GBRI - INTRODUCTION TO CORPORATE GOVERNANCE
(CHAPTER 1)
Governance - refers to a process whereby elements in
society wield power, authority, and influence and enact
policies and decisions concerning public life and social
upliftment.
 Therefore 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
Characteristics of Good Governance
1. Participation - participation by both men and women
is a key cornerstone of good cornerstone. Could either
be direct or indirect
2. Rule of Law - good governance requires fair legal
frameworks that are enforced impartially. It also
requires full protection of human rights, particularly
those of minorities.
3. Transparency - means that decision taken and their
enforcement are done in a manner that follows rules
and regulations. It means that enough information is
freely available and directly accessible to those who
will be affected by such decisions and their
enforcement.
4. Responsiveness - good governance requires that
institutions and processes try to serve the needs of all
stakeholders within a reasonable timeframe.
5. Consensus Oriented - good governance requires
mediation of the different interests in society to reach a
broad consensus on what in the best interest of the
whole community and how this can be achieved.
6. Equity & Inclusiveness - Ensures that all its members
feel that they have a stake in it and do not feel excluded
from the mainstream of society.
7. Effectiveness & Efficiency - good governance means
that processes and institutions produce results that
meet the needs of society while making the best use of
resources at their disposal. Also covers the sustainable
use of natural resources and the protection of the
environment.
8. Accountability - key requirement of good governance.
Not only governmental institutions but also the private
sector and civil society organizations must be
accountable to the public and to their institutional
stakeholders.
 Accountability cannot be enforced without
transparency and the rule of law.
Corporate Governance: An Overview
Corporate Governance - defined as the system of rules,
practices, and processes by which business
corporations are directed and controlled.
 Basically involves balancing the interests of a
company’s many stakeholders.
 Good corporate governance is all about controlling
one’s business and so is relevant, and indeed vital,
for all organizations, whatever size or structure.
Corporate governance structure - specifies the
distribution of rights and responsibilities among
different participants in the corporation.
Purpose of Corporate Governance
To facilitate effective, entrepreneurial and
prudent management that can deliver long-term
success of the company.
In simple terms, the fundamental aim of
corporate governance is to enhance shareholders’
value and protect the interests of other stakeholders by
improving the corporate performance and
accountability.
Objectives of Corporate Governance
1. Fair and Equitable Treatment of Shareholders - A
corporate governance structure ensures equitable and
fair treatment of all shareholders of the company.
2. Self-assessment - corporate governance enables
firms to assess their behavior and actions before they
are scrutinized by regulatory agencies. Business
establishments with a strong corporate governance
system are better able to limit exposure to regulatory
risks and fines.
3. Increase shareholders’ wealth - another corporate
governance’s main objective is to protect long-term
interests of the shareholders. Firms with strong
corporate governance structure are seen to have
higher valuation attached to their shares by
businessmen.
4. Transparency and full disclosure - good corporate
governance aims at ensuring a higher degree of
transparency in an organization by encouraging full
disclosure of transactions in the company accounts.
Basic Principles of Effective Corporate Governance
Effective corporate governance is transparent,
protects the rights of shareholders and includes both
strategic and operational risk management.
It is concerned in both long-term earning
potential as well as actual short-term earnings.
Basic Principles:
1. Transparency and Full Disclosure - is the board
telling us what is going on?
2. Accountability - Is the board taking responsibility?
3. Corporate Control - is the board doing the right thing?
GBRI - CORPORATE GOVERNANCE RESPONSIBILITIES organization’s charter and that there
AND ACCOUNTABILITIES (CHAPTER 2) is proper accountability

 There is no simple universal formula for good Specific activities include among
governance. others (see page 19):
1. Overall Operations
Relationship between shareholders/owners and other 2. Performance
Stakeholders 3. Compliance/Legal Conformance
3. Non-executive Broad Rule: the same as the broad
(See page 17 illustration) or Independent role the entire board of directors
directors
Governance starts with the Specific activities: (see page 20)
shareholders/owners delegating responsibilities 4. Management Broad Role: Operations and
through an elected board of directors to management accountability. Manage the
and, in turn, to operating units with oversight and organization effectively; provide
assistance from internal auditors. accurate and timely reports to
The board of directors and its audit committee shareholders and other
oversee management and are expected to protect the stakeholders.
shareholders’ rights.
Specific activities: (see page 21)
Management - can influence who sits on the board and 5. Audit Broad Role: Provide oversight of the
the audit committee as well as other governance Committees of internal and external audit function
controls that might be put into place the Board of and the process of preparing the
Directors annual financial statements as well
Accountabilities - do not extend only to shareholders. as public reports on internal control
Companies also have responsibilities to other 6. Regulators
stakeholder. a) Board of Broad Rule: Set accounting and
Accountancy auditing standards dictating
Stakeholders - anyone who is influenced, whether underlying financial reporting and
directly or indirectly, by actions of a company. auditing concepts; set the
expectations of audit quality and
Regulators - response to society’s wishes to ensure accounting quality.
that organizations, in their pursuit of returns for their
owners, act responsibility and operate in compliance b) Securities Broad Role: Ensure the accuracy,
with relevant laws. Exchange and timeliness and fairness of public,
Commission reporting of financial and other
Shareholders/owners - they also require accountability information for public companies.
as to how well the resources that have been entrusted 7. External Broad Role: Perform audits of the
to the management and the board have been used. Auditors company financial statements to
Owners want accountabilities on such things as: ensure that the statement are free of
1. Financial Performance material misstatements including
2. Financial transparency - clear with full misstatements that may be due to
disclosure fraud.
3. Stewardship - including how well the company 8. Internal Broad Role: Perform audits of
protects and manages the resources entrusted to Auditors companies for compliance with
it. company policies and laws, audits to
4. Quality of internal control evaluate the efficiency of operations,
5. Composition of the board of directors and the and periodic evaluation and tests of
nature of its activities. controls

Parties involved in Corporate Governance

Party Overview of Responsibilities

1. Shareholders Broad Role: provide effective
oversight through election of board
members, approval of major
initiatives such as buying or selling
stock, annual reports on
management compensation, from the
board.
2. Board of Broad Rule: Major representative of
Directors stockholders to ensure that the
organization is run according to the
GBRI - SECURITIES AND EXCHANGE COMMISSION (SEC)
CODE OF CORPORATE GOVERNANCE (Chapter 3)

November 10, 2016 - SEC approved the Code of

Corporate Governance for publicly-listed companies.
 Its goal is to help companies develop and
sustain an ethical corporate culture and keep
abreast with recent developments in
corporate governance.

Assessment process - the best measure of the Board’s

effectiveness.

Corporate Governance - the system of stewardship and

control to guide organizations in fulfilling their long-
term economic, moral, legal and social obligations
towards their stakeholders.

Board of Directors - the governing body elected by the

stockholders that exercises the corporate powers of a
corporation, conducts all its business and controls its
properties.

Management - a group of executives given the authority

by the Board of Directors to implement the policies it
has laid down in the conduct of the business of the
corporation.

Independent Director - a person who is independent of

management and the controlling shareholder.

Executive Director - a director who has executive

responsibilities of day-to-day operations of a part or
the whole of the organization.

Non-executive director - a director who has no

executive responsibility and does not perform any work
related to the operations of the corporation.