GBRIC QUIZ

• Governance


  The process of decision-making and the process by which decisions are implemented (or not implemented) through the exercise of power or authority by leaders of the country and / or organizations
• Characteristics of good governance

  • Participation
  • Rule of law
  • Transparency
  • Responsiveness
  • Consensus oriented
  • Equity and inclusiveness
  • Effectiveness & efficiency
  • Accountability
• Corporate governance


  A system of rules, practices and processes by which business corporations are directed and controlled
• Corporate governance


  • Balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community
• Purposes of corporate governance

  • To facilitate effective, entrepreneurial and prudent management that can deliver long-term success of the company
  • To enhance shareholders' value and protect the interests of other stakeholders by improving corporate performance and accountability
• Objectives of corporate governance

  • Fair and equitable treatment of shareholders
  • Self-assessment
  • Increase shareholders' wealth
  • Transparency and full disclosure
• Basic principles of effective corporate governance

  • Transparency and full disclosure
  • Accountability
  • Corporate control
• There is no simple universal formula for good governance
• Governance starts with the shareholders/owners delegating responsibilities through an elected board of directors to management and, in turn, to operating units with oversight and assistance from internal auditors
• The board of directors and its audit committee oversee management and, in that role, are expected to protect the shareholders' rights
• Management can influence who sits on the board and the audit committee as well as other governance controls that might be put into place
• Governance demands accountability back through the system to the shareholders
• Companies also have responsibilities to other stakeholders
• Stakeholders can be anyone who is influenced, whether directly or indirectly, by the actions of a company
• What owners want from management

  • Financial performance
  • Financial transparency - financial statements that are clear with full disclosure and that reflect the underlying economics of the company
  • Stewardship, including how well the company protects and manages the resources entrusted to it
  • Quality of internal control
  • Composition of the board of directors and the nature of its activities, including information on how well management incentive systems are aligned with the shareholders' best interests
• Management has always had the primary responsibility for the accuracy and completeness of an organization's financial statements
• Responsibilities of management regarding financial reporting

  • Choose which accounting principles best portray the economic substance of company transactions
  • Implement a system of internal control that assures completeness and accuracy in financial reporting
  • Ensure that the financial statements contain accurate and complete disclosure
• Related parties involved in corporate governance

  • Shareholders
  • Board of directors
  • Non-executive or independent directors
• Broad role of shareholders

  • Provide effective oversight through election of board members, approval of major initiatives
• Specific activities of the board of directors

  • Establishing the organization's vision, mission values and ethical standards
  • Delegating an appropriate level of authority to management
  • Demonstrating leadership
  • Assuming responsibility for the business relationship with CEO including his or her appointment, succession, performance remuneration and dismissal
  • Overseeing aspects of the employment of the management team
  • Recommending auditors and new directors to shareholders
  • Ensuring effective communication with shareholders other stakeholders
  • Crisis management
  • Appointment of the CFO and corporate secretary
  • Ensuring the organization's long-term viability and enhancing the financial position
  • Formulating and overseeing implementation of corporate strategy
  • Approving the plan, budget and corporate policies
  • Agreeing key performance indicators (KPIS)
  • Monitoring / assessing assessment, performance of the organization, the board itself, management and major projects
  • Overseeing the risk management framework and monitoring business risks
  • Monitoring developments in the industry and the operating environment
  • Oversight of the and organization, including its control and accountability systems
  • Approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures
  • Understanding and protecting the organization's financial position
  • Requiring and monitoring legal and regulatory compliance including compliance with accounting standards, unfair trading legislations, occupational health and safety and environmental standards
  • Approving annual financial reports, annual reports and other public documents / sensitive reports
  • Ensuring an effective system of internal controls exists and is operating as expected
• Specific activities of non-executive or independent directors

  • To understand the organization, its business, its operating environment and its financial position
  • To apply expertise and skills in the organization's best interests
  • To assist management to keep performance objectives at the top of its agenda
  • To understand that his/her role is not to act as auditor, nor to act as a manager
  • To respect the collective, cabinet nature of the board's decisions
  • To prepare for and attend board meetings
  • To seek information on a timely basis
• Board of Directors


  • The governing body elected by the stockholders that exercises the corporate powers of a corporation, conducts all its business and controls its properties
• Management


