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Governance
Corporate governance
The system by which companies are
Corporate governance
Corporate governance also provides
the structure through which the objectives of the
Corporate governance
Corporate governance is the system by
and achieved,
how risk is monitored & assessed,
how performance is optimized.
Corporate Governance
Corporate Governance is a relationship
among stakeholders that is used to
determine and control the strategic
direction and performance of organizations
Corporate Governance
Corporate Governance is a relationship
among stakeholders that is used to
determine and control the strategic
direction and performance of organizations
Concerned with identifying ways to
ensure that strategic decisions are
made effectively
Corporate Governance
Corporate Governance is a relationship
among stakeholders that is used to
determine and control the strategic
direction and performance of organizations
Concerned with identifying ways to
ensure that strategic decisions are
made effectively
Used in corporations to establish order
between the firms owners and its toplevel managers
Governance
challenges
(Diffuse Shareholders)
Maintain alertness
Board assessment
Advance value
Public Corporation
(Majority Shareholders)
Risk management
ent
Developm
Corporat
commitments
IPO
(Initial Public Offering)
Engage stakeholders.
Private
Company
Funding
Entrepreneurs
Raise capital
Recruit board of directors
Establish accountability
Time
differences
Ownership structure and dispersion
The industry and market environment
of the corporation
Firm size and structure
Life cycle variations including origin &
development, technology & periodic
crises and new directions
Levels of Governance
Business Ethics/Principles
Procedures/Processes
Practices/Behaviour
EXECUTIVES
Senior
Independent
directors
Investors
relations
Chairman
Nomination
Committee
Chief
Executive
Audit
Committee
Remuneration
Committee
Auditing of
Accounts
N O N-E X E C U T I V E S
Board
Appointments
Executive
Remuneration
involve:
The corporate governance framework should
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Board of Directors
The board of directors is responsible for
Board Size
Boards should be an appropriate size not
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Board Independence
Boards should have a majority/high
proportion of outside/independent
directors.
Outside/independent directors should
have no personal interest in the company
and therefore are more effective monitors.
But, it is also a good idea to have some
company insiders (CEO, executives) on the
board to provide the board with a better
understanding of the companys
operations.
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Chairman/CEO Positions
The Chairman of the Board is responsible
Board Committees
The board of directors can delegate
Executive Compensation
Compensation of top executives can be
or fired.
Alignment of interests is usually achieved
through:
Stock ownership
Stock options
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Ownership Structure
The identity of the controlling owner can
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Corporate
Secretary
Reporting &
Disclosure
Governance
System and
Controls
Board
Meetings
Board Operations
Chairman
Strategy
Corporate Policies & Procedures
Board Governance Instruments
Monitoring and Evaluation
Board Committees
Audit
Committee
Shareholders
Remuneration
Committee
Other
Committees
Executive
Committee
Internal Controls
& Assurance
External Audit
Other Assurance
Providers
Management
Source: KPMG
22
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Accountability
Ensure that management is accountable to
the Board
Ensure that the Board is accountable to
shareholders
Fairness
Protect Shareholders rights
Treat all shareholders including minorities,
equitably
Provide effective redress for violations
Transparency
Ensure timely, accurate disclosure on all
Independence
Procedures and structures are in place so
Elements of Corporate
Governance
Good Board practices
Control Environment
Transparent disclosure
Well-defined shareholder rights
Board commitment
understood
Board is well structured
Appropriate composition and mix of skills
practice
Board self-evaluation and training
conducted
Control Environment
Internal control procedures
Risk management framework present
Disaster recovery systems in place
Media management techniques in use
Control Environment
Business continuity procedures in place
Independent external auditor conducts
audits
Independent audit committee established
Control Environment
Internal Audit Function
Management Information systems
established
Compliance Function established
Transparent Disclosure
Financial Information disclosed
Non-Financial Information disclosed
Financials prepared according to
Transparent Disclosure
Companies Registry filings up to date
High-Quality annual report published
Web-based disclosure
conducted
Policy on related party transactions
Board Commitment
The Board discusses corporate governance
Board Commitment
Policies and procedures have been
loans
Improved company performance
sustainability
Higher firm valuation and share
performance
Reduced risk of corporate crisis and
scandals