Innovations in Corporate Governance
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Innovations in Corporate Governance

Global Perspectives

Edited by Susan Watson and P. M. Vasudev

The world is changing. Old certainties were swept away by the Financial Crisis of 2008. States are grappling with the implications of new thinking about the ways in which the role and nature of corporations should be viewed and therefore regulated. This timely study uses perspectives of scholars from around the world to highlight and provide critical analysis of innovations in corporate governance adopted in a range of jurisdictions, both mature and developing. Due to their primary importance, particular attention is paid to the governance of banks.
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Chapter 6: Empire-building: the rise of the audit committee

Brenda Hannigan

Abstract

In the largest traded public companies, the range of activities now undertaken by board committees continually expands in a way which means that increasingly they are occupying the board’s ‘space’. This chapter focuses on the role of the audit committee. It starts with a detailed consideration of the evolving remit of audit committees, so that we may appreciate just how wide-ranging an empire they have carved out for themselves at the expense, perhaps, of the board’s authority. It then moves on to assess the implications of this empire-building for committee members in terms of the expertise required of them, their workload and remuneration. It then discusses the relationship between the committee and the shareholders, which is as yet rather underdeveloped, though with some signs that shareholders are looking for better engagement with and improved transparency from the committee. The relationship with the board is also considered, examining in particular the potentially high standard of care, skill and diligence required of the committee members, which can be contrasted with the board’s residual (and probably quite nominal) duty of supervision. Finally, the chapter considers whether, given its pivotal role, the audit committee requires some additional statutory underpinning.

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