What Helps Notions Such As Fairness, Honesty, And Reciprocity To Be Codified Into Law?

What Helps Notions Such As Fairness, Honesty, And Reciprocity To Be Codified Into Law
What helps notions such as fairness, honesty, and reciprocity to be codified into law? The notions are universal norms.

Which of the following is true of the codes of conduct of an organization?

Which of the following is true of the codes of conduct of an organization? They detail how the organization expects an employee to behave and to represent the company in business dealings.

Which of the following facts proves that GE’s board is fairly diverse compared to other Fortune 500 companies?

Which of the following facts proves that GE’s board is fairly diverse compared to other Fortune 500 companies? GE’s board is composed of 94 percent outside directors, compared to less than 70 percent for the others.

Which of the following is an implication for the strategist in the context of corporate governance and a company’s success?

which of the following statements is true of shareholders in a public stock company? They are granted a charter of incorporation by the state and legally own company stock. is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally.

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis? Practicing effective corporate governance In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems? The expectation that the agent will act in the principal’s best interest Which of the following is the source of the principal-agent problem in publicly traded companies? The separation of ownership and control Saul is a manager at Holden Apparels Inc.

and is friends with the company’s CEO. This privilege gives Saul the information that Holden Apparels is in the midst of talks to take over a leading rival. Saul buys stocks of Holden with the expectation that its stocks will appreciate. But the deal falls through and the stocks of Holden depreciate in the following months.

Are Saul’s actions unethical? Why? Yes, because it is unethical to trade stocks based on insider information irrespective of the final outcome. The informational advantage that agents possess over principals is often based on the fact that: insiders are the first to learn about important developments before the information is released to the public.

Clare, the CEO of Femica Inc., reports to the board of directors appointed by the shareholders of Femica. Based on shareholder suggestions, the board ties Clare’s compensation to the performance of Femica. Due to this pressure, Clare begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation.

  1. This conflict between Clare’s interests and the board’s interests best illustrates a(n) The conflict in a principal-agent relationship arises when: the goals of the principals and agents are not aligned with each other.
  2. The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by In publicly-traded companies, individuals who are delegated to perform duties on behalf of company owners are known as The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the: informational advantage of the lower-level employees.

Which of the following acts in the Goldman Sachs-Galleon Group insider trading scandal is an egregious exploitation of information asymmetry? Rajat Gupta providing information regarding Warren Buffet’s impending multibillion-dollar injection into Goldman Sachs Neville and Andre are customer care employees at JPN Care.

  • In between calls, Neville and Andre spend time on Facebook and YouTube.
  • The relaxed guidelines at JPN allow them to do that.
  • However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they check their social networking accounts.
  • Such behavior: can be stopped by implementing performance incentives and strict control mechanisms.

The day-to-day operations of a publicly traded company are conducted by: its managers and lower-level employees. Outside directors are more likely to watch out for the interests of shareholders of their firm because: they have more independence than inside directors.

  • Frank is a board member at Lofloy Greens Inc., a publicly traded company.
  • In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc.
  • Which of the following is most likely to be true of Frank? Frank is an outside director on Lofloy’s board of directors.

Which of the following is NOT true about the members of the board of directors in a public stock company? They are not responsible to shareholders. Serena is the CEO of Pedalo Inc., a publicly traded company. The shareholders want Serena on the board of directors despite her recent appointment as the CEO.

  1. This decision of the shareholders is most likely because Serena: is likely to provide the board with valuable inside information.
  2. Hashim is a board member at Kluster Motors Inc.
  3. He is also a senior executive of the firm.
  4. On the other hand, the board is chaired by Compton Smith, the CEO of Jensen Electronics.

According to this scenario, Hashim is an inside director of Kluster Motors are board members who are not employees of the firm but frequently are senior executives from other firms or full-time professionals. are the board members who are part of a company’s senior management team appointed by shareholders to provide the board with necessary information pertaining to the company’s internal workings and performance.

  • The board of directors of a public stock company consists of: individuals who formally represent the firm’s shareholders and oversee the work of executives.
  • The _ is the centerpiece of corporate governance and is composed of inside and outside members.
  • Which of the following is true of the board of directors in a public stock company? Votes at shareholder meetings determine whose representatives are appointed to the board of directors.

Who appoints the board of directors in a public stock company? Rajat Gupta’s role in providing inside information to Galleon Group for the benefit of Galleon Group’s stockholders and Rajat Gupta himself is an example of _. _ is illustrated by a situation in which the principal cannot determine the value created by individual members of a team.

In principal-agent relationships, _ describes the difficulty of principals to ascertain whether agents have really put forth their best efforts. Adverse selection in a public stock company occurs when: information asymmetry increases the likelihood of selecting inferior alternatives. At Opnic Corp., a cross-functional team is formed to work on a project for a new client.

The team consists of Darius and four other members. At most of the team’s presentations to senior management, Darius takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Darius is recommended for promotion, while the other team members receive little recognition for their hard work.

The reality is that Darius did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Opnic Corp. is a typical consequence of Johan is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases.

A startup recruits Johan based on his stated credentials without verifying them. Two days into the job, Johan’s team lead realizes that Johan does not know much of what he claimed to know during the interview. This scenario best exemplifies Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company? Based on a tipoff by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs’ stocks prior to the announcement.

  • Which of the following is NOT true of corporate governance in public stock companies? Corporate governance seeks to create a separation between ownership and control.
  • According to the agency theory, conflicts that arise in corporations should be addressed in the legal realm An individual who is part owner of a company and hires another individual to act on his or her behalf is referred to as a(n) Travis, the CEO of Riplon Corp., used company funds to buy a car worth $1 million and a house for $6 million in Santa Fe.

This is an example of Postrupe Inc., a publicly traded company, has ten members on its board. Of the ten members, six members are employees of the company and includes the CEO, who also chairs the board. The board has been failing in its responsibilities toward the shareholders who now want a new board.

Assuming that the total number of board members remains constant, how many outside directors should the shareholders appoint to Postrupe’s board to achieve board independence? Which of the following proves that GE’s board of directors is significantly independent? 16 of the 17 board directors are from outside the organization.

Which of the following best defines duality in a board of directors? A person holds both the role of CEO and chairperson of the board. GE’s board has only one inside director, Jeffrey Immelt, GE’s CEO, who also acts as chairman of the board. This is known as duality.

  • Which of the following statements represents the best argument for this duality in GE? The CEO possesses invaluable inside information that can help chair the board effectively.
  • Which of the following best explains why a board of directors may grant stock options as part of a compensation package? To align incentives between shareholders and management A compensatory governance mechanism that allows executives to buy a company’s stock at a predetermined price sometime in the future is called a(n) Which of the following is a major issue at the forefront of CEO compensation in recent years? The absolute size of the CEO pay package compared with the pay of the average employee John Hammergren, the CEO of McKesson, received an annual compensation of $50 million.

The compensation was closely tied to the performance of McKesson’s stock, which appreciated considerably during his tenure. This situation best exemplifies the strong relationship between executive compensation and company performance Which of the following is an important external corporate-governance mechanism? Market for corporate control Which of the following is an important internal corporate-governance mechanism? Which of the following do NOT serve as additional external-governance mechanisms? All public companies listed on the U.S.

  1. Stock exchanges must file a number of financial statements with the _.
  2. Securities and Exchange Commission (SEC) Which of the following is true of business ethics? Certain notions such as fairness, honesty, and reciprocity are universal norms.
  3. A bank, YPC, offers a customer a personal loan.
  4. In which of the following circumstances will this decision most likely be considered unethical? The bank knows that the customer will be unable to pay the loan if the interest rate rises.

Which of the following is true of the codes of conduct of an organization? They detail how the organization expects an employee to behave and to represent the company in business dealings. One of the ways to foster ethical behavior in employees is to: create a control system that encourages desired values.

Which of the following statements best supports the separation of ownership and control?

Which of the following statements best supports the separation of ownership and control in publicly traded companies? Shareholders own stocks but do not run the company.

What is the name of the organization that is responsible for the code of ethical conduct position statement?

About the Code of Ethics The NAEYC Code of Ethical Conduct offers guidelines for responsible behavior and sets forth a common basis for resolving the principal ethical dilemmas encountered in early childhood care and education.

What helps notions such as fairness?

What helps notions such as fairness, honesty, and reciprocity to be codified into law? The notions are universal norms.

Why there is a divergence in corporate governance practices in different parts of the world?

Efficiency factors and institutional settings may influence the content of corporate governance codes. Differences in corporate governance systems may lead to divergence in the content of codes. Therefore, codes reflect the particularities of each country’s distinct institutional environments.

What are the key sources of corporate governance?

Sources of Corporate Governance These are: Law – common and legislation. Best Practice Codes. Books.

What are the 4 theories of corporate governance?

Business Ethics and Corporate Governance, Second Edition Get full access to Business Ethics and Corporate Governance, Second Edition and 60K+ other titles, with free 10-day trial of O’Reilly. There’s also live online events, interactive content, certification prep materials, and more.

  • There are four broad theories to explain and elucidate corporate governance.
  • These are: (i) Agency Theory; (ii) Stewardship Theory; (iii) Stakeholder Theory; and (iv) Sociological Theory.
  • Recent thinking about strategic management and business policy has been influenced by agency cost theory, though the roots of the theory can be traced back to Adam Smith who identified an agency problem (managerial negligence and profusion) in the joint stock company.

