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MUHAMMAD ALI KHANN

BS (ACCOUNTING & FINANCE)

SEVENTH SMESTER

CORPORATE GOVERNNCE

SIR SHERAZ AHMED

SUBMISSION DATE
01-02-2021
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Reference
Introduction 3
Corporate Governance 3
Corporate Governance in Pakistan 4
Number of Companies 6
Nature Of Business 6
Samsung 6
Vivo 6
Infinix 7
Huawei 7
Apple iPhone 7
Total capital of companies 8
CEO duality 9
Board Size 10
Non-executive directors 10
Family concentrated ownership 11
Independent audit committee 12
Cross directorship 13
Year of data 13
Data taken source 14
Conclusion 14
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Introduction of Project
In this project, we will Annalise the level of corporate governance in
different corporations in same sectors on base of different studies in
these corporations like, CEO duality, board size, Non-Executive
directors in board, Family concentrated ownership, independent audit
committee, Cross directorship.
Corporate Governance
Corporate governance is the system of rules, practices, and processes by
which a firm is directed and controlled. Corporate governance
essentially involves balancing the interests of a company's
many stakeholders, such as shareholders, senior management executives,
customers, suppliers, financiers, the government, and the community.
Since corporate governance also provides the framework for attaining a
company's objectives, it encompasses practically every sphere of
management, from action plans and internal controls to performance
measurement and corporate disclosure.
Governance refers specifically to the set of rules, controls, policies, and
resolutions put in place to dictate corporate behavior. Proxy advisors and
shareholders are important stakeholders who indirectly affect
governance, but these are not examples of governance itself. The board
of directors is pivotal in governance, and it can have major ramifications
for equity valuation.

A company’s corporate governance is important to investors since it

shows a company's direction and business integrity. Good corporate
governance helps companies build trust with investors and the
community. As a result, corporate governance helps promote financial
viability by creating a long-term investment opportunity for market
participants.

Communicating a firm's corporate governance is a key component of

community and investor relations. On Apple Inc.'s investor relations site,
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for example, the firm outlines its corporate leadership—its executive

team, its board of directors—and its corporate governance, including its
committee charters and governance documents, such as bylaws, stock
ownership guidelines and articles of incorporation.

Most companies strive to have a high level of corporate governance. For

many shareholders, it is not enough for a company to merely be
profitable; it also needs to demonstrate good corporate
citizenship through environmental awareness, ethical behavior,
and sound corporate governance practices. Good corporate governance
creates a transparent set of rules and controls in which shareholders,
directors, and officers have aligned incentives.

Corporate Governance in Pakistan

In Pakistan, since the introduction of the corporate governance in 2002
and subsequent revisions in 2012 and 2017 the specific provisions were
mandatorily required to be implemented with any exception reported as
a 'non-compliance'. Resultantly, the corporate governance
implementation and monitoring has been based on the "mandatory"
approach. It was acknowledged that this approach was relevant in the
early years of the evolution of the corporate governance in Pakistan,
providing a direct and simpler pathway to building a governance culture
that reflected compliance.

However, it had also been argued that under the mandatory corporate
governance regime the costs of compliance might exceed benefits. With
the underlying "One size fits all" approach, it lacks flexibility especially
important and relevant for the small companies, foreign multinationals
and non-regulated institutions. Further, the mandatory regulations may
reduce the incentives for companies to list and participate in public
markets.

The draft code outlines comply or explain approach except for certain
requirements, which are mentioned as "mandatory". The mandatory
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provisions include, simultaneous directorship in maximum seven

companies, appointment of independent directors, inclusion of female
director, maximum number of executive directors, formation of audit
committee, appointment of auditors having registration with Audit
Oversight Board, rotation of auditors for financial sector companies,
publication of statement of compliance with the code and its review by
the external auditors. The notable non mandatory provisions in the draft
code based on the 'comply or explain' principle include separation of the
office of chairman and chief executive, annual evaluation of the board,
its members and committees, directors training, placement of related
party transactions with the audit committee, qualifications of chief
financial officer, internal auditor and company secretary, internal audit
structure and function, formation of Human Resource &Remuneration,
Nominations and Risk Management committees. The draft code requires
mandatory formation of audit committee, however, taking into account
the practical aspects of listed company operations an alternate committee
structure may be the formation of separate financial statements review
committee, internal controls review committee and business & strategy
review committee to provide focused functional attention to each of
these matters.

