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CORPORATE GOVERNANCE

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  1. CORPORATE GOVERNANCE DSM 504

  2. Governance defined • The manner in which power is exercised in the management of economic and social resources of an organizational for sustainable development • Concerned with the processes, systems, practices and procedure: • What are these processes, systems and procedures that you should be concerned with? DSM 504

  3. Concerned with the processes, systems, practices and procedure: • The formal and informal rules that govern institutions • The manner in which these rules and regulations are applied and followed • the relationship that these rules and regulations determine or create • and the nature of these relationships DSM 504

  4. Essentially therefore, governance addresses the leadership roles in the institutional framework DSM 504

  5. Corporate governance defined • A system by which corporations are directed, controlled and held to account • The manner in which the power of a corporation is exercised in the stewardship of its assets/resources so as to increase shareholders value as well as satisfy the needs of all stakeholders DSM 504

  6. Good corporate Governance seeks to promote….. • Efficient, effective and sustainable corporations that contribute to the welfare of the society • Responsive and accountable corporations • Legitimate corporations that are managed with integrity, honesty and transparency • Recognition and protection of stakeholders rights • An inclusive approach based on democratic ideals, legitimate representation and participation DSM 504

  7. Pillars of good corporate governance • Good governance is frames against four main pillars • There must be effective body responsible for governance separate and independent of management to promote: • Accountability ( leaders must be ready to account • Efficiency and effectiveness ( hence leadership for results) • Honesty and integrity ( leadership that is honest, faithful and diligent) • Transparent and open leadership with accurate and timely disclosure of information relating to economic and other activities of the corporation DSM 504

  8. 2. there must be an all inclusive approach to governance that recognizes and protects the rights of members and all stakeholders – internal and external • 3. The institution must be governed and managed in accordance with the mandate granted to it • 4. The institutional governance framework should provide an enabling environment within which its human resources can contribute and bring to bear their full creative powers towards finding innovative solutions to shared problems DSM 504

  9. LAWS FOR EFFECTIVE DIRECTORSHIP KBC Governance Training

  10. 1. Primary duty Each director undertakes to: • Act first and foremost and always in the best interest of the corporation and not for any other collateral purpose • To exercise his /her powers in the executive duties in good faith • To act with the care a prudent person would take when acting on their own behalf In arriving at a decision on any issue he/she shall strive to ensure that the decision is in the best interest of the of the corporation and not driven by other interest KBC Governance Training

  11. 2. Core values • Each director subscribes to the values of the corporation • Directors undertake to take into account not only the possible financial impact of their decision, but also their consequences and effect o relations with stakeholders in general KBC Governance Training

  12. 3. Scope of responsibility • Each director is fully aware that the board is responsible for the upholding the vision, mission and values, deciding the strategic objectives and ensure effective control and be accountable to the stakeholders for these KBC Governance Training

  13. 4. commitment • Each director undertakes to dedicate time and attention necessary to fulfill his/her duties KBC Governance Training

  14. 5. Independence • In all circumstances, each director undertakes to preserve his/her independent of analysis, judgment, decisions and actions and to resist any pressure, direct or indirect whether by other directors, governments, creditors, suppliers of goods or services or, more generally any third party • Directors will not seek or accept from third parties any advantage that might be considered as compromising to his/her independence KBC Governance Training

  15. 6. Conflict of interest • Each director undertakes to disclose to the board fully and immediately it comes to his/her attention any real or potential conflict of interest, direct or indirect which they may have • A director with such a conflict shall not participate in any discussion of any such topic or on voting on it KBC Governance Training

  16. 7. Board effectiveness • Each director is fully aware of the importance of regular attendance and effective participation at meetings • Each director undertakes to do everything within their power to attend all meetings • Each director undertakes to prepare sufficiently for meetings by careful considering board papers and attachments thereto and where necessary seek clarification • Where a director is unable to attend a meeting, he/she undertakes to communication any concerns or issue they with considered KBC Governance Training

  17. 8. Board evaluation • At regular interval, not exceeding twelve months, the board shall undertake an evaluation of its functions collectively as individuals. KBC Governance Training

  18. 9. Information confidentiality • Each director is responsible for seeing to it that he is providing sufficient information in due time to permit the board to deliberate on all issues and on the other hand request of the chairman or CEO in a timely manner , information that may require decision making • Directors must personally take the necessary precautions to preserve the confidentiality of such information and not divulge it under any circumstances KBC Governance Training

  19. 10. Duty to communicate dissent • Each director commits to express his/her views clearly and to use all means at his/her disposal to convince the board of the validity of his her position should he/she hold the view that a proposed Board decision is not in the best interest of the corporation KBC Governance Training

  20. PRINCIPLES OF GOOD CORPORATE GOVERNANCE DSM 504

  21. 1. Authority And Duties Of shareholder • Protect, preserve and actively exercise the supreme authority of the organisation in general meetings. Authority to : • Ensure that only competent and reliable persons who can add value to the company are appointed to the board • Ensure that Board of Director/managers is constantly held accountable and responsible for efficient and effective governance • Change the composition of the board that does not perform to expectations or as per mandate DSM 504

  22. Leadership of the corporation • Every corporation shall be headed by an effective board which shall exercise leadership, enterprise, integrity and wise judgment in directing the corporation so as to achieve continuing prosperity of the corporations and shall always act in the best interest of the corporation DSM 504

  23. 3. Appointment Of The Board Of Director/managers • Appointment to the board of Director should, through a managed and effective process, ensure that a balanced mix of efficient individuals is made and that each of these appointment is meant to add value and bring independent judgment to bear in the decision making process DSM 504