The fundamental theoretical basis of corporate governance is agency costs. Shareholders are the owners of any joint stock, limited liability company, and are the principals of the same. By virtue of their ownership, the principals define, Get Business Ethics and Corporate Governance, Second Edition now with the O’Reilly learning platform.

Which of the following is a true statement related to corporate governance Mcq?

The correct answer is a. It refers to the manner in which an entity is managed and governed. This is the definition of the term. Entity management is an important element of corporate governance.

In which of the following there is separation of ownership and management as per the law?

Company is the form of business organisation in which there is a separation of ownership and management. Company has a separate legal entity from its members.

What is meant by separation of ownership and control in relation to corporate governance and its meaning?

ARTICLE Separation of ownership and control in South African-listed companies Blanché Steyn I ; Lesley Stainbank II I School of Business and Economics, Monash South Africa II School of Accounting, Economics and Finance, University of KwaZulu-Natal ABSTRACT This article tests the separation of ownership and control in South African-listed companies that leads to the divergence of interest between shareholders and directors.

Where listed companies are owned by so many shareholders that their diffused shareholding results in negligible control over the directors who manage the assets of the company, it is likely that the directors will manage and direct the company to maximise their self-interest to the detriment of the interest of the shareholders.

The separation of ownership and control and the maximisation of self-interest are central themes in the agency theory. Researching their validity in a South African context where the market is less liquid and the stock exchange is significantly smaller can add a valuable contribution to the continuing debate on corporate governance in the country.

  • The article analyses 186 listed South African companies using data extracted over four years to test whether there is separation of ownership and control and whether such separation leads to the maximisation of self-interest.
  • Data were extracted for the years 2005 and 2006, using the shareholding in 2006 to determine control, and for the years 2009 and 2010, using the shareholding in 2010 to determine control.

Directors’ remuneration as a percentage of assets was used as a proxy for the maximisation of directors’ interest, and profit attributable to shareholders as a percentage of assets was used as a proxy for the maximisation of shareholders’ interest. These proxies were used to test the impact of control during the two controlling periods, namely 2006 and 2010.

  • The article finds that the majority of listed companies in South Africa are controlled by a dominant shareholder.
  • However, there are still a significant number of companies where the directors have de facto control.
  • Contrary to the expectation that companies controlled by directors will aim to maximise directors’ remuneration, or companies controlled by shareholders will aim to maximise profit attributable to shareholders, this article finds the opposite to be true.

This is possibly an indication that the controlling parties might consider factors other than their direct financial self-interest, or that there is an inherent cost associated with control. Keywords: separation of ownership and control; goal divergence; maximisation of self-interest JEL: M20, 52 1 Introduction This article aims to determine whether there is separation of ownership and control in South African-listed companies and, if there is, whether the controlling party acts to maximise his/her self-interest to the detriment of the other party.

  • Thus this article questions whether separation of ownership and control over companies and the maximisation of self-interest that develops from it, as theorised by Berle and Means (1933), is a major factor for listed companies in the South African context.
  • The seminal work of Berle and Means (1933:95) was based on 200 large non-financial corporations listed in New York in the United States of America (USA), and successfully focused attention on the separation of ownership and control in modern corporations and the maximisation of self-interest.

According to Cheffins and Bank (2009:443) the contribution of the Berle and Means thesis is that ‘separation of ownership and control was a hallmark of large U.S. corporations, and their characterization of matters, had a profound and enduring influence on debates about corporate governance’.

This was despite the fact that their ‘data did not offer unequivocal proof of their separation-of-ownership-and-control thesis’ (Cheffins & Bank, 2009:454). The current standing of the contribution of the work of Berle and Means is acknowledged by Bratton (2001:737-738) who stated that ‘Berle and Means retain an enviable place at the forefront of policy discussion in a field where even a highly successful academic contribution rarely has a shelf life exceeding ten years.’ The separation of ownership and control plays a key role in the agency theory and the use of agency cost to manage the agency problem caused by divergence of interest (Jensen & Meckling, 1976:308; Fama & Jensen, 1983a:328-330; 1983b:312).

With the development of agency cost as a mechanism to manage the divergent interest of shareholders and directors, Jensen and Meckling (1976) successfully linked the agency problems to the separation of ownership and control through the management of agency cost.

  1. Afshan, Chhetri and Pradhan (2011:82) note that corporate governance was developed to address the problems caused by the separation of ownership and control, while Cho and Kim (2007) state that ‘ffective governance mechanisms have, since the study conducted by Berle and Means,
  2. Been identified as a requirement for solving the agency problems’.

Guidance on corporate governance in South Africa is given via the different King codes of governance issued by the South African Institute of Directors (IoD) (IoD, 1994; 2002; 2009). King l acknowledges the existence of the separation of ownership and control in the statement that ‘corporate governance is essentially only relevant where there is a division between the owners of equity and the directors of the business’ (IoD, 1994:5).

This statement was, however, not based on substantiating empirical evidence. The only prior South African research article that considered ownership and its impact on management and shareholders was by Cohen and Uliana (1990). Their article considered the impact of the basis of control for owner- controlled, foreign-controlled and conglomerate companies on employee, management and shareholder compensation and found that they are statistically indistinguishable, concluding that there is goal congruence (Cohen & Uliana, 1990:12).

The assumption of the agency theory that there is separation between ownership and control is not necessarily valid globally as not all countries have the diffusion of ownership that is an agency theory assumption (Dalton, Hitt, Certo & Dalton, 2007:41).

Care must be taken not to generalise the findings of ownership and other governance related studies performed in developed countries to developing countries (Afshan et al., 2011:89), highlighting the need for research in developing countries. This article focuses on testing the assumption that firstly there is a split between the owners as shareholders and directors as managers (separation of ownership and control) of a company, and secondly the reliance on the neo-classical economic assumption that the parties will maximise their self-interest leading to goal divergence.

Goal divergence problems stemming from the separation of ownership from control was assumed to exist as described by Rossouw, van der Watt and Malan (2002:289) who noted that the ‘concept of corporate governance was born out of the agency problem that arose when the ownership of companies became separated from the control thereof’.

As the separation of ownership and control and the maximisation of self-interest are central agency theory themes, researching their validity in a South African context, where the market is less liquid and the stock exchange is smaller, can add a valuable contribution to the continuing debate on corporate governance in the country.

This article uses two controlling periods to determine control for 186 companies listed on the Johannesburg Stock Exchange (JSE) and then identifies if control leads to the maximisation of self-interest. Self-interest maximisation occurs when the controlling parties maximise their direct self-interest to the detriment of the non-controlling parties.

  • Directors’ remuneration is used as a proxy for the interest of directors, and profit attributable to shareholders is used as a proxy for the interest of shareholders, as these are the most direct links to the possible controlling parties.
  • Given the assumption of self-interest, it was expected that companies controlled by directors will have higher levels of directors’ remuneration, and that companies controlled by shareholders would have higher levels of profit attributable to shareholders.

The article found the opposite to be true. The rest of the article is structured as follows. Section 2 describes the origin of separation of ownership from control, the roles of the shareholders and directors in the maximisation of self-interest that result from their goal divergence.

The research questions are described in section 3 followed by a brief description of the methodology used in this study in section 4. The results are described in section 5, followed by the conclusion, the limitations of the study and possible areas for future research discussed in section 6.2 Separation of ownership and control Separation of ownership and control became more prominent with the development of limited liability companies.

These deviated from the entrepreneurial model as the shareholders and providers of the funds and the residual claimants in the company are entitled to the rewards of ownership but were not directing the actions of the company that generated the rewards (Dalton et al., 2007:5).

The new separate role of the shareholders as the provider of funds is described by Berle and Means as: The property owner who invests in a modern corporation so far surrenders his wealth to those in control of the corporation that he has exchanged the position of independent owner for one in which he may become merely recipient of the wages of capital (Berle & Means, 1933:3).

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Separation of ownership and control distinguishes between the role and people involved in directing the company, the directors, and the shareholders or owners who provide funds. The shareholders need not have any other involvement in the company, in contrast to the entrepreneurial model where the owner provided the funds, directed the business and reaped the rewards.

As this article focuses on the separation of ownership and control, the role of other providers of finance for the business, such as the use of loans, falls outside the scope of this article and is a limitation of this study. The separation of ownership and control was tested in the USA by Stigler and Friedland (1983) as part of their assessment of the Berle and Means publication.

Both studies found that 44 per cent of the corporations did not have effective shareholder control (Berle & Means, 1933:94; Stigler & Friedland, 1983:238), leading to de facto control by the directors for 44 per cent (less than half) of the corporations in the sample.

  • Thus the separation of ownership and control is not necessarily widespread.
  • Shareholders are powerful, with their powerbase grounded in their voting rights that are protected by the Companies Act issued by the Republic of South Africa (RSA) (RSA, 2008).
  • This can result in control of a company by a large shareholder through voting rights.

