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8/2/2019 The Etymology Of
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National Proverty EradicationProgramme (NAPEP)Case study: Nigeria
Impact and Implementation of the National Eradication Programme (NAPEP)
NOSIRU GAFAR.O F/HD/09/3620039
AKPAN ELIZABETH INI F/HD/09/3620004
OZURUONYE EMEKA F/HD/09/3620090
F/HD/09/3620077
UDOH ENOBONG. H F/HD/09/3620040
ADEBAYO MUDASIRU. M F/HD/09/3620013
OJO FEYISAYO. C F/HD/09/3620014
ODUNSI SEUN. R F/HD/09/3620082
KPAGI THANKGOD. N F/HD/09/3620058
KAREEM ADEOLA. K F/HD/09/3620085
2012
Presented to:
MRS. Ejinwunmi
3/20/2012
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INTRODUCTION
The etymology of governance cornes from a Latin words gubernare and gubernator,
which refer to steering and to the steerer or captain of a ship. The word governance
cornes from the old French gouvernance and means control and the state of being
governed (farrar, 2011).
Corporate governance has succeeded in attracting a good deal of public interest because
of its important for the economic health of corporations and the welfare of society, in
general. However, the concept of corporate governance is defined in several ways
because it potentially covers many activities having direct or indirect influence on the
financial health of corporate entities.
Milton Friedman (2002), an economist and Noble laureate, said that corporate
governance is to conduct the business in accordance with owners or shareholders
desires, which generally will be to make as much money as possible, while conforming
to the basic rules of the society embodied in law and local customs.
The Organization for Economy Cooperation and Development (OECD) (1999) defined
corporate governance as the system by which business corporation are directed and
controlled.
The World Bank (1999) defined corporate governance from tow different perspectives .
A: from the standpoint of a corporation the emphasis is put on the relationship between
the owners, management board and other stakeholders (the employees, customers,
suppliers, investors and communities).
B: from the public policy perspective, corporate governance refers to providing for the
survival, growth and development of the company, and at the same time its
accountability in the exercise of power and control over companies.
Monks and Minow (2001) defined corporate governance as the relationship among
various participant in determining the direction and performance of corporations. The
primary participant are the shareholders, the management, and the board of directors.
Gregory (2001) in her very well done comparison study entitled, International
Comparison of Corporate Governance Guidelines and Codea of Best Practice:
Developed Markets, described corporate governance as the blend of law, regulation,
and appropriate voluntary private-sector practices which enables the corporation to
attract financial and human capital, perform efficiently, and thereby perpetuate itself by
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generating long term economy value for its shareholders, while respecting the interest
of stakeholders and society as a whole.
Olin (2001) said, corporate governance is a board term that encompasses rules and
market practices that determine how companies make decisions, the transparency of
their decision making process, the accountability of their directors, managers and
employees, the information they disclose to investors and the protection of minority
shareholders. From the authors point of view, corporate governance can be defined as
the set of rules and incentives by which the management of a company is directed and
controlled in order to maximize the profitability and long term value of the firm.
Corporate Governance Models around the World
There are many different models of corporate governance around the world. These
differ according to the variety of capitalism in which they are embedded. The Anglo-
American "model" tends to emphasize the interests of shareholders. The coordinated or
multi-stakeholder model associated with Continental Europe and Japan also recognizes
the interests of workers, managers, suppliers, customers, and the community.
Regulation
1. Legal environment - GeneralCorporations are created as legal persons by the laws and regulations of a particular
jurisdiction. These may vary in many respects between countries, but a corporation's
legal person status is fundamental to all jurisdictions and is conferred by statute. This
allows the entity to hold property in its own right without reference to any particular
real person. It also results in the perpetual existence that characterizes the modern
corporation. The statutory granting of corporate existence may arise from general
purpose legislation (which is the general case) or from a statute to create a specific
corporation, which was the only method prior to the 19th century.
In addition to the statutory laws of the relevant jurisdiction, corporations are subject to
common law in some countries, and various laws and regulations affecting business
practices. In most jurisdictions, corporations also have a constitution that provides
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individual rules that govern the corporation and authorize or constrain its decision-
makers. This constitution is identified by a variety of terms; in English-speaking
jurisdictions, it is usually known as the Corporate Charter or the [Memorandum and]
Articles of Association. The capacity of shareholders to modify the constitution of their
corporation can vary substantially.
