1st Exam Enough information is provided and that

is provided in easily understandable

Governance – a process whereby elements in forms and media.
society wield power, authority and influence and  Responsiveness – institutions and
enact policies and decisions concerning public processes try to serve the needs all
life and social upliftment. stakeholders within a reasonable
 Process of decision making and the timeframe.
process by which decisions are  Consensus Oriented - requires
implemented (or not) through the mediation of the different interest in
exercise of power or authority by the society to reach a broad consensus on
leaders. what is in the best interest of the whole
 Comprises all the process of community and how this can be
GOVERNING – whether undertaken by achieved. Requires a broad and long-
government of a country, by market or by term perspective on what is needed and
a network – over a social system, to achieve goals of such development.
whether through laws, norms, power or This can only result from an
language of an organized society. understanding of the historical, cultural
 Governance can be used in several and social contexts of a society or
contexts such as: community.
• Corporate governance  Equity & Inclusiveness – all its
• International members feel that they have a stake in it
• National and not excluded from the mainstream of
• Local society. Requires all groups, but
particularly the most vulnerable, have
CHARACTERISTICS OF GOOD opportunities to improve or maintain their
GOVERNANCE well-being.
 Participation – by both men and women  Effectiveness & Efficiency – process
is a key cornerstone of good governance. and institutions produce results that meet
Could be either direct or through the needs of society while making the
legitimate institutions or representatives. best use of resources at their disposal.
Need to be informed and organized. This The efficiency of good governance also
means freedom of association and covers the sustainable use of natural
expression on one hand and an resources and the protection of the
organized civil society on the other hand. environment.
 Rule of law – requires fair and legal  Accountability – key requirement of
frameworks that are enforced impartially. good governance. Not only government
Full protection of human rights, institutions but also other kind of
particularly those of minorities. Impartial organizations must be accountable to the
enforcement of laws requires an public and to their stakeholders. To
independent judiciary and an impartial whom accountable is varies depending
and incorruptible police force. on decisions or actions taken are internal
 Transparency – decisions taken and or external to an institution. An
their enforcement are done in a manner organization or institution is accountable
that follows rules and regulations. to those who will be affected by its
Information is freely available and directly decisions or actions. Cannot be enforced
accessible to those who will be affected without transparency and the rule of law.
by such decisions and their enforcement.
Corporate Governance – system of rules, A. Transparency and Full Disclosure
practices and processes by which business  Does the board meet the
corporations are directed and controlled. information needs of investment
communities?
 Involves balancing the interests of a
 Does it safeguard integrity in
company’s many stakeholders, such as
financial reporting?
shareholders, management, customers,
 Does the board have sound
suppliers, financiers, government and
disclosure policies and practices?
the community.
B. Accountability
 Conduct of business in accordance w/
 Does the board clarify its role
shareholders’ desires which generally is
and that of management?
to make as much money as possible
C. Corporate Control
while conforming to the basic rules of the
society embodied in law and local  Has the board built long-term
customs. sustainable growth in
shoulders’ value for the
 Heart of CG= transparency, disclosure,
corporation?
accountability & integrity
 Does it create an environment
Purpose of Corporate Governance to take risk?
 To facilitate effective, entrepreneurial
and prudent management that can
deliver long-term success of the
company.
 To enhance shareholders’ value and
protect the interest of others
stakeholders by improving the corporate
performance and accountability.
 It is also about the BOD of a company
does, how it sets the values of business
firm.
Objectives of Corporate Governance
 Fair and Equitable Treatment of
Shareholders -
 Self-Assessment
 Increase Shareholders’ Wealth
 Transparency and Full Disclosure
BASIC PRINCIPLES OF EFFECTIVE
CORPORATE GOVERNANCE
Transparency and Full
Accountability
Disclosure
(Is the board taking
(is the board telling us what is
responsibility?
going on?)

Good and Effective Governance

Corporate Control
(is the board doing the right thing?)
Good Corporate Governance
Essence of any system of good corporate
governance is to allow the board and
management the freedom to drive their
organization forward and to exercise that
freedom within a framework of effective
accountability.
Relationship between shareholders/Owners
and other stakeholders
Corporate governance refers to the system by
which companies are directed and controlled,
balancing the interests of shareholders and
stakeholders.