Tsipouri and Xanthakis (2004:18) emphasised the impact of self-maximisation of shareholders in ‘the stronger voting control by large investors, can pressure the management into profit maximization’. The separation of ownership and control need not be a disadvantage or constant struggle between directors and shareholders, as Fama and Jensen (1983a:330) found that ‘the survival of complex organizations is enhanced by common stock residual claims that allow specialization of management’.

  • This is also in line with the findings of Alchian and Demsetz (1972:777) who highlighted that the use of specialist managers can help to increase productivity.
  • Therefore, there is an underlying economic benefit through increased profit based on increased productivity in separating the role of the shareholders from the role of the directors who manage the resources of the company.

As this article focuses on the separation of ownership and control with the shareholders as residual claimants against the net assets of the company, other sources of funding through loans are not taken into consideration. Although companies also use loans to help fund the activities of a company, the returns on loans are fixed per the terms of the loan agreements.

  • Other studies summarised by Cheffins and Bank (2009:467-474) that also focused on the separation of ownership and control in the USA are summarised in Table 1,
  • The prior research described in Table 1 focused on companies in the USA, a developed market, and showed an increase in separation of ownership from control.

The replication of the Berle and Means study using companies from 1963 and 1974 showed a marked increase in separation of ownership from control with de facto control in the hands of the directors in 85 per cent and 83 per cent of the companies. The study of the Fortune 500 companies in 1967 found that directors had de facto control in 70 per cent of the companies.

The diffusion of the shareholding is highlighted by the 1980 Fortune 500 companies’ study that found that 78 per cent of the shareholders owned a 5 per cent plus shareholding with the average largest shareholder holding only 15.4 per cent of the shares (Cheffins & Bank, 2009:467-474).2.1 The role of shareholders Shareholders are the residual claimants against the net assets of the company, as they bear the residual risk (RSA, 2008:section 37(3)(b)(ii)).

Their shareholding is bonded in the company and is used by the directors to fund the activities of the enterprise (Fama & Jensen, 1983a:330). Thus from a self-interest point of view, shareholders are motivated to maximise the profit attributable to them as they are the providers of funding and can be rewarded through dividends, gains in the value of their shares or distributions as residual claimants.

An example of the maximisation of shareholders’ interest was found by Jiang, Habib and Smallman (2009:124), who discovered that high ownership concentrations are negatively associated with CEO compensation in New Zealand.2.2 The role of directors In contrast, as directors receive directors’ remuneration, their self-interest might cause them to direct the company in a manner that increases their directors’ remuneration to the detriment of the profit attributable to the shareholders.

As directors’ remuneration is an expense, it directly influences the determination of profit attributable to shareholders. The directors are the specialist managers who coordinate the activities and manage the use of resources in the company to ensure the business of the company can flourish and generate profit.

Goal divergence is especially likely in situations where the shareholdings of the directors are so small that they cannot be personally motivated using the same profit incentive that motivates the shareholders. One of the recommended governance mechanisms is to use shares to encourage directors to act in the best interest of the shareholders.

Singh and Davidson (2003:814) found that “higher inside ownership aligns managerial and shareholders’ interests and lowers the agency costs in large corporations”. This raises a concern that when the directors hold little equity and the shareholders are dispersed, the directors can use the assets of the company to benefit themselves rather than the shareholders (Morck, Shleifer & Vishny, 1988:293).

  • Such a concern is not unrealistic as there were massive misstatements in the financial statements of Enron leading up to its demise with managers who made enormous profits (Westbrook, 2003:64).
  • This risk can be addressed through disclosure requirements requiring directors to disclose their remuneration.

Such disclosures help to ensure shareholders and other stakeholders are aware of the benefits received by directors. Examples of some of the disclosed benefits include a £5.7 million tax bill paid by Barclays for their CEO (Treanor, 2012), and the 2009 payment by Berkshire Hathaway for personal and home security to the value of $344 490 for Warren Buffet, its CEO (Stempel, 2010).

The disclosure requirement of directors’ remuneration does not necessarily hamper the ability of directors to maximise their own self-interest to the detriment of the shareholders, but it does reduce information asymmetry. Hill and Yablon (2002:298-299) found that the CEO of the National Australia Bank was the second highest paid executive despite a A$4 billion write-down associated with the failed HomeSide venture, and that the board of Adelaide Bank increased its CEO’s salary by 30 per cent while keeping dividends constant despite record profits.

The latter clearly shows a bias by the board to favour a director, supporting the self-interest maximisation assumption.2.3 Goal divergence between shareholders and directors Assuming the maximisation of self-interest, shareholders have different goals from directors.

  1. This goal divergence is also referred to as the agency problem.
  2. Although there are many studies highlighting different governance mechanisms that can be used to achieve goal concurrence (Jensen & Meckling, 1976; Fama & Jensen, 1983a; 1983b; Jensen & Murphy, 1990; O’Sullivan & Diacon, 1999; Jensen, 2001; Cremers & Nair, 2005; Shapiro, 2005; Babatunde & Olaniran, 2009; Setia-Atmaja, 2009; Ward, Brown & Rodriguez, 2009), this article focuses on investigating the separation of ownership and control and the maximisation of direct financial self-interest that can cause goal divergence.

How any such goal divergence should be managed using corporate governance mechanisms falls outside the scope of this article, and is an area for future research.3 Research questions This article answers the following two research questions to achieve the aim of the study: 1) Is there separation of ownership and control in South African-listed companies? 2) Does the controlling party maximise his/her self-interest to the detriment of the other party? To answer these two questions information was extracted for 186 listed companies on the JSE across all boards.

The companies had to be active, not suspended from the JSE, not be part of major merger or takeover activities, be trading under the same name with total assets, directors’ remuneration and profit or loss attributable to shareholders and with identifiable major shareholders for the 2006 and the 2010 control periods.

In this article, profit attributable to shareholders is used as the proxy for shareholders’ interest, while directors’ remuneration is used as a proxy for directors’ interest, in line with the executive compensation and profitability measures used by Berle and Means (1933:94) and Stigler and Friedland (1983:249, 254).

To facilitate comparability of the profit and directors’ remuneration between the different companies, the profit attributable to ordinary shareholders and directors’ remuneration, both are contextualised as a percentage of the total assets of their respective companies including intangible assets as shareholders are the residual risk takers in the company.

Total assets were used to contextualise the rewards attributable to directors and shareholders as the total assets of the company were used to generate those rewards. The use of profit attributable to shareholders is because shareholders maximise their direct interest when profit is maximised and could be prepared to accept more risk for the chance of higher profit.

The maximisation of shareholder value is already integral to the ideology of capital markets (Lee, Michie & Oughton, 2003:92). A driving factor of shareholder value is the ability of a company to generate profits. In contrast, directors might be more conservative in their acceptance of risk, focusing on smaller more assured profit opportunities while maximising directors’ interest through increased directors’ remuneration, or alternatively direct the company towards safer, more constant but lower income-generating investments (Garen, 1994:1178).

Brennan and Solomon (2008:585) note that the risk aversion of directors could motivate them to act in their own interest rather than contribute to shareholder value maximisation. In companies where there is no strong shareholder control, there is seemingly little direct oversight over the directors, and it could be possible for directors to positively influence their remuneration or reduce profitability by positioning the company towards safer investments that yield lower returns.

This results in a risk of maximisation of directors’ remuneration when the directors are in control and a director can ‘guarantee his appointment with the firm at an attractive salary’ (Morck et al., 1988:294). Financial data for the 186 companies were extracted for the years 2005 and 2006, using the shareholding in 2006 to determine control, and for the years 2009 and 2010 using the shareholding in 2010 to determine control.

In order to obtain useful and comparable data the information on the companies was extracted using Blink on the McGregor’s BFA database, with the major shareholder and controlling interest in the companies identified using Profile’s Stock Exchange Handbook for 2006 and 2010 (Profile, 2006; 2010).

The article uses only the two controlling periods 2006 and 2010 to answer the research questions.3.1 Is there separation of ownership and control in South African-listed companies? In order to answer the first research question the companies were divided into two groups for each controlling period depending on their controlling influence.

The first group consists of companies controlled by a dominant shareholder, referred to as shareholder controlled. In the absence of a controlling shareholder, the company was deemed to be controlled by the directors to form the second group, director controlled, unless directors’ control was specifically indicated.

  • Where directors in the company were also listed as major shareholders, the controlling interest is shown under shareholder controlled, because it is the voting right as a shareholder that renders the strongest level of control.
  • The recorded shareholding of the largest major shareholder was used to answer the first research question.

Control rests with the power to exercise a controlling vote. The Companies Act, 71 of 2008 requires a 25 per cent shareholding and three people to form a quorum at a shareholders’ meeting, making it possible for a major shareholder, with a shareholding as small as 25 per cent, to approve resolutions at a meeting in situations where the rest of the shareholding is more widely diffused (RSA, 2008:section 64).

It is difficult to ascertain real control, because it is seldom possible to determine with certainty which shareholders or combination of shareholders have the power to appoint directors in situations where the controlling interest is not disclosed, or not evident from a shareholding of more than 50 per cent.

Legally a shareholding greater than 50 per cent has the power to appoint the directors but, as described above, on a practical level, a lower dominant and uncontested shareholding could have enough voting rights to appoint the directors and control the company.

