CHAPTER 1:

INTRODUCTION TO CORPORATE
GOVERNANCE
WHAT IS 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.
• It comprises all the process of governing- whether undertaken by the
government of a country, by a market or by network- over a social system
and whether through the laws, norms, power of language of an organized
society.
• Governance therefore means the process of decision-making and the process
by which decisions are implemented (or not implemented) through the
exercise of power of authority by leaders of the country and /or
organizations.

Corporate Governance – Meaning

The term ‘Governance’ is derived from the Latin word ‘Gubernare’ which means ‘to steer’. In the context
of companies, governance means direction and control of a company. There is no single definition of
corporate governance acceptable to all. Different experts have defined the term in their own ways.

Separation of Ownership from Management:

A company is run by its managers. Corporate governance ensures that managers work in the best
interests of corporate owners (shareholders).
Characteristrics of GOOD
GOVERNANCE

Participation

Accountability
Rule Of laws

Transparency Effectiveness and Efficiency

GOOD
GOVERNANCE

Responsiveness
Consensus oriented
Corporate governance is something
altogether different from the daily
operational management activities enacted
by a company’s executives. It is a system of
direction and control that dictates how a 
board of directors governs and oversees a
company. •Governance can be used in several
contexts such as corporate
governance, international governance,
national governance and local
governance.
 A Key Principle of Corporate Governance –
Shareholder Primacy.

The current corporate governance paradigm fails to

account for the diversity among minority shareholders
and their interests – Did not manifest participation.

Freedom of association guarantees the right of

employees to meaningfully associate in the
pursuit of collective workplace goals, which
includes a right to collective bargaining

Impartiality can be described as the principle that decisions ought to be based

on objective criteria, rather than on the basis of bias, prejudice, or preferring to
benefit one person over another for improper reasons.
• Consensus oriented decision-making ensures that even if everyone does not achieve what they
want to the fullest, a common minimum can be achieved by everyone which will not be
detrimental to anyone.
• It mediates differing interests to meet the broad consensus on the best interests of a community.

• Consensus Oriented is demonstrated by an agenda that seeks to mediate between the many
different needs, perspectives, and expectations of a diverse citizenry. Decisions needs to be made
in a manner that reflects a deep understanding of the historical, cultural, and social context of the
community.
 RESPONSIVENESS IS NOT ONLY A BEHAVIOR; IT IS A
COMMUNICATION STYLE. ...
Fundamental claim of corporate governance is
to enhance shareholder’s value and protect the
interest of other stakeholders.
How do you safeguard integrity in financial reporting?

Principle 4: Safeguard Integrity in Financial Reporting

ensure compliance with
statutory reporting responsibilities.
liaise with, assess the quality and review the scope of work
of the external auditors.
enable the auditors to communicate any concerns to the
Board.
advise the Board on the appointment of the external
auditors and the results of their work
Are you paying your employees fairly? Are your
benefits package and bonuses on par with those at
competing companies? Regularly reviewing and
upgrading the details of your program is key to your
organization's success. A well-managed remuneration
program will attract, reward, and retain the best
performing employees and promote continued
excellence, while maintaining the efficient use of your
organization's financial resources. Failing to perform a
regular review and upgrade will result in poor
employee relations, a reduction in productivity, and,
very likely, the loss of competitive advantage as key
employees leave to join the competition.