CORPORATE

GOVERNANCE
 CORPORATE
GOVERNANCE

Corporate Governance 02 Corporate Governance

01
Overview Elements

Corporate Governance 04 Corporate Governance

03
Pillars Debate
 01

CORPORATE GOVERNANCE
OVERVIEW
 Why Corporate Governance?

• Better access to external finance

• Lower cost of capital- interest rates of loans

• Improved company performance- Sustainability

• Higher firm valuation and share performance

• Reduced risk of corporate crisis and scandals

 Corporate Governance Parties

02
01 03

Share Directors Manager

Holders Guardians for the
Who use the
Those that own the companies assets
companies assets
company for the shareholders
Corporate Governance Vs Management
 What is Corporate Governance?

If MANAGEMENT is about running the business,

CORPORATE GOVERNANCE is about seeing that it
run properly.

All companies need Managing and Governing.

 02

CORPORATE GOVERNANCE PILLARS

Corporate Governance Pillars
Corporate Governance Frameworks
 Principles of Corporate Governance

Sustainable development of all stakeholders- to ensure

growth of all individuals associated with or effected by

the enterprise on sustainable basis.
Effective management and distribution of wealth – to
ensure that enterprise creates maximum wealth and
judiciously uses the wealth so created for
providing maximum benefits.
 Principles of Corporate Governance

 Discharge of social responsibility- to ensure that

enterprise is acceptable to the society in which it is functioning.

 Application of best management practices- ensure

to
excellence in functioning of enterprise and optimum creation of
wealth.
 Compliance of law in letter & spirit

 Adherence to ethical standards - to integrity,

ensure
transparency, independence and accountability in dealings with all
stakeholders.
 Accountability | Fairness

Accountability Fairness

 E n s u r e that management  P r o t e c t Shareholders rights

is accountable to the
Board
 Treat all shareholders including
minorities, equitably.
 E n s u r e that the Board is accountable
to shareholders  P r o v i d e effective redress for violations.
 Transparency | Independance

Transparency
Ensure timely, accurate disclosure on
all material matters, including the
financial situation, performance,
ownership and corporate governance.
Independence
 Procedures and structures are in pa
lce so
as to minimise, or avoid completely
conflicts of interest.
 Independent Directors and Advisers
free from the influence of others.
Case Study 01- Corporate Governance
 03

CORPORATE GOVERNANCE ELEMENTS

Elements of Corporate Governance
 Good Board practices

 Control Environment

 Transparent disclosure

 Well-defined shareholder rg
i hts

 Board commitment
 Good Board Practices

 Clearly defined roles and authorities

 Duties and responsibilities of Directors understood

 Board is well structured

 Appropriate composition and mix of skills

 Appropriate Board procedures

 Director Remuneration in line with best practice

 Control Environment

 Internal control procedures

 Risk management framework present

 Disaster recovery systems in place

 Media management techniques in use

 Business continuity procedures in place

 Independent external auditor conducts audtis

 Transparent Disclosure

 Financial Information disclosed

 Non-Financial Information disclosed

 Financial Reporting Standards (IFRS)

 Companies Registry fillings up to dae

t

 High-Quality annual report published

 Web-based disclosure
Well-Defined Shareholder Rights

 Minority shareholder rights formalised

 Well-organised shareholder meetings conducted

 Policy on related party transactions

 Policy on extraordinary transactions

 Clearly defined and explicit dividend policy

 Board Commitment

The Board discusses corporate governance issues and h

as
created a corporate governance committee
 The company has a corporate governance champion

 A corporate governance improvement plan has been created

 Appropriate resources are committed to corporate governance

 Policies and procedures have been formalised

 A code of ethics has been developed

Case Study 02 - Corporate Governance
 04

ADVANTAGES VS DISADVANTAGES
 Corporate Governance Debate

ABC Corporation is a leading SME in the telecommunication sector in

Srilanka with staff over 50 and records a 10 million turnover annually.

Company CEO who is a friend of you seeks your advice whether the
company should follow corporate governance.

Team A- ABC Corporation should follow Corpoarte Governance

Team B- ABC Corporation does not need to follow Corpoarte
Governance
 Advantages of Corporate Governance
Enhanced Performance- helps a company improve
overall performance.
Access to Capital- The better corporate governance a company
has, the more easily it can access outside capital that
the business can use to fund its projects.
 Better Standards- Corporate governance makes many
decisions about business operations, but one of the most
important decisions involves corporate standards.
 Better Talent Utilization- With a strong corporate governance
structure, people can find positions that utilize their talents more effectively.
 Disadvantages of Corporate Governance
Easily Corruptible-Corporate governance needs a certain level of
government oversight to avoid increasing levels of corruption.
 Family-Owned Companies- Corporate governance works at its best
when shareholders and board members are able to make objective
decisions that are in the best interest of the company.
 Costs of Monitoring- To effectively govern a publicly traded
corporation, shareholders must speak with one voice and have enough
votes to allow that voice to have any real weight.
2019
Thank You