  • For practical purposes the controlling cut-off used in this article is the lowest percentage of shareholding that was disclosed in Profile as a controlling interest (Profile, 2006; 2010).
  • The choice of a specific cut-off point for practical purposes was because the identity of the controlling party was only disclosed in Profile for 28 companies (15.05 per cent) in 2006 and 16 companies (8.6 per cent) in 2010 (Profile, 2006; 2010).

This resulted in 25 per cent being used as the cut-off point to indicate shareholder control, as 25.1 per cent was the lowest level disclosed for a controlling shareholder.3.2 Does the controlling party maximise his/her self-interest to the detriment of the other party? In order to answer the second research question the results of the first research question were used.

  • To determine the maximisation of self-interest, profit attributable to shareholders is used as the proxy for shareholders’ interest and directors’ remuneration as a proxy for directors’ interest.
  • Both are normalised as a percentage of the total assets of their respective companies, including intangible assets.

As companies use their total assets to generate the rewards attributable to the shareholders or directors, total assets is a suitable measure to normalise the rewards generated by the company. Normalising the directors’ remuneration and profit attributable to shareholders as a percentage of total assets enables intercompany comparisons between the companies.

The use of these proxies is in line with the executive compensation and profitability measures used by Berle and Means (1933:94) and Stigler and Friedland (1983:249, 254).4 Research method The research questions were empirically answered by extracting secondary data on the companies from the McGregor’s BFA database, supplemented with information on control, and on the major shareholders extracted from Profile stock exchange handbook for the relevant controlling periods.

All the extracted information was captured into Excel and imported into SPSS version 19 for analysis. The collected data included the companies’ names, total assets, directors’ remuneration, profit attributable to ordinary shareholders, the percentage shareholding of the largest shareholders, and notes on instances where a major shareholder was also on the board of directors.

To ensure that data is comparable between the different companies, the following two variables were calculated for each company to normalise the data: 1) Profit attributable to ordinary shareholders as a percentage of total assets (including intangible assets), and 2) Directors’ remuneration as a percentage of total assets (including intangible assets).

These variables represent the different interests between shareholders’ (variable 1) and directors’ (variable 2) self-interest maximisation. In line with agency theory and agency cost (Jensen & Meckling, 1976) and the separation of ownership and control (Berle & Means, 1933) given the maximisation of self-interest, it is expected that the directors will maximise directors’ remuneration whereas the shareholders will maximise the profit attributable to them in the companies they control.

The recorded shareholding (as extracted from Profile) of the largest owners was used to answer the first research question by identifying which companies are controlled by a major shareholder and which are controlled by the directors. Answering the second research question was more complex. Before the question could be answered, the study needed to use the results of the first question that identified the companies controlled by directors and those controlled by shareholders.

The identification of control is necessary to determine if the controlling source in the company acted to maximise direct financial self-interest. Based on the factors identified the companies were grouped into two categories, namely companies controlled by shareholders and companies controlled by directors.

  1. SPSS was used to analyse whether companies controlled by directors pay higher remuneration to the directors, and if companies controlled by shareholders generate more profit attributable to shareholders.
  2. By focusing on directors’ remuneration (the directors’ reward) and profit (the shareholders’ reward) this study can be compared to the studies of Berle and Means (1933:94) and Stigler and Friedland (1983:249, 254) that focused on the link between control, directors’ remuneration and profit in the USA.

Profitability and directors’ remuneration are used as the basic measures to show the maximisation of individual interest between the shareholders as owners and directors as managers of the owners’ assets. The percentage shareholding of the smallest disclosed controlling shareholding at 25.1 per cent was used to determine the cut-off point to classify companies into their controlling groups.

The rounded figure of 25 per cent was used in the classification of control. The first group included companies with a shareholder with 25 per cent or more shares and were classified as controlled by shareholders. The second group is made up by default of companies not controlled by a dominant shareholder and were classified as controlled by directors.

It was deemed that companies not controlled by a dominant shareholder are in the position where the directors have de facto control, becoming companies controlled by directors. When it was disclosed that a company was controlled by the directors the company was classified as controlled by directors.

In the case of companies controlled by directors who were also controlling shareholders, the companies were classified as controlled by shareholders because the voting power of shareholders is the more dominant power.5 Results 5.1 First research question The first research question asked if there is separation of ownership and control in South African-listed companies.

The results show that separation of ownership and control exists but shareholding is not yet widely diffused. Just over half of the companies from the 2006 and 2010 controlling periods are controlled by shareholders. The directors controlled over 88 companies (47.3 per cent) in 2006 and over 85 companies (45.7 per cent) in 2010.

  • This is in line with the 44 per cent management-controlled corporations identified by Berle and Means (1933:94) and confirmed by Stigler and Friedland (1983:249, 254).
  • Only six companies disclosed directors’ shareholding as a major shareholder, with the shareholding ranging from 5.3 per cent to 24.7 per cent for both controlling periods.

The evaluation of the majority shareholder resulted in an average size majority shareholding of 32.36 per cent for 2006 and 31 per cent in 2010. The study found that the majority of listed companies in South Africa are controlled by a dominant shareholder.

  1. The controlling interests for the 2006 and 2010 periods are shown in Table 2,
  2. The disclosed majority shareholding of companies ranged from 5.4 per cent to 91.8 per cent in 2006 and 2.8 per cent to 91.8 per cent in 2010, with a median of 26.95 per cent in 2006 and 27.5 per cent in 2010 and an average size majority shareholding of 32.36 per cent for 2006 and 31 per cent in 2010.

An analysis of the average large shareholding in the study of Shleifer and Vishny (1986:462) on companies in the Fortune 500 found the average percentage shareholding of large shareholders to be 15.4 per cent, smaller when compared to the averages found in this study.

  1. This could indicate that the developing nature of the South African economy with its smaller, less liquid stock exchange might have a negative influence on the diversity of shareholding.
  2. The results of the data extraction and analysis are described below under the discussion of the second research question.

As just more than half of the companies are still controlled by directors, separation of ownership and control in South Africa is still in the early stages of its development when compared to the more sophisticated markets in the USA, which already showed greater shareholder diffusion with most of the companies under the de facto control of the directors, as disclosed in Table 1,

  1. Although the shareholdings in South African companies are not as widely diffused as in the USA, there is still a level of separation between shareholders and directors, with a large number of companies under the control of the directors.
  2. Thus the assumption that there is separation of ownership and control is applicable to South African-listed companies.5.2 Second research question The second research question asks if the controlling party maximises his/her self-interest to the detriment of the other party.

The controlling interest that grouped the companies between director controlled and shareholder controlled companies as shown in Table 2 was used to identify whether they maximised their self-interest. The calculated variables Directors’ remuneration as a percentage of total assets and Profit attributable to ordinary shareholders as a percentage of total assets are continuous variables.

Descriptive statistics were used to compare the averages or means, to determine whether the means give any indication of the maximisation of self-interest on the part of the controlling party. The results of the descriptive statistics are shown in Table 3, The results from the descriptive statistics show that the average of directors’ remuneration as a percentage of total assets is less for companies controlled by directors in both controlling periods in all four years, with the average profit attributable to shareholders as a percentage of total assets higher for companies controlled by directors in 2005, 2009 and 2010.

The exception is in the 2006 year when the shareholder controlled companies generated a higher average profit attributable to shareholders as a percentage of total assets. The results show that the influence of self-interest of the controlling parties was the opposite of what was expected, with one exception when in 2006 profit attributable to shareholders was higher on average for companies controlled by shareholders.

The results show that the consequences of control result in the maximisation of the interest of the other party to the detriment of the controlling party. The findings were opposite from the expected impact and do not fully support the maximisation of self-interest principle. It could be that the South African corporate governance principle of ubuntu, where ubuntu is a reflection of the interdependence of humanity (IoD, 2002:18-19, 91), counters the maximisation of direct financial self-interest.

In essence, it was surprising that the controlling group was not the recipient of the larger financial benefit, but that they received a slightly smaller direct financial benefit while the non-controlling group received a slightly larger direct financial benefit.

  1. It could also be that control itself has a cost or intangible value that is discounted, thereby requiring the controlling party to pay for the privilege of control through a reduced direct financial benefit.
  2. Further statistical analysis was performed using independent sample t-tests to determine if the differences were statistically significant.
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The results of these tests are included in Table 4,5.3 Independent t-test for the 2006 controlling period The independent sample t-test was conducted for the 2006 controlling period. The test compare directors’ remuneration as a percentage of assets, and profit attributable to shareholders as a percentage of assets, for companies controlled by directors, with companies controlled by shareholders, for 2005 and 2006.

There was no significant difference between directors’ remuneration as a percentage of assets’ scores for companies controlled by directors despite the average directors’ remuneration at (average or mean m ) m = 1.2820 (2005) and m = 1.1331 (2006) being lower than the average directors’ remuneration of companies controlled by shareholders at m = 1.6650 (2005) and m = 1.4528 (2006).

In addition, there was no significant difference between profit attributable to shareholders as a percentage of assets’ scores for companies controlled by directors. However, the differences in means fluctuate between the controlling parties over the two periods, m = 8.6050 (2005) and m = 9.1623 (2006), and for companies controlled by shareholders m = 8.2433 (2005) and m = 10.9288 (2006).5.4 Independent t-test for the 2010 controlling period The independent sample t-test was conducted for the 2010 controlling period.

