Governance

Presented By :
S.M. Aminur
Rahman

Governance is the act of governing.

Government
Vs.
Governance?
Governance is what a Government does

What is Corporate Governance?

It is the system by which companies

are directed and controlled.

It deals largely with the relationship
between all the stakeholders in a
company.
Stakeholders in this case include
everyone ranging from the BOD,
management,
shareholders
to
customers, employees and society.

Corporate Governance based on principles

:

Conducting business with all integrity

& fairness.
Being transparent with all
transactions.
Making all disclosures and decisions,
complying with all laws of the land
Accountability and responsibility
Commitment with ethical manner.

Three essential ingredients of Corporate Governance merit attention.

Check & balances like audit

committees, independent
accounting, systems etc.
Clear demarcation of
responsibilities for effective
accountability.
Complete disclosure and
transparency.

Principles of corporate governance:

Rights and equitable treatment

of shareholders.
Interests of other stakeholders.
Role and responsibilities of the
BOD.
Integrity and ethical behavior.
Disclosure and transparency.

Parties to Corporate Governance:

Government agencies and

authorities.
Stock Exchange.
Management.
BOD

Internal corporate
governance controls:
Internal corporate governance controls monitor
activities and then take corrective action to
accomplish organizational goals. Examples include:
Monitoring by the board of directors.
Internal control procedures and internal auditors.
Balance of power.
Remuneration.
Monitoring by large shareholders and/or

monitoring by banks and other large creditors.

External corporate
governance controls:
External corporate governance controls encompass
the controls external stakeholders exercise over the
organization. Examples include:
Competition
Debt covenants
Demand for and assessment of performance
information (especially financial statements)
Government regulations
Managerial labor market
Media pressure
Takeovers

The need for good

corporate governance:
A Responsible Corporate Citizen should not only

enhance the shareholders wealth but also exhibit

fairness to other stakeholders like consumers,
employees
and
the
community
in
general.
Maximization of shareholder wealth has to be achieved
by adherence to ethical values and transparency in
dealings. The principles of corporate governance are
developed to ensure that the companies do justice to
all the shareholders, investors and society in general.
It has also to be ensured that investors are not
enronised by corporates in future.

Corporate governance in Banking :

Contd
Corporate governance in a service Industry like Bank is

Not only to ensure compliance with regulatory requirements

but also to be responsive to the expectations of all the
shareholders who deal with the Bank.

Banks shall have strive for excellence with twin objectives

of enhancing customer satisfaction and shareholders value.

The BOD shall support the broad principles of corporate

governance.

The BOD should lay strong emphasis on transparency,

accountability and integrity.

Features of Good Corporate

Governance Principles:
Openness, integrity and accountability must be
the key elements of corporate Governance

Functioning

of the Board needs to undergo

qualitative change.

A bifurcation of the role of the Chairman and the

Managing Director may ensure that the Chairman

is free from operational chores and is able to give
focused attention to the working of the Board.

Contd.
Composition of the Board should be

broad based through the induction of

independent Director and the Board
should adopt code of corporate
governance.
Code of best practices shall be

evolved to achieve the necessary

high standards of corporate

Bangladesh Bank initiated various

measures to improve Corporate
Governances:
Better disclosure and transparency standards
have been introduced; fit and proper tests
prescribed
for
Bank
Directors,
Chief
Executives and Advisors; restriction imposed
on the composition of the membership of the
Board of Directors; the roles and functions of
the Board and Management were clarified
and redefined. Audit Committee has been
mandated for all banks with clear guidelines
and TORs. Besides Early Warning System
(EWS) also been introduced.

Contd..
To strengthen the banking operation

capital Adequacy measures (minimum

CAR 9%) introduced.

Introduced Secondary Market of shares

which depends on the quality of

governance, vision of the Board,
Earnings per share (EPS) Return on
Assets (ROA).

Internal pressure to Adhere

to good corporate
Governance:
The good practice followed by Corporate like

Banks to meet the representatives of the media

and the investment analysts who dissect and
discuss the details of performance at quarterly
intervals puts internal pressure to prepare the
organization for exposure in public.
Transparency in operations is the hallmark of a

good corporate citizen. Access to information

may be made a fundamental right of an investor
in respect of the operations of every corporate.

A suggested Model code of Best

Practice for Banks:
Men of eminence who can contribute towards

the vision, control and guidance should be

chosen as Director.
Bifurcation of the post of Chairman and MD,
so that the Chairman is free from operational
chores and able to give focused attention to the
working of the Board.
Boards should have a formal schedule of
matters reserved for them for decision to ensure
that the direction and control of the Bank is
firmly in their hands.

Contd
Reappointment of directors should be based on

appraisal of their contribution to the boards

functioning. Directors who have not been present
for at least 50% of the board meetings should not
be considered for reappointment.
Chairman & MD should have a minimum tenure

of 2 years to ensure proper direction and

continuity of policy.
BOD should form a effective audit committee
comprising
non -executive directors and this
committee should be given access to all financial
information.

Contd
The Report of BOD should contain

adequate MIS.
The quality of shareholders

communication should be improved.

Adoption of code of self-discipline will

improve quality of governance.

Directors should be paid reasonable

fees.

Thank You