ALEEM MANSOOR

FA18-BAF-019
CORPORATE GOVERNANCE

ASSIGNMENT NO.1
Question no.1
What is Corporate Governance?
Ans:
In Corporate Governance stakeholders, shareholders, senior executives, suppliers,
customers basically everyone who is involved in the company get their interests and
objective matched as per their desires. For this the company goes through some rules
and regulations and the way company handles all these things is known as corporate
governance.
Corporate Governance shows us where is this company going in the
future and what kind of business environment this company is having. These are the
things that attracts the investors and the other companies. Good corporate
governance attracts the investors this way more investments come which creates
financial feasibility. We can also say that good corporate governance can attract long
term investments from the people in the market ready to invest their money.
Corporate governance clearly defines the difference between managers and the
owners of the company, their roles and their importance.
Finding different ways and different strategic plans to run the company
is part of corporate governance. Corporate governance gives complete control,
authority and responsibility to board of directors. In addition, the productivity and
globalization of corporate governance are important considerations. Corporate
governance is critical if stakeholders want to build added value. Corporate
governance is wide-ranging. It covers social as well as structural dimensions.
Corporate governance promotes a credible, moral and ethical environment.

Question no.2
Evolution of corporate governance?
Ans:
The word Corporate Governance appeared in 1976 when it was used in US federal
Register. The concept was officially used to define the way standardized boards and
best practices should be measured as a standard by regulators and firms. The first
proof of this was the N.Y. Bond, which requires Listed companies to form a Board
of Auditors, of which independent Non-Executive Directors must be members
(INEDs). But governance is continually changing, leading to reforms during a period
of economic downturn. Perhaps the biggest economic disaster ever since the
Economic Crisis was the 2008 financial crisis. It led to the failure of investment
institutions, such as Lehman Brothers, and the implementation of bailouts and
preventative monetary policy, in order to discourage the global economy from
falling. This has been contributed by several causes, but there may be considerable
lack of governance and supervision. Aside from the fact that there was no overall
long-term risk-reduction plan, the compensation policies were particularly dubious
and led CEO's to push for short-term growth instead of long-term survival out of
balance benefits.
In several countries the control of the Board has grown substantially. Given
that good governance is mostly about balancing supervision and strategic thinking
with understanding of broad-based implications, it is important to ask the right
questions. Therefore, INEDs are needed. They will evaluate the scenario critically
and propose candid prospects. Improving the number of INEDs and improving the
diversity of boards across regions reflects evidence of reforms. We constantly see
that businesses with good governance have several different boards and that this
offers a strategic advantage in exchange. In 2010, the number of female board
members in the UK was 9.5 percent. Recently this has hit 30%. In terms of diversity,
many counties fell behind, but changes exist. The Hong Kong boards of directors
have fewer than 14% female managers, which are obviously not good enough, but
are growing.
In the end, management will begin to adapt as times change and the world is
awakening to crucial problems, influencing and leading both investors and boards.
Corporate profits are no longer alone and global acknowledgment of corporate
influence and accountability is growing.