The test compare the directors’ remuneration as a percentage of assets, and the profit attributable to shareholders as a percentage of assets, for companies controlled by directors, and companies controlled by shareholders, for 2009 and 2010. A comparison of the averages or means of the directors’ remuneration as a percentage of assets generated by companies controlled by directors was less at m =,4796 (2009) and m =,5487 (2010) than the average directors’ remuneration as a percentage of assets generated by companies controlled by shareholders with averages of m = 1.4733 (2009) and m = 1.6806 (2010).

The same pattern was apparent as a comparison of the means of the profit attributable to shareholders as a percentage of assets generated by companies controlled by directors was more at m = 6.1971 (2009) and m = 6.3433 (2010) than the average profit attributable to shareholders as a percentage of assets generated by companies controlled by shareholders with averages of m = 3.6995 (2009) and m = 3.2029 (2010).

  1. The independent t-test found these differences to be statistically significant.
  2. Thus in 2010 companies controlled by directors generated less value for themselves through a lower directors’ remuneration, ( t = -3.846, df = 114.956, p =,001) following on the pattern from 2009 ( t = -4.128, df = 115.870, p =,001); while companies controlled by shareholders generated less value for themselves through a lower profit attributable to shareholders in 2010 ( t = 1.026, df = 121.359, p =,307) also following on the 2009 pattern ( t = 1.293, df = 138.839, p =,198).

The assumption that directors or shareholders will act to maximise their direct financial self-interest is not supported by an evaluation of the averages (or means) or by the results of the independent t-tests. Although the 2006 controlling period did not show any statistically significant variances, the differences for the 2010 controlling period are statistically significant.

  1. The results of the analysis indicate that the controlling party acts in the best interest of the other party and maximises the direct financial benefit attributed to the noncontrolling party at the cost of the controlling party.
  2. This is in contrast to the neo-classical economic assumption that the parties will act to maximise their self-interest.

It could be that there is an inherent cost to control that accrues to the controlling party. Cheffins and Bank (2009:462) noted that banks do not adopt a control-centred investment strategy for their trust funds possibly because they then run the risk of inferior returns when compared with more diversified investment strategies, indicating that having a controlling interest could have an inherent cost of control.

  1. It could be that the smaller size of the South African economy and market influences the actions of the controlling party.
  2. Tsipouri and Xanthakis (2004:18) indicated that “there is a risk of not having enough people to fill the boards in small countries”.
  3. Thus the availability of competent directors can be a factor.

PricewaterhouseCoopers (PWC) found that the pool of available non-executive directors in South Africa is shrinking (PWC, 2011). Because the structure of a firm allows for the separation of ownership and control in companies, both parties need each other.

  1. Directors could use simple market forces to attract shareholders by managing the company in a manner that generates higher profits for the shareholders, whereas shareholders need the skills of specialist managers.
  2. These skills are also in short supply and shareholders might be prepared to pay a premium to attract good specialist managers.6 Conclusions, limitations and further research The majority of listed companies in South Africa are controlled by a dominant shareholder.

However, there are still a significant number of companies where the directors have de facto control. Contrary to the expectation that companies controlled by directors will aim to maximise directors’ remuneration, and that companies controlled by shareholders will aim to maximise the profit attributable to shareholders, this study found the opposite to be true.

Although the fact that the majority of listed companies in South Africa are controlled by a dominant shareholder, the levels of separation of shareholder from control over the company are still evolving towards high levels of shareholder diffusion as the local market expands and increases its sophistication.

Despite not being in the majority, there are a significant number of companies where the directors have de facto control and the separation of shareholders and control is more pronounced. With regard to the maximisation of self-interest by the controlling party, the reduction in the average directors’ remuneration as a percentage of total assets earned by directors in companies controlled by directors, while companies controlled by shareholders pay a slightly larger directors’ remuneration, is contrary to the neo-classical assumption of self-interest.

As this study used the most direct outcome as proxies for the maximisation of self-interest, further studies can consider other proxies that consider indirect benefits to the parties as well. In addition, it is possible that control has a cost, as the controlling parties mostly maximised the most direct value of the other party.

This was found to be statistically significant in the 2010 controlling period. As the profit attributable to shareholders as a percentage of total assets was mostly higher for the companies controlled by directors than for the companies controlled by shareholders, it suggests that directors are also profit orientated.

A limitation of this study was that it used only two controlling periods, so a further study can extend the periods to determine if the pattern observed for the 2010 controlling period extends into the future. A further limitation of this study is its focus on the basic building blocks of the agency theory, the separation of ownership and control in companies and the most direct consequences of the control, either via profit attributable to shareholders or directors’ remuneration payable to the managers or directors of the companies.

Because of the focus on the most direct financial consequences, the impact of other indirect or non-financial advantages to the parties needs to be considered in a future study. In addition, further research on the impact of the sources of funding on firm performance and on the profit attributable to shareholders, as well as directors’ remuneration, can lead to improved insight into the role of the different sources used to finance a company and their contribution to firm performance.

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BABATUNDE, M.A. & OLANIRAN, O.2009. The effects of internal and external mechanisms on governance and performance of corporate firms in Nigeria. Corporate Ownership & Control, 7(12):330-343. BERLE, A.A. & MEANS, G.C.1933. The modern corporation and private property, New York: The Macmillan company.

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Is Berle and Means really a myth? Business History Review, 83(3): 443-472. CHO, D. & KIM, J.2007. Outside directors, ownership structure and firm profitability. Corporate Governance: An International Review, 15(2):239-250. COHEN, T. & ULIANA, E.1990. An evaluation of corporate ownership structures on employee, management and shareholder compensation for JSE companies.

De Ratione, 4(1):7-14. CREMERS, K.J.M. & NAIR, V.B.2005. Governance mechanisms and equity prices. The Journal of Finance, 60(6):2859-2894. DALTON, D.R., HITT, M.A., CERTO, S.T. & DALTON, C.M.2007. The fundamental agency problem and its mitigation: Independence, equity, and the market for corporate control.

Academy of Management Annals, 1:1-64. FAMA, E.F. & JENSEN, M.C.1983a. Agency problems and residual claims. Journal of Law and Economics, 26(2):327-350. FAMA, E.F. & JENSEN, M.C.1983b. Seperation of ownership and control. Journal of Law and Economics, 26(2):301-326.

GAREN, J.E.1994. Executive compensation and principal-agent theory. The Journal of Political Economy, 102(6):1175-1199. HILL, J. & YABLON, C.M.2002. Corporate governance and executive remuneration: Rediscovering managerial positional conflict. UNSW Law Journal, 25(2):294-319. IOD 1994. The King report on corporate governance, Johannesburg, Institute of Directors.

IOD 2002. King report of corporate governance for South Africa, Johannesburg, Institute of Directors. IOD 2009. King code of governance for South Africa 2009, Johannesburg, Institute of Directors. JENSEN, M.C.2001. Value maximisation, stakeholder theory, and corporate obejective function.

European Financial Management, 7(3):297-317. JENSEN, M.C. & MECKLING, W.H.1976. Theory of the firm: Managerial behaviour, agency cost and ownership structure. Journal of Financial Economics, 3(4):305-360. JENSEN, M.C. & MURPHY, K.J.1990. Performance pay and top-management incentives. Journal of Political Economy, 98(2):225-264.

JIANG, H., HABIB, A. & SMALLMAN, C.2009. The effect of ownership concentration on CEO compensation – firm performance relationship in New Zealand. Pacific Accounting Review, 21(2):104-131. LEE, S.H., MICHIE, J. & OUGHTON, C.2003. Comparative corporate governance: beyond ‘shareholder value’.

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PricewaterhouseCoopers. ROSSOUW, G.J., VAN DER WATT, A. & MALAN, D.2002. Corporate governance in South Africa. Journal of Business Ethics, 37(3):289-302. RSA 2008. Companies Act, No 71 of 2008. Pretoria: Government printer. SETIA-ATMAJA, L.Y.2009. Governance mechanisms and firm value: the impact of ownership concentration and dividends.

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DAVIDSON, W.N.2003. Agency costs, ownership structure and corporate governance mechanisms. Journal of Banking & Finance, 27(5):793-816. STEMPEL, J.2010. Buffett, world’s 3rd richest person, gets pay rise. Reuters. Available at: http://www.reuters.com/assets/print?aid=USTRE62A5SH20100311, STIGLER, G.J. & FRIEDLAND, C.1983.

The literature of economics: the case of Berle and Means. Journal of Law and Economics, XXVI:237-268. TREANOR, J.2012. Row grows over Barclays chief’s pay and £5.7m tax bill The Guardian Available at: http://www.guardian.co.uk/business/2012/apr/10/barclays-chief-pay-award-warning,

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Corporate Governance: An International Review, 17(5):646-660. WESTBROOK, D.A.2003. Corporation law after Enron: The possibility of a capitalist reimagination. The Georgetown Law Journal, 92:61-125. Accepted: March 2013

Which of the following is also known as the code of conduct and ethical standards for public officials and employees?

