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Introduction to
CORPORATE GOVERNANCE
Chapter 1

Governance
• Refers to a process whereby elements in society wield
power, authority and influence and enact policies and
decisions concerning public life and social upliftment

• Means the process of decision-making and the process by

which decisions are implemented through the exercise of
power and authority by leaders of the country

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Characteristics of Good Governance

• Participation • Accountability
• Rule of Law • Effectiveness &
• Transparency Efficiency

• Responsiveness • Equity and

Inclusiveness
• Consensus oriented

Corporate Governance
• Defined as the system of rules, practices and processes by
which business corporations are directed or controlled

• It basically involves balancing the interests of a company’s

many stakeholders, i.e., shareholders, management,
customers, suppliers, financiers, government and the
community.

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Purpose of Corporate Governance

• Facilitate effective, entrepreneurial and prudent
management that can deliver long-term success of the
company
• Enhance shareholder’s value and protect the interests of
other stakeholders by improving the corporate
performance and accountability.

Objectives of Corporate Governance

• Fair and Equitable Treatment of shareholders

• Self-assessment
• Increase shareholders wealth
• Transparency and full disclosure

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Basic Principles of
Effective Corporate Governance

Exercise: Identify the following questions

to which basic principle it applies
• Does it promote objective, ethical and responsible decision
making?
• Does the board meet the information needs of investment
communities?
• Does the board have sound disclosure policies and
practices?

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Exercise: Identify the following questions

to which basic principle it applies
• Does the Board clarify its role and that of management?
• Does it create an environment to take and manage risks?
• Does the composition mix of board membership ensure
an appropriate range and mix of expertise, diversity,
knowledge and added value?

Exercise: Identify the following questions

to which basic principle it applies
• Has the board built long-term sustainable growth in
shareholders’ value for the corporation?
• Does it safeguard integrity in financial reporting?

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Corporate Governance
Responsibilities and
Accountabilities
Chapter 2

Relationship between
shareholders and other stakeholders
Stakeholders

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Owners/Shareholders demands
accountability from BOD on the following
aspects:
• Financial performance
• Financial Transparency
• Stewardship
• Quality of Internal Control
• Composition of the Board of Directors and its responsibilities

Parties involved in Corporate Governance

Party Overview of Responsibilities

1. Shareholders Broad role:
Provide effective oversight through election of
board members, approval of major initiatives

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Parties involved in Corporate Governance

Party Overview of Responsibilities

2. Board of Broad role:
Directors
Major representative of stockholders to ensure
that the organization is run according to the
organization’s charter and that there is proper
accountability

Parties involved in Corporate Governance

Party Overview of Responsibilities

3. Non-executive Broad role:
or Independent
Same as BOD
directors

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Parties involved in Corporate Governance

Party Overview of Responsibilities

4. Management Broad role:
Operations and accountability. Manage the
organization effectively, provide accurate and
timely reports to shareholders and other
stakeholders.

Parties involved in Corporate Governance

Party Overview of Responsibilities

5 Audit committee Broad role:
of the BOD
Provide oversight of the internal and external
audit function and the process of preparing the
annual financial statements as well as public
reports on internal control.

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Parties involved in Corporate Governance

Party Overview of Responsibilities

6. Regulators Broad role:
a. BOA Set accounting and auditing standards

b. SEC Ensure the accuracy, timeliness and fairness of

public reporting and financial and other
information for public companies

Parties involved in Corporate Governance

Party Overview of Responsibilities

7. External Broad role:
Auditors
Performs audit of company financial statements
to ensure that the statements are free from
material misstatements

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Parties involved in Corporate Governance

Party Overview of Responsibilities

8. Internal Broad role:
Auditors
Performs audit of companies for compliance
with company policies and laws, audits to
evaluate the efficiency of operations, and
periodic evaluation and test of controls.

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