ABC Learning - Corporate Finance Management (Essay Sample)

ABC Learning - Corporate Finance Management
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Executive Summary
ABC Learning - Corporate Finance Management
* The paper defines fiduciary duty as a loyalty and legal care requirement that applies to any organization and individuals that have a fiduciary connection with other organization as well as a person.
* It gives responsibilities and duties of Executive directors of public listed companies that they should perform such as obtaining an overall understanding of the business.
* Various responsibilities of Independent non-executive directors of public listed company are provided. For instance, aiding in communication and monitoring performance.
* The concept of independence in the context of non-executive directors making them independent from the management
* It defines the meaning of joint responsibility in the Board as to all members of the Board jointly involved in the strategic decision
* The corporate governance arrangements at ABC Learning being so lax leading to the organization’s collapse
* It gives the cash flow statement from operating activities is a kind of financial reporting that illustrates the sources where an organization obtains cash and the expenditure of that cash over a given period
The concepts of accountability and fiduciary duty of directors
An organization is a social structure having a pluralist interest with some goals that are common. Organizations operate through an individual who is appointed to represent it since it is an artificial being (Hopkins, 2002). Although, in theory, the company’s powers are applied by the shareholders, it is normally the directors, who have a fiduciary with the organisation as well as its shareholders. According to Hopkins (2002), they handle the general direction and the organization’s management. The directors assign the day to day duties of the organisation to a different executive who are selected by the board of directors and at times they are accountable to them. In some occasions, the executive have a straight fiduciary connection with the shareholders.
Loyalty, as well as care, is a legal requirement of fiduciary duty that applies to any organization and a person that has a fiduciary connection with another organisation as well as a person. Examples of fiduciary relationships comprise of an investment manager to contributors in a pension arrangement, a parent to a kid, a bank to a client, the participants to a partnership to each other or even popular stockholder in an organisation to alternative investor (Flannigan, 2004).
A fiduciary duty is a complete trust as well as utmost good faith. Although fiduciaries receive a permissible title to assets, the assets don’t fit into them. Rather permissible title permits fiduciaries to control as well as manage the resources for a contemporary era and a particular function (Flannigan, 2004). Apart from the enchanting control of another’s resources, fiduciaries also concur to control those resources in agreement with the will of the persons who recognized the fiduciary connection. The duties, as well as the powers of fiduciaries, are frequently established in a manuscript that formally creates the fiduciary relationship. The behavior of fiduciaries is ruled by the common law and particular state as well as federal laws (Hopkins, 2002).
According to Hopkins (2002), Fiduciaries performs specific duties to their customers: a loyalty duty as well as a duty of care. Loyalty duty necessitates that the fiduciaries operate solely according to their customers’ interest, rather than in the interest of their own. Therefore, the fiduciaries are not supposed to get any indirect as well as direct benefit from their position and should avoid any necessary conflicts of interest. The care duty necessitates that fiduciaries carry out their tasks with the highest competence and thoroughness as per the standards of the organisation (Hopkins, 2002).
The directors have an important fiduciary duty to the shareholders. The directors are not only accountable for safekeeping of the assets but also for the effective as well as efficient use of the assets. The directors might not benefit in person at the expense of, on the contrary to the organization’s shareholders. This means that the directors should put their interests below the interests of their shareholders. Flannigan (2004) argues that the theory of fiduciary duty has a wider diversity of other functions in the world of business. But the specific part of concern for upcoming as well as small enterprises is the extended explanation of fiduciary duty that is relevant to employers that give their employees specific types of benefit plans.
Responsibilities of executive directors of public listed company
Du Plessis et al. (2005) reiterate that Executive directors of public listed companies have responsibilities as well as duties that they should perform. The Executive Directors should not only act in good faith as well as honesty, but also for the interest as well as promoting the success of the organisation for all its shareholders altogether. According to Du Plessis et al. (2005), this is done through practicing as free reasonable care judgment, diligence as well as skill, whilst having look upon to, among other subjects, the interest of workers, the fostering of the company relationships with supplies, customers as well as others, and the influence of the operations of the Group on the surroundings in which the organisation operates as well as the natural environments.
The executive directors of a public listed company play a key role in developing, designing as well as implementing organization’s strategic plans (Hopkins, 2002). They are also responsible in the day to day activities of a company including the management of committees and other staff, as well as creating a business plan amid collaboration with the Board. Du Plessis et al. (2005) further reiterates that in essence, the executive directors of the public listed company are granted the authority by the board to run the company. Ideas and suggestions may be offered to the executive directors by the board regarding the improvement of a company, but it is the executive director who decides how the ideas are implemented. They also offer leadership responsibilities to the company and at times they act as motivational leader beside work of the office. They usually inspire as well as mentor staff, members as well as volunteers.
According to Hopkins (2002), another responsibility of the executive directors is obtaining an overall understanding of his or her business, taking a lively interest in the affairs of the group and following up anything that comes to his or her attentions. The executive directors of the public listed companies should be informed all the organizational activities. This includes the assets of the company, budgetary issues, the stuff, membership as well as other organizational properties to aid in making best utilization that leads to the increase of profitability as well as profile of the organization. In addition to that, the executive directors should only use powers including the power of delegation as per the terms and the conditions which he or she is granted as well as for a proper function, and act as per the articles of association (Du Plessis et al., 2005)
The executive directors avoid a divergence of interest amid his or her duties including individual interest to the organisation together with not tolerating a profit from a third party. They affirm an interest either direct or indirect in arranged or proposed transaction with the organisation (Hopkins, 2002).
Responsibilities of independent non-executive directors of public listed company
According to Du Plessis et al. (2005) in a public listed company, the non- executive directors play crucial roles and responsibilities. There is a need for the CEOs as well as the chairmen to use the no-executive directors in the provision of the general counsel. There is also a need to seek guidance from the non executive directors regarding specific issues before being raised at the meeting of the board. In fact, majority of the main roles played by the non-executive directors is sub-committee of the board in the public listed companies. Hopkins (2002) argues that the main responsibilities that they perform include: strategic direction, monitoring performance, communication, auditing and risk.
Strategic direction
Independent non-executive directors have a wider observation of the external factors that have an impact on the performance of the organisation as well as its business surrounding than the executive directors. The role of non-executive directors in the formation of strategic is thus to give informed contribution, creativity as well as to act as a productive critic in looking at the plans and the objectives devised by the executive team of the chief executive (Du Plessis et al., 2005).
Monitoring performance
Du Plessis et al. (2005) says that Non-executive directors take the responsibility of supervising the recital of the executive management, specifically with the aim of looking at the progress that has been made towards the achievement of the determined objectives as well as the strategies of the company. The independent non-executive directors play a role in the determination of suitable levels of payment of the executive directors. The independent non-executive directors of a public listed company also play a significant role regarding the removal of the executive directors where necessary as well as they help in the planning of succession.
Communication
The board, as well as the organization’s effectiveness, can get assistance from opinions as well as the outside contacts. Therefore ...