Eighth Congress Republic Act No.6713 February 20, 1989 AN ACT ESTABLISHING A CODE OF CONDUCT AND ETHICAL STANDARDS FOR PUBLIC OFFICIALS AND EMPLOYEES, TO UPHOLD THE TIME-HONORED PRINCIPLE OF PUBLIC OFFICE BEING A PUBLIC TRUST, GRANTING INCENTIVES AND REWARDS FOR EXEMPLARY SERVICE, ENUMERATING PROHIBITED ACTS AND TRANSACTIONS AND PROVIDING PENALTIES FOR VIOLATIONS THEREOF AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled: Section 1.

  • Title. – This Act shall be known as the “Code of Conduct and Ethical Standards for Public Officials and Employees.” Section 2.
  • Declaration of Policies.
  • It is the policy of the State to promote a high standard of ethics in public service.
  • Public officials and employees shall at all times be accountable to the people and shall discharge their duties with utmost responsibility, integrity, competence, and loyalty, act with patriotism and justice, lead modest lives, and uphold public interest over personal interest.

Section 3. Definition of Terms. – As used in this Act, the term: (a) “Government” includes the National Government, the local governments, and all other instrumentalities, agencies or branches of the Republic of the Philippines including government-owned or controlled corporations, and their subsidiaries.

  1. Lawphi1.net (b) “Public Officials” includes elective and appointive officials and employees, permanent or temporary, whether in the career or non-career service, including military and police personnel, whether or not they receive compensation, regardless of amount.
  2. C) “Gift” refers to a thing or a right to dispose of gratuitously, or any act or liberality, in favor of another who accepts it, and shall include a simulated sale or an ostensibly onerous disposition thereof.

It shall not include an unsolicited gift of nominal or insignificant value not given in anticipation of, or in exchange for, a favor from a public official or employee. (d) “Receiving any gift” includes the act of accepting directly or indirectly, a gift from a person other than a member of his family or relative as defined in this Act, even on the occasion of a family celebration or national festivity like Christmas, if the value of the gift is neither nominal nor insignificant, or the gift is given in anticipation of, or in exchange for, a favor.

E) “Loan” covers both simple loan and commodatum as well as guarantees, financing arrangements or accommodations intended to ensure its approval. (f) “Substantial stockholder” means any person who owns, directly or indirectly, shares of stock sufficient to elect a director of a corporation. This term shall also apply to the parties to a voting trust.

(g) “Family of public officials or employees” means their spouses and unmarried children under eighteen (18) years of age. (h) “Person” includes natural and juridical persons unless the context indicates otherwise. (i) “Conflict of interest” arises when a public official or employee is a member of a board, an officer, or a substantial stockholder of a private corporation or owner or has a substantial interest in a business, and the interest of such corporation or business, or his rights or duties therein, may be opposed to or affected by the faithful performance of official duty.

  • J) “Divestment” is the transfer of title or disposal of interest in property by voluntarily, completely and actually depriving or dispossessing oneself of his right or title to it in favor of a person or persons other than his spouse and relatives as defined in this Act.
  • K) “Relatives” refers to any and all persons related to a public official or employee within the fourth civil degree of consanguinity or affinity, including bilas, inso and balae.

Section 4. Norms of Conduct of Public Officials and Employees. – (A) Every public official and employee shall observe the following as standards of personal conduct in the discharge and execution of official duties: (a) Commitment to public interest. – Public officials and employees shall always uphold the public interest over and above personal interest.

  • All government resources and powers of their respective offices must be employed and used efficiently, effectively, honestly and economically, particularly to avoid wastage in public funds and revenues.
  • B) Professionalism.
  • Public officials and employees shall perform and discharge their duties with the highest degree of excellence, professionalism, intelligence and skill.

They shall enter public service with utmost devotion and dedication to duty. They shall endeavor to discourage wrong perceptions of their roles as dispensers or peddlers of undue patronage. (c) Justness and sincerity. – Public officials and employees shall remain true to the people at all times.

They must act with justness and sincerity and shall not discriminate against anyone, especially the poor and the underprivileged. They shall at all times respect the rights of others, and shall refrain from doing acts contrary to law, good morals, good customs, public policy, public order, public safety and public interest.

They shall not dispense or extend undue favors on account of their office to their relatives whether by consanguinity or affinity except with respect to appointments of such relatives to positions considered strictly confidential or as members of their personal staff whose terms are coterminous with theirs.

(d) Political neutrality. – Public officials and employees shall provide service to everyone without unfair discrimination and regardless of party affiliation or preference. (e) Responsiveness to the public. – Public officials and employees shall extend prompt, courteous, and adequate service to the public.

Unless otherwise provided by law or when required by the public interest, public officials and employees shall provide information of their policies and procedures in clear and understandable language, ensure openness of information, public consultations and hearings whenever appropriate, encourage suggestions, simplify and systematize policy, rules and procedures, avoid red tape and develop an understanding and appreciation of the socio-economic conditions prevailing in the country, especially in the depressed rural and urban areas.

F) Nationalism and patriotism. – Public officials and employees shall at all times be loyal to the Republic and to the Filipino people, promote the use of locally produced goods, resources and technology and encourage appreciation and pride of country and people. They shall endeavor to maintain and defend Philippine sovereignty against foreign intrusion.

(g) Commitment to democracy. – Public officials and employees shall commit themselves to the democratic way of life and values, maintain the principle of public accountability, and manifest by deeds the supremacy of civilian authority over the military.

  • They shall at all times uphold the Constitution and put loyalty to country above loyalty to persons or party.
  • H) Simple living.
  • Public officials and employees and their families shall lead modest lives appropriate to their positions and income.
  • They shall not indulge in extravagant or ostentatious display of wealth in any form.

(B) The Civil Service Commission shall adopt positive measures to promote (1) observance of these standards including the dissemination of information programs and workshops authorizing merit increases beyond regular progression steps, to a limited number of employees recognized by their office colleagues to be outstanding in their observance of ethical standards; and (2) continuing research and experimentation on measures which provide positive motivation to public officials and employees in raising the general level of observance of these standards.

  • Section 5.
  • Duties of Public Officials and Employees.
  • In the performance of their duties, all public officials and employees are under obligation to: lawphi1.net (a) Act promptly on letters and requests.
  • All public officials and employees shall, within fifteen (15) working days from receipt thereof, respond to letters, telegrams or other means of communications sent by the public.

The reply must contain the action taken on the request. (b) Submit annual performance reports. – All heads or other responsible officers of offices and agencies of the government and of government-owned or controlled corporations shall, within forty-five (45) working days from the end of the year, render a performance report of the agency or office or corporation concerned.

Such report shall be open and available to the public within regular office hours. (c) Process documents and papers expeditiously. – All official papers and documents must be processed and completed within a reasonable time from the preparation thereof and must contain, as far as practicable, not more than three (3) signatories therein.

In the absence of duly authorized signatories, the official next-in-rank or officer in charge shall sign for and in their behalf. (d) Act immediately on the public’s personal transactions. – All public officials and employees must attend to anyone who wants to avail himself of the services of their offices and must, at all times, act promptly and expeditiously.

  1. E) Make documents accessible to the public.
  2. All public documents must be made accessible to, and readily available for inspection by, the public within reasonable working hours.
  3. Section 6.
  4. System of Incentives and Rewards.
  5. A system of annual incentives and rewards is hereby established in order to motivate and inspire public servants to uphold the highest standards of ethics.

For this purpose, a Committee on Awards to Outstanding Public Officials and Employees is hereby created composed of the following: the Ombudsman and Chairman of the Civil Service Commission as Co-Chairmen, and the Chairman of the Commission on Audit, and two government employees to be appointed by the President, as members.

It shall be the task of this Committee to conduct a periodic, continuing review of the performance of public officials and employees, in all the branches and agencies of Government and establish a system of annual incentives and rewards to the end that due recognition is given to public officials and employees of outstanding merit on the basis of the standards set forth in this Act.

The conferment of awards shall take into account, among other things, the following: the years of service and the quality and consistency of performance, the obscurity of the position, the level of salary, the unique and exemplary quality of a certain achievement, and the risks or temptations inherent in the work.

  1. Incentives and rewards to government officials and employees of the year to be announced in public ceremonies honoring them may take the form of bonuses, citations, directorships in government-owned or controlled corporations, local and foreign scholarship grants, paid vacations and the like.
  2. They shall likewise be automatically promoted to the next higher position with the commensurate salary suitable to their qualifications.

In case there is no next higher position or it is not vacant, said position shall be included in the budget of the office in the next General Appropriations Act. The Committee on Awards shall adopt its own rules to govern the conduct of its activities.

Section 7. Prohibited Acts and Transactions. – In addition to acts and omissions of public officials and employees now prescribed in the Constitution and existing laws, the following shall constitute prohibited acts and transactions of any public official and employee and are hereby declared to be unlawful: (a) Financial and material interest.

– Public officials and employees shall not, directly or indirectly, have any financial or material interest in any transaction requiring the approval of their office. (b) Outside employment and other activities related thereto. – Public officials and employees during their incumbency shall not: (1) Own, control, manage or accept employment as officer, employee, consultant, counsel, broker, agent, trustee or nominee in any private enterprise regulated, supervised or licensed by their office unless expressly allowed by law; (2) Engage in the private practice of their profession unless authorized by the Constitution or law, provided, that such practice will not conflict or tend to conflict with their official functions; or (3) Recommend any person to any position in a private enterprise which has a regular or pending official transaction with their office.

