What is Corporate Governance?

Faisal Rasheed

Corporate Governance
Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed

particularly due to the high-profile collapses of a number of large U. In 2002. federal government passed the Sarbanes-Oxley Act. the U. intending to restore public confidence in corporate governance .Corporate Governance There has been renewed interest in the corporate governance practices of modern corporations since 2001. (formerly WorldCom). firms such as Enron Corporation and MCI Inc.S.S.

Corporate Governance Parties  Shareholders  Directors – those that own the company – Guardians of the Company’s assets for the Shareholders who use the Company’s assets  Managers .

Corporate Governance  Primarily concerned with public listed companies i. Polly Peck and the Maxwell companies  Focused . those listed on a Stock Exchange on preventing corporate collapses such as Enron.e.

Four Pillars of Corporate Governance  Accountability  Fairness  Transparency  Independence .

Accountability  Ensure that management is accountable to the Board that the Board is accountable to shareholders  Ensure .

equitably effective redress for violations  Provide .Fairness  Protect  Treat Shareholders rights all shareholders including minorities.

Transparency Ensure timely. accurate disclosure on all material matters. performance. including the financial situation. ownership and corporate governance .

free from the influence of others  Independent .Independence  Procedures and structures are in place so as to minimise. or avoid completely conflicts of interest Directors and Advisers i.e.

Elements of Corporate Governance  Good Board practices Environment disclosure shareholder rights  Control  Transparent  Well-defined  Board commitment .

Good Board Practices  Clearly  Duties defined roles and authorities and responsibilities of Directors understood is well structured composition and mix of skills  Board  Appropriate .

Good Board procedures  Appropriate  Director  Board Board procedures Remuneration in line with best practice self-evaluation and training conducted .

Control Environment  Internal  Risk control procedures management framework present recovery systems in place  Disaster .

Control Environment  Business continuity procedures in place external auditor conducts audits audit committee established  Independent  Independent .

Control Environment  Internal Audit Function Information systems established  Management  Compliance Function established .

Transparent Disclosure  Financial Information disclosed Information disclosed  Non-Financial  Financials prepared according to International Financial Reporting Standards (IFRS) .

Transparent Disclosure  Companies Registry filings up to date annual report published  High-Quality  Web-based disclosure .

Well-Defined Shareholder Rights  Minority shareholder rights formalised shareholder meetings conducted  Well-organised  Policy on related party transactions .

Well-Defined Shareholder Rights  Policy on extraordinary transactions defined and explicit dividend policy  Clearly .

Board Commitment  Policies and procedures have been formalised and distributed to relevant staff  A corporate governance code has been developed  A code of ethics has been developed  The company is recognised as a corporate governance leader .

hospitals.Other Entities  Corporate Governance applies to all types of organisations not just companies in the private sector but also in the not for profit and public sectors are NGOs. schools. state-owned enterprises  Examples . pension funds.

1. ICAP 2.3. EXPERIENTIAL LEARNING ASIA 3. Stakeholders  Sound Corporate Practices . Pakistan First Code of Corporate Governance  SECP  With Assistance from.

EXPERIENTIAL LEARNING ASIA 3. Listed Companies 2. Companies/Corporations held or controlled by the Government . NBFIs 4.3. Insurance Companies 5. Pakistan B: Applicable to: 1. Banking Companies 3. Unit Trusts 7. Mutual Funds 6.

Powers and Functions of BOD • Meetings • Key Information . EXPERIENTIAL LEARNING ASIA 3. Directors • BOD • Qualifications and Eligibility • Tenure • Responsibilities.3. Pakistan C: Constituents: 1.

EXPERIENTIAL LEARNING ASIA 3. CFO & Secretary • Qualifications • Attendance of Board Meetings 3.3. Corporate & Financial Reporting Framework • Directors Report to Shareholders • Frequency of Financial Reporting • Responsibility for Financial Reporting & Corporate Compliance • Disclosure of interest by a Director holding company’s shares . Pakistan C: Constituents: 2.

Pakistan C: Constituents: 3.3. Corporate & Financial Reporting Framework • Auditors not to hold shares • Corporate ownership structure • Divesture of shares by sponsors/controlling interest 4. EXPERIENTIAL LEARNING ASIA 3. Audit Committee • Committee • Frequency of meetings • Attendance at meetings • Terms of reference .

EXPERIENTIAL LEARNING ASIA 3. Pakistan C: Constituents: 4. External Auditors . Audit Committee • Reporting procedure • Internal Audit 5.3.

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