2. Codes and guidelinesCorporate governance principles and codes have been developed in different countries
and issued from stock exchanges, corporations, institutional investors, or associations
(institutes) of directors and managers with the support of governments and
international organizations. As a rule, compliance with these governance
recommendations is not mandated by law, although the codes linked to stock exchange
listing requirements may have a coercive effect. For example, companies quoted on the
London, Toronto and Australian Stock Exchanges formally need not follow the
recommendations of their respective codes. However, they must disclose whether they
follow the recommendations in those documents and, where not, they should provide
explanations concerning divergent practices. Such disclosure requirements exert a
significant pressure on listed companies for compliance.
One of the most influential guidelines has been the 1999 OECD Principles of Corporate
Governance. This was revised in 2004. The OECD guidelines are often referenced by
countries developing local codes or guidelines. Building on the work of the OECD,
other international organizations, private sector associations and more than 20 national
corporate governance codes, the United Nations Intergovernmental Working Group of
Experts on International Standards of Accounting and Reporting (ISAR) has produced
their Guidance on Good Practices in Corporate Governance Disclosure. This
internationally agreed benchmark consists of more than fifty distinct disclosure items
across five broad categories:
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Auditing Board and management structure and process Corporate responsibility and compliance Financial transparency and information disclosure Ownership structure and exercise of control rightsThe World Business Council for Sustainable Development WBCSD has done work on
corporate governance, particularly on accountability and reporting, and in 2004
released Issue Management Tool: Strategic challenges for business in the use of
corporate responsibility codes, standards, and frameworks. This document offers
general information and a perspective from a business association/think-tank on a few
key codes, standards and frameworks relevant to the sustainability agenda.
Most codes are largely voluntary. An issue raised in the U.S. since the 2005 Disney
decision in 2005 is the degree to which companies manage their governance
responsibilities; in other words, do they merely try to supersede the legal threshold, or
should they create governance guidelines that ascend to the level of best practice. For
example, the guidelines issued by associations of directors, corporate managers and
individual companies tend to be wholly voluntary. For example, The GM Board
Guidelines reflect the companys efforts to improve its own governance capacity. Such
documents, however, may have a wider multiplying effect prompting other companies
to adopt similar documents and standards of best practice.
Parties to Corporate Governance
The most influential parties involved in corporate governance include government
agencies and authorities, stock exchanges, management(including the board of directors
and its chair, the Chief Executive Officer or the equivalent, other executives and line
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management, shareholders and auditors). Other influential stakeholders may include
lenders, suppliers, employees, creditors, customers and the community at large.
The agency view of the corporation posits that the shareholder forgoes decision rights
(control) and entrusts the manager to act in the shareholders' best (joint) interests. Partly
as a result of this separation between the two investors and managers, corporate
governance mechanisms include a system of controls intended to help align managers'
incentives with those of shareholders. Agency concerns (risk) are necessarily lower for a
controlling shareholder.
A board of directors is expected to play a key role in corporate governance. The board
has the responsibility of endorsing the organization's strategy, developing directional
policy, appointing, supervising and remunerating senior executives, and ensuring
accountability of the organization to its investors and authorities.
All parties to corporate governance have an interest, whether direct or indirect, in the
financial performance of the corporation. Directors, workers and management receive
salaries, benefits and reputation, while investors expect to receive financial returns. For
lenders, it is specified interest payments, while returns to equity investors arise from
dividend distributions or capital gains on their stock. Customers are concerned with the
certainty of the provision of goods and services of an appropriate quality; suppliers are
concerned with compensation for their goods or services, and possible continued
trading relationships. These parties provide value to the corporation in the form of
financial, physical, human and other forms of capital. Many parties may also be
concerned with corporate social performance.
A key factor in a party's decision to participate in or engage with a corporation is their
confidence that the corporation will deliver the party's expected outcomes. When
categories of parties (stakeholders) do not have sufficient confidence that a corporation
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is being controlled and directed in a manner consistent with their desired outcomes,
they are less likely to engage with the corporation. When this becomes an endemic
system feature, the loss of confidence and participation in markets may affect many
other stakeholders, and increases the likelihood of political action.
General Principles of Corporate Governance
Rights and equitable treatment of shareholders: Organizations should respect therights of shareholders and help shareholders to exercise those rights. They can
help shareholders exercise their rights by effectively communicating information
that is understandable and accessible and encouraging shareholders to participate
in general meetings.
Interests of other stakeholders: Organizations should recognize that they havelegal and other obligations to all legitimate stakeholders.
Role and responsibilities of the board: The board needs a range of skills andunderstanding 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. There are issues about the appropriate mix of executive and non-executive
directors.