The new reshaping governance framework is built on trust. The trust that
companies would be committed to the best corporate governance
practices and the trust that the regulators and other stakeholders would
consider reasonable and justifiable explanations of companies as right
course of action. However, consistent with the international practices on
the comply or explain based governance approach, a guidance material
for the companies, providing the tools and techniques in ensuring the
compliance and guiding justifiable reasoning and explanation would be
required.

The processes that characterize strong corporate governance systems

also promote and ensure a law-compliant organization and society. The
linkage of rights and obligations, controls and oversight under the
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corporate governance also provide an avenue to the companies to

develop and implement anti-corruption and law compliant corporate
system. With this objective, the corporate governance framework can
require boards to develop a code of conduct for ensuring compliance
with laws and regulations, including anti-corruption and bribery aspects.
On a relevant note, the protection to whistleblowers through legislative
measures is also required in Pakistan.

Number of Companies
1. Samsung mobile
2. Vivo Mobile
3. Infinix Mobile.
4. Huawei
5. Apple iPhone.

Nature of Business
Samsung Mobile
South Korean company that is one of the world's largest producers of
electronic devices. Samsung specializes in the production of a wide
variety of consumer and industry electronics, including appliances,
digital media devices, semiconductors, memory chips, and integrated
systems.

Vivo Mobiles
Vivo is a Chinese technology company headquartered
in Dongguan, Guangdong that designs and develops smartphones,
smartphone accessories, software and online services. The company
develops software for its phones, distributed through its V-Appstore,
with I Manager included in their proprietary, Android-based operating
system, Funtouch OS. Vivo is an independent company and develops its
own products. It has 10,000 employees, with research and development
centers in Shenzhen, Guangdong, and Nanjing, Jiangsu.
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Infinix Mobile
Infinix is a Hong Kong based smartphone manufacturer and a subsidiary
of the Transsion Group. Established in 2013, Infinix has already
established itself as a leading player in the smartphone/tablets market.
Infinix has R&D centers in France and Korea and has manufacturing
centers in China along with local subsidiaries in 60 countries worldwide.

The company’s vision is to provide high-end devices at affordable prices

and does this by using a unique ‘factory to consumer model’, which
eliminates the use of distributors (thereby reducing channel costs
substantially) and takes the smartphone directly from the factory to the
consumer.

Huawei Mobile

Founded in 1987, Huawei is a leading global provider of information

and communications technology (ICT) infrastructure and smart devices.
We have more than 194,000 employees, and we operate in more than
170 countries and regions, serving more than three billion people around
the world. Our vision and mission is to bring digital to every person,
home and organization for a fully connected, intelligent world.

Apple iPhone

The nature of the business is manufacturing technology devices,

operating software, application software and providing services. One of
the things that has become clear over the years of dealing
with Apple products and different parts of the organization is,
the company is very, very compartmentalized.
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Table # 1

S.No Mobile Tablet Smart Laptop LED AC LED

watch lights
TV

Samsung       

Apple       

Huawei       

Vivo       

Infinix       

Total Capital of Companies

Table # 2

Companies Net Capital

Samsung $260 billion

Huawei $122 Billion

Apple iPhone $2 trillion

Vivo $470 Million

Infinix $250 million

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CEO Duality
CEO duality refers to the situation when the CEO also holds the position
of the chairman of the board. The board of directors is set up to monitor
managers such as the CEO on the behalf of the shareholders. They
design compensation contracts and hire and fire CEOs.
Agency theory suggests that CEO duality is bad for performance
because it compromises the monitoring and control of the CEO.
Stewardship theory, in contrast, argues that CEO duality may
be good for performance due to the unity of command it presents.

A strong power in the CEO duality actually is good because it can create
a clear direction of a single leader, but on the other hand, it is also
a disadvantage of CEO duality. This is because if a person has enormous
power within a company then it will create segregation of duty.

Table #3

Companies CEO DUALITY

Samsung Samsung Electronics has decided to
separate the roles of chairperson of the
board of directors and chief executive for
the first time since its foundation. Now
there is no CEO duality in Samsung.
Apple iPhone Apple rightly keeps chairperson,
CEO roles split. There is no CEO
duality.
Huawei Huawei company is not involved
in CEO duality. They have
separate roles of CEO and
chairperson.
Vivo They also have different CEO and
Chairperson.
Infinix The CEO and chairperson in
Infinix is separate.
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Board Size
Board size refers to the total number of directors on the board of each
sample firm, which is inclusive of the CEO and Chairman for each
accounting year. This will include outside directors, executive directors
and non-executive directors. According to the Corporate Library's study,
the average board size is 9.2 members, and most boards range from three
to 31 members. Some analysts think the ideal size is seven. In addition,
two critical board committees must made up of independent members:
The compensation committee. A large number of members represents a
challenge in terms of using them effectively and/or having any
meaningful individual participation. According to the Corporate
Library's study, the average board size is 9.2 members, and
most boards range from three to 31 members. Some analysts think
the ideal size is seven.

