FINAL PRESENTATION OF MANAGEMENT

ONCORPORATE GOVERNANCE

GROUP MEMBERS Ali Iqbal (Group leader) MBP-11507 Nabeel Ahmad Butt MBP-11539 Zain Fayyaz Butt MBP-11510 Weheb Abid MBP-11546 Amna Khan MBP-11505 Huma Khalid MBP-11552

HISTORY OF CORPORATE GOVERNANCE

In 1983 it appeared as the title of a paper “In perspective on Management” Earl (1983) and in 1984 as the title of report of“The American Law Institute” on the Principles of Corporate Governance and also as the title of a book “Corporate Governance – practices, procedures and power” in British companies and their board of directors…

DEFINITION OF CORPORATE GOVERNANCE Corporate Governance means a

company in a value based manner. Corporate Governance is the system

by which companies are directed & controlled.

EXISTING CORPORATE GOVERNANCE SYSTEM

EXECUTIVE DIRECTORS

BOARD OF DIRECTORS

OWNER DIRECTORS

MANAGEMENT

CORPORATE

SHAREHOLDERS STAKEHOLDERS CREDITORS

SUPERVISORY & ENFORCEMENT AUTHORITIES

INDEPENDENT DIRECTORS

OBJECTIVES Enhancement of Shareholders value

keeping in view the interest of other Stakeholders.

Key Constituents; Share holders Board of Directors Management

ROLES IN CORPORATE GOVERNANCE Gompers et al. (2003) view a

corporation as a republic. The ultimate authority rests with voters (shareholders). These voters elect representatives (directors) who delegate most decisions to bureaucrats (managers).

FUNCTIONS OF CORPORATE GOVERNANCE As in a republic, the actual power

sharing relations depend upon the specific rules of governance. A republic with significant voters rights may be called “Democratic” where as a republic with significant restrictions to voter rights may be called “Dictatorial”

IMPORTANCE OF CORPORATE GOVERNANCE High profile corporate scandals where

directors held accountable Questionable behavior of directors

Excessive bonuses despite poor performance

Decisions based on own interests rather than the interest of shareholders.

Good corporate governance practices, companies can reduce vulnerability to financial crises.

RELATING REPUTATION Corporate Reputation is a multi-stakeholder concept

that is reflected in the perceptions that stakeholders have of an organization (Smidtset al., 2001).

There is much evidence that reputations with different stakeholder groups interact. In particular, reputation with employees is seen to have an impact on reputation with customers and communities (Carmeli, 2005).

When managing their Corporate Reputation, organizations should therefore take account of not only their relationships with stakeholders but also monitor how stakeholders influence each other (Dutton et al., 1994).

COMPETITION OF CORPORATE GOVERNANCE

Corporate governance competition among firms is based upon the following factors Transparency (true and fair facts & figure) Accountability (responsible) Equanimity (equal treatment)

It involves letting Investors know how the company in which they have invested is utilizing their money?

CORPORATE ETHICS Ethics is the integral part of corporate

governance. The board of directors established the code of ethics for management and staff which is considered to be the tasks. This covers penalty of punishment of those who fail to comply, so all the staff must follow strictly the implication and supervision of the code of ethics is applied through the existing management system.

CORPORATE ETHICS Corporate Ethics involves

Transparency among firms decisions an shareholders

Effective board of directors Clearly defined responsibilities Operate in shareholders interest Reliable financial statements Fair remuneration Open communication

CORPORATE RESPONSIBILITIES

CORPORATE RESPONSIBILITY

CORPORATE FINANCIAL

RESPONSIBILITY

CORPORATE ENVIRONMENTAL RESPONSIBILITY

COPRORATE SOCIAL

RESPONSIBILITY

DESCRIPTION OF MODELS & MECHANISM Outsider (shareholders) model

Insider (stakeholders) model

THE OUTSIDER MODEL A priority to market regulation the owners of firms tend to have a

transitory interest in the firm The absence of close relationships

between shareholders and management

the existence of an active `market for corporate control´ - takeovers, particularly hostile ones

the primacy of shareholder rights over those of other organisational groups

THE INSIDER MODEL The priority to stakeholders control The owners of firms tend to have an

enduring interest in the company They often hold positions on the board of

directors or other senior managerial positions The relationships between management and

shareholders are close and stable There is little by way of a market for

corporate control the existence of formal rights for employees

to influence key managerial decisions

GLOBALIZATION WITH CORPORATE GOVERNANCE Increasing integration of economies around

the world Particularly through trade and financial

flows Also refers to the movement of (labour) and

knowledge (technology) across international borders.

IMF

SHAREHOLDERS Shareholders are the owners of the company.

They control the company by appointing board of directors to act as representatives. Shareholders are eligible to make decisions on any of significant corporate changes. Therefore the company encourages the shareholders to exercise their right. Board of directors realizes the importance of shareholders, meeting as revealed in the policies to facilitate all shareholders equally to maintain governance policies.

STAKEHOLDERS The board of directors values the right

of stakeholder that they provide mechanism to promote cooperation between the company and its stakeholders along with customers, employees, suppliers, shareholders, investors, creditors, government competitors, external auditors etc.

BOARD OF DIRECTORS The primary responsibility for

administration and performance of the company lies with the directors. The directors administer the company on behalf of shareholders and their powers and duties are covered in the statue.

AUDIT COMMITTEE The company has the policy that

through independent directors or audit committee, stakeholders can communicate with the board any concerns about illegal or unethical practices, incorrect financial reporting, insufficient internal control etc. so the investigation could be carried out and reported to the board of Directors.

AUDIT COMMITTEE The system by which a company is

directed and controlledInternal Control

•Safeguard the assets•Maintain adequate accounting records•Prepare financial statements

Directors must identify

•Objectives of the entity•Business & Governance risks•How to manage those risks

ROLE OF AUDITOR IN CORPORATE GOVERNANCE External auditor

Checks the integrity of financial statements. Form an opinion on companies compliance

with local corporate governance regulations Review the system & controls for weakness

Internal auditor Monitor & controls with in the entity. Reports to the directors on effectiveness of

procedure and control system and report to the management about governance policies.

CORPORATE SCANDALSSet of questionable, unethical, and/or illegal actions that a person or persons within a corporation engage in.

CONCLUSION There is no doubt that a strong

correlation exists between good governance practices & levels of economic development in a nation.

Good governance leads to good performance and create a positive impact on corporate performance & national economy.

Leaders should understand this link and respond effectively.

FLOW CHART OF CORPORATE GOVERNANCE