Integrity and ethical behavior: Ethical and responsible decision making is not onlyimportant for public relations, but it is also a necessary element in risk
management and avoiding lawsuits. Organizations should develop a code of
conduct for their directors and executives that promotes ethical and responsible
decision making. It is important to understand, though, that reliance by a
company on the integrity and ethics of individuals is bound to eventual failure.
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Because of this, many organizations establish Compliance and Ethics Programs to
minimize the risk that the firm steps outside of ethical and legal boundaries.
Disclosure and transparency: Organizations should clarify and make publiclyknown the roles and responsibilities of board and management to provide
shareholders with a level of accountability. They should also implement
procedures to independently verify and safeguard the integrity of the company's
financial reporting. Disclosure of material matters concerning the organization
should be timely and balanced to ensure that all investors have access to clear,
factual information.
IMPORTANCE OF CORPORATE GOVERNANCE
1. Value-adding philosophyCorporate governance should provide foundationsfor all corporate governance functions to add value to the company's sustainable
performance.
2. Ethical conductCorporate governance should promote ethical conduct for allparticipants throughout the company. This entails setting an appropriate tone at
the top and a firm commitment by corporate governance participants to adhere to
ethical behavior and conduct.
3. Accountability Corporate governance should foster accountability andresponsible decision making throughout the company. All participants should be
held account able for their decisions, actions, and performance. Accountability is
the cornerstone of corporate governance in continuously monitoring best
practices. Main drivers of accountability are the acceptance of responsibility,
ethical decision making, transparency, and candor, which result in the
establishment of trust and a mutually beneficial working relationship between
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scalable.
6. Transparency The companies' actions, governance, and financial andnonfinancial aspects of its business should be easily available and understandable
by all parties concerned.
7. Independence The concept of independence in corporate governance determines
the extent to which the corporate governance process and its related mechanism
minimize or avoid conflicts of interests and self-dealing actions of its key personnel.
Corporate governance in Saudi Arabia
The development of corporate governance in Saudi Arabia is of interest for a number of
reasons. Saudi Arabia present a unique blend of size, stage of development of the
economy and wealth, coupled with strictness of Islamic observance. Also, corporate
governance in Saudi context has received very little attention from researcher.
In this paper, four important element of corporate governance in Saudi Arabia will be
discussed, namely: shareholder right, board of directors, audit committees and
disclosure and transparency. Islamic law and Islamic jurisprudence are analyzed as a
basis for the regulation of corporate governance.
It is important to mention here that Saudi Arabia is in the foundation stage of
developing corporate governance and no code of best practices has been set up yet.
REASNS FOR CORPORATE GOVERNANCE IN SAUDI ARABIA
Empirical evidence (Fremond et all., 2002) suggests that good corporate governance
increases the efficiency of capital allocation within and across firms, reduces the cost of
capital for issuers, helps broaden access to capital, reduces vulnerability to crisis, fosters
savings provisions and renders corruption more difficult.
A careful study of corporate governance is important at the present time in Saudi
Arabia because the future will be even more competitive than it is now. In emerging
market economies the business environment lacks many element needed for a
competitive market and a culture enforcement and compliance. Saudi Arabia needs to
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take a long hard look at the way other countries systems work and keep their own
under review.
To remain competitive in changing world, Saudi Arabia corporation must innovate and
adopt the corporate governance practices so that they can meet new demands and new
opportunities. The Saudi government also has an important responsibility for shaping
an effective regulatory framework that provides for sufficient flexibility to allow the
Saudi market to function effectively and to respond to expectation of shareholders and
other stakeholders. The way this principle should be adopted is the responsibility of the
government and the market participants.
Principles of corporate governance in Saudi Arabia
Equitable treatment
of shareholders
Under Saudi company law, shareholders have the right to attend
annual general meetings and have one share, one vote. They have
the right to appoint the board of directors.
Shareholders rights in Saudi companies are to a certain extent,
theoretically protected and maintained, but in practice, we find
that shareholders do not view their rights as seriously as they
should
Responsibilities of
the board of
directors
Saudi company law specifies the duties and responsibilities of
Saudi company boards. The specified goal of boards is to protect
shareholder wealth and the interests of stakeholders. Boards are
now required to appoint audit committees from non-executive
directors. As with shareholders rights, some interviewees
indicated that there was a gap between what was prescribed by
Saudi company law and what was happening in practice.
Disclosure by Saudi
companies
This stipulated by OECD (2004), transparency is a comerstone of
good corporate governance. Before the 1990s, Saudi disclosure
requirements were low, with companies only required to provide
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a balance sheet, a profit and loss account
PRINCIPLES OF CORPORATE GOVERNANCE IN KOREA
KORA Basic feature/characteristics
Description
1. Appointment of directors Directors are appointed at a shareholders general
meting and should be at least three in number.