Table #4

Companies Board of directors

Samsung 11
Huawei 17
Apple iPhone 23
Vivo 27
Infinix 19

Non-Executive Directors in Board

Non-executive director is member of company's board of directors who
is not part of the executive team. A non-executive director typically
does not engage in the day-to-day management of the organization but is
involved in policymaking and planning exercises.

Essentially the non-executive director's (NED) role is to provide a

creative contribution to the board by providing independent oversight
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and constructive challenge to the executive directors. ... However, it is

important that they show the same commitment to its success as
their executive colleagues.

An executive director is a member of a board or firm who is also an

employee of the company and has management responsibilities.

Executive board directors sometimes serve as non-

executive board directors on other companies. In fact, about 30%
of executive directors serve as non-executive directors for other
companies.

Table #5

Companies Numbers of NED’s

Samsung 6
Huawei 9
Apple iPhone 12
Vivo 16
Infinix 11

Family Concentrated Ownership

Most experts agree that a family company board should be a relatively
small group of about five to eight members. It should include the CEO
of the company, a majority of external board members (meaning
not family members or company managers), and a small number
of family representatives.

The constitution of the executive and non-executive directors from the

family members has much influence on the quality of information,
which is board casted for the corporation’s users. Also in the other case
they may have the greater influence to affect the election process of the
board of directors and as well as the chairperson of the board.
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Table #6

Companies Family concentrated ownership

Samsung Does not exists, majority owned
by foreign investors.
Huawei Does not exists, Huawei is owned by
its employees through an Employee
Stock Ownership Program (ESOP) that
has been in place since the beginning.
Apple iPhone Does not exists
Vivo Does not exists, mostly owned by
different foreign investors.it is a
subsidiary company.
Infinix Does not exist it is a subsidiary
company owned by Transsion
group.

Independent Audit Committee

A public sector organization board-level committee made up of at least a
majority of independent members with responsibility to provide
oversight of management practices in key governance areas.

All audit committee members should be independent. Independence

needed to prevent insiders from influencing the work and oversight of
the committee and the work of the external auditors. ...
Auditors should be able to identify earnings management or accounting
irregularities, and thus, deter such activity.

The audit committee of each listed company must be comprised solely

of “independent” directors, subject to certain limited exemptions.
The audit committee must have the authority to
engage independent counsel and other advisors, as
the committee determines necessary to carry out its duties.
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Table # 7

Company Members in audit committee

Samsung 4
Huawei 4
Apple iPhone 7
Vivo 6
Infinix 5

Cross Directorship
A cross directorship defines when the director of one company is also
the director of another company or companies. Often, creditors are
unaware that the director of a company who they are doing business
with is also the director of one or multiple companies elsewhere.

As per Section 203, a person can be Managing Director in more than

one Company with the approval of the Board of Director of
First Company. Therefore, a person can be executive director in more
than one Company in this exception situation. By virtue of law,
such person shall considered as Whole Time Director.

Table #8

Company Existence of cross directorship

Samsung 
Huawei 
Apple iPhone 
Vivo (as it is subsidiary company)
Infinix (as it is subsidiary company)

Year of data (data collected for project)

In this project, we take the data of all companies year 2019 for analysis.
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Data Taken Source

1. www.accaglobal.com
2. Creditorwatch.com.au
3. Specialities.bayt.com
4. www.nurole.com
5. www.wikipedia.org
6. Annual reports of all companies year 2019
7. Official websites of each company

Conclusion
On the basis of above discussion on several factors for the analysis of
corporate governance by data form different sources, annual reports and
tables we come to know that the level of corporate governance is very
strong and effective in above corporations. As level of CEO duality does
not exists in any of the above companies, as its main disadvantage is
unfairness if any fraud happens and very less variations and lack of new
ideas.

In addition, family concentrated ownership lacks if it exists it will affect

the quality of information, which is board casted for the corporation’s
users.

Another factor that can affect companies’ performance is cross

directorship, that is also not present if it exists it will affect the
performance of company. Therefore, on the above discussion we can
easily say that the level of corporate governance is strong.