Lecture 2

The key corporate actors

1. The board of directors
 Achieve long term value by overseeing the company's management and business strategies.
 Select CEO, monitoring and evaluating his performance, and overseeing his planning process.

2. Management
 Responsible for setting, managing and executing the strategies.
 Responsible por strategic planning risk management and financial reporting.
 keep the board informed of the status of the company's operations.

3. Shareholders
 They buy stocks and receive dividends.
 Have the right to elect directors receive information materials to invest and vote.
 Boards and managers acts on behalf of the shareholders.

Corporate governance
 It is the system by which companies are directed and controlled in aim to balance between the
shareholders, directors and other different participants by distribute the rights and
responsibilities of each participant.
 It sets the company's objectives, the way to achieve them and monitoring performance.

Its benefits
1. Ensure corporate success and economic growth.
2. Maintain the investors' confidence by raising capital efficiently and effectively.
3. lower the capital Cost, minimize wastages, corruption risks and mismanagement.
4. Provide positive impact on the share price.
5. Help in brand formation and development.
6. Provide inducement to both owners and managers to achieve objectives.
7. Ensure that the organization is managed in a way that fits the interests of all.

The need for Corporate governance

1. Wide spread of shareholders
 Corporations have a large number of shareholders spread all over the world.
2. Changing ownership structure
 Investment isn't limited to individual investors but also to institutional investors who
became the largest shareholders in corporate private sector
3. Scams and scandals
 Corporate governance is important to enhance investors' confidence in corporate
management.
Its principles
1. Fairness
 The board must treat all the parties fairly and with equal consideration.
2. Responsibility
 The board is responsible por overseeing the management activities and supporting the
Successful performance of the company.
3. Transparency
 Stakeholders should be received an accurate, adequate and timely disclosure of relevant
information about the operating results.
 They Can publish relevant information about corporate affairs in leading newspaper.
4. Accountability
 Is the liability to explain the results of one's decision taken in the interest of others.
 It requires the chairman, board and CEO to use the resources in the best interest of
company.
5. Independence
 The board must be strong non-partisan body, So that all corporate decisions can be
taken based on business prudence.