Presented By : Karim Virani

Presented to : Dr. Abuzar Wajidi

Course : Corporate Governance

TOPICS TO BE COVERED
What Is Corporate Governance?
Objectives Of Corporate Governance
Importance Of Corporate Governance
Parties to Corporate Governance
Control and Ownership Structures
Mechanism and Control
Financial Reporting and the Independent Auditor
Systemic Problems Of Corporate Governance
Debates In Corporate Governance

Presented By : Karim Virani

WHAT IS CORPORATE
GOVERNANCE

Corporate governance is the set of processes, customs,

policies, laws and institutions affecting the way in which a
corporation is directed, administered or controlled.

Corporate governance structure specifies the distribution

of rights and responsibilities among different participants in
the corporation.

Corporate governance also includes the relationships

among the many players involved and the goals for which
the corporation is governed.

Presented By : Karim Virani

PRINCIPAL PLAYERS
Share Holders
Management
Board of Directors

Presented By : Karim Virani

OBJECTIVES OF CORPORATE
GOVERNANCE

The fundamental objective of corporate governance is to

enhance shareholders' value and protect the interests of other
stakeholders by improving the corporate performance and
accountability

It harmonizes the need for a company to strike a balance at all

times between the need to enhance shareholders' wealth
whilst not in any way being detrimental to the interests of the
other stakeholders in the company

It is integral to the very existence of a company and

strengthens investor's confidence by ensuring company's
commitment to higher growth and profits.

Presented By : Karim Virani

IMPORTANCE OF CORPORATE
GOVERNANCE
Corporate governance is an important aspect of business..

It helps streamline the process and gives people accountability.

The point of corporate governance is to help the decision

making process.

One of the main goals is to clearly explain to the board, the

stakeholders, and the shareholders what their duties and
responsibilities are within the company.

With knowing those roles and responsibilities, the people within

the corporation can understand what they are held
accountable for.

Accountability is what helps people within the company make

Presented By : Karim Virani
decisions.

GOOD CORPORATE
GOVERNANCE AIM
The aim of Good Corporate Governance is to
ensure commitment of the board in managing the
company in a transparent manner for maximizing
long-term value of the company for its
shareholders and all other partners.

'Good Corporate Governance' is simply

'Good Business'
Presented By : Karim Virani

ELEMENTS OF
GOOD CORPORATE
GOVERNANCE
Accountabil
ity of both
internal &
external

Recognitio
n of stake
holders/sha
reholders
rights

Transparen
cy /
openness

Ongoing
financial
scrutiny
and control

Legal
compliance

Presented By : Karim Virani

PARTIES TO CORPORATE
GOVERNANCE

Presented By : Karim Virani

PARTIES TO CORPORATE
GOVERNANCE

A board of directors is responsible for oversight of

managements performance, acting in the best interests of
all shareholders.

The board has the responsibility of endorsing the

organization's strategy, developing directional policy,
appointing, supervising and remunerating senior executives,
and ensuring accountability of the organization to its
investors and authorities.
Presented By : Karim Virani

PARTIES TO CORPORATE
GOVERNANCE
The Employees

Strengths the system of human resource management

Increases the labor motivation
Raises lawfulness and authority of the decision making.
Improves the corporate culture
Contributes to economic grow and social stability
Without stable cooperation between employees and
management,
shareholders
value
will
never
be
maximized
Presented By : Karim Virani

PARTIES TO CORPORATE
GOVERNANCE
The Shareholders

Shareholders provide capital, approve major transaction

and elect directors of the board but they are not involved
in the day to day management of the company.

Presented By : Karim Virani

PARTIES TO CORPORATE
GOVERNANCE

The CEO and Senior executives are responsible for the day to
day operation of the corporation.

The role of management is to support the chief executive

officer and implement the running of the general operations
and financial business of the Company, in accordance with
the delegated authority of the Board.
Presented By : Karim Virani

CONTROL AND OWNERSHIP

STRUCTURES
Control and possession construction alludes to the kinds and
constitution of stockholders within a company.

Dual-class shares
Ownership pyramids
Voting coalitions
Proxy votes

Presented By : Karim Virani

DUAL CLASS SHARES

Dual class stock is intended to give specific shareholders

voting control.

