Question

PLEASE ANSWER ALL QUESTIONS!!!

(a) Critically discuss the ‘comply or explain’ model of corporate governance.

(b) Listed companies must send their financial statements to the authorities that oversee the stock exchange on which their shares are listed. Companies incorporated in the UK file their accounts with both Companies House and the London Stock Exchange. Identify and explain the characteristics of the approach that is used to the filing of financial statements by plc’s that are incorporated in the UK.

Answer 1

Answer(a):

Comply or exlplain model of Corporate governance- It is a regulatory approach that is used in many countries such as United Kingdom, Germany, Netherlands etc. This approach says, "let the market decide" that the particular standards are appropriate for individual companies or not. Companies may not follow the proper standards because they do not fit them, it may also happen if investors do not accept the company's explanations, they may sell their holdings.

Comply or explain model says that companies have to comply with the code's provision but if few companies do not follow or comply then they have to explain and justify the reason behind not following the same.

Motive of comply or explain is to justify to the shareholders, why the company is not complying, shareholders should be informed about any non compliance decision of company. So if companies are not following any code, are they giving proper explanation?