Executive summary:

The objectives of good corporate governance, there principle to an organization,

the guideline or practices to assist companies designing their approach to
corporate governance. The right of shareholders as to established by law and
encourages of active corporations and stakeholders in creating wealth and job to
the sustainability of financial sound enterprises.
The critical analysis of poor corporate governance of Merrill lynch which chief
executive officer Mr. O’Neal .S due to his unethical behavior towards to the
position in the ‘organization, ignorantly abusing the rules of good corporate
governance in Merrill lynch company which averted to the collapsed of the
organization.OECD and Government action, OECD is an international body that has
impact in all development of regulatory of an organization, by follow the
principle approved by the government to the co-operate organization.

Title page
Executive summary
Table of contents
1.0 Introduction…………………………………………………………………………………...3
1.2Corporate governance over view……………………………………………………….…..…4
2.0Objectives of governance……………………………………………………………….….….4
2.1Structure of corporate governance…………………………………………………………….5
2.2Board of Directors……………………………………………………………………………...6
2.3Poor corporate governance of Merrill lynch…………………………………………………...7
3.0Evaluation of OECD and Government actions………………………………………………...9
4.0Conclusion……………………………………………………………………………………10
4.1 Recommendation…………………………………………………………………………….11
5.0References…………………………………………………………………………………….12

1.0 Introduction:
The words, corporate governance is a structure specifies the distribution of
rights and responsibilities amongst participants in the corporate such as the
board, managers, shareholders and others stakeholders, and spells out the rules
and the procedure for making decision on corporate affairs. It is also about
commitment to value, about ethical business conducts and about making a
distribution between personal and corporate funds in the management of a company.
Corporate governance is a term that refers broadly to the rules process, or laws
by which business are operated, regulated and controlled. It also provides the
structure through which the objectives are set, and the means of attaining those
objectives and monitoring performance.
Finally to discuss the poor corporate governance of how an organization should
manage their corporate governance and also to evaluate critically and analyst the
OECD and government actions.

1.1 Overview of corporate governance:

This is the relationship among stakeholders that is used to determined and control
the strategic direction and performance of an organization, the corporate
governance of the organization is therefore the way in which order and process
is established to ensure that decisions are made ,and interest s are properly
represented for all stakeholders. It is a boards operational concerned with
choosing the board of directors and with setting the long term objectives of the
firm.
2.0 Objectives of Governance:
The aims to set out principles and best practices on structure and process that
companies may use in there operations towards achieving the optimal governance
framework. Its implies the structure and process existing at a micro-level which
involves issues such as the composition of the boards procedure for recruiting new
directors.
>Its identifies a set of guidelines or practices to assist companies designing,
their approach to corporate governance
> The board should be meets regularly with due notice of issues to be discussed
and should records its conclusions in discharging of its duties and
responsibilities.
>The chief executive officers should clearly accept division of responsibilities
at the head of the company which will ensure a balance of power of decision.
>They must to ensure the strategies guidance of the company, the effective
monitoring of management by the board and the board’s accountability to the
company and the shareholders.
> They should recognize the rights of stakeholders as established by law and
encourage active cooperation between corporations and stakeholders in creating
wealth and jobs and the sustainability of financial sound enterprises.

2.1 Structure of corporate governance

The modern corporations actions and behaviors are directed and controlled by both
internal forces and external forces
The internal forces, the officers of the corporate (such as the chief executive
officers or CEO) and the board of directors of the corporation (involves the
chairman of the board), are those directly responsible for the determination of
both strategic direction and the execution of the company’s future. They are
subject to the permanent prying eyes of the external forces in the market-place.
The creditors and credits agencies who lend them money, while the auditors and
legal advisors are those who testify to the fairness and legality of their
reporting and the multitudes of regulators who oversee their actions in order to
protect the investing public.
The market-place (external)

Figure 1 show the structure of corporate governance:

