External Influences on a company’s governance

Dr Safdar A Butt

1

External influences

Regulatory bodies
Government  Professional and trade associations

Media
Print, Electronic  Lobbyists

Pressure Groups
Consumers, NGOs  Investors

2

Government’s Role
   

Regulatory Promotional Entrepreneurial Planning

3

Regulatory Role

Determination of conditions under which what can be done by how for how long.

Licenses, permits, special permissions

 

Controls, monitors, regulates Balance between various segments of economy to avoid conflicts

4

Promotional Role

Creating business environment

Infrastructure development

Business incentives
Tax relief  Cheaper capital

 

Subsidies Embassies

5

Entrepreneurial Role
 

Running strategic businesses Showing the business how to do business

Sadly missing from our country

Setting up and disposing essential units

Ayub Khan’s reforms

6

Planning Role
  

General economy Fiscal policies Monetary policies

Credit control

Specific sector/area development

7

SECP
   

Companies NBFIs and special companies Professional bodies regulations Stock Exchanges

8

Divisions

 

Company Law (company registrations) Securities Market (stock exchanges) Specialized Companies (NBFIs, modarabas, mutual funds, pension funds, etc.) Insurance (insurance companies, reinsurances) Law (various laws affecting business other than company law)

9

Impact of Professional Associations
   

ICAP, ICMAP, IEP Stock Exchanges Chamber of Commerce & Industry Trade Associations

10

Media
 

Reporting (facts and events) Commentary (on news)

Not just giving views, shaping views Can work for or against business Double edged sword

Awareness campaigns

Advertisements

11

Objectives of Media Intervention

To stop the “bad” corporate practices. To encourage the “good” corporate behavior.

12

Reporting on Facts and Commentaries

Corporate reporting is gaining popularity.

It is coming out of the domain of specialized journals into daily newspapers.

It has impact on all stakeholders; so companies care.
 

Shareholders activism Consumer activism

Factual reporting and commentaries can serve as “carrot and stick” mode of motivation for companies.
13

Awareness Campaigns

Media has greater reach; hence is more effective.
Polythene bags issue  Harmful effluents disposal

 

Companies can help media in campaigns for social good. Awards Political campaigns
14

Advertisement

Media can insist on honest advertising

Printing disclaimers is not enough

Advertisements are also a way of buying media’s support (or silence)

15

Ethics in Media
    

Editorial independence Refuse dishonest advertisement Avoid sensationalism Should have its own CSR policy Maintain moral values in all their four functions

16

Media and Reputational Risk

Apart from company’s own policies and actions, the greatest risk to a company’s reputation comes from media.

17

Reputation
 

Good reputation takes years to build. Shades of reputation:
Products  Management  Profits  Social posture

It takes just one incidence to destroy the reputation of a company.
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Reputational Risk
    

What can bring a company into disrepute? What is the price of disrepute? Is it worth losing/keeping reputation? What if there is no direct potential of losing reputation? Defending and Sustaining Reputation:
Sustaining reputation is painstaking  Defending reputation may often be selfdefeating.

19

Policy on handling RR
 

Price of disrepute Is it worth maintaining a good reputation? What if there is no potential of illrepute? How to defend attacks on reputation

If not carefully handled, it could further damage the reputation.
20

Pressure Groups
   

Consumer Associations NGOs Investor Associations Become more effective if media joins them. Situation in Pakistan

No real threat right now, but things will change.
21

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