Question no.3
Corporate governance and executive compensation?
Ans:
Execute compensation varies significantly, in that executive pay is highly
susceptible to incentives for the real performance, from traditional wage
arrangements for hourly employees or employee managers and experts. Therefore,
if an organization fails, managers usually earn a lower portion of their potential
salary. When an organization fulfills its annual goals and the stock market answers
over the long run, managers earn a much bigger bonus.
Management salaries are designed to reward business success and match
managerial salary to shareholder valuation. In consequence, a lot of management's
salary is at stake, as is the case with most other employees; in most words, managers
cannot earn it. But if management and the corporation are effective, they will benefit
even more from superior results along with the owners of the company.
It is difficult to read the corporate news without reporting the pay, incentives
and equity option packages for managers of publicly listed enterprises. It is not easy
to understand the figures in order to evaluate how businesses pay senior officers.
Investors need to trust that executive pay works for them.
In practice, at least, the boards of directors try to use incentive contracts in
order to equate the activities of management with performance of the business. The
idea is to make the company's CEO success worthwhile. The mantra used by most
businesses for their bonus programs was "Pay for results." While the principle of
paying for success is supported by others, the concept suggests that CEOs take risks.
The fortunes of a CEO can increase and decrease with the fortunes of the company.
Check to see how often stakeholders generate benefits to investors in the analysis of
a corporate incentive scheme. This is an expression of the ways in which the CEO's
incentive can be jeopardized if success is bad.
Base salaries of CEOs are frequently well over 1 million dollars. In other
words, when the business is nice, the CEO is significantly compensated. In addition,
the CEO is recognized for the poor performance of the company. In their own, high
basic wages give managers no motivation to work more and decide intelligently.
Equity returns or share price appreciation may be measured by a variety, such as
benefit or sales increase. However, it could be difficult to use simple metrics to
calculate a suitable output pay. Financial measurements and average share price
increases are not necessarily a realistic indicator of how well a manager is at work.
Managers can be penalized harshly for one-time incidents and hard decisions
that might harm short term results or trigger negative market reactions. A balanced
collection of metrics must be set out by the Board of Directors to evaluate the
efficacy of the CEO.
The trumpet options of companies are a means of linking the financial interests
of management with the interests of the shareholders. However, as recourse, options
are also defective. Really, the risk can be severely reduced with alternatives. If shares
increase in value, managers will earn a fortune from options. However, as equity
rates decrease, owners lose while managers do not get worse off. In fact, as the
company's shares decline in value, some corporations allow executives to change
old stock into new lower-priced shares. Worse, the temptation and maintain share
price increases to allow management to concentrate solely on the next quarter and
neglect the long-term needs of shareholders. Also, top management will distort the
figures to make sure their short-term objectives are fulfilled. The connection
between CEOs and shareholders is hardly strengthened.
Academic surveys have shown that shares are the major drivers of
success. CEOs should really relate to owners by owning shares, not choices. Ideally,
this means that executives are awarded incentives provided that they purchase shares
with the capital. Take it, when you have a share in the company, top managers are
just like founders.
Question no.4
Corporate finance and corporate governance?
Ans:
Corporate finance and governance apply to the structure that finances, manages and
controls companies. The governance system defines the division of duties and
liabilities between the individual members of the business group and describes the
principles and procedures of decisions on corporate relations (for example the Board
of Directors, administrators, owners, creditors, auditors, regulatory, etc.).
Governance is a corporate monitoring process, which entails the coordination of
priorities amongst the stakeholders.
With the high-profile bankruptcy of many major firms during 2001-2002,
attention has been revived in the corporate governance of modern companies, in
particular in the area of transparency. In this field, research addresses numerous
corporate finances, investment and governance topics. Typical topics include agency
issues involving various actors, administrators' and other workers' pension plans,
investment and finance payments, mergers and acquisitions, company ownership
and governance mechanisms.
Corporate finance and corporate management are two aspects of business
relating to a company's operation. Corporate finance applies to all financial decisions
taken by companies, while corporate governance refers to the mechanism
established to control the way a business run. One picture that should quickly be
remembered when it comes to corporate finance and corporate governance is that of
large corporations or organizations such as Microsoft Corporation and Apple Inc.
The reality is that the corner deli still includes business finance and corporate
governance practices in its activities.
Large companies must be monitored actively to effectively control how
actions influence organizational profitability. Big businesses such as Apple and
Microsoft cannot be controlled only by one person. It is public corporations with
many owners to whom accountability must be paid. The financial stake of all parties
is affected by any action taken. Thus, the corporate governance body contributes
towards corporate financial oversight through organizations such as the trustees'
council, external auditor, credit ion agencies and main owners.
The primary objective of the various regulatory bodies is not to make rash
financial choices. This would boost market trust and give shareholders who buy
shares of the company higher returns. If corporate finance breaks down, the
consequences could be catastrophic for owners, who will lose their whole capital
when the company breaks down.
Question no.5
Corporate governance and board structure, board composition?
Ans:
Almost every corporation is governed on its own behalf by a Board of Directors
appointed or chosen by the shareholders. Managers are re-elected periodically (often
every year) by shareholders of most countries. This is what we are talking about.
The shareholders seem to grant supreme control, but it is in most sectors realized
that only short to long-term output can be measured. Accordingly, shareholders must
put trust in people acting for them. It's unusual but the owners are not unknown over
losing patience and withdrawing the Board members.
Following are board of directors’ duties:
• Defining the company's mission
• To identify the principles to carry out the everyday tasks of the organization.
• Identifying the relevant stakeholders of the firm.
• Ensuring that this plan is implemented.
• To build a strategy that combines these elements.
There is no practical method for determining how many managers to have a business,
while corporate law sets a minimum and/or maximum number of managers for
various categories of enterprises in some jurisdictions. The board of director consist
of executive directors and non-executive directors.
Executive director they are full-time employers and therefore have two
partnerships and responsibilities packages. They work with the corporation in senior
positions, normally in political or practical fields. A political significance of major
importance. Managing directors prefer to be large corporations finance, IT/IS,
publicity etc. The Board of Directors is normally employed by executive managers.
They are the company's top performers, with salaries packages that consist in part of
basic salaries and gross wages and in part performance pay. The biggest companies
are now entering into a regular deal with their executive directors each twelve
months rolling.
Non-executive director are not business contractors and do not participate in
the everyday activity. They normally have work elsewhere in full-time or may even
be famous people in public life. They normally accept a flat rate for their work and
are entered into a service contract. The remainder should be independent of non-
executive management. The factors for the independence assessment include their
corporate, financial and other responsibilities, other shareholdings and directors and
their participation in enterprises related to the enterprise. Yet the group holds shares
don't compromising freedom obviously.
Key positions:
The chairman is the head of BOD. The chairman is responsible for ensuring that
the Board functions properly and safely. For example, the President should
encourage daily participation and absolute participation in debates. The President
decides the content and time control of each conference. Meetings of the Committee
to ensure that all matters are absolutely and expenditure free Unlimited time with
specific issues on the agenda. The president is an of several corporations.

The chief executive officer (CEO) is the executive staff chief and the organization's
day-to-day management. As such, this person is almost always a managing director.
Board members as well as the CEO will normally chair meetings in his capacity as
Director, Board of Directors or Board of Management. Although most firms have
the management/executive committee is usual in monthly board meeting.

The secretary is the company's Chief administrative Officer. The Secretary sets the
schedule for board sessions and supporting documents, as well as also for board
meetings. He/she takes minutes of meetings and gives advice, for example, on
procedural issues. The secretary is generally liable for owners and the government
registry body. The secretary may then, on behalf of the board of directors, sign the
note of general meetings.