These above diagram shows how corporate governance represents the relationship
among stakeholders that is used to determined and control the strategic
direction and performance of the organization.(Eiteman et al 2008 pg 12
2.2 The Board of Directors:
These are describes as the legal body that are responsible for the accountability
of governance, of the corporation. The board is composed of both employees of the
organization (inside members) and senior and influential non-employees (outside
members).Areas of debate surrounding boards includes.
>the proper balance between inside and outside members.
>the means by which board members are compensated for their service.
>the actual ability of a board to adequately monitor and manage a corporation
when board members are spending sometimes less than five days a year in board
activity.
Due to current or retired chief executive, outside member of other companies might
bring the healthy sense of distance and impartiality, which although refreshing
can also result in limited understanding of the true issues and events within the
company.
Officers and management:
The senior officers of the corporation, that comprises the chief executive
officer(CEO),the chief financial officer(CFO) and the chief operating officer
(COO) are not only the employees most knowledgeable of the business, but the
creators and directors of its strategies operational directions. According to the
theory, the management was acting as contractors, as an agent or shareholders to
purse value creation. They are salary, bonus motivators and stock options
(positively) or the risk of losing their jobs (negatively) they are biased of
self-enrichment or personal agendas that the board and other corporate
stakeholders are responsible for overseeing and policing. In many organizations,
the CEO is also the chairman of the board.
>Equity markets: A publicly traded company, regardless of the country of
residence, is highly susceptible to the changing opinion of the marketplace. These
reflect the market’s constant evaluation of the promise and performance of the
individual company.
>Auditors and legal advisors: the responsible for providing an external
professional opinion as to the fairness, legality and accuracy of the corporate
financial statements. The auditors and legal advisors that been hired by the
company should be centralized in the auditing, leading rather than being unique
in terms of practice of policing their employers.

2.3 Poor corporate governance of Merrill lynches:

Due to the poor corporate governance in the senior management was caught up in
frenzied pursuit of short term gain, the senior management and the boards of
directors of major financial institutions such as Citicorp and Merrill lynch
failed to perform their proper corporate governance roles that help to precipitate
the financial markets crisis to recent week, say’s Henry Kaufman .At a number of
institution, there was a failure by senior management to know the full extent of
the risk-taking.it would seen that risk modeling did not correctly assess the
totality of the risk-taking in the organization.(ARMCHAIR MBA January 29,2008
time11:36am est)
> O’Neal lost his job as chairman and chief executive of Merrill-lynch last
October after the posted a $2.24b third quarters loss due to staggering of $8.4b
write down on investment in junk mortgage and risk debt securities. The wall
street firm posted an $8b loss of 2008 and when the shareholder saw the
depreciating of the share values drops more to 40%,yet O’Neal left with stock
option, unvested shares, deferred compensation and pension payments worth more
than $160b due failure of corporate governance.(Merrill lynch 2007)
> The discrepancy between O’Neal generous compensation and his lackluster
performance that led to some of the largest quarterly losses in his company’s
history points to an executive compensation programmed that lacks accountability
and rewards short term gains at the expense of the long term value. Due to the
period, merill lynch failed to out perform the standard and poor in annual basis.
>Due to failure of corporate governance O’Neal told the lawmakers at the hearing
that he received no severance package no bonus for 2007, which he forwarded that
the restricted stock form invested and unexercised stocks option granted over the
six years span.
>At merill-lynch,proxy statement over O’Neal’s regime as CEO shows that his
compensation was not tied to risk-adjusted performance measures.Instead.it was
drawn by revenue earning growth and return on equity. The consequences of this
lack of risk accountability can be seen in the direction the company took during
O’Neal regime, since taking over. O’Neal slowly pushed >Merrill lynch into riskier
business, in his quest for higher returns. during the housing boom,merill lynch
became increasingly in package and selling pool of securities tied to subprime
mortgage and eventually increasing its exposure to these collateralized debt
obligation to more than $40 b in late 2008.(Merrill lynch 2007)
>Merrill-lynch became involved in the packaging and selling of a particular type
of CDO called ‘Norma’ that let heavily on securities that were among the
vulnerable to a rise in defaults of subprime mortgage loans.
>Merrill-lynch became the top under writer of CDO and generated hundreds of
millions of dollar in profits from packaging selling. Early 2008, the height of
the real estate bubble, he was paid $91m, however according to critics, merill-
lynch’s high-risk strategy created little value for investors or the broader
economy.
(www.aflcio.org/corporatewatch/retirementsecurity/case_merrillynch.cfm)
>O’Neal .S paid for his mistakes with his job, but financially, he’ll walk away
flush.Mereill said O’Neal would not get any severance or a bonus for 2007, and
that his salary stopped Tuesday. But because of his long services to the company.
O’Neal will be able to keep all of his stock option grants and restricted stock
accumulated over the years, a sum that approach #160.
>Bove say’s O’Neal should not have been pushed out, since it puts Merrill back
where it was five years ago,re-creating its business without the benefits of time-
tested veterans.Bove’s biggest criticism of O’Neal is he fired so many experience
people that there was no one to warn him about overexposure to credit risk in
subprime market.
>Bove placed a ‘sell’ on this week, saying he did not have faith that this board
understands the need to build a long-term business plane or the capability to
execute it.
>The two big risk remain, merill is expecting to write down further losses on bad
bets tied to mortgage gone bad in the fourth quarter. Also the firm’s investment
banking division, big revenue produce may fall victim to a talent drain as
competitors seek to capitalize on Merrill’s woes by luring away their top
producers.
(www.snl.com/snlitn/scans/110107merriusatod.pdf)

