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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