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External Influences
on a company’s
governance
Dr Safdar A Butt
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External influences
Regulatory bodies Government
Professional and trade associations
Media Print, Electronic
Lobbyists
Pressure Groups Consumers, NGOs
Investors
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Government’s Role
Regulatory
Promotional
Entrepreneurial Planning
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Regulatory Role
Determination of conditions under which whatcan be done by how for how long.
Licenses, permits, special permissions
Controls, monitors, regulates
Self Regulation
Balance between various segments of economyto avoid conflicts
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Self Regulation
Done by a trade or industrial association to keeptheir members compliant with laws and rules.
Advantages include proximity, flexibility, bettercompliance, collective interest, pooling ofresources.
Disadvantages include conflict of interest,under-enforcement, global competition,insufficient resources.
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Promotional Role
Creating business environment
Infrastructure development
Business incentives Tax relief
Cheaper capital
Subsidies Embassies
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Entrepreneurial Role
Running strategic businesses
Showing the business how to do business
Sadly missing from our country Setting up and disposing essential units
Ayub Khan’s reforms
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Planning Role
General economy
Fiscal policies
Monetary policies Credit control
Specific sector/area development
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SECP
Companies
NBFIs and special companies
Professional bodies regulations Stock Exchanges
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Divisions
Company Law (company registrations)
Securities Market (stock exchanges)
Specialized Companies (NBFIs, modarabas,mutual funds, pension funds, etc.)
Insurance (insurance companies, reinsurances)
Law (various laws affecting business other thancompany law)
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Impact of Professional Associations
ICAP, ICMAP, IEP
Stock Exchanges
Chamber of Commerce & Industry Trade Associations
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Media
Reporting (facts and events)
Commentary (on news)
Not just giving views, shaping views
Awareness campaigns
Can work for or against business
Advertisements Double edged sword
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Objectives of
Media Intervention
To stop the “bad” corporate practices.
To encourage the “good” corporate behavior.
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Reporting on Facts
and Commentaries
Corporate reporting is gaining popularity.
It is coming out of the domain of specialized journals intodaily newspapers.
It has impact on all stakeholders; so companies care. Shareholders activism
Consumer activism
Factual reporting and commentaries can serve as“carrot and stick” mode of motivation for companies.
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Awareness Campaigns
Media has greater reach; hence is more effective.
Polythene bags issue
Harmful effluents disposal
Companies can help media in campaigns forsocial good.
Awards
Political campaigns
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Advertisement
Media can insist on honest advertising
Printing disclaimers is not enough
Advertisements are also a way of buying media’s
support (or silence)
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Ethics in Media
Editorial independence
Refuse dishonest advertisement
Avoid sensationalism Should have its own CSR policy
Maintain moral values in all their four functions
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Media and
Reputational Risk
Apart from company’s own policies and actions,
the greatest risk to a company’s reputation
comes from media.
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Reputation
Good reputation takes years to build.
Shades of reputation:
Products
Management
Profits
Social posture
It takes just one incidence to destroy thereputation of a company.
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Reputational Risk
What can bring a company into disrepute?
What is the price of disrepute?
Is it worth losing/keeping reputation?
What if there is no direct potential oflosing reputation?
Defending and Sustaining Reputation: Sustaining reputation is painstaking Defending reputation may often be self-
defeating.
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Policy on handling RR
Price of disrepute
Is it worth maintaining a good reputation?
What if there is no potential of ill-repute? How to defend attacks on reputation
If not carefully handled, it could further damage thereputation.
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Pressure Groups
Consumer Associations
NGOs
Investor Associations Become more effective if media joins them.
Situation in Pakistan
No real threat right now, but things will change.
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Thank you
Dr Safdar A Butt
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