MGT 209 REVIEWER 2.

Accountability
3. Equitable treatment of shareholders
4. Self-evaluation
CORPORATE GOVERNANCE 5. Increasing shareholder’s wealth

GOVERNANCE Basic Principles of Corporate Governance

- Refers to a process whereby elements in  Transparency and Full Disclosure

society wield power, authority, and influence
- Process of decision making
- Process by which decisions are implemented
through the exercise of power
o Is the board telling us what is going on?
 Accountability
o Is the board taking responsibility?
 Corporate Control
o Is the board doing the right thing?

CORPORATE GOVERNANCE
Stakeholders – have a vested interest in the success of
- System of rules, practices, and processes by w/c
the org/proj
a company is directed and controlled.
- Identifies Shareholders – are partial owners of the org/proj and
o Who has power are focused on return on investment (ROI)
o Who is accountable
o Who makes decisions
- “great power comes great responsibility” Parties Involved in Corporate Governance
- Ensures that businesses have decision-making
processes and controls in place 1. SHAREHOLDERS
- Stakeholders: - Oversight through election of board members
o Shareholders - Approval of major activities
2. BOARD OF DIRECTORS
o Employees
- Major repre of shareholders
o Suppliers
- Ensures that top mgmt takes care of SH
o Customers
- Ensures that the org is run according to org’s
o Community
charter
- Ensures that there is properly placed
accountability
Characteristics of Good Governance 3. NON-EXECUTIVE OR INDEPENDENT DIRECTORS
 Participation – everyone should participate - Same w/ BOD
 Rule of Law – should follow the law 4. MANAGEMENT
 Transparency – good governance is transparent - Operations and accountability
 Responsiveness – we have to be responsive - Manages the org effectively
 Consensus oriented – decision should be on - Executive and operation management
majority 5. AUDIT COMMITTEE OF THE BOD
- Oversight of internal and external audit function
 Accountability – we have to be held
- Internal audit is part of internal control
accountable
6. REGULATORS
 Effectiveness & Efficiency – decision be done on
a. BOA – sets auditing and accounting
efficient way
standards
 Equity & Inclusiveness – employees should feel
b. SEC – ensures the accuracy, timeliness, and
included
fairness of public and financial reporting
OBJECTIVES OF CORPO GOV 7. EXTERNAL AUDITORS
- Ensures that the statements are free from
1. Transparency and full disclosure
material misstatements
 8. INTERNAL AUDITORS Professional Ethics include among others:
- Performs audit of companies for compliance
 Integrity, impartiality, objectivity
with policies and laws
 Professional competence
- Note: actually based on complying w/
regulatory bodies, policies and regulations; then  Confidentiality
builds from that  Professional behavior
 Avoidance of potential or apparent conflict of
interest
INTRODUCTION TO BUSINESS ETHICS Business Ethics include among others:
Ethics  Fair competition
- Greek word “ethos” = Character  Global as well as domestic justice
- Understanding right and wrong  Social responsibility
- How conduct should be judged as good or bad  Concern for the environment (triple bottom
- Set of moral principles or values that govern line)
actions and decisions Common Characteristics of Professions
Characteristics and values associated with ethical  Responsibility to serve the public
behavior  Complex body of knowledge
-Integrity -Fairness and Openness  Standards of admission to the profession
-Honesty -Caring for others  Need for public confidence
-Trustworthiness and -Respect for others
Nepotism – someone who has a backer or connection on
Promise-keeping -Responsible citizenship
the org
-Loyalty (fidelity) & -Pursuit of Excellence
Confidentiality -Accountability - hiring someone on the position despite of not
being qualified just because he has connections
Ethical Behavior

- Necessary for society to function in an orderly EXECUTIVE ORDER NO. 220, JUNE 23, 2003
fashion
- Glue that holds a society together Directing the Adoption of the Code of Governance for
- Promotes trust and confidence the Professions in the Philippines

Who do people act unethically General Principles of Professional Conduct

1. Person’s ethical standards are diff from the - ethical awareness

society - ethical commitment
2. Person chooses to act selfishly/greedily - ethical competency

Specific Principles of Professional conduct

Categories of Ethical Principles 1. Service to Others
Personal Ethics 2. Integrity and Objectivity
 Basic justice and fairness 3. Professional competence
 Respect for the rights of others
 Concern -------------------------------- 4. Solidarity and Teamwork
 Concern for the well-being of others 5. Social and Civil Responsibility
 Benevolence, trustworthiness, and honesty
 Compliance w/ the law 6. Global competitiveness

7. Equality of all Processions

RISK MANAGEMENT

- focuses on the negative weaknesses and threats

rather than strengths and oppo
- deals w/ the prevention and contingency plan

RISK

- probability that some future event could

adversely impact the org
- is measured in terms of probability (likelihood)
and impact (magnitude)
- exposure to possibility of loss, adverse
(negative) event
- inherent in every business

Process of Rick Management

1. Identify the risk

2. Analyze the risk
3. Evaluate the risk
4. Treat the risk
5. Monitor and review the risk

Internal or External Factors

External Risks – exposures from environmental

conditions that firms cannot influence

Ex: regulatory environment; market condition

Internal Risks – exposures derived from decision-

making & use of internal and external resources

Ex: includes firm’s operation and objectives

ELEMENTS OF RISK MANAGEMENT

 Process
 Integration
 Culture
 Infrastructure