Definition

Governance
Corporate Body
Companies
Public Sector
Social 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
Charismatic
Powerful
Intolerant
Often seemingly sincere
Does 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-executive
Independent / 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 shareholders
Company 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 stakeholders
Actual 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 RISKS
Operational
Takeovers

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?

Dishonesty
Did 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, or
Majority shareholders only, or
Vocal shareholders only?

Balanced treatment
Between shareholders and others

Enlightened Shareholders
Approach

Balance between the interest of all

stakeholders, but basic attention to
shareholders.
Issues:
Which shareholders
People who wear two or more caps

Integrated/Pluralist
Approach

Accountability

To shareholders, but also to others

Responsibility
To all stakeholders.

Means of enforcement

The Corporate Sins

Sloth (unwillingness to take

risk/initiative)
Greed
Fear

What is the Best

Approach?

Which
Why
Where