corporate governance

• Governance


  The way rules, norms and actions are structured, sustained, regulated and held accountable
• Governance


  The act or process of governing or overseeing the control and direction of something
• Governance

  The degree of formality depends on the internal rules of a given organization and, externally, with its business partners. As such, governance may take many forms, driven by many different motivations and with many different results.
• Good governance

  • Is responsive to the present and future needs of the organization
  • Exercises prudence in policy-setting and decision-making
  • The best interests of all stakeholders are taken into account
  • Typically involves well-intentioned people who bring their ideas, experiences, preferences and other human strengths and shortcomings to the policy-making table
  • Is achieved through an on-going discourse that attempts to capture all of the considerations involved in assuring that stakeholder interests are addressed and reflected in policy initiatives
  • Is an ideal which is difficult to achieve in its totality
• Eight major characteristics of good governance

  • Rule of law
  • Transparency
  • Responsiveness
  • Consensus-oriented
  • Equity and inclusiveness
  • Effectiveness and efficiency
  • Accountability
  • Participation
• Rule of law


  Requires fair legal frameworks that are enforced by an impartial regulatory body, for the full protection of stakeholders
• Transparency


  • Information should be provided in easily understandable forms and media
• Responsiveness


  Organizations and their processes are designed to serve the best interest of stakeholders within a reasonable timeframe
• Consensus-oriented


  Consultation to understand the different interests of stakeholders in order to reach a broad consensus of what is in the best interest of the entire stakeholder group and how this can be achieved in a sustainable and prudent manner
• Equity and inclusiveness


  The organization that provides the opportunity for its stakeholders to maintain, enhance or generally improve their well-being provides the most compelling message regarding its reason for existence and value to society
• Effectiveness and efficiency


  The processes implemented by the organization to produce favorable results meet the needs of its stakeholders, while making the best use of resources - human, technological, financial, natural and environmental - at its disposal
• Accountability


  • Who is accountable for what should be documented in policy statements
  • In general, an organization is accountable to those who will be affected by its decisions or actions as well as the applicable rules of law
• Participation

  • By both men and women, either directly or through legitimate representatives, is a key cornerstone of good governance
  • It needs to be informed and organized, including freedom of expression and assiduous concern for the best interests of the organization and society in general
• Corporate governance


  • The system of rules, practices and processes by which business corporations are directed and controlled
  • It involves balancing the interests of a company's stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community
  • It involves a set of relationships between a company's management, its board, its shareholders and other stakeholders
  • Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined
• Core principles of sound corporate governance

  • Fairness
  • Responsibility
  • Transparency
  • Accountability
• Fairness


  Touches on the points of uniform and equal treatment of all the shareholders in reference to considerations regarding shareholdings
• Responsibility

  • The CEO and Board of Directors are accountable to the shareholders on behalf of the company regarding the execution of responsibilities
  • The Board of Directors is responsible for conducting the management of the business, appointing the suitable CEO, overseeing the affairs of the company and keeping an eye on the performance of the company
• Transparency

  • A company should reveal an informative piece of data about their activities to shareholders and other stakeholders
  • It also includes the open-mindedness and willingness to divulge financial figures which are genuine and correct in reality
  • The unveiling of reports regarding the organization's accomplishments and activities should be on time and strive for accuracy
• Accountability

  • Presentation of a balanced and simple analysis of the company's orientation and prospects
  • Responsibility for determining the character and extent of the adopted risks by the company
  • Maintenance of adequate risk management and internal control structure
  • Setting up formal and unclouded arrangements for corporate reports and a suitable relationship with the company's auditor
  • Proper communication with shareholders regarding diversification, progress and financial reports at frequent
• Benefits of corporate governance


  • Strict compliance culture
  • Rapid access to information and good communication
  • Lift up a company's influence and reputation
  • Increasing cognizance and consensus about the importance of good corporate governance among investors
  • Positive correlation between excellent corporate governance and inflow of foreign investment
  • Enables corporate social responsibilities
  • Reduces corruption
  • Provides the elasticity to apply customized practices that fits the companies' requirements and to alter those practices in light of ever-changing conditions, benchmarks, and standards
• Guiding principles of corporate governance

