Corporate Governance,

Business Ethics, Risk

Management & Internal
Control
Introduction to
Corporate Governance
 WHAT IS GOVERNANCE?

 Latin verb “gubernare”  Greek word which means “to steer”

“kubernaein”

 Governance means the process of decision-making and the process by which

decisions are implemented (or not implemented) through the exercise of power
or authority by leaders of the country and/or organizations.
 Governance is the way rules, norms & actions are structured, sustained,
regulated, & held accountable.
 It includes the mechanisms required to balance the powers of the members (with
the associated accountability), & their primary duty of enhancing the prosperity
& viability of the organization.
 CHARACTERISTICS OF GOOD
GOVERNANCE

1. Participation

2. Rule of Law

3. Transparency

4. Responsiveness
 5. Consensus-oriented
6. Equity &
Inclusiveness

7. Effectiveness & Efficiency

8. Accountability

CHARACTERISTICS OF GOOD
GOVERNANCE

1. Participation
 Both men & women
 Direct or indirect (representatives)
 Informed & organized
 Freedom of association & expression, & organized civil society

2. Ruleof Law
 Fair legal frameworks or law

 Impartiality

 Independence of enforcing body

CHARACTERISTICS OF GOOD
GOVERNANCE

3. Transparency
 About decisions & enforcement
 Direct accessibility
 Enough information
 Easily understandable (forms & media)

4. Responsiveness
 Serving the needs of ALL stakeholders
 Within a reasonable timeframe

CHARACTERISTICS OF GOOD
GOVERNANCE
 5. Consensus-oriented
 Mediation of different interests
 Best interest of community

6. Equity
& Inclusiveness
 Members do not feel excluded

 Members feel they have a stake in it

 All must have opportunities to improve or maintain their well being.

CHARACTERISTICS OF GOOD
GOVERNANCE
 7. Effectiveness & efficiency
 Producing results that meet the needs of society
 while making the best use of resources at their disposal

8. Accountability

 An organization & its exercising authority are accountable to those who will be
affected by its decisions & actions.

Corporate Governance

Corporate Governance is defined as the system of rules, practices and processes

by which business corporations are directed and controlled.
It basically involves balancing the interests of a company’s many stakeholders,
such as shareholders, management, customers, suppliers, financiers, government
and the community.

Purpose of Corporate Governance?

The purpose of corporate governance is to facilitate effective,

entrepreneurial and prudent management that can deliver long-term
success of the company.
Objectives of Corporate Governance
 Fair & Equitable Treatment of Shareholders

 Self-assessment

 Increase Shareholders’ Wealth

 Transparency & Full Disclosure

BASIC PRINCIPLES OF
EFFECTIVE CORPORATE
GOVERNANCE
  Transparency & Full Disclosure
Is the board telling us what is going on?

 Accountability
Is the board taking responsibility?

 Corporate Control
Is the board doing the right thing?
Positive answers to the following questions indicate a firm’s conformance and
compliance with the basic principles of good
corporate governance:

Transparency & Full Disclosure

 Does the board meet the information needs of investment communities? 

Does it safeguard integrity in financing reporting?

 Does the board have sound disclosure policies and practices?

❑ does it make timely and balanced disclosure?
❑ can an outsider meaningfully analyze the organization’s actions and
performance?
Accountability
 Does the board clarify its role and that of management?
❑ Does it promote objective, ethical and responsible decision making? ❑
Does it lay solid foundations for management oversight?
❑ Does the composition mix of board membership ensure an appropriate range
 and mix of expertise, diversity, knowledge and added value?
❑ Is the organization’s senior official committed to widely accepted standards of
correct and proper behavior?
Corporate Control
 Has
the board built long-term sustainable growth in
shareholders’ value for the corporation?

 Does it create an environment to take risk?

❑ Does it encourage enhanced performance?
❑ Does it recognize and manage risk?
❑ Does it remunerate fairly and responsibly?
❑ Does it recognize the legitimate interests of stakeholders?
❑ Are conflicts of interest avoided such that the organization’s best interest
prevail at all times?