  • A group of executives given the authority by the Board of Directors to implement the policies it has laid down in the conduct of the business of the corporation
• Independent director


  A person who is independent of management and the controlling shareholder, and is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director
• Executive director


  A director who has executive responsibility of day-to-day operations of a part or the whole of the organization
• Non-executive director


  A director who has no executive responsibility and does not perform any work related to the operations of the corporation
• Conglomerate


  A group of corporations that has diversified business activities in varied industries, whereby the operations of such businesses are controlled and managed by a parent corporate entity
• Internal control


  A process designed and effected by the board of directors, senior management, and all levels of personnel to provide reasonable assurance on the achievement of objectives through efficient and effective operations; reliable, complete and timely financial and management information; and compliance with applicable laws, regulations, and the organization's policies and procedures
• Enterprise Risk Management


  A process, effected by an entity's Board of Directors, management and other personnel, applied in strategy setting and across the enterprise that is designed to identify potential events that may affect the entity, manage risks to be within its risk appetite, and provide reasonable assurance regarding the achievement of entity objectives
• Related Party


  Shall cover the company's subsidiaries, as well as affiliates and any party (including their subsidiaries, affiliates and special purpose entities), that the company exerts direct or indirect control over or that exerts direct or indirect control over the company; the company's directors; officers; shareholders and related interests (DOSRI), and their close family members, as well as corresponding persons in affiliated companies. This shall also include such other person or juridical entity whose interest may pose a potential conflict with the interest of the company
• Related Party Transactions


  A transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. It should be interpreted broadly to include not only transactions that are entered into with related parties, but also outstanding transactions that are entered into with an unrelated party that subsequently becomes a related party
• Stakeholders


  Any individual, organization or society at large who can either affect and/or be affected by the company's strategies, policies, business decisions and operations, in general. This includes, among others, customers, creditors, employees, suppliers, investors, as well as the government and community in which it operates
• Requiring and monitoring legal and regulatory compliance

  1. Compliance with accounting standards

  2. Compliance with unfair trading legislations

  3. Compliance with occupational health and safety

  4. Compliance with environmental standards
• Broad Role of Non-Executive or Independent Directors


  • The same as the broad role of the entire board of directors
• Specific activities of Non-Executive or Independent Directors

  1. To understand the organization, its business, its operating environment and its financial position

  2. To apply expertise and skills in the organization's best interests

  3. To assist management to keep performance objectives at the top of its agenda

  4. To understand that his/her role is not to act as auditor, nor to act as a manager

  5. To respect the collective, cabinet nature of the board's decisions

  6. To prepare for and attend board meetings

  7. To seek information on a timely basis

  8. To ensure that he/she is in a position to contribute to the discussion when a matter comes before the board, or alert the chairman in advance to the need for further information

  9. To ask appropriate questions relative to operations
• Broad Role of Management


  • Operations and accountability
  • Manage the organization effectively and provide accurate and timely reports to shareholders and other stakeholders
• Specific activities of Management

  1. Recommend the strategic direction and translate the strategic plan into the operations of the business

  2. Manage the company's human, physical and financial resources to achieve the organization's objectives - run the business

  3. Assume day to day responsibility for the organization's conformance with relevant laws and regulations and its compliance framework

  4. Develop, implement and manage the organization's risk management and internal control frameworks

  5. Develop, implement and update policies and procedures

  6. Be alert to relevant trends in the industry and the organization's operating environment

  7. Provide information to the board

  8. Act as conduit between the board and the organization

  9. Developing financial and other reports that meet public, stakeholder and regulatory requirements
• Broad Role of Audit Committees of the Board of Directors


  • Provide oversight of the internal and external audit function and the process of preparing the annual financial statements as well as public reports on internal control
• Specific activities of Audit Committees of the Board of Directors

  1. Selecting the external audit firm

  2. Approving any non-audit work performed by the audit firm

  3. Selecting and / or approving the appointment of the Chief Audit Executive (Internal Auditor)

  4. Reviewing and approving the scope and budget of the internal audit function

  5. Discussing audit findings with internal auditor and external auditor and advising the board (and management) on specific actions that should be taken
• Broad Role of Board of Accountancy

  • Set accounting and auditing standards dictating underlying financial reporting and auditing concepts, set the expectations of audit quality and accounting quality