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Corporate Governance

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If management is about running the business, corporate governance is about seeing that it is run properly. All companies need managing and governing.

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Corporate Governance Why and What Anand Subramaniam
“There has been in recent years excessive emphasis on a citizen's rights and inadequate stress put upon his duties and responsibilities.” - Paxton Blair 2
Highlights  Corporate Governance – Overview  Corporate Governance – Pillars  Corporate Governance - Elements 3
Corporate Governance - Overview
Why Corporate Governance?  Better access to external finance  Lower costs of capital – interest rates on loans  Improved company performance – sustainability  Higher firm valuation and share performance  Reduced risk of corporate crisis and scandals 5
Corporate Governance - Parties Share- Manager Directors holders Who use the Guardians of Company’s Those that own the Company’s assets the company assets for the Shareholders 6
Corporate Governance vs. Management Accountability Accountability and and Corporate Supervision Corporate Supervision Governance Governance Strategic Strategic Management Management Executive Mgmt. Corporate Executive Mgmt. Corporate -Decision and Control- Management - Decision and Control - Management Operational Mgmt. Operational Mgmt. Source: Robert Tricker,Corporate Governance, 1984 Source: Robert I. Tricker, Corporate Governance, 1984 7
Corporate Governance is NOT..  Corporate governance ≠ corporate / financial management  Corporate governance ≠ corporate social responsibility or business ethics 8
What is Corporate Governance? If management is about running the business, corporate governance is about seeing that it is run properly. All companies need managing and governing. 9
Corporate Governance - Pillars
Accountability Fairness Transparency Corporate Governance - Pillars Independence 11
Accountability  Ensure that management is accountable to the Board  Ensure that the Board is accountable to shareholders 12
Fairness  Protect Shareholders rights  Treat all shareholders including minorities, equitably  Provide effective redress for violations 13
Transparency  Ensure timely, accurate disclosure on all material matters, including the financial situation, performance, ownership and corporate governance 14
Independence  Procedures and structures are in place so as to minimise, or avoid completely conflicts of interest  Independent Directors and Advisers i.e. free from the influence of others 15
Corporate Governance - Elements
Corporate Governance - Elements Well- Good defined Board share- practices holder rights Control Board Environ- Elements commit- ment ment Trans- parent P/E Ratio disclo- sure 17
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 18
Control Environment  Internal control procedures  Independent audit committee established  Risk management framework present  Internal Audit Function  Disaster recovery systems in  Management Information place systems established  Media management  Compliance Function techniques in use established  Business continuity  Independent external auditor procedures in place conducts audit 19
Transparent Disclosure  Financial Information disclosed  Non-Financial Information disclosed  Financials prepared according to International Financial Reporting Standards (IFRS)  Companies Registry filings up to date  High-Quality annual report published  Web-based disclosure 20
Well-Defined Shareholder Rights  Minority shareholder rights formalised  Well-organised shareholder meetings conducted  Policy on related party transactions  Policy on extraordinary transactions  Clearly defined and explicit dividend policy 21
Board Commitment  The Board discusses corporate governance issues and has created a corporate governance committee  The company has a corporate governance champion  A corporate governance improvement plan has been created  Appropriate resources are committed to corporate governance initiatives  Policies and procedures have been formalised and distributed to relevant staff  A corporate governance code has been developed  A code of ethics has been developed  The company is recognised as a corporate governance leader 22
“When a man says he approves of something in principle, it means he hasn't the slightest intention of carrying it out in practice.” - Otto von Bismarck 23
Good Luck http://www.linkedin.com/in/anandsubramaniam 24

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Corporate Governance

  • 1. Corporate Governance Why and What Anand Subramaniam
  • 2. “There has been in recent years excessive emphasis on a citizen's rights and inadequate stress put upon his duties and responsibilities.” - Paxton Blair 2
  • 3. Highlights  Corporate Governance – Overview  Corporate Governance – Pillars  Corporate Governance - Elements 3
  • 5. Why Corporate Governance?  Better access to external finance  Lower costs of capital – interest rates on loans  Improved company performance – sustainability  Higher firm valuation and share performance  Reduced risk of corporate crisis and scandals 5
  • 6. Corporate Governance - Parties Share- Manager Directors holders Who use the Guardians of Company’s Those that own the Company’s assets the company assets for the Shareholders 6
  • 7. Corporate Governance vs. Management Accountability Accountability and and Corporate Supervision Corporate Supervision Governance Governance Strategic Strategic Management Management Executive Mgmt. Corporate Executive Mgmt. Corporate -Decision and Control- Management - Decision and Control - Management Operational Mgmt. Operational Mgmt. Source: Robert Tricker,Corporate Governance, 1984 Source: Robert I. Tricker, Corporate Governance, 1984 7
  • 8. Corporate Governance is NOT..  Corporate governance ≠ corporate / financial management  Corporate governance ≠ corporate social responsibility or business ethics 8
  • 9. What is Corporate Governance? If management is about running the business, corporate governance is about seeing that it is run properly. All companies need managing and governing. 9
  • 11. Accountability Fairness Transparency Corporate Governance - Pillars Independence 11
  • 12. Accountability  Ensure that management is accountable to the Board  Ensure that the Board is accountable to shareholders 12
  • 13. Fairness  Protect Shareholders rights  Treat all shareholders including minorities, equitably  Provide effective redress for violations 13
  • 14. Transparency  Ensure timely, accurate disclosure on all material matters, including the financial situation, performance, ownership and corporate governance 14
  • 15. Independence  Procedures and structures are in place so as to minimise, or avoid completely conflicts of interest  Independent Directors and Advisers i.e. free from the influence of others 15
  • 17. Corporate Governance - Elements Well- Good defined Board share- practices holder rights Control Board Environ- Elements commit- ment ment Trans- parent P/E Ratio disclo- sure 17
  • 18. 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 18
  • 19. Control Environment  Internal control procedures  Independent audit committee established  Risk management framework present  Internal Audit Function  Disaster recovery systems in  Management Information place systems established  Media management  Compliance Function techniques in use established  Business continuity  Independent external auditor procedures in place conducts audit 19
  • 20. Transparent Disclosure  Financial Information disclosed  Non-Financial Information disclosed  Financials prepared according to International Financial Reporting Standards (IFRS)  Companies Registry filings up to date  High-Quality annual report published  Web-based disclosure 20
  • 21. Well-Defined Shareholder Rights  Minority shareholder rights formalised  Well-organised shareholder meetings conducted  Policy on related party transactions  Policy on extraordinary transactions  Clearly defined and explicit dividend policy 21
  • 22. Board Commitment  The Board discusses corporate governance issues and has created a corporate governance committee  The company has a corporate governance champion  A corporate governance improvement plan has been created  Appropriate resources are committed to corporate governance initiatives  Policies and procedures have been formalised and distributed to relevant staff  A corporate governance code has been developed  A code of ethics has been developed  The company is recognised as a corporate governance leader 22
  • 23. “When a man says he approves of something in principle, it means he hasn't the slightest intention of carrying it out in practice.” - Otto von Bismarck 23