation frameworks in Ireland ensure high standards of accountabilityauditing and organizational management, most foreign investors find Ireland an ideal place for setting up subsidiary companies or branch networks.
Categories:
0 comments:
Post a Comment