Where Does The Buck Finish?
Accountant's Minute 152
Welcome to Accountants Minute.
The aftermath of the Banking Royal Commission has clearly established that the “buck” finishes with the board of directors or management committee.
Important corporate governance principles are being reinforced in the horror expressed by ordinary citizens about some of the breakdowns in corporate culture, combined with the resignations of some of the directors from what was traditionally one of Australia’s leading companies, have all emphasised where the buck finishes.
There is no doubt that the buck finishes at the board or committee of the company, not-for-profit, charity or sport organisation.
There are over 1,000,000 companies and hundreds of thousands of organisations in Australia to which the corporate law and concepts of corporate governance apply, just as if the company or organisation was a listed public company.
Many of these company directors will be looking for guidance and assistance as to what is “corporate governance“ for a small/medium company or organisation.
The law and society apply certain obligations on companies for the right to trade in special status classifications – propriety limited companies.
Companies emerged about 500 years ago as a special category to protect shareholders whilst, at the same time, encourage shareholders to invest in companies. The law gave companies special treatment – whether taxation or limited liability.
Not-for-profits, charities and sporting organisations also benefit quite significantly from special taxation treatment and the ability to receive tax deductible contributions from members of the public.
In return for the special categories of treatment, society expects certain standards to be abided by, irrespective of whether the company is a publicly listed company, a small/medium enterprise company or a not-for-profit, charity or sporting organisation – this is called “corporate governance”.
The custodians of corporate governance are the company’s directors or the organisation’s management committee.
Many companies and organisations will be seeking guidance from their accountants on appropriate processes to maintain corporate governance in their company/organisation.
What is corporate governance in an SME company or organisation?
