Reference no: EM132891767

Gladstone Transport, a road haulage company, is likely to be seeking a stock exchange listing in a few years' time. In preparation for this, the directors are seeking to understand certain key recommendations of the international corporate governance codes, since they realise that they will have to strengthen their corporate governance arrangements. In particular the directors require information about what the governance reports have achieved in:

1. Defining the role of non-executive directors

2. Improving disclosure in financial accounts

3. Strengthening the role of the auditor

4. Protecting shareholder interests

Previously also, the directors have received the majority of their income from the company in the form of salary and have decided salary levels amongst themselves. They realise that they will have to establish a remuneration committee but are unsure of its role and what it will need to function effectively. The directors also have worked together well, if informally; there is a lack of formal reporting and control systems both at the board and lower levels of management. There is also currently no internal audit department.

The directors are also considering whether it will be worthwhile to employ a consultant to advise on how the company should be controlled, focusing on the controls with which the board will be most valid.

(a) Explain the purpose and role of the remuneration committee and analyse the information requirements the committee will have in order to be able to function effectively.

(b) Discuss what is meant by organisation and management controls and recommend the main organisation and management controls that Gladstone Transport should operate.