The Role of a Corporate Governance Task Force - Shabrawishi

8/3/2019 The Role of a Corporate Governance Task Force - Shabrawishi

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Governanc e Task Forc eBa sed on: Devel o in Cor o rat e Gover n an c e Cod es of B est

Prac t ice Toolk i t - Global Corporat e Governanc e Forum

Presented By : Hassan ElPresented By : Hassan El--ShabrawishiShabrawishi -- ConsultantConsultantGlobal Corporate Governance ForumGlobal Corporate Governance ForumInternational Finance CorporationInternational Finance Corporation

Yemen, FebruaryYemen, February 20082008


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Who We Are Founded in 1999 by World Bank Group and OECD

Forums purpose:

Promote global, regional and local CG reform initiatives

Improve institutional framework for good corporate governance

Facilitate improved CG practices in developing countries


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Cor orate Governance Defined

Corporate governance is the system by which companies aredirected and controlled.

Source:Sir Adrian Cadbury, UK Combined Code

Corporate governance involves a set of relationships between a

companys management, its board, its shareholders and otherstakeholders.

Corporate governance also provides the structure through which theobjectives of the company are set, and the means of attaining those

.

Source:OECD Corporate Governance Principles, 2004


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The System by Which Companies are

Directed and ControlledShareholders

Monitor and guide


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Important to Distinguish Corporate

Governance From Other ConceptsCorporate governance corporate/financial management

CorporateGovernance

Accountabilityand

SupervisionCorporate

Governance

Accountability

andSupervision

Executive M mt. Corporate

StrategicManagement

Executive Mgmt. Corporate

ra eg cManagement

- Decision and Control -Operational Mgmt.

Management

Source: Robert I. Tricker, Corporate Governance, 1984

- ec s on an on ro -Operational Mgmt.

Source:Robert Tricker,Corporate Governance, 1984

Corporate governance corporate social responsibility or business ethics

If management is about running the business, corporate governance is aboutseeing that it is run properly. All companies need managing and governing.


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Put Differently, Corporate Governance means


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Governance Means

Increased access to financing

Higher firm valuation

Greater growth potential

e uce r s o nanc a cr ses

Better relations with other stakeholders


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Codes of Best Practice?

recommendations aimed at improving and guiding the governance practices ofcorporations within a countrys specific legal environment and business context.

,

companies, or they may address a specific aspect of corporate governance such as

disclosure or board practices;,

governance codes of best practice are by nature voluntary, yet various incentive

mechanisms may encourage corporate compliance with essential provisions of the

Corporate governance codes of best practice are just one element of the legal

framework in which businesses operate.


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At the national level they contribute to raising standards as well as

driving reform efforts; At the corporate level, codes serve as a benchmark for monitoring and

mp emen ng corpora e governance prac ces an po c es;

Many countries have now adopted Corporate Governance Codes of

best ractice to restore and sustain investor confidence

Following this trend and the examples of Egypt, Oman and the UAE,

countries from the MENA region are now engaging in the development

of corporate governance codes.


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Examples from the Region

1. Egypt: code for state-owned enterprises issued by the Egyptian Institute of Directors(status: passed)

2. Egypt: code for listed companies is to be reviewed by Egyptian Institute of Directorsstatus: in rocess of constitutin task force

3. Jordan: code for listed companies issued by the Jordan Securities Commission

4. Lebanon: code targeted to small and medium enterprises (status: passed)5. Lebanon: code for listed companies (status: in process)6. West Bank & Gaza: code for listed com anies status: in rocess7. Saudi Arabia: code passed as a regulation by the Capital Market Authority, which now

forms part of the stock exchanges listing requirements (status: passed)8. United Arab Emirates: regulation issued by the Emirates Securities Commission

Authority (status: passed). n te ra m rates: co e ssue y t e u a ecur t es ar et status:

passed)10. United Arab Emirates: listing rules issued by the Abu Dhabi Securities Market

(status: passed).

12. Morocco: code for listed companies (status: in process)13. Tunisia: code for listed companies (status: in process)14. Algeria: code for family and state owned enterprises (status: in process)


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Global Standards

OECD ca ital markets & Commonwealth emer in markets

ICGN standards and recommendations Country Standards

United Kingdom [Combined Code], South Africa [King II], etc.

Industry Initiatives

Resources, forestry, banking, etc.

