CORPORATE GOOD

GOVERNANCE
CORPORATE GOVERNANCE:
- The application of best management practices,
compliance of law in true letter and spirit and
adherence to ethical standards for effective
management and distribution of wealth and
discharge of social responsibility for sustainable
development of all stakeholders.
- The conduct of business in accordance with
shareholders desires ( maximizing wealth) while
confirming to the basic rules of the society
embodied in the law and local customs.
- Relationships among various participants in
determining the direction and performance of a
corporation.
- An effective management in its relationships
among:

1. Shareholders 6. Creditors
2. Managers 7. Suppliers
3. Board of Directors 8. Community
4. Employees
5. Customers
WHY CORPORATE GOVERNANCE?
1. Better access to external finance
2. Lower costs of capital – interest rates on loans
3. Improved company performance – sustainability
4. Higher firm valuation and share performance
5. Reduced risk of corporate crisis and scandals
PRINCIPLES OF CORPORATE
GOVERNANCE:
1. Sustainable development of all stakeholders – to
ensure growth of all individuals associated with or
effected by the enterprise on sustainable basis.
2. Effective management and distribution of wealth -
to ensure that enterprise creates maximum wealth
and judiciously uses the wealth so created for providing
maximum benefits to all stakeholders and enhancing its
wealth creation capabilities to maintain sustainability.
3. Discharge of social responsibility- to ensure that
enterprise is acceptable to the society in which it is
functioning.
4. Application of best management practices- to ensure
excellence in functioning of enterprise and optimum
creation of wealth on sustainable basis.
5. Compliance of law in letter and spirit- to ensure value
enhancement for all stakeholders guaranteed by the law for
maintaining socio-economic balance.
 6. Adherence to ethical standards- to ensure integrity,
transparency, independence and accountability in
dealings with all stakeholders.
FOUR PILLARS OF CORPORATE
GOVERNANCE:
1. ACCOUNTABILITY
2. FAIRNESS
3. TRANSPARENCY
4. INDEPENDENCE
ACCOUNTABILITY- Ensures that management is
accountable to the board and the latter is accountable
to the shareholders.
FAIRNESS – Suggests equitable treatment of all
shareholders, including minorities. Also, provides
protection and effective redress for violations.
TRANSPARENCY- The timely, accurate disclosure on all
materials, including the financial situation,
performance, ownership and corporate governance.
INDEPENDENCE- Entails free from the influence of
others. Procedures and structures are in place so as to
minimize, or avoid conflicts of interest.
ELEMENTS OF CORPORATE
GOVERNANCE:
1. Good Board Practices
2. Control Environment
3. Transparent Disclosure
4. Well-defined Shareholder Rights
5. Board Commitment
• Good Board Practices: There is clearly defined roles
and authorities; duties and responsibilities of BOD are
understood; board is well structured; there is an
appropriate composition and mix of skills; appropriate
board procedures, self-evaluation and training
conducted.
Control Environment : There is internal control
procedures; risk management framework; disaster
recovery systems in place; media management
techniques; business continuity procedures;
independent external auditor; established independent
audit committee; MIS; and internal audit and
compliance function.
Transparent Disclosure : Like financial and non-
financial information; preparation of financials
according to international financial reporting
standards; up to date filing of companies registry; high
quality annual report published; and web-based
disclosure.
Well- Defined Shareholder Rights : Meaning,
formalized minority rights; well-organized meetings;
policy on related party transactions or extraordinary
transactions; and clearly defined and explicit dividend
policy.
Board Commitment: The discussion of corporate
governance issues and creation of corporate governance
committee; championing corporate governance; creation
of corporate governance improvement plan; appropriate
resources allocation to governance initiatives;
formalization of policies and procedures and its
distribution to relevant staff; development of corporate
governance code and ethical code.