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These prohibitions shall continue to apply for a period of one (1) year after resignation, retirement, or separation from public office, except in the case of subparagraph (b) (2) above, but the professional concerned cannot practice his profession in connection with any matter before the office he used to be with, in which case the one-year prohibition shall likewise apply.

(c) Disclosure and/or misuse of confidential information. – Public officials and employees shall not use or divulge, confidential or classified information officially known to them by reason of their office and not made available to the public, either: (1) To further their private interests, or give undue advantage to anyone; or (2) To prejudice the public interest.

(d) Solicitation or acceptance of gifts. – Public officials and employees shall not solicit or accept, directly or indirectly, any gift, gratuity, favor, entertainment, loan or anything of monetary value from any person in the course of their official duties or in connection with any operation being regulated by, or any transaction which may be affected by the functions of their office.

As to gifts or grants from foreign governments, the Congress consents to: (i) The acceptance and retention by a public official or employee of a gift of nominal value tendered and received as a souvenir or mark of courtesy; (ii) The acceptance by a public official or employee of a gift in the nature of a scholarship or fellowship grant or medical treatment; or (iii) The acceptance by a public official or employee of travel grants or expenses for travel taking place entirely outside the Philippine (such as allowances, transportation, food, and lodging) of more than nominal value if such acceptance is appropriate or consistent with the interests of the Philippines, and permitted by the head of office, branch or agency to which he belongs.

  1. The Ombudsman shall prescribe such regulations as may be necessary to carry out the purpose of this subsection, including pertinent reporting and disclosure requirements.
  2. Nothing in this Act shall be construed to restrict or prohibit any educational, scientific or cultural exchange programs subject to national security requirements.

Section 8. Statements and Disclosure. – Public officials and employees have an obligation to accomplish and submit declarations under oath of, and the public has the right to know, their assets, liabilities, net worth and financial and business interests including those of their spouses and of unmarried children under eighteen (18) years of age living in their households.

(A) Statements of Assets and Liabilities and Financial Disclosure. – All public officials and employees, except those who serve in an honorary capacity, laborers and casual or temporary workers, shall file under oath their Statement of Assets, Liabilities and Net Worth and a Disclosure of Business Interests and Financial Connections and those of their spouses and unmarried children under eighteen (18) years of age living in their households.

The two documents shall contain information on the following: (a) real property, its improvements, acquisition costs, assessed value and current fair market value; (b) personal property and acquisition cost; (c) all other assets such as investments, cash on hand or in banks, stocks, bonds, and the like; (d) liabilities, and; (e) all business interests and financial connections.

  1. The documents must be filed: (a) within thirty (30) days after assumption of office; (b) on or before April 30, of every year thereafter; and (c) within thirty (30) days after separation from the service.
  2. All public officials and employees required under this section to file the aforestated documents shall also execute, within thirty (30) days from the date of their assumption of office, the necessary authority in favor of the Ombudsman to obtain from all appropriate government agencies, including the Bureau of Internal Revenue, such documents as may show their assets, liabilities, net worth, and also their business interests and financial connections in previous years, including, if possible, the year when they first assumed any office in the Government.

Husband and wife who are both public officials or employees may file the required statements jointly or separately. The Statements of Assets, Liabilities and Net Worth and the Disclosure of Business Interests and Financial Connections shall be filed by: (1) Constitutional and national elective officials, with the national office of the Ombudsman; (2) Senators and Congressmen, with the Secretaries of the Senate and the House of Representatives, respectively; Justices, with the Clerk of Court of the Supreme Court; Judges, with the Court Administrator; and all national executive officials with the Office of the President.

(3) Regional and local officials and employees, with the Deputy Ombudsman in their respective regions; (4) Officers of the armed forces from the rank of colonel or naval captain, with the Office of the President, and those below said ranks, with the Deputy Ombudsman in their respective regions; and (5) All other public officials and employees, defined in Republic Act No.3019, as amended, with the Civil Service Commission.

(B) Identification and disclosure of relatives. – It shall be the duty of every public official or employee to identify and disclose, to the best of his knowledge and information, his relatives in the Government in the form, manner and frequency prescribed by the Civil Service Commission.

  • C) Accessibility of documents.
  • 1) Any and all statements filed under this Act, shall be made available for inspection at reasonable hours.
  • 2) Such statements shall be made available for copying or reproduction after ten (10) working days from the time they are filed as required by law.
  • 3) Any person requesting a copy of a statement shall be required to pay a reasonable fee to cover the cost of reproduction and mailing of such statement, as well as the cost of certification.

(4) Any statement filed under this Act shall be available to the public for a period of ten (10) years after receipt of the statement. After such period, the statement may be destroyed unless needed in an ongoing investigation. (D) Prohibited acts. – It shall be unlawful for any person to obtain or use any statement filed under this Act for: (a) any purpose contrary to morals or public policy; or (b) any commercial purpose other than by news and communications media for dissemination to the general public.

Section 9. Divestment. – A public official or employee shall avoid conflicts of interest at all times. When a conflict of interest arises, he shall resign from his position in any private business enterprise within thirty (30) days from his assumption of office and/or divest himself of his shareholdings or interest within sixty (60) days from such assumption.

The same rule shall apply where the public official or employee is a partner in a partnership. The requirement of divestment shall not apply to those who serve the Government in an honorary capacity nor to laborers and casual or temporary workers. Section 10.

Review and Compliance Procedure. – (a) The designated Committees of both Houses of the Congress shall establish procedures for the review of statements to determine whether said statements which have been submitted on time, are complete, and are in proper form. In the event a determination is made that a statement is not so filed, the appropriate Committee shall so inform the reporting individual and direct him to take the necessary corrective action.

(b) In order to carry out their responsibilities under this Act, the designated Committees of both Houses of Congress shall have the power within their respective jurisdictions, to render any opinion interpreting this Act, in writing, to persons covered by this Act, subject in each instance to the approval by affirmative vote of the majority of the particular House concerned.

  1. The individual to whom an opinion is rendered, and any other individual involved in a similar factual situation, and who, after issuance of the opinion acts in good faith in accordance with it shall not be subject to any sanction provided in this Act.
  2. C) The heads of other offices shall perform the duties stated in subsections (a) and (b) hereof insofar as their respective offices are concerned, subject to the approval of the Secretary of Justice, in the case of the Executive Department and the Chief Justice of the Supreme Court, in the case of the Judicial Department.

Section 11. Penalties. – (a) Any public official or employee, regardless of whether or not he holds office or employment in a casual, temporary, holdover, permanent or regular capacity, committing any violation of this Act shall be punished with a fine not exceeding the equivalent of six (6) months’ salary or suspension not exceeding one (1) year, or removal depending on the gravity of the offense after due notice and hearing by the appropriate body or agency.

  1. If the violation is punishable by a heavier penalty under another law, he shall be prosecuted under the latter statute.
  2. Violations of Sections 7, 8 or 9 of this Act shall be punishable with imprisonment not exceeding five (5) years, or a fine not exceeding five thousand pesos (P5,000), or both, and, in the discretion of the court of competent jurisdiction, disqualification to hold public office.

(b) Any violation hereof proven in a proper administrative proceeding shall be sufficient cause for removal or dismissal of a public official or employee, even if no criminal prosecution is instituted against him. (c) Private individuals who participate in conspiracy as co-principals, accomplices or accessories, with public officials or employees, in violation of this Act, shall be subject to the same penal liabilities as the public officials or employees and shall be tried jointly with them.

  • D) The official or employee concerned may bring an action against any person who obtains or uses a report for any purpose prohibited by Section 8 (D) of this Act.
  • The Court in which such action is brought may assess against such person a penalty in any amount not to exceed twenty-five thousand pesos (P25,000).

If another sanction hereunder or under any other law is heavier, the latter shall apply. Section 12. Promulgation of Rules and Regulations, Administration and Enforcement of this Act. – The Civil Service Commission shall have the primary responsibility for the administration and enforcement of this Act.

  1. It shall transmit all cases for prosecution arising from violations of this Act to the proper authorities for appropriate action: Provided, however, That it may institute such administrative actions and disciplinary measures as may be warranted in accordance with law.
  2. Nothing in this provision shall be construed as a deprivation of the right of each House of Congress to discipline its Members for disorderly behavior.

The Civil Service Commission is hereby authorized to promulgate rules and regulations necessary to carry out the provisions of this Act, including guidelines for individuals who render free voluntary service to the Government. The Ombudsman shall likewise take steps to protect citizens who denounce acts or omissions of public officials and employees which are in violation of this Act.

  1. Section 13.
  2. Provisions for More Stringent Standards.
  3. Nothing in this Act shall be construed to derogate from any law, or any regulation prescribed by any body or agency, which provides for more stringent standards for its official and employees.
  4. Section 14.
  5. Appropriations.
  6. The sum necessary for the effective implementation of this Act shall be taken from the appropriations of the Civil Service Commission.

Thereafter, such sum as may be needed for its continued implementation shall be included in the annual General Appropriations Act. Section 15. Separability Clause. – If any provision of this Act or the application of such provision to any person or circumstance is declared invalid, the remainder of the Act or the application of such provision to other persons or circumstances shall not be affected by such declaration.