  24. 4. Strategy and Values • The board of Director/senior managers should determine the values of the corporation, determine the strategy to achieve its purpose and implement its values in order to ensure that the corporation survives and thrives and that procedures and values that protects the assets and reputation of the corporation are in place DSM 504

  25. 5.Structure and organisation • The board should ensure that a proper management structure is in place and make sure that the structure functions to maintain corporate integrity, reputation and responsibility DSM 504

  26. Corporate Performance, Viability And Financial Sustainability • The Board should monitor and evaluate the implementation of strategies, policies and management performance criteria and plans • Constantly review the financial sustainability of the corporation DSM 504

  27. Corporate Compliance • Ensure that the corporation complies with all relevant laws, regulation, governance practices, accounting and audit standards DSM 504

  28. Remuneration • The Board of Director should set up an independent Remuneration Committee to determine in consultation with the Government, equitable and attractive remuneration packages for Directors as well as management for ratification by the government as shareholders DSM 504

  29. Responsibility to stakeholders • The Board should identity the corporations internal and external stakeholders; agree on a policy for determining how the corporation should relate to, and with them, while ensuring the rights of stakeholders are respected, recognized and protected DSM 504

  30. Rights and expectations of stakeholders • Who are the stakeholders? • What are their rights? • What information do they require? DSM 504

  31. Stakeholders Internal: • Members • Board • Management • Employees External: • Providers of funds • Suppliers and providers of services • Beneficiaries • Regulatory authorities • Government and community DSM 504

  32. Stakeholder: Information needs Providers of finance have special rights and duties to ensure that: • The funds entrusted are used for the purpose intended, efficiently and effectively and for the target communities or beneficiaries. • That the governance practices are adequate to ensure • Accountability • transparency and openness • efficiency and effectiveness • honesty and integrity DSM 504

  33. GUIDELINES/CODE OF BEST PRACTICES DISCLOSURE OF INTEREST BY DIRECTORS/MANAGERS • On appointment and on a continuous basis, all Director/managers, and in good faith, disclose to the board any interest or other interest that is likely to create a potential conflict of interest DSM 504

  34. COMPOSITION, MIX OF SKILL AND COMPETENCIES • Board member who bring with them a mix of various skills and competencies DSM 504

  35. SUCCESSION PLANNING • in order to ensure continuity of the Board, the appointment of the members of the Board should be staggered and the practice or rotation of Directors applied • THE CHAIRMAN OF THE BOARD • The chairman should be elected by the board DSM 504

  36. CORPORATE COMMUNICATION • ensure that the corporation communicates with its stakeholders effectively through well defined channels DSM 504

  37. INDUCTION, TRAINING AND DEVELOPMENT OF DIRECTORS • The Board should put in place an effective induction programme for new Directors and that training and development programmes should be continuously mounted to in order to provide Directors with newer and emerging skills in good corporate governance and leadership DSM 504

  38. INDEPENDENCE OF THE BOARD OF DIRECTORS/MANAGERS • The appointment procedure for Director/managers should ensure that the Director/managers discloses actual or perceived conflict of interest so that the corporation can function independently objectively and only in the best interest of the corporation DSM 504

  39. BOARD MEETINGS • In order to bring effectiveness in the governance of the corporation as a business entity, the Directors should devote time and resourcefulness to their corporation by meeting regularly as dictated by the needs of each corporation DSM 504

  40. FINANCIAL OPERATIONAL AND GOVERNANCE REPORTING • The Board should ensure that financial reports follow international standards and that there is effective communication of all operational report to the stakeholders • COMMITTTES OF THE BOARD • The board should ensure that they establish effective committees to streamline reporting including the Audit Committee DSM 504

  41. MONITORING THE PERFORMANCE OF THE BOARD • in order to ensure that this is adding shareholders value, the Board should monitor is collective performance, individual performance and the performance of the management DSM 504

  42. LIABILITIES OF DIRECTORS • The Directors must exercise highest degree of care and diligence in the discharge of their duties and should be held jointly and severally liable for all acts of omission • ACCOUNTABLITY OF THE BOARD • The appropriate chain of accountability should be from CEO, to the board and shareholders DSM 504

  43. THE RELATIONSHIP BETWEEN THE BOARD AND MANAGEMENT • The culture and environment within which the Board and the Management operate should provide an enabling environment and effective atmosphere which good governance and management can thrive • BALANCING COMMERCIAL vs. SOCIAL OBLIGATIONS • the board should put in place strategies for balancing its commercial and social obligations DSM 504

  44. CODE OF BEST PRACTICE • The Board should approve and ensure the implementation of written code of best practices for their individual corporations DSM 504

  45. ROLES AND FUNCTIONS OF THE BOARD OF DIRECTORS DSM 504

  46. functions • Performance functions • Conformance functions DSM 504

  47. Functions • PERFORMANCE FUNCTIONS • Exercising leadership, enterprise, integrity, judgment in directing the corporation • Determining the corporation purpose and values • Determining the strategy to achieve the corporation values and to implement its values that it survive and thrives • Identifying key risk areas and performance indicators in order to generate economic profit and provide efficient services DSM 504

  48. Performance function (cont..) • Exercising objective judgment of the corporation, independent from management but with sufficient management information • Determining the broad policies of the corporation • Monitor and evaluate the implementation of strategies • Regularly assessing the corporations performance and effectiveness as a whole, and that of individual Directors and CEO DSM 504

  49. Conformance function • Ensure the procedures and practices are in place to protect the corporation assets and reputation • Ensure that the corporation complies with all relevant laws and regulations and code of best practices • Ensure that the technology and systems in use are adequate to run the corporation properly DSM 504

  50. Ensure that the corporation has developed succession and exit plans for its execute Director/managers and senior management DSM 504