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External Influences

on a company’s

governance

Dr Safdar A Butt

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External influences

Regulatory bodies Government

Professional and trade associations

Media Print, Electronic

Lobbyists

Pressure Groups Consumers, NGOs

Investors

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Government’s Role 

Regulatory

Promotional

Entrepreneurial Planning

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Regulatory Role

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

Licenses, permits, special permissions

Controls, monitors, regulates

Self Regulation

Balance between various segments of economyto avoid conflicts

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Self Regulation

Done by a trade or industrial association to keeptheir members compliant with laws and rules.

 Advantages include proximity, flexibility, bettercompliance, collective interest, pooling ofresources.

Disadvantages include conflict of interest,under-enforcement, global competition,insufficient resources.

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Promotional Role

Creating business environment

Infrastructure development

Business incentives Tax relief

Cheaper capital

Subsidies Embassies

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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

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Planning Role

General economy

Fiscal policies

Monetary policies Credit control

Specific sector/area development

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SECP

Companies

NBFIs and special companies

Professional bodies regulations Stock Exchanges

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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 thancompany law)

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Impact of Professional Associations

ICAP, ICMAP, IEP

Stock Exchanges

Chamber of Commerce & Industry Trade Associations

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Media

Reporting (facts and events)

Commentary (on news)

Not just giving views, shaping views

 Awareness campaigns

Can work for or against business

 Advertisements Double edged sword

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Objectives of

Media Intervention

 To stop the “bad” corporate practices. 

 To encourage the “good” corporate behavior. 

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Reporting on Facts

and Commentaries

Corporate reporting is gaining popularity.

It is coming out of the domain of specialized journals intodaily 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. 

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 Awareness Campaigns

Media has greater reach; hence is more effective.

Polythene bags issue

Harmful effluents disposal

Companies can help media in campaigns forsocial good.

 Awards

Political campaigns

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 Advertisement

Media can insist on honest advertising

Printing disclaimers is not enough

 Advertisements are also a way of buying media’s

support (or silence)

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Ethics in Media

Editorial independence

Refuse dishonest advertisement

 Avoid sensationalism Should have its own CSR policy

Maintain moral values in all their four functions

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Media and

Reputational Risk

 Apart from company’s own policies and actions,

the greatest risk to a company’s reputation

comes from media.

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Reputation

Good reputation takes years to build.

Shades of reputation:

Products

Management

Profits

Social posture

It takes just one incidence to destroy thereputation 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 oflosing reputation?

Defending and Sustaining Reputation: Sustaining reputation is painstaking Defending reputation may often be self-

defeating.

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Policy on handling RR

Price of disrepute

Is it worth maintaining a good reputation?

 What if there is no potential of ill-repute? How to defend attacks on reputation

If not carefully handled, it could further damage thereputation.

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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.

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 Thank you

Dr Safdar A Butt

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