  • Section 16.
  • Repealing Clause.
  • All laws, decrees and orders or parts thereof inconsistent herewith, are deemed repealed or modified accordingly, unless the same provide for a heavier penalty.
  • Section 17.
  • Effectivity.
  • This Act shall take effect after thirty (30) days following the completion of its publication in the Official Gazette or in two (2) national newspapers of general circulation.

Approved, February 20, 1989. The Lawphil Project – Arellano Law Foundation

What organization is responsible for maintaining a code of ethics for healthcare professionals?

Understand the Codes of Ethics and Conduct for Healthcare Quality Professionals – NAHQ’s mission is to prepare a coordinated, competent workforce to lead and advance healthcare quality across the continuum of care. NAHQ is the only organization dedicated to advancing healthcare quality competencies, defining the standards of excellence for the profession.

To that end, it is of paramount importance healthcare quality professionals adhere to exemplary conduct and ethics standards. Whether you’re just entering the healthcare quality profession or thinking about earning the Certified Professional in Healthcare Quality ®, now is the time to familiarize yourself with the code of ethics and the code of conduct for the profession.

Required for NAHQ Members and CPHQ Candidates All NAHQ members and CPHQ candidates for certification and recertification must read and abide by the Code of Ethics and Code of Conduct for Healthcare Quality Professionals. Code of Ethics for Healthcare Quality Professionals Introduction A code of ethics clarifies roles and responsibilities within a profession and provides guidance to the professional for addressing common ethical questions.

The increasingly respected designation of the Certified Professional in Healthcare Quality ® and changes in the healthcare industry have generated a new appreciation for the essential role of the healthcare quality professional. Ethics is the art of making value-laden choices. Questions of regulatory compliance generally are not ethical matters.

The profession offers ethical principles to aid in the healthcare quality professionals’ execution of their duties as members of the profession. A professional is likely guided by several codes of ethics and standards of practice that relate to a person’s industry, licensure, certification and employer relationship.

These codes may be complimentary or contradictory, requiring the professional to exercise judgment about the framework that applies to a specific ethical question. A healthcare quality professional — regardless of his or her specific practice setting, organization size, or portfolio of work — is dedicated to improving clinical outcomes, reducing systemic waste, and ensuring stakeholder engagement and satisfaction.

This purpose is often, but not always, captured in a specific quality role. A healthcare quality professional is defined by his or her purpose and not by a job description. The NAHQ Code of Ethics informs individual decision-making about ethical situations within a given role or relationship.1.

  • The Healthcare Quality Professional’s Commitment to Stakeholders Self Healthcare quality professionals work competently and impartially, practicing within the scope of their education and expertise.
  • They advocate for processes that are fair, transparent, and consistent with evidence-based practices.
  • They remain current on industry trends and best practices,

Healthcare recipients Healthcare quality professionals understand that recipients of healthcare services are the most vulnerable stakeholders in the system. They treat recipients with empathy and respect, honoring their autonomy and privacy. They support positive health outcomes for healthcare recipients.

  1. Colleagues Healthcare quality professionals provide consultative expertise.
  2. They support a fair and just use of influence to foster collaborative relationships.
  3. Employers Healthcare quality professionals extend to their employers the full benefit of their expertise as aligned with the profession’s body of knowledge.

Providers Healthcare quality professionals advocate for quality and safety regardless of healthcare setting. They facilitate seamless transitions of care among providers and provider groups. They support approaches to care that promote the right intervention to the right person at the right time and in the right setting.

  1. Purchasers Healthcare quality professionals seek to reduce systemic waste among all stakeholders by advocating for interventions and processes that both improve health outcomes and minimize waste.
  2. Researchers Healthcare quality professionals model transparency and replicability in their own work, and advocate for and leverage evidence-based practices.

They protect the autonomy and privacy of research subjects. They partner with academics and research scientists while respecting intellectual-property rights. Regulators Healthcare quality professionals remain transparent and forthright with officials from government agencies, industry regulators, and accrediting bodies.

  1. They comply with regulations and standards and report critical information when necessary to protect the public interest.
  2. The public Healthcare quality professionals work to improve healthcare delivery and processes within the community.
  3. They engage members of the community into forums that influence systems of care.2.

The Healthcare Quality Professional’s Commitment within the Profession Health data analytics Healthcare quality professionals engaged in the work of data analytics follow best practices for data management and statistical practice. They ensure that the findings of data-driven inquiries are presented fairly, that work product is reproducible, and that defects and biases are appropriately disclosed.

Patient safety Healthcare quality professionals advocate for policies and processes that support a safe environment of care. They advocate for processes that demonstrate high reliability, minimize defects, and mitigate harm to all stakeholders. Performance and process improvement Healthcare quality professionals engaged in the work of performance improvement employ science-based best practices developed within established quality frameworks.

Population health and care transitions Healthcare quality professionals supporting complex populations advocate for wellness practices in addition to disease management. They promote interventions that address the totality of a healthcare recipient’s circumstances.

Quality review and accountability Healthcare quality professionals advocate for coaching and mentoring to foster accountability. They promote transparent team-based non-punitive approaches to mitigate problems and resolve disputes. Regulatory and accreditation Healthcare quality professionals partner in good faith with regulators, auditors, and inspectors to foster compliance with relevant standards and regulations.

Leadership Healthcare quality professionals are forthright and transparent with the teams they lead. They encourage meaningful inter-professional relationships. They present information using clear, accurate, and concise language. They recruit and mentor colleagues to foster a coordinated and competent workforce aligned with the profession’s body of knowledge.3.

  1. The Healthcare Quality Professional’s Commitment to the Profession Body of knowledge Healthcare quality professionals support the body of knowledge through careful study and application of evidence-based practices.
  2. They protect the integrity of the processes and procedures within the body of knowledge, guide colleagues outside of the profession to use quality tools effectively, and consult on the appropriate application of quality tools.

They seek to fully understand how quality tools and processes apply to the healthcare industry. They contribute to the body of knowledge and to the evidence that supports evolving best practices. Lifelong learning Healthcare quality professionals develop their skills through continuing education, certification, professional experience, and training.

They remain current on industry trends. They seek new ways to apply the body of knowledge to emerging problems. Mentoring Healthcare quality professionals advance the profession through mentoring, publishing, and volunteering. They help colleagues at various stages of their career to master the translation of quality tools to everyday practice.

They share best practices about the application of the body of knowledge and foster a safe environment for collaboration and learning.

What is the name of the professional organization that has developed the code of ethical and professional standards for human resource management?

SHRM Code of Ethical and Professional Standards in Human Resource Management

Introduction

Code of Ethics SHRM Bylaws

A Guide to Developing Your Organization’s Code of Ethics A Guide to Developing Your SHRM Chapter’s Code of Ethics Member Discipline Process

As the world’s largest human resource management association, the Society for Human Resource Management (SHRM) has a responsibility to set and support ethical standards for the human resource profession. Our Bylaws (Section 3) state that, “The purposes of the Society shall be to promote the use of sound and ethical human resource management practices in the professionto be the voice of the profession on human resource management issues to facilitate the development and guide the direction of the human resource profession and to establish, monitor and update standards for the profession.” Our original Code of Ethics was first developed in 1972 and was last modified in 1989 to reflect our name change from the American Society for Personnel Administration to our current name.

  • This package includes a new Code of Ethical and Professional Standards in Human Resource Management.
  • The Code was written entirely by SHRM members and volunteer leaders with the assistance of the Ethics Resource Center (ERC) and SHRM staff.
  • The ERC is a non-profit, nonpartisan educational organization located in Washington, DC.

Hundreds of members and leaders shared in the process through focus groups and individual interviews representing a cross-section of our membership, participation on code development teams, and by providing feedback on code drafts. This Code of Ethical and Professional Standards in Human Resource Management is one part of an overall ethics initiative undertaken by SHRM.

The Code will be supplemented by resources and services which SHRM members can use to promulgate ethics programs within their own organizations or chapters. Communications and Education strategies for initial and continuous training will be put into place as well as an infrastructure for enforcement and advice/counseling.

The standards outlined in our new Code of Ethical and Professional Standards in Human Resource Management, together with integrated ethics program components, are designed to provide guidance and support in your daily work. Introduction to Code of Ethics More than 300,000 SHRM members around the globe look to the Society for their vision and their values.

Composition of the Board of Directors and how it will function;Roles and duties of directors and officers;Rules and procedures for holding meetings, electing directors, and appointing officers;Conflict of interest policies and procedures; andOther essential association governance matters.

SHRM Bylaws

What are the 4 principles in the code of conduct?

The Fundamental Principles of Ethics – Beneficence, nonmaleficence, autonomy, and justice constitute the 4 principles of ethics. The first 2 can be traced back to the time of Hippocrates “to help and do no harm,” while the latter 2 evolved later. Thus, in Percival’s book on ethics in early 1800s, the importance of keeping the patient’s best interest as a goal is stressed, while autonomy and justice were not discussed.

What are the code of conduct of any Organisation?

A code of conduct is a set of rules outlining the norms, rules, and responsibilities or proper practices of an individual party or an organization.

What is Organisation code of conduct?

The Organization and its employees must, at all times, comply with all applicable laws and regulations. The Organization will not condone the activities of employees who achieve results through violation of the law or unethical business dealings.