However, in case of a company of which the total
capital si less than W500,000,000, the number of the
directors may be one or two unless prescribed
otherwise in the articles of incorporation.
2. Duties and liabilities of
directors
The duties of directors related to business pursuant to
the commercial code are mainly classified into the
duties to be faithful and duties to keep secret. In cases
where a director has caused harm to the company,
shareholders representing one percent of total
outstanding shares may request the company to file a
suit against such director.
3. Notice of shareholders
meeting
Shareholders must be notified, in writing or by
electronic documents of any general meeting at least
two weeks prior to such meeting.
4. Proxy rights Shareholder may have proxies to exercise the voting
rights on their behalf. In this case, the proxy shall
submit a document providing power of representation
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at the general meeting.
5. Rights of foreign creditors
and shareholders
There are no separate regulations governing the status
of foreign shareholders. However, the commercial code
specifies the principle of shareholders equality
indicating that shareholders right are not
discriminated against according to nationality.
6. Insider trading Securities and exchange land prohibits officer,
employees, proxies, major shareholders or other
insiders from providing information to third parties in
case they learn undisclosed important information in
relation to the business.
7. Government regulatory
bodies
There are two main government regulatory bodies in
Korea: the ministry of finance and economy (MOFE)
and the financial supervisory commission (FSC). The
FSC has the securities and futures commission under
its control and the financial supervisory services (FSS0
as its executive body. Monetary policy is the
responsibility of the monetary board of the bank of
Korea. MOFE has eth authority to set the principles and
the basic directions of economic policy.
8. Korean accounting
standard
In the process of formulating Korean accounting
standards, the Korea Accounting Institute (KAI), once it
decides international Accounting Standard (IAS) inputs
are not sufficient for use in Korea, refers to accounting
standard generally accepted in the U.S.
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9. Ease of access to financial
statement
All companies are required to keep their audited
financial statements as well as the audit report and
make them available for their shareholders and
creditors. If any of them seek access to the financial
information during normal business hours.
Principles of Corporate Governance in United State of America (USA)
1. Objectives The objectives of shareholder value is directly on owner
interest compared to Germany who specialized in
corporate interest or whole organization objectives.
2. Board system The board of director of corporate governance in USA has
only one tier board such as capital market oriented.
3. Stakeholder
participation
There is always selected amount of stakeholder that run
participate in every aspect of corporate governance in USA
compared to Germany who has area of specification.
4. Share ownership The ownership of corporate government in USA. Provide
great avenue for small firms, large share management to
involved the Germany who has a specific group of bodies
or institutions.
5. Capital market The capital market has plentiful liquid fund. i.e they have
enough capital fund to financed corporate governance
U.S.A Thanger many corporate governance.
6. Bank system They specialized on varieties of books, compared to
Germany who are universal in financial institution.
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Principles of corporate governance in India
INDIA Basic feature
/characteristics
Description
Board of director (a) No need for German style two tired board
(b) For a listed company with turnover exceeding
(c) No single person should hold directorship in more
than 10 listed companies
(d) Non executive directors should be competent and
active clearly defines responsibilities like in the Audit
committee
(e) Attendance record of directors should be made
explicit at the time of re-appointment. Those with less
than 50% attendance should not be reappointed.
(f) Key into that must be prevented to the board as
listed in the code.
(g) Audit committee listed companies with turnover
over Rs.
Remuneration committee The remuneration committee should decide
remuneration committee should decide remuneration
package for executive directors. It should have at least 3
directors, all non executive can be chaired by at least 4
board meeting a year with maximum gap of 4 months
between any 2 meeting minimum information
available to boards stipulated.
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Disclosure and
transparency
(a) Companies should provide consolidatedaccounts for subsidiaries where they have
majority shareholding.
(b) Disclosure list pertaining to related partytransaction provided by committee till ICAIs
norms is established.
(c) Management should inform based of allpotential conflict of interest situations.
Creditors right a. It should rewrite loan covenants, eliminating nominee
directors excepts in cases of serious and systematic debt default
or provision of insufficient information.
b. Same disclosure of norms for foreign and domestic creditors.
Shareholders
right
a. A board of committee headed by a non-executive director look
into shareholders complaints and grievances
b. Half yearly financial results and significant event reports be
mailed to shareholders
Special discloses
IPO
a. Companies making initial public offering (IPO) should inform
the audit committee of category-wise uses of funds every quarter.
b. The audit committee should advise the board for action in this
matter
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Basic Principles of corporate governance system Japan
Shareholder
influence
Only beginning of broader shareholder participation and activities of
(nongovernmental) institutional shareholders. Although eroding,
'keiretsu' still have considerable influence through cross-holding.
