Corporate Governance:

Overview
Saif Ullah Khan
Corporate Governance
Introduction
 Corporate Governance refers to
actions taken by organizations to
improve relationships and
interactions with various
stakeholders.
 It covers a set of rules, procedures
and operational structure that
dictates the long term and short
term actions of companies.
 Corporate Stakeholders
Stakeholders Concerns

Shareholders Value maximization, Profitability, Liquidity – Growth, Market

Price.
Employees Benefits Maximization
Government Tax, Employment, True Reporting, Diversity
Creditors Liquidity, Debt Servicing
Customers Quality, Price, Care
Community Job, Environment Protection, Equity
Trade Unions Quality of Worker’s Life
Competitors Fair play, Ethical Business
Corporate Governance & Democratic Governance

1 Public 1 Shareholders

2 Government 2 Board

3 Bureaucracy 3 Management

Gov’t
4 Servants 4 Employees
Market Model
Control Model
Principals of Corporate
Governance

1. Principle of Fairness
2. Transparency Principle
3. Principle of Accountability
4. Fiduciary Principle
5. Reliability Principle
6. Principle of Dignity
7. Propriety Principle
8. Responsiveness Principle
OECD
Principles
1. Rights of Shareholders
2. Equitable treatment of
shareholders
3. Role of stakeholders in
corporate governance
4. Disclosure and
transparency
5. Responsibilities of the board
 Comparison of Corporate Governance Principles
Key Organization for Economic International Corporate Asia Pacific Economic
Parameters Cooperation and Development Governance Network (ICGN) Cooperation (APEC)
of OECD Guidelines Principles Principles

1 Rights of - Right to attend and Participate in AGMs, to
Shareholders elect board members, to receive dividend,
and to receive material information in a
timely manner.
- Right to transfer shares.
- To know capital structures and
arrangements that confer on some
members.
- Corporate Control Mechanism should
function efficiently and transparently.
- Transparent transactions, accountable
management.
- Major Organizational Changes - Establishment of rights and
require their approval. responsibilities of all
- Opportunity to exercise their voting shareholders.
rights.
- Right to have timely disclosure of the
result of resolutions.
- Adherence to one-share, one vote
standard. Institutional investors have
proxy responsibilities to exercise
voting rights.

2 Equitable - All shareholders receive equitable - One share, one vote - Equitable treatment of all
Treatment of treatment. - Protection of rights of minority shareholders.
Shareholders - Effective redressal of violations. shareholders.
- Changes in voting rights subject to voting.
- Prohibition of insider-trading and self-
dealing.
- Directors should avoid decisions regarding
their own interests.
 Comparison of Corporate Governance Principles
Key Organization for Economic Cooperation International Corporate Asia Pacific Economic
Parameters and Development Guidelines Governance Network Cooperation (APEC)
of OECD (ICGN) Principles Principles
3 Role of - Recognizing their roles as established by law. - Directors should built good and - Establishment of effective
Stakeholders - Encouraging their active cooperation in creating a productive relationships with and enforceable
sustainable enterprise. stakeholders. accountability standards.
- Permit performance enhancing mechanisms. - Directors are accountable to
- Access to relevant information. shareholders.

4 Disclosure and - Accurate and timely dispersal of information - Timely and full disclosure of all - Timely and full disclosure of
transparency regarding: information. financial and non-financial
1. Objectives of the company. - Disclosure of share-holding and information with regards to
2. Major share ownership and voting rights. the status of voting rights. the company’s
3. Financial and operational results. - Annual audits but external performance.
4. Directors, executives and their renumerations. statutory auditors.
5. Significant, foreseeable risks.
6. Government structures and practices.
7. Material issues regarding employees and other
stakeholders.

5 Responsibilities of - Specify the key responsibilities of the Board-overseeing - Judgement of the directors, - Formation of Board of
the Board of the process of disclosure and communication, independent of management Directors and deciding their
Directors monitoring the effectiveness of governance practices operations. renumeration.
and change them, if necessary. - Establishment and nomination of
committees for audit,
compensation and outside
directors.