3.0 Evaluation of OECD and Government actions:

These evaluation of OECD and government actions, in may 1999 ministers
representing the 29 government which comprises China, American, European etc.The
organization for Economic co-operation and Development (OECD) the government are
the country involved in the organization to endorse the principles of OECD.The
principles were to negotiate over the course of a year in consultation with key
players in the market.
The constitution ,the chief response by government to the OECD,the important
pillar is to pin point in these areas like world bank,interntional monetary fund
,united nation and international organization.OECD is a bedrock of good corporate
governance ,it holes the amplification and required to give then sufficient
force. The government strategies towards them should be on a concrete guidance
on how OECD principle can best be implemented, less say, practical guidance can
be of help to the boards meeting real-world expectations so that may operate most
efficiently and in particular, to compete for scarce investment capital
effectively.

4.0 Conclusion:
>Its identifies a set of guidelines or practices to assist companies designing,
their approach to corporate governance
>The chief executive officers should clearly accept division of responsibilities
at the head of the company which will ensure a balance of power of decision
>They must to ensure the strategies guidance of the company, the effective
monitoring of management by the board and the board’s accountability to the
company and the shareholders.
>Merrill lynch into riskier business, in his quest for higher returns. during the
housing boom,merill lynch became increasingly in package and selling pool of
securities tied, they should apply good corporate governance.

4.1 Recommendations:

> The board should be meets regularly with due notice of issues to be discussed
and should records its conclusions in discharging of its duties and
responsibilities.
> They should recognize the rights of stakeholders as established by law and
encourage active cooperation between corporations and stakeholders in creating
wealth and jobs and the sustainability of financial sound enterprises
>Merrill-lynch became involved in the packaging and selling of a particular type
of CDO called ‘Norma’ that let heavily on securities that were among the
vulnerable to a rise in defaults of subprime mortgage loans. They should learn
proper way of good governance.
5.0 References:
>Armchair M.B.A January 29, 2008
>http://www.businessweek.com/managing/content/january2008/ca 20080129_778908.htm.
>Eiteman et al 2008 pg 18.
> Merrill lynch 2007
> (www.aflcio.org/corporatewatch/retirementsecurity/case_merrillynch.cfm
>(www.snl.com/snlitn/scans/110107merriusatod.pdf
>www.soxfirst.com/50226711/oneal_160_million_parachute_merril_lynch_reward_for_fai
lure.php.
www.researchrecap.com/index.php/2008/09/22/poor-corporate-governance-highlights-
risk-of-
bank-failure/ - 31k

>digg.com/business_finance/Merrill_lynch_CEO_Nothing_justifies_suspending_our-
bonus.
>www.usatoday.com/money/companies/management/2007-10-30-merrill-lynch-future-
N.htm-64k.
>www.blackwell-synergy.com
www.oecd.org/dataoecd/41/33/38309896pdf
www.oecd.org/dataoecd/32/1/4229620pdf
www.svs.cl/sitio/publicaciones/doc/gobcorp/sherman_boone.pdf
old.tuac.org/News/cnews2002.htm - 26k