Chapter. 15. Stockholder Rights and Corporate Governance. Stockholders Corporate Governance Executive Compensation Shareholder Activism Government Protection of Stockholder Interests. Stockholders. Stockholders (shareholders) The legal owners of business corporations.
The legal owners of business corporations.
Types of stockholders:
Members of board of directors (to elect/remove board members)
Major mergers and acquisitions
Charter and bylaw changes
Proposals by stockholders
Refers to the process by which a company is controlled, or governed. These systems determine overall strategic direction and balance sometimes divergent interest.
According to Worldbank Organization,
“Corporate governance refers to the structures and processes for the direction and control of companies. It concerns the relationships among the management, Board of Directors, controlling shareholders, minority shareholders and other stakeholders.”
Malaysia has a strong legal and institutional framework for corporate governance
Legal framework based on traditions of common law legal system
Comprehensive array of statutes
Supported by traditional common law remedies
Established institutions like courts and regulatory agencies
Overview of Reform Agenda
True and fair certification by Directors on financial statements
Audit Committee Requirement
Independent Accounting Standard Setting Board
Directors and CEOs to disclose interests in PLC
Revamped Takeovers & Mergers Code
Code on Corporate Governance
Mandatory disclosure on CG Code compliance
Establishment of MSWG
Mandatory Accreditation Programme for Directors
Internal Audit guidelines for PLCs
Board of directors (BOD)
An elected group of individuals who have a legal duty to establish corporate objectives, develop broad policies, and select top-level personnel to carry out these objectives and policies. The Board of Directors also reviews management’s performance to be sure that the company is well run and shareholders’ interest are protected.
i). review and approve a strategic plan and to oversee the business operations;
2). directly monitor and evaluate the management’s performance; and
3). ensure the integrity of accounting and financial reporting systems.
1. The board is responsible for the overall corporate governance of the company or group of companies, including its strategic direction, establishing goals for management, and monitoring the achievement of those goals.
2. Monitoring effectiveness of company governance practices.
3. Selecting / compensating / monitoring / replacing key executives.
4. Aligning executive and board pay with long term company and shareholder interests.
5. Transparent board nomination / election process.
6. Reviewing the adequacy and the integrity of the company’s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.
Represent the right to buy a company’s stock at a set price for a certain period.
2. Social investment
Refers to the use of stock ownership as a strategy for promoting social objectives.
Social investment can be done in two ways:
Securities Commission Malaysia
Information Transparency and Disclosure
Occurs when a person gains access to confidential information about a company’s financial condition and then uses that information, before it becomes public knowledge, to buy or sell the company’s stock.