Investor Standards

Hermes, CalPERS, Morley, TIAA-Cref, ABI, etc.

NYSE, JSE, ASX, London, etc.

Corporate Policies and Standards

Source: Recommendations by Phil Armstrong, Head of GCGF June 2006


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Initiating and Leading The Process

The Crafting Committee or the Task ForceThe Crafting Committee or the Task Force

e ea rgan za on

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The Initiator

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No single type of organization is best suited to initiating or developing a corporate governance code.Virtually every possible combination has resulted in the adoption of quality codes. What is essential is

.


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Initiating and Leading The Process


e ea rgan za on

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The Initiator

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rganization

ssional

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The Role of Government


e ea rgan za on

Onl in a few cases has the overnment actuall

Government

played a leading role in developing a corporategovernance code, preferring to keep a low profile

in favour of the private sector;

Regardless of its level of involvement, thegovernment is often perceived to be an essentialsource of support.

In the United Kingdom, for example, staff from various government departments including theDepartment of Trade and Industry and the Treasury, were assigned to assist Derek Higgs in preparing

e epor on e ec veness o on- xecu ve rec ors, ssue n .


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The Role of Private Organizations and

Professional AssociationsThe Crafting Committee or the Task ForceThe Crafting Committee or the Task Force

e ea rgan za on

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The Role of Private Organizations and


e ea rgan zat on

Private Organizations

Legal profession; Accounting profession;

Auditing profession; Professional

Directors institutes; Shareholder associations.

Brazils first code of corporate governance was initiated in 1995 by the Instituto Brasileiro deGovernanca Corporativa (IBGC), a private, self-financed, independent institution.


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The Role of Business Community and Financial


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The Initiator

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mmunity

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The Role of Business Community and Financial

SectorThe Crafting Committee or the Task ForceThe Crafting Committee or the Task Force

e ea rgan za on

In many countries, they have been the first to

Business Community

governance

Some of these initiatives suggest that corporatean nanc a ec or governance co es nee no necessar y e

developed by national bodies only and thatdirectly interested parties may also take theinitiative of introducin cor orate overnance best

The Turkish Industrialists and Businessmens Association (TUSIAD) initiated and led the developmentof the first corporate governance best practices code developed in Turkey. This organization is

practices.

composed of senior executives of the major industrial and service companies in Turkey.


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When developing a corporate governance code, it is preferable to have the

support of the government as well as the business community.This does not mean that a corporate governance code should be enforced by way

of statute,

but it does mean that the code crafting committee and the various task teams thatdraft the code need to be handpicked so that business leaders, regulators such

as stock exchanges, professional bodies such as lawyers and accountants,labor unions and or anized business such as chambers of commerce are allrepresented on the committee.

Mervyn King, Chairman of the King Committee on Corporate Governance, South


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Consulting main stakeholders;

Appointing a project manager;

Appointing the project team;

Appointing a secretary and organizing secretariat services andmeeting facilities;

Securing funding;

Organizing pre-meeting discussions between the chairman and

individual members of the committee.


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Identify Reasons for a Code

For example, is it to ..

..enhance established law and set higher business practices

..address particular standards in a specific sector

..reconcile domestic practices with international requirements

..

..set standards on a particular issue or circumstances

Code should NOT be a Substitute for Legal Deficiencies!

Be clear in making the Distinction (and Implications) between ..

.a voluntary initiative, e.g. UK, The Netherlands, South Africa

. , . . ,

Explore Leverages that will Support Adherence (Enforcement?)

Consider Market Framework and Policy Priorities



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General Principles to Consider

o un ary or a esources ..generally a question of public duty for committee members

..task team members = depends

..if using academic resources, question of compensation might be relevant

..if using international research, often compensation is raised

Allow Time for Consultation with Authorities ..especially if some of the issues are sensitive

..dont be tra ed b s ecific ublic olic a endas

Consider Potential for Conflict in the Committee

..often over issues reflecting vested interests

..hence, clear agenda and objectives must guide the process

Code should NOT be a Reflection of Status Quo

Must Contain Aspirational Elements = raise the bar (Make sure to consult anddiscuss)

Effective Formulation Must also have Effective Dissemination

..useful to assist market in understanding requirements, implications

..should allow a transitional period to adapt new standards

..can assist buy in and give a more qualitative touch to the recommendations



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Thank You !

Documents

The Role of a Corporate Governance Task Force - Shabrawishi