Expect any change to be slow and gradual
Board Most still large size, more celebrity members than real decision
mating,
which in Japan is consensus-driven and more emergent than
formalized. First pioneers like Sony or Asahi have tried to install a
professional board, but Toyota still prefers the traditional way with
slow adaptation
Top management
Seniority principles are eroding, but still influential. However the more
companies are forced to act globally (and do not only export), the"
more pressure is on them to professionalize management along
'western' standards and processes. The (individual) accountability for
performance and supervision is key to this
Regulation Despite capital market reforms and privatization, the government's
influence is still stronger than even Latin-European countries
(sometimes more informal, but not less effective)
Employees No formal co-determination process, but still pressure for consensus
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Basic Principles of corporate governance systems: France
Shareholder
influence
Considerable, as many big companies have block holders with
multiple voting rights, influenced by the government (declining,
but still visible especially in pre-election limes), increasing
minority shareholder and transparency rights through the EU
influence; growing foreign shareholding, mainly by institutional
investors, leading to conflicts between block holders and
minority investors (relatively to, e.g., Benelux and Germany) as
general assemblies were previously mere formalities
Board Option to go for one-tier or two-tier board (60:40. the top tier
has mostly
opted for two-tier), dominant position of the 'president and
director general', who often chairs the board also in the two-tier
system, but increasingly boards are becoming more active, but
so far few have ousted a president/director general due to the
tight network among the French elite
Top
management
Dominated by graduates of the 'Grand licole*, with technical
and administrative background, often service in government,
more hierarchical organizations, lower degree of viable
compensation (also growing)
Regulation Detailed, based on traditional mistrust of market forces, most
driven by EU directives, only slowly emergence of 'soft
regulations' (e.g., codes)
Employees No relevant involvement of organized labor as also the unions
want to have clear division of responsibilities
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Principles of corporate governance in South Africa
Shareholders
influence
Mostly family or government controlled business with stock
market listing; control often based on different voting rights.
Minority rights a permanent issue, often hampered by lack of
legal enforcement. Similar: transparency regulations are not
always enforced. Effective capital markets and other 'capitalist'
institutions still in early development
Board Often dominated by insiders, e.g., family members and friends,
which makes management control less efficient. Reluctance for
transparency, strong relation-based decisions
Top management Often still part of 'friends and family', interested in risk
diversification through conglomerate building to buffer volatile
business development, little culture of (personal) accountability
in many countries
Employees Even if laws are 'perfect', lack of enforcement, e.g., due to
corruption and independent judiciary makes any law
implementation uncertain and decisions of authorities often
arbitrary Not at all-
Differences between U.S.A. and European model of corporate governance
Significant difference U.S.A. European countries
(i) Definition of corporate
governance
It focuses primarily on
aligning the interest of
It emphasizes the
protection of all
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management with those of
the shareholders
stakeholders interest,
including alignment of the
interest of controlling
shareholders.
(2) Disposed versus
concentrated ownership
Here the capital ownership is
dispersed because about 100
million Americans own shares
of public company through
direct ownership
Capital ownership is more
concentrated with majority
ownership and controlling
shareholders.
(3) Fiduciary duties The Anglo-Saxon in the U.S.A
and U.K. Establishes an
enforceable set of fiduciary
duties for directors to act as
agents in the best interest of
both controlling and minority
shareholders.
The fiduciary principles is
not well developed and this
the role based approach
often allows controlling
shareholders to extract
private benefits
(4) Different types of
fraud
The dispersed US structure is
more prone to short-term
earnings management and
overstating earning to stock
prices
Shareholders are not
susceptible to short-term
earnings management
fraud.
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REFERENCES
Aguilera, R. 2004, "Corporate governance and Employment Relations: Spain in theContext of Western Europe", in Gospel H. and Pendleton A. (ed.), Corporate Governanceand Labour Management. An International Comparison, Oxford University Press.
Solomon, J. 2007, Corporate Governance and Accountability, second edition, Wiley,England.
Van den Berghe, L. 2002, Corporate governance in a globalising world: convergence ordivergence?, Kluwer Academic Publishers, USA.
Rajesh Chakrabarti. 2005, Corporate Governance in India Evolution and ChallengesCollege of Management, Georgia Tech 800 West Peachtree Street, Atlanta GA30332,USA.
www.bookboon.com, Corporate Governance principles
http://www.bookboon.com/http://www.bookboon.com/http://www.bookboon.com/