Definition

Governance Corporate Body

CompaniesPublic SectorSocial Sector

Important Issues

Accountability Stakeholders Transparency Governance/ Board Structures Monitoring Performance

CG in Public Sector

Seven Principles of Public Life Selflessness Integrity Objectivity Accountability Openness Honesty Leadership

Dominant Personality Aspect Principal cause of CG issues Characteristics of a dominant leader

CharismaticPowerfulIntolerantOften seemingly sincereDoes not nurture subordinates

Stakeholders

Board of Directors elected by shareholders Controlling (Majority / Minority)Non-controlling (individual / institutional)

Lenders (individual / institutional) Management / Employees Clients / Suppliers Society (includes government)

Key Persons Mr Shareholder

Individual / Institutional Investor Chairman Board Members

Executive / Non-executiveIndependent / Nominees

CEO Other Managers / Employees

Agency Problem

Minority Controller Majority Controller Cost of agency monitoring

Key Issues of CG Financial Reporting and Auditing Directors Remuneration Risk Taking Effective Communication between:

Board and shareholdersCompany and stakeholders

Corporate Social Responsibility

Financial Reporting Force of Law Influence of professional bodies Audit Report – how valid is it? Does it work? Role of Institutional Investor

Professional analysts What is the real solution?

Directors Remuneration

Big issue in West, not here Who sets it? Why do shareholders complain after

approving? Disunity in shareholders?

Company-Stakeholders Relations Structure of the Board

Is it representative?Does it have sufficient Independents?

Articles of Association Contents?Allocation of power to stakeholdersActual use of powers

Risk Management WHO CARES:

To take risk or not to take risk?How much risk to take?How to minimize / manage risks?

NATURE OF RISKSOperationalTakeovers

Communication

What needs to be communicated? Frequency Set pattern, or need basis Why communicate?

Legislation for CG

Company Law Regulations for listed companies Specific CG related laws? Social pressure can often have the

same force as law.

Questions asked when companies fail

Was it management incompetence?Why was it not noticed before disaster?

DishonestyDid the dishonest person get away with it?How?Why?

Eventually, this boils down to poor governance.

Approaches to CG

Shareholder Value approach Enlightened Shareholder Approach Pluralist Approach Ethical conduct and Code of ethics in

CG

Assignment of this week

Shareholders Approach Board cares for only shareholders Shareholder means:

All shareholders, orMajority shareholders only, orVocal shareholders only?

Balanced treatmentBetween shareholders and others

Enlightened ShareholdersApproach Balance between the interest of all

stakeholders, but basic attention to shareholders.

Issues:Which shareholdersPeople who wear two or more caps

Integrated/Pluralist Approach Accountability

To shareholders, but also to others

ResponsibilityTo all stakeholders.

Means of enforcement

The Corporate Sins

Sloth (unwillingness to take risk/initiative)

Greed Fear

What is the Best Approach? Which Why Where