Purpose: To ensure accountability, fairness,

and transparency in a corporation’s relationship
with all stakeholders, including shareholders,
management, customers, suppliers, and the
community.
Shareholders/Owners:
 Primary investors or owners of the
corporation.
 They delegate responsibilities to the
board of directors to manage and
protect their interests.

Board of Directors:
 Elected by shareholders to oversee
the corporation's management.
 Responsible for setting policies,
approving strategic decisions, and
ensuring the corporation adheres to
legal and ethical standards.
 Plays a crucial role in monitoring
executive management and ensuring
corporate accountability.

Executive Management:
 Appointed by the board to run the
day-to-day operations of the
corporation.
  Responsible for implementing the  Oversight and Control
board’s policies and strategic - The board and audit committees
directions. ensure executive management acts
Operational Management and Internal in shareholders' best interests.
Auditors: - Internal auditors and external
 Operational Management: Manages auditors provide additional layers of
the company's functional areas (e.g., oversight, enhancing accountability.
finance, marketing, HR).
 Internal Auditors: Provide independent Importance of Accountability and
assessments and oversight, ensuring Transparency
controls and compliance with  Stakeholders: Corporations are not only
regulations. accountable to shareholders but also to a
broader group of stakeholders, who
Accountabilities in the Governance System might be impacted by the company's
 Shareholders/Owners: Hold actions.
ultimate accountability, as they own  Legal and Ethical Obligations:
the company. Management and the board must
operate within legal frameworks and
 External Auditors: Independent maintain ethical standards, addressing
parties who examine the financial stakeholders’ expectations and
statements and report on their requirements.
accuracy, ensuring transparency for
shareholders. Owners want Accountability on such things
as:
 Regulators: Ensure the corporation  Financial Performance
complies with legal and regulatory
requirements.  Financial Transparency – financial
statements that are clear with full
disclosure and that reflect the underlying
 Society and Others: Includes economics of the company.
employees, communities, and any
other stakeholders affected by the  Stewardship - how well the company
corporation's operations. protects and manages the resources
Corporations are accountable to entrusted to it.
society for ethical and sustainable
practices.  Quality of Internal Control

 Composition of the Board of Directors

Governance Process and the nature of its activities –
 Delagation Responsibilities information on how well management
- Shareholders delegate governance incentive systems are aligned with the
responsibilities to the board. shareholders’ best interests.
- The board further delegates
operational responsibilities to -Management has always had the primary
executive and operational responsibility for the accuracy and
management. completeness of an organization’s financial
statements
Management’s Responsibility:  Securities and Exchange
Commission – ensure the
 Choose which accounting principles best
accuracy, timeliness and fairness
portray the economic substance of
of public reporting of financial and
company transactions.
other information for public
 Implement a system of internal control
companies.
that assures completeness and accuracy 7. External Auditors – perform audits of
in financial reporting company financial statements to ensure
 Ensure that the financial statements that the statements are free of material
contain accurate and complete misstatements that may be due to fraud.
disclosure. 8. Internal Auditors – performs audits for
Parties involved in Corporate Governance: compliance with company policies and
Their Respective Broad Role and Specific laws, audits to evaluate the efficiency of
Responsibilities operations, and periodic evaluation and
tests of controls.
1. Shareholders – provide effective
oversight through election of BOD
members, approval of major initiatives  November 10, 2016. SEC approved the
such as buying and selling stock, annual Code of Corporate Governance for
reports on management compensation, publicly-listed companies.
from the board. - Goal is to help companies develop
2. Board of Directors – major and sustain an ethical corporate
representative of stockholders to ensure culture and keep abreast with recent
that the organization is run according to developmets in corporate
the organization’s charter and that there governance.
is proper accountability.
3. Non-Executive or Independent - Establish a code of business conduct
Directors – same as the broad role of the and submit new manual on Corporate
entire BOD. Governance that would “provide
4. Management – operations and standards for professional and
accountability. Manage the organization ethical behavior as well as
effectively; provide accurate and timely articulate acceptable and
reports to shareholders and other unacceptable conduct and
stakeholders. practices.”
5. Audit Committees of the BOD –
provide oversight of the internal and
external audit function and the process of
preparing the annual financial
statements as well as public reports on
internal control.
6. Regulators
 Board of Accountancy – set
accounting and auditing
standards dictating underlying
financial reporting and auditing
concepts; set the expectation of
audit quality and accounting
quality.