OVERVIEW ON CORPORATE

GOVERNANCE
1.0 Corporate Governance
Definition
Corporate Governance is a system of
structures and processes to direct and control
companies
It specifies the distribution of responsibilities
among companies stakeholders including
shareowners, directors, and managers
It articulates the rules and procedures for
making decisions on corporate affairs

Corporate Governance Definition
(Contd)
It provides the structure for defining,
implementing, and monitoring a company s /
an institutions or an organisations goals and
objectives, and ensuring accountability to
appropriate stakeholders

Corporate Governance Definition
(Contd)
Corporate Governance as defined by Sir Adrian
Cadbury, UK 1992:

The system by which companies / institutions are
directed and controlled

2.0. Hence Corporate Governance
Means Leadership
For efficiency
For probity (complete honesty)
With responsibility
Both transparent and accountable

3.0. The 4 Pillars Corporate
Governance
Transparency: Directors should clarify to shareowners and other
key stakeholders why every material decision has been made

Accountability: Directors should be held accountable for their
decisions and actions to shareholders (private or public / govt)
and, in certain cases, key stakeholders (management, staff etc),
submitting themselves to rigorous scrutiny

Fairness: All share owners should receive equal, just and unbiased
consideration by the directors and management

Responsibility: Directors should carry out their duties with honesty
and integrity

4.0. Agency And Stewardship

5.0. Competing Tensions
If management is
about running business,
governance is about
seeing that it is run
properly. All companies
need governing as well
as managing.
Prof. Bob Tricker, 1984

5.1. Corporate Governance Tensions
An effective system of corporate governance must strive to
channel the self-interest of managers, directors and the advisors
upon whom they rely into alignment with the corporate, shareholder
and public interest.

Ira Millstein
Senior Partner, Weil Gotshal & Menges, LLP
Senior Associate Dean, Corporate Governance,
Yale School of Management
Chair Emeritus, the Forums Private Sector Advisory Group





6.0. Five Key Examples of Good
Corporate Governance Practice
Board Commitment
The board discusses corporate governance issues and has created corporate governance committee
The company has a corporate governance champion
A corporate governance improvement plan has been created
Appropriate resources are committed
Policies and procedures have been formalized and distributed to relevant staff
A corporate governance code has been developed
The company is publicly recognized as a corporate governance leader
Good Board Practices
Clearly defined roles and authorities
Duties and responsibilities of directors
understood
Board is well structured
Appropriate composition and mix of skills
Appropriate board procedures
Director remuneration in-line with best practice
Board self-evaluation and training conducted
Transparent Disclosure
Financial information disclosed
Non-financial information disclosed
Financials prepared according to IFRS
High-quality annual report published
Web-based disclosure
Well Defined Shareowner rights
Minority shareowner rights are formalized
Well-organized general assembly conducted
Policy on related-party transactions
Policy on extraordinary transactions
Clearly defined and explicit dividend policy
Control Environment
Independent audit committee established
Risk-management framework present
Internal control procedures
Internal audit function
Independent external auditor conducts audits
Management information systems established
Compliance function established
6.1. Good (Sound) Corporate
Governance Practice Attracts
Investors
Sound Corporate Governance practices inspire
investor and lender confidence, spur domestic
and foreign investment, and improve corporate
competitiveness. Key to this are well informed
Boards and Directors fully aware of their
responsibilities and functions
Philip Armstrong, Head, Global Corporate
Governance Forum, Washington

7.0. Boards Over Riding Role
The Boards role is to provide entrepreneurial
leadership of the company / organisation within
a framework of prudent and effective controls.







United Kingdom Combined Code (2006)


8.0 Board Responsibilities
Develop the companys / institutions purpose,
vision, values
Guide strategy
Oversee management
Monitor corporate governance
Ensure that controls are in place
Oversee disclosure, communications

9.0 Differences Between Directing
And Managing
Collective decision-making
Duties and responsibilities to
shareowners, company
Directors report regularly to
shareowners
Leadership vision, strategy
Approve, abide by ethics code
Signoff of financial statements,
etc.
Joint and several liability

Individual decision-making
Specific to department
Report to board
Implement vision, strategy
Abide by ethics code
Preparation of financial
statements, etc.
Several liabilities

Directing Managing
10.0 Chairman, CEO Role Separation
Board Chairman
Provide overall leadership to the Board
Responsible for Board Agenda, Work Plan
Work with Chairmen of Board Committees
Informal link between Board and CEO/Management
Participate in selection, induction of NEDs
Counsel individual Directors, Performance Evaluation
Relations with Shareowners, Investors, Key
Stakeholders

Chairman, CEO Role Separation
(cont.)
Chief Executive Officer (Managing Director)
Work closely with Board / Council Chairman
Formulate strategy, business plan, gain board budget
approval
Responsible for financial, corporate objectives
Formulate major corporate policies, supervise management
Ensure effective management succession planning
Ensure continuous improvement in services, products
Relations with investors, major customers, business partners
Ensure companys long-term sustainability

11.0 Directors Role
Decision-maker
Challenger
Supervisor
Reflective Listener
Process Manager
Knowledge Provider
Company Representative
Status Provider
Innovator
Developer

12.0 Directors Duties
12.1 Duty to Act Within Powers
Act only within their powers as defined by the
constitution or approved by shareowners

12.2 Duty of Care
Legal obligation imposed on directors requiring that they
adhere to a reasonable standard of care while
performing any acts that could potentially harm others
Directors are normally expected to discharge their duties
in:
Companys best interests
Compliance with companys code of conduct

Directors Duties (cont.)
12.3 Fiduciary Duties
Directors must act in a faithful, trustful manner
towards or on the companys behalf, putting
their duty before personal interests.
Considerations include:
Good faith
Proper purpose
Not to make secret profits
Avoiding conflicts of interest
Confidentiality

13.0 Directors Rights
Access to information
Reimbursement for expenses incurred
Discharge their duties without interference
from co-Directors
Attend and participate in Board Meetings
Notice of Meetings
Advice
Delegation

14.0 Corporate Governance: Local
Examples
The Good

The Bad

The Ugly

15.0. Conclusion: Action Ideas
I plan to take the following actions upon my
return to my company:
Obstacles that may prevent me from
implementing CG in my Company:
Actions to overcome such anticipated problems
are: