CORPORATE GOVERNANCE

DEFINITION:

 Corporate Governance may be defined as a set of systems, processes and

principles which ensure that a company is governed in the best interest of all
stakeholders. It is the system by which companies are directed and controlled.
It is about promoting corporate fairness, transparency and accountability. In
other words, 'good corporate governance' is simply 'good business'.

PURPOSES:

 Define the principles that must underpin the governance of each Department;
 Provide the framework within which each Department can ensure confidence
and credibility, minimise risk, and manage change, and;
 Assist Departments by articulating what is considered to be best practice.

BENEFITS:

 Improving strategic thinking at the top through induction of independent

directors who bring in experience and new ideas;
 Rationalizing the management and constant monitoring of risk that a firm
faces globally;
 Limiting the liability of top management and directors by carefully articulating
the decision making process;
 Assuring the integrity of financial reports, etc.
 It also has a long term reputational effects among key stakeholders, both
internally and externally.
DISADVANTAGES:

1) Family-Owned Companies
 Corporate governance works at its best when shareholders and board
members are able to make objective decisions that are in the best
interest of the company. According to Ibis Associates, a business
planning firm, family-run corporations (founding family members own
controlling share of the company), such as Ford and Wal Mart, lose
objectivity in business making decisions due to the family's financial
investment in the business' performance and the emotional ties
associated with building a worldwide corporation from the ground up.

2) Easily Corruptible
 Corporate governance needs a certain level of government oversight to
avoid increasing levels of corruption. This is certainly true of areas in
corporate finance and banking where deregulation of the industry
through 2001-2004 contributed to predatory lending practices and
created a credit crisis for millions of Americans. According to Jonathan
Brown, author of "The Separation of Banking and Commerce," the
lacks of governmental oversight in corporate governance lead to a
misallocation of credit that actually worked against competition. Banks
stopped competing with one another.

3) Costs of Monitoring
 To effectively govern a publicly traded corporation, shareholders must
speak with one voice and have enough votes to allow that voice to
have any real weight. This requires individuals that have a collective
vision for the company to pour more money into that company to gain a
controlling share. This process can be highly political, since controlling
shareholders that sense a hostile takeover may attempt to buy up more
shares to stay in power and keep the minority party silent. Corporate
governance at this level could grind to a halt, driving stock prices lower
and hindering a corporation's ability to make smart business decisions.
PEOPLE INVOLVES IN CORPORATE GOVERNANCE:

Parties involved in corporate governance include the regulatory body (e.g. the Chief
Executive Officer, the board of directors, management, shareholders and Auditors).
Other stakeholders who take part include suppliers, employees, creditors, customers
and the community at large.

In corporations, the shareholder delegates decision rights to the manager to act in

the principal's best interests. This separation of ownership from control implies a loss
of effective control by shareholders over managerial decisions. Partly as a result of
this separation between the two parties, a system of corporate governance controls
is implemented to assist in aligning the incentives of managers with those of
shareholders. With the significant increase in equity holdings of investors, there has
been an opportunity for a reversal of the separation of ownership and control
problems because ownership is not so diffuse.

A board of directors often plays a key role in corporate governance. It is their

responsibility to endorse the organisation's strategy, develop directional policy,
appoint, supervise and remunerate senior executives and to ensure accountability of
the organisation to its owners and authorities.

The Company Secretary, known as a Corporate Secretary in the US and often

referred to as a Chartered Secretary if qualified by the Institute of Chartered
Secretaries and Administrators (ICSA), is a high ranking professional who is trained
to uphold the highest standards of corporate governance, effective operations,
compliance and administration.
All parties to corporate governance have an interest, whether direct or indirect, in the
effective performance of the organization. Directors, workers and management
receive salaries, benefits and reputation, while shareholders receive capital return.
Customers receive goods and services; suppliers receive compensation for their
goods or services. In return these individuals provide value in the form of natural,
human, social and other forms of capital.

A key factor is an individual's decision to participate in an organisation e.g. through

providing financial capital and trust that they will receive a fair share of the
organisational returns. If some parties are receiving more than their fair return then
participants may choose to not continue participating leading to organizational
collapse.

THE CRITERIA OF GOOD CORPORATE GOVERNANCE:

1. Integrity

The organization conducted and operated its business with integrity for itself and
other stakeholders. The company shall not take advantage over others and merely
bond to the benefits of the company.

2. Disclosure and Transparency

Carried out its business with transparent operations, willing to reveal the
important information and update regarding the company completely and accurately,
including being prepared to be examined, and open to opinions from all relevant
partners for continuous development.

3. Treat People Equally

All stakeholders, including shareholders, customers, business partners, creditors,

employees and other relevant parties of the company have been treated with
equality.
 4. Fair to All

An organization operated its business with fairness to all stakeholders, including

shareholders, customers, business partners, creditors, employees and other relevant
parties, for the sake of balancing in mutual benefits.

5. Keep Promises and Confidentiality

Conducted and operated its business through the clear policies and efficient
operating system with regard for the promise given to our stakeholders, including
shareholders, customers, business partners, creditors, employees and other relevant
parties.

6. Care for People and Society

Takes responsibility for social and community on the basis of rights abided by
law, and operates its business entirely, conscious of environmental and social for the
purpose of sustainable growth and development.