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ON CORPORATE GOVERNANCE. FINAL PRESENTATION OF MANAGEMENT. Ali Iqbal (Group leader) MBP-11507 Nabeel Ahmad Butt MBP-11539 Zain Fayyaz Butt MBP-11510 Weheb Abid MBP-11546 Amna Khan MBP-11505 Huma Khalid MBP-11552. - PowerPoint PPT Presentation
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FINAL PRESENTATION OF MANAGEMENT
ONCORPORATE GOVERNANCE
GROUP MEMBERS Ali Iqbal (Group leader) MBP-11507 Nabeel Ahmad Butt MBP-11539 Zain Fayyaz Butt MBP-11510 Weheb Abid MBP-11546 Amna Khan MBP-11505 Huma Khalid MBP-11552
HISTORY OF CORPORATE GOVERNANCE
In 1983 it appeared as the title of a paper “In perspective on Management” Earl (1983) and in 1984 as the title of report of“The American Law Institute” on the Principles of Corporate Governance and also as the title of a book “Corporate Governance – practices, procedures and power” in British companies and their board of directors…
DEFINITION OF CORPORATE GOVERNANCE Corporate Governance means a
company in a value based manner. Corporate Governance is the system
by which companies are directed & controlled.
EXISTING CORPORATE GOVERNANCE SYSTEM
EXECUTIVE DIRECTORS
BOARD OF DIRECTORS
OWNER DIRECTORS
MANAGEMENT
CORPORATE
SHAREHOLDERS STAKEHOLDERS CREDITORS
SUPERVISORY & ENFORCEMENT AUTHORITIES
INDEPENDENT DIRECTORS
OBJECTIVES Enhancement of Shareholders value
keeping in view the interest of other Stakeholders.
Key Constituents; Share holders Board of Directors Management
ROLES IN CORPORATE GOVERNANCE Gompers et al. (2003) view a
corporation as a republic. The ultimate authority rests with voters (shareholders). These voters elect representatives (directors) who delegate most decisions to bureaucrats (managers).
FUNCTIONS OF CORPORATE GOVERNANCE As in a republic, the actual power
sharing relations depend upon the specific rules of governance. A republic with significant voters rights may be called “Democratic” where as a republic with significant restrictions to voter rights may be called “Dictatorial”
IMPORTANCE OF CORPORATE GOVERNANCE High profile corporate scandals where
directors held accountable Questionable behavior of directors
Excessive bonuses despite poor performance
Decisions based on own interests rather than the interest of shareholders.
Good corporate governance practices, companies can reduce vulnerability to financial crises.
RELATING REPUTATION Corporate Reputation is a multi-stakeholder concept
that is reflected in the perceptions that stakeholders have of an organization (Smidtset al., 2001).
There is much evidence that reputations with different stakeholder groups interact. In particular, reputation with employees is seen to have an impact on reputation with customers and communities (Carmeli, 2005).
When managing their Corporate Reputation, organizations should therefore take account of not only their relationships with stakeholders but also monitor how stakeholders influence each other (Dutton et al., 1994).
COMPETITION OF CORPORATE GOVERNANCE
Corporate governance competition among firms is based upon the following factors Transparency (true and fair facts & figure) Accountability (responsible) Equanimity (equal treatment)
It involves letting Investors know how the company in which they have invested is utilizing their money?
CORPORATE ETHICS Ethics is the integral part of corporate
governance. The board of directors established the code of ethics for management and staff which is considered to be the tasks. This covers penalty of punishment of those who fail to comply, so all the staff must follow strictly the implication and supervision of the code of ethics is applied through the existing management system.
CORPORATE ETHICS Corporate Ethics involves
Transparency among firms decisions an shareholders
Effective board of directors Clearly defined responsibilities Operate in shareholders interest Reliable financial statements Fair remuneration Open communication
CORPORATE RESPONSIBILITIES
CORPORATE RESPONSIBILITY
CORPORATE FINANCIAL
RESPONSIBILITY
CORPORATE ENVIRONMENTAL RESPONSIBILITY
COPRORATE SOCIAL
RESPONSIBILITY
DESCRIPTION OF MODELS & MECHANISM Outsider (shareholders) model
Insider (stakeholders) model
THE OUTSIDER MODEL A priority to market regulation the owners of firms tend to have a
transitory interest in the firm The absence of close relationships
between shareholders and management
the existence of an active `market for corporate control´ - takeovers, particularly hostile ones
the primacy of shareholder rights over those of other organisational groups
THE INSIDER MODEL The priority to stakeholders control The owners of firms tend to have an
enduring interest in the company They often hold positions on the board of
directors or other senior managerial positions The relationships between management and
shareholders are close and stable There is little by way of a market for
corporate control the existence of formal rights for employees
to influence key managerial decisions
GLOBALIZATION WITH CORPORATE GOVERNANCE Increasing integration of economies around
the world Particularly through trade and financial
flows Also refers to the movement of (labour) and
knowledge (technology) across international borders.
IMF
SHAREHOLDERS Shareholders are the owners of the company.
They control the company by appointing board of directors to act as representatives. Shareholders are eligible to make decisions on any of significant corporate changes. Therefore the company encourages the shareholders to exercise their right. Board of directors realizes the importance of shareholders, meeting as revealed in the policies to facilitate all shareholders equally to maintain governance policies.
STAKEHOLDERS The board of directors values the right
of stakeholder that they provide mechanism to promote cooperation between the company and its stakeholders along with customers, employees, suppliers, shareholders, investors, creditors, government competitors, external auditors etc.
BOARD OF DIRECTORS The primary responsibility for
administration and performance of the company lies with the directors. The directors administer the company on behalf of shareholders and their powers and duties are covered in the statue.
AUDIT COMMITTEE The company has the policy that
through independent directors or audit committee, stakeholders can communicate with the board any concerns about illegal or unethical practices, incorrect financial reporting, insufficient internal control etc. so the investigation could be carried out and reported to the board of Directors.
AUDIT COMMITTEE The system by which a company is
directed and controlledInternal Control
•Safeguard the assets•Maintain adequate accounting records•Prepare financial statements
Directors must identify
•Objectives of the entity•Business & Governance risks•How to manage those risks
ROLE OF AUDITOR IN CORPORATE GOVERNANCE External auditor
Checks the integrity of financial statements. Form an opinion on companies compliance
with local corporate governance regulations Review the system & controls for weakness
Internal auditor Monitor & controls with in the entity. Reports to the directors on effectiveness of
procedure and control system and report to the management about governance policies.
CORPORATE SCANDALSSet of questionable, unethical, and/or illegal actions that a person or persons within a corporation engage in.
CONCLUSION There is no doubt that a strong
correlation exists between good governance practices & levels of economic development in a nation.
Good governance leads to good performance and create a positive impact on corporate performance & national economy.
Leaders should understand this link and respond effectively.
FLOW CHART OF CORPORATE GOVERNANCE