Dual class stock structures are controversial.

Supporters feel that the structure allows strong leadership to

put long-term interests first while seeing beyond the nearterm financial situation.

Opponents of dual class structures feel it allows a small

group of privileged shareholders to maintain control while
other shareholders (with less voting power) provide the
majority of the capital.
Presented By : Karim Virani

OWNERSHIP PYRAMID

Pyramidal ownership structure is defined as an entity whose

ownership structure displays a top-down chain of control

The separation of actual ownership and control occurs

because the pyramid structure enables the ultimate owners
to establish control disproportionately to the amount of
ownership he has in every one of the successive firms.

Presented By : Karim Virani

VOTING COALITIONS

A voting coalition or voting pool consists of several

shareholders agreeing to vote in the same way.

Voting coalitions are rare, especially those that persist in the

long term. One reason for the infrequency of voting coalitions
may be the costs imposed by regulation.

Presented By : Karim Virani

PROXY VOTING

A ballot cast by one person on behalf of another.

One of the benefits of being a shareholder is the right to

vote on certain corporate matters.

Since most shareholders cannot or do not want to attend the

annual and special meetings at which the voting occurs,
corporations provide shareholders with the option to cast a
proxy vote.

Presented By : Karim Virani

FAMILY CONTROL
Family concerns control possession and command constructions
of a few organizations, and it has been proposed the omission of
kin managed company is senior to that of organizations
managed by institutional financiers.

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DIFFUSE SHAREHOLDERS

In elaborated Anglo-American nations (Australia, Canada,

New Zealand, U.K., U.S.), institutional financiers control the
trade for stocks in greater organizations.

The major part in the Japanese trade are grasped by

monetary businesses and manufacturing organizations, those
are not institutional financiers if their possessions are mostly
with-on cluster.

Presented By : Karim Virani

MECHANISM AND CONTROL

Corporate manner of government systems and powers are

developed to lessen the incompetencys that emerge as of
meaning hazard and unfavorable choice.

There are either interior tracking setups or outside tracking

setups.

Internal tracking may be completed, for instance, by one (or

a few) great shareholder(s) in the situation of confidentially
grasped businesses either a firm belonging to a trade cluster.

External tracking of managers conduct happens once an

autonomous 3rd party (e.g. the outside auditor) attests the
precision of data presented by administration to financiers.

Presented By : Karim Virani

INTERNAL CORPORATE
GOVERNANCE CONTROLS
Internal corporate governance controls (internal controls) play a
vital role in ensuring the success of a business organization and
preventing corporate fraud.
Internal control activities that ensure proper corporate
governance include:

Monitoring by board
Internal audits and robust policies
Proper balance of power
Performance based remuneration
Monitoring by large shareholders and other stakeholders

Presented By : Karim Virani

MONITORING BY BOARD
The board should monitor the corporate governance of the
company through continuous review of its internal structure.
This ensures that there are clear lines of accountability for
management throughout the company.
The board should also monitor and review:
Corporate strategy
Major plans of action
Risk policy
Annual budgets and business plans
Corporate performance
major capital expenditures, acquisitions and divestitures
governance practices and changes
selection, compensation and succession planning of
executives
key executive and board remuneration
Presented By : Karim Virani

INTERNAL AUDITS AND

ROBUST POLICIES

Regular internal audits have to be carried out by auditors

employed by the organization in order to assess the health of
governance processes, operational health and financial
reporting.

Robust internal control policies should also be implemented

to ensure that the company lives up to its obligations to
investors, stakeholders, employees, the environment, the
government and the public at large

Presented By : Karim Virani

PROPER BALANCE OF POWER

A separation of powers and responsibilities between

management groups ensures that theres a proper system of
checks and balances in place, with one group implementing
policies and another ensuring that these are implemented and
functioning in the right manner.

Presented By : Karim Virani

PERFORMANCE BASED
REMUNERATION

Executive pay, a contentious topic following the 2007-08

financial crises, is expected to be linked to performance in order
to ensure that management is rewarded for operating the
company keeping in mind the rights of investors and other
stakeholders.

