Corporate governance
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CORPORATE GOVERNANCE. Definition: “The system by which companies are directed and controlled”. OR Corporate governance is a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated, and controlled.

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CORPORATE GOVERNANCE

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Corporate governance

CORPORATEGOVERNANCE

Definition:

“The system by which companies are directed and controlled”.

OR

Corporate governance is a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated, and controlled.

Over all Corporate Governance is combination of vision, mission, values, ethics & service standards,


Governance structure

GOVERNANCE STRUCTURE

Share Holders

Vote for.

BOD

Have a fiduciary responsibility to look out for shareholders’ interests.

Hires

CEO

Who is accountable to the board.

TEAM MGT

Workers


Importance of corporate governance

IMPORTANCE OF CORPORATE GOVERNANCE

  • Issue of integrity.

  • Bonus culture .

  • Regulatory framework.

  • Directors' training.


Relating reputation

RELATING REPUTATION

Corporate

Governance

Firm A

Firm C

Firm B

Share holders

Needs

Customer

Needs

Employees

Needs

Govt.

Needs

Reputation

Assets/Resources

Relating amount of Assets

Weak

Strong


Corporate governance

  • We need to win back their trust. A cat may have nine lives to live, yet leaders have only one. If we destroy our reputation in search of profits, we destroy our pride and ourselves.For example:Honda = no break fail.Toyota = does change its model.Mercedes = run without petrol.Shezan = Fruitfully yours etc.A good corporate governance image enhances the reputation of the organization and makes it more attractive to customers, investors, suppliers and, in the case of nonprofit organizations, contributors.


Competition

COMPETITION

Famous Competitors:

  • Superior University and Punjab University.

  • Microsoft and Apple.

  • Moblink and Ufone etc.

    Competition among firms may be more effective by ensuring that resources are used efficiently. However, not every type of corporate governance mechanism can effectively promote competitiveness. (Berle and Means, 1932) argue that in practice the board would pursue/follow their own interest rather that interests of its shareholders, resulting in inefficiency and diminished competitiveness.


Corporate ethics

CORPORATE ETHICS

  • Ethics is concerned with the code of values and principles that enables a person to choose between right and wrong.

  • Corporate ethics refers to the ethical and moral decision that are faced in business world or ethical conduct in bussiness.

  • Corporate governance and ethical behaviour have a number of advantages.

  • Corporate Ethics Isn't About Rules; It's About Honesty. Trust is the only currency that can sustain a corporation through the turbulences over its lifecycle.

  • Corporate governance is out-and-out a matter of ethics. It is about who is responsible to whom, and for what, and under what conditions.


Corporate governance

Corporate Ethics

Shareholder

Employees

Quality

Satisfaction

Community


Corporate governance

Answer is…!!!

Every One


Corporate resposibilities

CORPORATE RESPOSIBILITIES

For Example:

  • WWE: Don’t try this at home.

  • Tobacco: Smoking is injurious for health.

  • Alcohol: Stay Alive, don’t drink and drive.

  • Cancer:Show you care, be aware .

  • Fire fighters: Got crazy with the lighter? Call a firefighter etc.


Golbalization with corporate governance

GOLBALIZATION WITH CORPORATE GOVERNANCE

  • Globalization means to build up world-wide common market.

  • Globalization is process toward a Nation, and to governance a global world and also recognized that toward an art of Alliance, and now, it means to build up a global market. (Ex. World Bank, WTO, IMF, G8, and so on...)

    MAJOR SHARE HOLDERS

  • Toyota Industries Corporation 5.3%

  • Sumitomo Mitsui Banking Corp. 5.0%

  • UFJ Trust Bank Ltd. 4.2%

  • Nippon Life Insurance Co. 4.2%

  • The Master Trust Bank of Japan, Ltd. 4.0%


Models mechanism

Outsider (shareholders) model

A priority to market regulation.

The owners of firms tend to have a transitory interest in the firm

The absence of close relationships between shareholders and management.

Insider (stakeholders) model

The priority to stakeholders control

The owners of firms tend to have an enduring interest in the company

The relationships between management and shareholders are close and stable

MODELS & MECHANISM

MODEL:

The Corporate Model is a Human Resource Management tool that allows anyone to take recruitment on the Web into their own hands.


Mechanisms

According to Denis and McConnell Corporate Governance Mechanism are of either internal or external.

Internal mechanisms:

Operate through the Board

of Directors and ownership

structure.

External Mechanisms:

Which refers to the external market for corporate control (the takeover market) and the legal system.

MECHANISMS


Share holders stake holders

SHARE HOLDERS & STAKE HOLDERS

Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, the board of directors, executives, employees, customers, creditors, suppliers, and the community at large.


Corporate governance

STAKE HOLDERSAny constituencies in the organization’s environment that are affected by the organization’s decisions and action. For example Customers, Employees, unions, suppliers, Government etc.

SHARE HOLDERS

Shareholders are the owner of an organization / company. In other words those persons who provide capital / investment to the company for running an organization’s operations.


Board of directors

BOARD OF DIRECTORS

The board is responsible for taking major policy and strategic decision. Directors should have a mix of skill and their performance should be assessed regularly. The appointment of directors have been made by formal nominations committee. Board have decision making power and control over the organization.

  • Executive BOD: People with shares who are on the board.

  • Non- Executive BOD: People who are hired in need only.


Board of directors1

BOARD OF DIRECTORS

PARAMETERS FOLLOWED BY BOD

  • · Board of Director meetings held quarterly or monthly

  • · Recorded minutes from each meeting

    The first Board of Directors meeting should include:

  • · Approving the corporate bylaws

  • · Establishing procedures, including record-keeping

  • · Deciding on the corporation’s fiscal year

  • · Selecting or appointing the corporate officers

  • · Electing S Corporation status if appropriate

  • · Authorizing the sale of stock


Aduit commitee

ADUIT COMMITEE

  • An audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure.

  • The Audit Committee is composed of six Members, appointed by the Board of Governors for a non-renewable term of office of six consecutive financial years.

  • The Audit Committee is an independent body answerable directly to the Board of Governors and responsible for verifying that the operations of the Bank have been conducted and its books kept in a proper manner.

  • The Audit Committee should have discussions with the auditors periodically about internal control systems.


Corporate governance

The audit committee has four main functions:

Select the audit firm,

Provide guidance to auditors,

Review audit report,

Inform the company board of directors of the results of the audit.


Corporate scandals

CORPORATE SCANDALS

  • A corporate scandal is a scandal involving allegations of unethical behavior by people acting within or on behalf of a corporation. A corporate scandal sometimes involves accountingfraud of some sort.

  • Good corporate governance helps to prevent corporate scandals, fraud, and potential civil and criminal liability of the organization.


Corporate governance

FOR EXAMPLE:

A company created a secret reserve in the boom year under the head “Taxation Reserve” but these reserve were not shown on the face of balance sheet. Later on company sustained losses, which were converted into profits by utilizing of secret reserve. Thus the shareholders were kept in darkness and they were made to believe that the company was running profitably. It was held that the share holders should be informed about utilization of secret reserve and amount should also be disclose to them.


Corporate governance

CONCLUSION:

Finally the key lesson for us to learn are that Regulations and Policies are

only one part of improving governance.

Corporate governance is an inevitable phenomenon of corporate businesses. Whether it is good or bad is determined by the performance of the components. Good corporate governance is being promoted in almost all parts of the world.


Thank you

THANK YOU


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