  • The board approves corporate strategies that are intended to build sustainable long-term value; selects a chief executive officer (CEO); oversees the CEO and senior management in operating the company's business, including allocating capital for long-term growth and assessing and managing risks; and sets the "tone at the top" for ethical conduct
  • Management develops and implements corporate strategy and operates the company's business under the board's oversight, with the goal of producing sustainable long-term value creation
  • Management, under the oversight of the board and its audit committee, produces financial statements that fairly present the company's financial condition and results of operations and makes the timely disclosures investors need to assess the financial and business soundness and risks of the company
  • The audit committee of the board retains and manages the relationship with the outside auditor, oversees the company's annual financial statement audit and internal controls over financial reporting, and oversees the company's risk management and compliance programs
  • The nominating/corporate governance committee of the board plays a leadership role in shaping the corporate governance of the company, strives to build an engaged and diverse board whose composition is appropriate in light of the company's needs and strategy, and actively conducts succession planning for the board
  • The compensation committee of the board develops an executive compensation philosophy, adopts and oversees the implementation of compensation policies that fit within its philosophy, designs compensation packages for the CEO and senior management to incentivize the creation of long-term value, and develops meaningful goals for performance-based compensation that support the company's long-term value creation strategy
  • The board and management should engage with long-term shareholders on issues and concerns that are of widespread interest to them and that affect the company's long-term value creation
  • In making decisions, the board may consider the interests of all of the company's constituencies, including stakeholders such as employees, customers, suppliers and the community in which the company does business, when doing so contributes in a direct and meaningful way to building long-term value creation
• Key corporate actors

  • Board of directors
  • Management
  • Shareholders
• Board of directors


  • Has the vital role of overseeing the company's management and business strategies to achieve long-term value creation
  • Selecting a well-qualified chief executive officer (CEO) to lead the company, monitoring and evaluating the CEO's performance, and overseeing the CEO succession planning process are some of the most important functions of the board
  • The board delegates to the CEO—and through the CEO to other senior management—the authority and responsibility for operating the company's business
  • Effective directors are diligent monitors, but not managers, of business operations
  • They exercise vigorous and diligent oversight of a company's affairs, including key areas such as strategy and risk, but they do not manage—or micromanage—the company's business by performing or duplicating the tasks of the CEO and senior management team
• Management

  • Led by the CEO, is responsible for setting, managing and executing the strategies of the company, including but not limited to running the operations of the company under the oversight of the board and keeping the board informed of the status of the company's operations
  • Management's responsibilities include strategic planning, risk management and financial reporting
  • An effective management team runs the company with a focus on executing the company's strategy over a meaningful time horizon and avoids an undue emphasis on short-term metrics
• Transparency

  • Information be freely available and directly accessible to those who will be affected by governance policies and practices, as well as the outcomes resulting therefrom
• Transparency

  • Any decisions taken and their enforcement are in compliance with established rules and regulations
• Governance


  The way rules, norms, and actions are structured, sustained, regulated, and held accountable
• Major characteristics of good governance

  • Rule of law
  • Transparency
  • Responsiveness
  • Consensus-oriented
  • Equity and inclusiveness
  • Effectiveness and efficiency
  • Accountability
  • Participation
• Rule of Law (in good governance)

  It requires fair legal frameworks enforced by an impartial regulatory body for the full protection of stakeholders
• Transparency in governance

  Information should be provided in easily understandable forms and media, be freely available, directly accessible, and decisions must comply with established rules and regulations
• Accountability in good governance

  It is a key tenet where those responsible for decisions must be documented in policy statements and be accountable to those affected by decisions or actions
• Corporate governance


  The system of rules, practices, and processes by which business corporations are directed and controlled, balancing the interests of stakeholders
• Core principles of sound corporate governance

  • Fairness
  • Responsibility
  • Transparency
  • Accountability
• Fairness in corporate governance

  It involves uniform and equal treatment of all shareholders regarding their shareholdings
• Key corporate actors in governance

  • The board of directors
  • Management (led by the CEO)
  • Shareholders
• Benefits of good corporate governance

  • Improved performance
  • Better communication
  • Enhanced reputation
  • Increased investments
  • Positive influence on share price
  • Attraction of foreign investment
  • Corporate social responsibility
• Role of the board of directors in corporate governance

  Overseeing the company's management and business strategies, selecting the CEO, and monitoring performance and risk management
• CEO's responsibility in corporate governance

  Setting, managing, and executing the company's strategies and operations under the board's oversight
• Good corporate governance

  Attracts long-term capital and supports economic growth by demonstrating stability and reliability
• Insider trading


  Trading by internal members of a company based on sensitive, non-public information