External Influences on a companys governance

Dr Safdar A Butt

External influences

Regulatory bodies
Government Professional and trade associations

Media
Print, Electronic Lobbyists

Pressure Groups
Consumers, NGOs Investors

Governments Role

Regulatory Promotional Entrepreneurial Planning

Regulatory Role

Determination of conditions under which what can be done by how for how long.

Licenses, permits, special permissions Self Regulation

Controls, monitors, regulates

Balance between various segments of economy to avoid conflicts

Self Regulation

Done by a trade or industrial association to keep their members compliant with laws and rules. Advantages include proximity, flexibility, better compliance, collective interest, pooling of resources. Disadvantages include conflict of interest, under-enforcement, global competition, insufficient resources.
5

Promotional Role

Creating business environment

Infrastructure development

Business incentives
Tax relief Cheaper capital

Subsidies Embassies

Entrepreneurial Role

Running strategic businesses Showing the business how to do business

Sadly missing from our country Ayub Khans reforms

Setting up and disposing essential units

Planning Role

General economy Fiscal policies Monetary policies

Credit control

Specific sector/area development

SECP

Companies NBFIs and special companies Professional bodies regulations Stock Exchanges

Divisions

Company Law (company registrations) Securities Market (stock exchanges) Specialized Companies (NBFIs, modarabas, mutual funds, pension funds, etc.) Insurance (insurance companies, reinsurances) Law (various laws affecting business other than company law)

10

Impact of Professional Associations

ICAP, ICMAP, IEP Stock Exchanges Chamber of Commerce & Industry Trade Associations

11

Media

Reporting (facts and events) Commentary (on news)

Not just giving views, shaping views Can work for or against business

Awareness campaigns

Advertisements

Double edged sword

12

Objectives of Media Intervention

To stop the bad corporate practices. To encourage the good corporate behavior.

13

Reporting on Facts and Commentaries

Corporate reporting is gaining popularity.

It is coming out of the domain of specialized journals into daily newspapers. Shareholders activism Consumer activism

It has impact on all stakeholders; so companies care.

Factual reporting and commentaries can serve as carrot and stick mode of motivation for companies.

14

Awareness Campaigns

Media has greater reach; hence is more effective.

Polythene bags issue Harmful effluents disposal

Companies can help media in campaigns for social good. Awards Political campaigns

15

Advertisement

Media can insist on honest advertising

Printing disclaimers is not enough

Advertisements are also a way of buying medias support (or silence)

16

Ethics in Media

Editorial independence Refuse dishonest advertisement Avoid sensationalism Should have its own CSR policy Maintain moral values in all their four functions

17

Media and Reputational Risk

Apart from companys own policies and actions, the greatest risk to a companys reputation comes from media.

18

Reputation

Good reputation takes years to build. Shades of reputation:

Products Management Profits Social posture

It takes just one incidence to destroy the reputation of a company.

19

Reputational Risk

What can bring a company into disrepute? What is the price of disrepute? Is it worth losing/keeping reputation? What if there is no direct potential of losing reputation? Defending and Sustaining Reputation:
Sustaining reputation is painstaking Defending reputation may often be selfdefeating.

20

Policy on handling RR

Price of disrepute Is it worth maintaining a good reputation? What if there is no potential of ill-repute? How to defend attacks on reputation

If not carefully handled, it could further damage the reputation.

21

Pressure Groups

Consumer Associations NGOs Investor Associations Become more effective if media joins them. Situation in Pakistan

No real threat right now, but things will change.

22

Thank you

Dr Safdar A Butt

23