Presented By : Karim Virani

MONITORING BY LARGE
SHAREHOLDERS AND OTHER
STAKEHOLDERS
Individuals and institutions that have large shareholdings (and
financial institutions such as banks who are creditors) have the
right to monitor the performance of the management, acting as
an effective internal control measure.

Presented By : Karim Virani

EXTERNAL CORPORATE
GOVERNANCE CONTROLS
External stakeholders play an important role in ensuring proper
corporate governance processes in a business organization.
Some of the key external corporate governance controls
include:

Government regulations
Media exposure
Market competition
Takeover activities
Public release and assessment of financial statements

Presented By : Karim Virani

GOVERNMENT REGULATIONS

Government regulations are the most effective external

controls on the governance of a company. Companies are
required to comply with these or face penalties for violations.

Most corporate governance regulatory requirements are

based on the OECD Principles of Corporate Governance.

Presented By : Karim Virani

MEDIA EXPOSURE

Media scrutiny of the workings and processes of a company

ensures, to a certain degree, the proper governance in an
organization. Whistleblowers often expose wrongdoing within a
company to the government and media organizations

Presented By : Karim Virani

MARKET COMPETITION

Companies with the best corporate

the best standing in the market.
positive public perception all play
companys image and thus help it
best its peers.

governance practices have

Reputation, credibility and
a vital role in boosting a
trump its competition and

Presented By : Karim Virani

TAKEOVER ACTIVITIES

Takeover activities lay a companys internal processes and

workings open to public scrutiny. Both government regulators
and the media will focus on the internal policies and governance
structures, thus acting as an effective external control.

Presented By : Karim Virani

PUBLIC RELEASE AND

ASSESSMENT OF FINANCIAL
STATEMENT
The public release of financial statements by listed companies
exposes them open to assessment or scrutiny by regulators,
investors, members of the public and so on. This acts as an
external control as companies have to be scrupulous and careful
about the details included in these statements and in ensuring
that they are properly prepared and audited.

Presented By : Karim Virani

FINANCIAL REPORTING AND

THE INDEPENDENT AUDITOR

The board of executives has main obligation for the

corporations outside monetary informing purposes.

The Chief Executive Officer and Chief Financial Officer are

vital contributors and boards normally have a elevated level
of dependence on them for the stability and provision of
bookkeeping data. They supervise the interior bookkeeping
setups, and are reliant on the corporations Accountants and
interior assessors.

The power of the business customer to begin and end

administration advising facilities and, further basically, to
choose and disband bookkeeping businesses contradicts the
idea of an autonomous assessor.
Presented By : Karim Virani

SYSTEMIC PROBLEMS OF
CORPORATE GOVERNANCE

Demand for information: In line to impact the directors, the

stockholders should roll into one with other ones to shape a
polling cluster that may pose a actual menace of bearing
intentions either designating directors at a common gathering.

Monitoring costs: A obstacle to stockholders utilizing highquality data is the outlay of handling it, particularly to a not so
large stockholder. The customary reply to this difficulty is the
effectual trade theory that proposes that the not so large
stockholder must gratis ride on the discernments of greater
non-amateur financiers.

Supply of bookkeeping information: Financial accounts

shape a vital link in activating suppliers of funding to screen
directors. Imperfections in the monetary informing procedure
tend to trigger imperfections in the success of business
manner of government..
Presented By : Karim Virani

DEBATES IN CORPORATE
GOVERNANCE
EXECUTIVE PAY

Top corporate executives have always been well-paid for

obvious reasons.

Running a major corporation is a demanding job; you would

expect to pay a high salary to get and retain talented
hardworking people.

CEOs generally can count on big paychecks in good times

and bad. They tend to do well even when their companies do
poorly; although they can expect to do better when
corporate profits or stock prices rise

Presented By : Karim Virani

SEPARATION OF CEO AND

CHAIRMAN OF THE BOARD ROLES
To date, research on CEO-chair separation has yielded only one
overarching conclusion:

A CEO who also serves as board chair is no better or worse

for company performance than an independent director
serving as board chair.

Nevertheless, many in the corporate governance field

advocate for separation of the CEO and board chair.

A body with two heads is in the social as in the

animal sphere a monster, and has difficulty in
surviving
Presented By : Karim Virani

Presented By : Karim Virani