Corporate Governance

PRESENTED BY:
MOHSIN SHAIKH
(BSAF-5)
SZABIST LARKANA
Overview

 Official Definition of Corporate Governance

 Definition of Corporate Governance in Business
 Corporate Governance Today- What does it mean
 Purpose of Corporate Governance & it’s benefits
 Structure of Corporate Governance
 Pillars of Corporate Governance
 Elements of Effective Corporate Governance
 Corporate Governance & Sustainable Development
 The Relationship b/w Corporate Governance and Sustainable Development
 Conclusion
Official Definition of Corporate Governance

 The purpose of Corporate Governance is to build an

environment of trust, transparency and accountability
necessary for forecasting long-term investment, financial
stability and business integrity, thereby supporting
stronger growth and more inclusive societies.
Simple Definition of Corporate Governance in
Business

 Corporate Governance in the business context refers to the

system of rules, practices and processes by which
companies are governed.

 In this way, the corporate governance model followed a

specific company is the distribution of rights and
responsibilities by all participants in the organization
Simple Definition of Corporate Governance in
Business

 Governance ensures everyone in an organization follows

appropriate and transparent decision making processes and
that interests of all stakeholders (shareholders, managers,
employees, suppliers, customers, among others) are
protected.
Corporate Governance Today
 Corporate Governance deals with the way the investors make sure they get a fair
return on their investment.
 In todays market-oriented economy and with the effects of globalization, the
importance of Corporate Governance is growing.
 This due to the fact of governance being an important way of ensuring
transparency that makes sure the interests of all stakeholders (big or small) are
safeguarded.
Impacts of Corporate Governance & it’s Benefits

 A good Corporate Governance System has:

 Ensures that the management of a company considers the best interest of
everyone;
 Helps companies deliver long-term corporate success and economic growth
 Maintains the confidence of investors and as consequence companies raise capital
efficiently and effectively;
 Has a positive impact on the price of shares as it improves the trust in the market;
Impacts of Corporate Governance & it’s Benefits

 Improves Control over management and information systems (such as security or

risk management)
 Gives guidance to the owners and managers about what are the goals strategy of
the company;
 Minimize wastages, corruption, risks and mismanagement;
 Helps to create a strong brand reputation;
 Most importantly-it makes companies more re-silent
Structure of Corporate Governance
Structure of Corporate Governance

 Corporation can have many structures, but the most typical structure
consists of the:
 Shareholders
 Board of Directors
 Officers & Employees

 The Structure of Corporate Governance determines the distribution

of rights and responsibilities between the different parties in the
organization and sets the decision-making rules and procedures.
Structure of Corporate Governance

 It is usually up to the management board to decide how the company

will develop
 Boards- and directors- are not all the same. In fact, they face
different challenges and their structure is shaped by different factors

 A report synthesized some of the variables that can effect the

foundations of board:
 The legal and regulatory obligations of the relevant geography
Structure of Corporate Governance

 The company’s ownership structure

 The expectations and interests, of key stakeholders
 The company attributes

 In the end, companies with a good corporate governance system,

together with an experienced board that has a growth-mindset and
sustainability concerns, will be better positioned to prosper both in
the short term and long term on the long term
Pillars of Corporate Governance

 There are six pillars of Corporate Governance which are as follows:

 Rules of Law
 Moral Integrity
 Transparency
 Participation
 Responsibility and Accountability
 Effectiveness and Efficiency
Pillars of Corporate Governance

 Rules of Law
 Legislation and issuing regulations
 Legally authorizing the power
 Improves the process of drafting, issuing, and implementing the law with the
consideration on quality, fairness & quickness

 Moral Integrity
 Embracing the morality and culture values
 Encouraging the employees to conduct their duties and be role model for society
 Encouraging the employees to be honest, sincere, disciplined & diligent
Pillars of Corporate Governance

 Transparency
 Building the trust within the organization
 Providing the opportunities for employees, general public or stakeholders to
check the correctness

 Participation
 Providing the opportunities for employees & stakeholder’s:
 To understand the situation
 To participate in solving the organization problems by giving options or voting
Pillars of Corporate Governance

 Responsibilities and Accountability

 Realizing that one has duties and responsibility for the society and environment
 Concerning oneself with public problems and solving them
 Respecting the different options

 Effectiveness and Efficiency

 Using the resources efficiently
 Producing high quality goods and providing good service
 Conserving the natural resources & Adding Values
Elements of Effective Corporate Governance

 There are six Essential elements of effective Corporate Governance which are follows as:
 Director independence and performance
 A focus on diversity
 Regular compensation review and management
 Auditor independence and transparency
 Shareholders rights and takeover provisions
 Proxy voting and shareholder influence
Elements of Effective Corporate Governance

 Director Independence & Performance

 Driving Long-term strategic vision, and
 Appointing and overseeing the Chief Executive Officer.
 Supervise company management and independent committees for the benefit of
shareholders
 Attend the meetings and be prepared to discuss key issues

 Focus on Diversity
 Companies with more diversified boards are:
 More risk averse
 Have less volatile stock returns, &
 Are more likely to pay dividends
Elements of Effective Corporate Governance

 Caucasian men were much more likely to serve as:

 Board chairs
 Lead directors, or chairs of key board committees.

 Regular Compensation review and Management

 Institutional Shareholder Service (ISS) has established five compensation
guidelines for regular compensation review and Management which are as follow:
 Pay should be aligned with performance
 Avoid paying for failure
 Create an independent compensation committee for effective oversight
 Ensure transparent and comprehensive compensation disclosures
 Manage payments made to nonexecutive directors
Elements of Effective Corporate Governance

 Auditor independence and transparency

 Auditors should be independent with the majority of their revenues derived from
audit activities
 Accounting issues should be handled in a transparent manner

 Shareholder Rights and Takeover provisions

 Investor should consider shareholder right as a key element of good governance
as well. For Example:
 It is a common for company founders and insiders to hold shares that have greater
voting rights than outside investors.
Elements of Effective Corporate Governance

 Proxy voting and shareholder influence

 Investors are using proxy voting as a means:
 To influence Corporate Board’s, &
 To improve its Governance as well

 Shareholders must have the ability to use their votes to send a message to the board to
send a message to the board in case where the company had delayed taking action on:
 Winning share holder proposals
 Failed to deal with a director’s performance, or
 Did not improve board accountability and oversight
Corporate Governance & Sustainable Development

 According to the Brundtland Commission report, sustainable

development is “the one that satisfies the needs of the present
without jeopardizing the ability of future generations to meet their
needs.”

 In order to achieve the long-term corporate sustainability goal, the

sustainable development concept is build on top of three important
“pillars” that must be fulfilled by companies: economic
development, social equity & environmental protection
The relationship between Corporate Governance &
Sustainable Development

 There is no doubt that sustainable development has entered our lives and the way
business is done because management board is caring not only for the return rates
of the companies shares and dividends so on… but also considering the society
and the planet as well.
 It is difficult for a Management board to care the above mentioned things without
following sustainable development strategy.
Conclusion

 It is important for every business entity to follow Corporate

Governance to run their business with rules, practices and in
positive manner. However it also helps businesses to achieve their
Missions & Visions as well. They can easily achieve their goals with
efficient and effectiveness.

 By following Corporate governance, it is also mandatory for

business entities to Follow sustainable development, because this
can not enough for achieving the goals of company but also
understand the client’s needs, society and planets as well.
Any Question 
THANK YOU 