BUCALON, Michael Tom J.

BSMA - 4 19101592
University of San Carlos

CORPORATE GOVERNANCE Criticisms on the Agency Model

- One dimensional; not focusing on

Corporate Governance
- Spells out the rules and procedures
to be followed in making decisions
- The totality of the corporation itself
- The joint responsibility of the BOD
and Management
other stakeholders like customers,
suppliers
- Missing the ethical consideration
component
THE COMPREHENSIVE AGENCY MODEL

THE AGENCY MODEL

- KPIs are integrated with key risk

- BOD formulate objectives based on
indicators so that performance
the wants of the shareholders
efforts are directed towards the
- They formulate strategies
high risk parts of the business.
- BOD has the responsibility to
protect the business and account
Ethical Standards
for the activities that should be
- BOD down to staff has
done
responsibility to report any
- The agency model also promotes
unethical practices
accountability and identify different
- They also have the responsibility to
report materials in each hierarchy
uphold the rules and regulations of
the organization
CEO - responsible for managing the
operations in a day to day basis
CORPORATE GOVERNANCE

CFO - financial affairs of the company

- The main goal of corporate
governance is to enhance

MA 4221 - Managing Risks Associated with Cash Flows and Capital Investments
 BUCALON, Michael Tom J.
BSMA - 4 19101592
University of San Carlos

shareholder value and protect the 4. Responsiveness - serve the needs

interest of other stakeholders by of various stakeholders in a
improving performance and reasonable timeframe
accountability 5. Consensus Oriented - requires
CHARACTERISTICS OF A GOOD mediation to cater what is in the
GOVERNANCE best interest of the whole
community and how it can be
achieved
6. Equity and Inclusiveness - ensure
that all members have a stake in
the business.
7. Effectiveness and Efficiency
(favorite niya) - optimize resources,
goals and strategies must be
achievable in the least possible
effort
8. Accountability - key requirement of
corporate governance. There are
gov inst. That enforce
accountability

OBJECTIVES OF CORPORATE
1. Participation - involvement of all GOVERNANCE
employees and members in the
different levels of the organization ● Fair and equitable Treatment of
2. Rule of Law - make or break of the Shareholders
organization ● Self-Assessment
3. Transparency - reports must be ○ [RCC] Independent BOD -
directly accessible to those affected point out loopholes in the
by the decisions. Enough company and help solve
information is available and it is problems internally
provided easily and in a ○ KPIs and KRAs are tools to
comprehensive medium. assess the actions of the
a. Transparency doesn’t mean company
just showing information it ● Increase Shareholders Wealth -
must also be original objective; protect the long
understandable term interests of shareholders.

MA 4221 - Managing Risks Associated with Cash Flows and Capital Investments
 BUCALON, Michael Tom J.
BSMA - 4 19101592
University of San Carlos

● Transparency and Full Disclosure - ● Reviewing corporate policies

report operations of the company relating with laws and regulations,
conflicts of interest, investigate
AUDIT COMMITTEE misconduct and fraud
● Review current and pending
Composed of independent directors with corporate governance-related
financial, auditing, company, and industry litigations
expertise ● Updating with senior management
regarding status, progress, and
The Audit Committee: new developments and
- Selects the external auditor problematic areas
- Evaluate the Ext Aud performance ● Make sure that internal auditors
- Approve the audit fee have access to the audit committee
- Internal auditors are evaluate by and encourage scheduled meetings
the Audit Committee ● Review internal plans, reports, and
significant findings
Why is there a need to have an audit ● Establish direct reporting
committee? relationships with the external
auditors
- Not all BOD understands Financial ● Balnce their role as advisor and
and Accounting process counselor to manage their fiduciary
- There should be a team that duty to monitor and oversee
provides Financial and Accounting management
Oversigh to ensure that there is
fairness and reliability, A MORE(!!) COMPREHENSIVE AGENCY
transparency etc. MODEL (atay pwera gaba)

AUDIT COMMITTEE RESPONSIBILITIES

● Ensure that FS are transparent,

understandable and reliable
● Ensure that Risk Management is
comprehensive and on going (not
partial and periodic)
● Help achieve org-wide
commitment to strong and effective
controls

MA 4221 - Managing Risks Associated with Cash Flows and Capital Investments
 BUCALON, Michael Tom J.
BSMA - 4 19101592
University of San Carlos

SARBANES-OXLEY ACT OF d. They have designed internal

controls that are enough to ensure
2002 AND CORPORATE
FR integrity
GOVERNANCE e. They have evaluated and given
their own opinion on the
Sec 301: Requires audit committee
effectiveness of the IntCon within
INDEPENDENCE.
90 days of the report
- Aud Comm members cannot
f. They have disclosed to the auditors
accept any consulting, advisory,
and AudComm changes in IntCon
other fees from their company
and significant deficiencies (IntCon)
and weaknesses
Sec 404: Requires public companies to
establish and maintain a system of
internal controls, which must be audited
by external auditors
- One of the Reqs of SOX is for
ExtAud to really form an opinion

Sec 201: Prohibits accounting firms from

providing non-audit services (such as
bookkeeping and accounting systems
design) to audit clients to help maintain
the independence of the audit firm

Sec 203: Requires lead audit partners to

rotate off engagements every five years to
help maintain the independence of audit
partner

Sec 302: Key executives must attest,

under penalty of law, that:
a. They have reviewed the FS
b. To their knowledge, it does not
have material inaccuracies and
fairly presents the companies
financial position
c. They are responsible for internal
controls

MA 4221 - Managing Risks Associated with Cash Flows and Capital Investments