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 institution’s or an organisation’s 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 efficiencyFor probity (complete honesty)With responsibilityBoth transparent and accountable

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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 6

4.0. Agency And Stewardship

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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

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5.1. Corporate Governance Tensions

“An effective system of corporate governance must strive tochannel the self-interest of managers, directors and the

advisorsupon whom they rely into alignment with the corporate,

shareholderand public interest.”

Ira MillsteinSenior Partner, Weil Gotshal & Menges, LLPSenior Associate Dean, Corporate Governance, Yale School of ManagementChair Emeritus, the Forum’s Private Sector Advisory

Group

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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

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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. Board’s Over – Riding Role“The Board’s 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 ResponsibilitiesDevelop the company’s / institution’s

purpose, vision, valuesGuide strategyOversee management Monitor corporate governance Ensure that controls are in placeOversee disclosure, communications

9.0 Differences Between Directing And Managing

Directing ManagingCollective decision-

makingDuties 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 boardImplement vision,

strategy Abide by ethics codePreparation of financial

statements, etc.Several liabilities

10.0 Chairman, CEO Role SeparationBoard ChairmanProvide overall leadership to the BoardResponsible for Board Agenda, Work PlanWork with Chairmen of Board CommitteesInformal link between Board and

CEO/ManagementParticipate in selection, induction of NEDsCounsel individual Directors, Performance

EvaluationRelations with Shareowners, Investors, Key

Stakeholders

Chairman, CEO Role Separation (cont.)Chief Executive Officer (Managing Director)Work closely with Board / Council ChairmanFormulate strategy, business plan, gain board budget

approvalResponsible for financial, corporate objectivesFormulate major corporate policies, supervise

managementEnsure effective management succession planningEnsure continuous improvement in services, productsRelations with investors, major customers, business

partnersEnsure company’s long-term sustainability

11.0 Director’s RoleDecision-makerChallengerSupervisorReflective ListenerProcess ManagerKnowledge ProviderCompany RepresentativeStatus ProviderInnovator Developer

12.0 Directors’ Duties12.1 Duty to Act Within Powers• Act only within their powers as defined by the

constitution or approved by shareowners

12.2 Duty of CareLegal 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:Company’s best interests Compliance with company’s code of conduct

Director’s Duties (cont.)12.3 Fiduciary DutiesDirectors must act in a faithful, trustful

manner towards or on the company’s behalf, putting their duty before personal interests.

Considerations include:Good faithProper purposeNot to make secret profitsAvoiding conflicts of interestConfidentiality

13.0 Directors’ RightsAccess to informationReimbursement for expenses incurredDischarge their duties without interference

from co-DirectorsAttend and participate in Board Meetings Notice of MeetingsAdviceDelegation

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:

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Thank you!