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“  D o th e y n o t se e th e b ird s
a b o ve th e m , sp re a d in g o u t
th e ir w in g s a n d fo ld in g th e m
in ? N o n e u p h o ld s th e m
exce p t th e m o st
b e n e fice n t( A LLA H ). ve rily , H e
is th e A LL -S E E R o f
e ve ryth in g ” . H O LLY Q U R A N
S U R E H A L -M U LK ( 6 7 : 1 9 )
 Presenting BY
NAWAZ TABASSUM

Members :
SAJID SARWR 11056
AITIZAZ AHSAN 11027
ARSLAN ALI 11044
SHAHBAZ AHMED 11037
FAIZAN KHAN 11040
SHAHBAZ AHMED 11011
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AGENDA
 Definition of Corporate Governance:

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§ “Corporate governance is the relationship between corporate managers, directors and
providers of equity, and institutions who save and invest their capital to earn a return”. by
Sir Ronald Hampel
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• “corporate governance” includes every force that bears on the decision-making of the firm.
That would encompass not only the control rights of stockholders, but also the contractual
covenants and insolvency powers of debt holders, by Kenneth Scott of Stanford Law
School, (March 1999) states:.
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 THE IMPORTANCE OF CORPORATE GOVERNANCE:
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• The popularity and development of corporate governance frameworks in both the developed and
developing worlds.
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• Corporate governance serves two indispensable purposes. It enhances the performance of corporations
and entrepreneurs to maximize the company's operational efficiency.
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• Corporate governance has become the means by which companies seek to improve competitiveness and
access to capital and borrowing in a local and global market.
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• The corporate governance system specifies the rights of the shareholder.
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• To acknowledge the rapid developments that are taking place within the Pakistan corporate culture.
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• Financing of any kind, whether for publicly traded companies or privately held and state owned
companies, can only be made possible through the exercise of good corporate governance.
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 Building Corporate Reputation Through Corporate Governance

• According to Fombrun corporate reputation consists of four characteristics: credibility,

reliability, responsibility and trustworthiness (Fombrun 1996).
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• According to Widerman and Buxel (2005), corporate reputation helps the companies to get
good employees, attract consumers, and increase consumers’ loyalty.
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• organizations recognize the significance of corporate reputation in business goals
achievements and in the function of competitive advantage maintenance (Argenti and
Druckenmiller 2004).
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• Corporate reputation may be divided in factors that are company’s ethics, employees ,financial
performance, leadership, management, social responsibility, and focus on consumers,
quality, reliability, emotional appeal, and communication.
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• A prominent corporate image may be developed through coordinate image building
Campaign.
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• Transparency is a necessary requirement for successful corporate governance and it leads to
good reputation.
 Competition and Corporate Governance:
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• competition and corporate governance indicators may move in a particular direction we say they are complementary or
in opposite direction opposite direction, then they are substitutes.
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• Grosfeld and Tressel (2001) have studied the interaction effect of governance and competition. They find competition to be
positively affecting productivity.
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• weak product market competition has a negative impact on productivity growth of profitable, widely held firms.
Block holder control has no impact (Koke and Renneboog 2005).
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 Corporate Ethics:
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• Reputation of a company and its share price also rise if they act upon on corporate social responsibility
(CSR) and fulfill ethical values diligently and honestly.
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• It is very difficult to define; good and bad behavior within a business sense.
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• Management gurus talk of a few cardinal values that are justice, temperance, courage and wisdom.
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• An organization is characterized by group interaction and mutual respect.
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• Only good teams can raise the standard of the work that it is assigned to, If the employee feels one with
the environment in which they are working.
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• The attitude of the management to its employees also matters a lot when considering the ethical status of
the company.
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• Ethics in the work place is important because it reflects on the internal organization of the company.
 Corporate responsibility:
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• Corporate social responsibility is a form of corporate self-regulation integrated into a business model.
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• An organization's mission as well as a guide to what the company stands for and will uphold to its
consumers.
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• The term "CSR" came in to common use in the early 1970s.

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• Today most major corporate websites lay emphasis on commitment to promoting non-economic social
values Under , social responsibility.
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• ISO 26000 is the recognized international standard for CSR.
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• CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of a
triple bottom line: people, planet, profit.
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The Globalization of Corporate Governance:
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A global economy whose main hallmarks were, according to Gilpin (2000), the following ones:
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O Open markets
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O Unrestricted capital flows

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O Pervasive activity and influence from multinational corporations

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 Globalization conveys the emergence of a sort of post-sovereign governance, because States cannot be
sovereign in the traditional sense.
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 Criminal economic activities find out their way through special purpose entities allowed by the governance
of global companies
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 Models of Corporate Governance:

THE FIDUCIARY MODEL:

 The "aggregation" theory was short-lived probably because it conflicted descriptively with the rise of large
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corporations.

 This shareholder-centered model emphasizes that directors and officers owe "fiduciary duties" to
shareholders, who are the rightful "owners" of the firm.

 The fiduciary lacks ownership interest in the property and is obligated to use his control for the benefit
of the principal.

Anglo-American Model:

 Anglo-American model tends to give priority to the interests of shareholders.

 The liberal model of corporate governance encourages radical innovation and cost competition.

 The coordinated model of corporate governance facilitates incremental innovation and quality competition.

 The CEO has broad power to manage the corporation.

  
Mechanisms and controls:

 Corporate governance mechanisms and controls are designed to reduce the inefficiencies
that arise from moral hazard and adverse selection.
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Internal corporate governance controls:

• Monitoring by the board of directors
• Internal control procedures and internal auditors:
• Balance of power
• Remuneration
External corporate governance controls:

External corporate governance controls encompass the controls external stakeholders exercise

over the organization.

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 Stakeholders vs. shareholders in corporate governance:

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• The corporation must be run in the interest of shareholders, creating value on their behalf.
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• The objective of management should be to maximize the market value of the company.
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• In the stakeholders’ view may also be included the vision of the social responsibility of the firm,
whereby society as a whole is a stakeholder.
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THE BOARD OF DIRECTORS:

• A board of directors is a body of elected or appointed members who jointly oversee the
activities of a company or organization.
• In an organization the board is elected with voting members.
• In a stock corporation, the board is elected by the stockholders.
• In a non-stock corporation with no general voting membership.
• Duties of boards of directors include:
 Governing the organization
 Selecting, appointing, supporting and reviewing the performance
 Ensuring the availability of adequate financial resources;
 Approving annual budgets;
 Accounting to the stakeholders for the organization's performance.
• The board chooses one of its members to be the chairman.
• Directors are the members of a board of directors.
• Directors can be owners, managers, or any other individual elected by the owners of the
business entity.
 Role of the Audit Committee:
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The Code requires every listed company to establish an Audit Committee.

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 Three members including the chairman, from among its directors.

 The secretary of the Audit Committee may be appointed from among the employees of the
company.

 The role of the audit committee is to function as the “ultimate guardian of investor's interest
and corporate accountability”.

 The names of members of the Audit Committee should be disclosed in each annual report
of the company.

 The Audit Committee is entrusted with an extremely crucial role.

 Determine appropriate measures to safeguard the company's assets.

 The audit committee in every listed company should meet at least once in every quarter
of the financial year.
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 Corporate scandal:

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 A corporate scandal is a scandal involving allegations of unethical behavior by people acting within or
on behalf of a corporation.
Concluding remarks
QUESTIONs???
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