C ORPORATE G OVERNANCE

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 C ORPORATE G OVERNANCE D EFINED
2

“Corporate governance refers to the

structures and processes for the direction
and control of companies.”
IFC
“Corporate governance involves a set of relationships
between a company’s management, its board, its
shareholders and other stakeholders. Corporate
governance also provides the structure through which
the objectives of the company are set, and the means
of attaining those objectives and monitoring
performance are determined.”
OECD Corporate Governance Principles, 2004 1/22/2019
3 C ONCEPT

A mechanism to enable Rules, standards and

stakeholders to exercise procedures that
control over insiders governs the corporate
and management to owners, directors and
protect their interests managers

Processes by which
companies are directed
and controlled

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S NAPSHOT OF C ORPORATE G OVERNANCE : A
4
N ARROWER V IEW
Shareholders

CG is a
Journey, Not a
Destination

Regularly report and update

Monitor and guide

Managers Directors

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5 P RINCIPLES

 Rights and equitable treatment of shareholders

(including minority and foreign shareholders)
 Protect interests of other stakeholders
 Role and responsibilities of the board (size,
representation and expertise)
 Integrity and ethical behavior
 Disclosure and Transparency

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6 P RINCIPLES OF W ORLD B ANK

 Voice and accountability

 Political stability and lack of violence

 Government effectiveness

 Regulatory quality

 Rule of law

 Control of corruption

 Transparency
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7 P RINCIPLES OF ADB

Performance orientation

Nomination and compensation committees

Disclosure

Audit committee

Code of conduct

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8 P RINCIPLES OF ADB

Conflicts of interest

Environment and social commitment

Conduct of the board of directors

Responsibilities of investors

Role of directors in turnaround situation

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 9 P RINCIPLES OF OECD

Rights of
Role of
shareholders Equitable Disclosure Responsibilit
stakeholders
and key treatment of and ies of the
in corporate
ownership shareholders transparency board
governance
functions

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10 UN (ISAR) BENCHMARK

More than 50 disclosure items in following 5

categories:
 Auditing
 Board and management structure and process
 Corporate responsibility and compliance
 Financial transparency and information
disclosure
 Ownership structure and exercise of control
rights.

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When any of the principles mentioned above are
violated and not applied properly, one can sense
bad corporate governance in the company. Poor
corporate governance is only the start of
deterioration in company’s health. If uncurbed,
then company will eventually become bankrupt.

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12 E XPERIENCES

Boardroom tussles, Despite recognition the

intra/inter corporate world continues to bog
competitions and usurping down with ignorance of
for partisan benefits are sound corporate
aplenty. governance

Enron, Worldcom, Nepal Development

Bank and many more are illustrations
of poor corporate governance

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13 C ONCLUSION

 Effective corporate governance is necessary to

grow and compete
 Mere compliance with regulatory requirements
not adequate
 Codes of governance have to be evolved keeping
in view the demands and effectively acted upon
by every institution on its own to maximize the
value of stakeholders
 Foundations of corporate governance are
independence, disclosure and transparency,
accountability and self control.

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14

A NY Q UERIES
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