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The reformation of the voting and control system is a task that entails complex and accurate considerations, as well as a thorough assessment of the existing control system. (McKee, and Garner, 412) The implementation of the additional control element will inevitably complex the existing system, as the additional control elements will have their own interests in the control process, which may contradict the initial control policy. Additionally, in accordance with AASB127 principles, the control may be specified by the legislative or executive authority. As it is stated by Bavly (87):
In determining whether the relationship between similar organizations within the public sector constitutes a control relationship, the following factors would be among those which should be considered either singly or in combination: ministerial approval is required for operating budgets; the power of the Minister or a central authority to appoint and remove members of the board of management; or a ministerial power of direction. Where the relationship between a company and a central authority constitutes a control relationship, this Standard would require consolidated financial statements to be prepared for the group comprising the central authority and the controlled company.
In the light of this perspective, the company with less than a half votes in an entity will not be controlled effectively, or it may get under the control of the shareholders, who have lesser amounts of shares, which contradicts the initial policy of the company. Additionally, the implementation of the additional control element will cause the diversification of the control power, which may impact the entire governing system negatively.
On the other hand, if the existing system is aimed at ignoring the interests of the investment minority, this group of investors may leave, and the company will be left without additional reserves. Thus, if financial difficulties are forecasted, this reformation will be useful for the entire company, nevertheless, eh governing system will be diversified, which will not grant stable control of the financial resources.
From the perspective of the research by Imhoff (117), it should be stated that any entity may own its own securities which are convertible into ordinary shares. Thus, the potential of these instruments is explained by the flexibility of the control system. Thus, the voting power of the financial performance is applicable for implementing the additional regulation tools and systems, which are as follows:
- Equity share warrants
- Share call options
- Convertible preference shares
- Convertible debts (Bavly, 201)
Consequently, the innovation of the reformation will be useless for increasing the flexible control system, which is useful either for preparing for a crisis or for implementation of the changes in other spheres of financial and business performance.
Works Cited
Badawi, Ibrahim M. “Global Corporate Accounting Frauds and Action for Reforms.” Review of Business 26.2 (2005): 87
Bavly, Dan A. Corporate Governance and Accountability: What Role for the Regulator, Director, and Auditor?. Westport, CT: Quorum Books, 2007.
Imhoff, Eugene A. “Accounting Quality, Auditing and Corporate Governance.” Accounting Horizons (2003): 117
McKee, David L., and Don E. Garner. Accounting Services, the International Economy, and Third World Development. Westport, CT: Praeger Publishers, 2003.
Someya, Kyojiro, ed. Accounting Education and Research to Promote International Understanding: The Proceedings of the Sixth International Conference on Accounting Education: Kyoto, Japan. New York: Quorum Books, 2004.
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