Meggitt Plc's Governance Practices - Coursework Example

GOVERNANCE al Affiliation) Key words: Principles, Competitors Introduction The United Kingdom of governance outlines that corporate governance facilitates prudent management, effective, and entrepreneurial that can deliver the company’s success. The code defines corporate governance as system where companies are controlled and directed. The directors govern the companies. The role of the shareholders is to appoint the auditors and directors and satisfy themselves that a proper structure of governance is underway. The board of director sets the strategic aims of the company, offering leadership, supervises the business management, and report the stewardship of the shareholders. The actions of the board are subjected to regulations, laws, and shareholders in meetings. Therefore, corporate governance entails the responsibilities of the board, how they set the company’s values, and are too differentiated from the daily operation of the company by the executives. The UK code of governance guides the components of board practices based on the principles of good governance like transparency, accountability, probity, and concentrates on the success of the company. The codes are not immutable since it is subjected to evaluations due to changing social and economic environment. The codes are normally applicable to companies listed in the equity shares irrespective of their locations. The paper therefore analyses the governance of Meggitt Plc. and GKN Plc. It further compares the organizations and determines if they comply with proper practices. Discussion The Board of Meggit Plc. considers that when the company has good corporate governance, their values, reputation, and implementation ability will be strengthened. In the remuneration report of Meggit Plc., the company has acknowledged the applications of UK Corporate Governance code outlined in the introduction. This is in respect to effectiveness and role of the board, together with the committees and board’s activities. In terms of board composition, the company still uses the services of David Robins since he is a highly experienced non-executive director who contributes importantly in the Board. The company also appointed Guy Berruyer and Philip Cox as independent non-executive directors. The appointments are based on the fact that the two members will come forth with diversity to the Board deliberations. After Terry Twigger retired, his successor was appointed. The smooth succession is a critical role for the company’s board and this is one of the key focuses of the company. The company has applied the UK code of corporate governance but breached some rules in the compliance statement (“Meggit PLC” , 2012). The company has ten board members including the chairman, 3 executive directors, and 6 non-executive directors. The directors are subjected to elections and reelections annually. The board meets eight times in a year and their success is comprehensively dependent on their leadership. The board sets the standard and values of the group and ensures obligation to the employees and shareholders are met. The company has a nomination committee that reviews the size, composition, and structure of the board and makes recommendations to them regarding the proposed changes and their decisions. Meggitt Plc. board confirms the diversity commitment that includes gender diversity. The governance policy on diversity ensures that the recruitment and appointing process for the directors and employees has a various range of candidates. The company also aspires to attain 25% of board to be women, in addition, disclose the gender diversity statistics annually (“Meggit PLC” , 2012). Additionally, the company reviews their policies from time to time. Meggit Plc. has also an audit committee that monitors the financial statement integrity and review the internal control and structure of governance. They also consider supporting analysis from the management on crucial accounting judgment and estimates. They also review process in ensuring the policies of accounting are aligned with the policies of the group. It is confirmed from the board that the organization has complied with the code except during Mr.Cox appointment, more than half of board members were not independent. After the diversity, size, and composition reviews, it was agreed that 2 non-executive members be appointed. On the other hand, GKN plc. believe that maintaining good governance needs continuing and considerable effort forming an integral part in which the committees and board operate. Just like Meggit plc. the governance framework of GKN facilitates prudent, effective, and entrepreneurial management in safeguarding the interest of shareholders and the company. The Board of GKN ensures the necessary capabilities in delivering strategy are underway, review the performance of operations, and ensures effective and appropriate framework of risk and control management are in place. Different from Meggitt plc., GKN plc. has both operational governance and corporate governance committee. The corporate governance committees include the audit committee, remuneration committee, and nomination committee while the operational governance comprises of executive committee, Lean Enterprise Sub-Committee, Group Technology Strategy Board, and Governance and Risk Sub-Committee. GKN plc., has a chairman, 4 executive directors, and 4 non-executive directors totaling to nine Board members. The audit committee of the company reviews the control process and actions carried out by the committee in discharging the responsibilities. The board gets the annual report from the committee on the system’s operation and risk management. The Board will then review the effectiveness of the risk management and the system’s internal control during that period (“GKN PLC Annual Report and Accounts”, 2011). The Board communicates with the shareholders through letters or email. The shareholders are given a priority in guiding the company through open forums during AGM and meeting with the directors after the AGM proceedings. The shareholders vote for their member choice through polls; is transparent since votes can be counted and published on the London Stock Exchange. GKN plc. Has a 7 member nomination committee, this is according to the UK code provisions where most members are non-Executive Directors. The committee members lead the identification process, and make recommendation to the governance, on candidates aspiring to directors of the company. The board met five times with an encouraging attendance from the members. The audit committee has 5 members who are responsible for reviewing and monitoring the financial statement integrity, the appropriateness of the company’s relationship with external auditors and also ensure the company’s risk management and internal control systems are effective (“GKN PLC Annual Report and Accounts”, 2011). From the paper it is evident that Meggitt plc. has better governance practices. The company has embraced sufficient the main code principles ranging from leadership, effectiveness, accountability, remuneration and relations with shareholders. Where by in every appointment they conducted, the company used the codes as reference point. During the appointment of Mr. Cox, controversies arose but they were resolved by adhering to the guidelines in the code. GKN plc. breached some of the practices, like gender diversity; where the required employee’s fraction was not considered during the workers recruitment. Therefore, Meggit plc. has better practices than GKN plc. Reference Corporate Governance-Meggit PLC. (2012, April 23). Smart Engineeing for Extreme Environment. Retrieved February 18, 2014, from http://meggitt.com/resources/Meggitt_PLC_Report_and_Accounts_2012.pdf Corporate governance - GKN PLC Annual Report and Accounts 2011. (n.d.). Corporate governance - GKN PLC Annual Report and Accounts 2011. Retrieved February 18, 2014, from http://annualreport2011.gkn.com/governance/corporate_governance_03.html#Effectiven Read More