Corporate Governance Definition: Corporate governance is the relationship between corporate managers, directors and providers of equity, institutions who save and invest their capital to earn a return. Corporate Governance in Pakistani context: In March 2002, the SECP issued the Code of Cor porate Governance under Section 34(4) of the Securities and Exchange Ordinance, 19 69 and SECP Act, 1997 Listed compa nies are also re gulate d by the stock exchange at which th e y are listed Banking companies are also regulated by the State Bank of Pakistan. Need For Corporate Governance 1. Means to meet the increasing demand of invest ment capital. 2. Enhance the performance of corporations & conformance of corporations to laws, rules and practice 3. Improve competitivenes s Mobilization of capital 4. Market mechan ism 5. Transparency 6. Accountability 7. To facilitate the agency problems. 8. The corporate governance system specifies the r ights of the shareholder under³equity Contract´. Principles of corporate governance Rights and equitable treatment of shareholders : Organizations should respect the rights of shareholders and help shareholders to exercise those rights. They can help shareho lders exercise their rights by effectively communicating in for mation that is understandable and accessible and encouraging shareholders to participate in general meetings. Interests of other stakeholders : Organizations should recognize that they have legal and other obligations to all legitimate stakeholders. Role and responsibilities of the board : The board needs a range of skills and understanding to be able to deal with various business issues and have the ability to review and challenge management performance. It needs to be of sufficient size and have an appropriate level of commitment to fulfill its responsibilities and duties Integrity and ethical behaviorNecessary element in risk management and avoiding lawsuits. Organizations should develop a code of conduct for their directors and executives. Disclosure and transparency :. Clarify the roles and responsibilities of board and management. Verify and safeguard the integrity of the company's financial reporting. Disclosure of material matters should be timely & balance . Roles & Responsibility of Board of Directors & Managers. Fiduciary Duties. To adopt mission & vision statement, corporate strategy. To issue securitie s. To make loans. To invest the funds of the company. A Well-Governed Company Mostly outside directors No management ties Formal evaluation of directors responsive to investors' requests for information on governance issues Corporate Governance Models Anglo-American Model , in which all directors participate in a single board. Adopted in America, Britain, Canada & Australia
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