9 Good Governance
-
Upload
siti-noorhafiza -
Category
Documents
-
view
214 -
download
0
Transcript of 9 Good Governance
-
7/23/2019 9 Good Governance
1/29
GOOD
CORPORATEGOVERNANCE
-
7/23/2019 9 Good Governance
2/29
Corporate Governance
The system by which business corporations aredirected and controlled. Its structure specifes the
distribution o rights and responsibilities amongdierent participants in the corporation (board,managers, shareholder and other stakeholder), andspells out the rules and procedure or makingdecisions on corporate aairs. It also provide thestructure through which the company obectives
are set, and the means o attaining thoseobectives and monitoring perormance.
(!larke,T, "##$)
-
7/23/2019 9 Good Governance
3/29
Introduction Corporate Governance is concerned with:-
The way corporate entities are governed. Addresses the issues facing board of
directors, such as:-
Interaction with top management,
%elationships with the owners and
others interested in the aairs o thecompany (creditors, fnanciers, analysts,auditors, corporate regulators),
-
7/23/2019 9 Good Governance
4/29
Concern about corporateperformance throughinvolvement with strategyformulation and policy making.
Concern about corporateconformance through topmanagement supervision.
Accountability to stakeholders.
-
7/23/2019 9 Good Governance
5/29
The primary role of corporate governance
participants:-
&rotecting shareholders
%estoring investors confdence
'upporting strong and eicientcapital markets
nsures corporate
accountabilitynhances the reliability and
uality o public fnancial
inormation
-
7/23/2019 9 Good Governance
6/29
Corporate Governance is ultimately
about leadership and accountability:-*or eiciency and eectiveness o
operations to compete in the
markets.*or disclosure o accurate,
complete, and transparentinormation regarding corporate
perormance in areas o economicand social activities.
Transparent in ensuringtrustworthiness o the corporations.
-
7/23/2019 9 Good Governance
7/29
CG is an umbrella term that includes specicissues arising from those interactions:
!hareholder
!enior"anagement
#oards of$irectors
%ther !takeholders
-
7/23/2019 9 Good Governance
8/29
Implications
&as wider implication and is critical to economicand social well-being:-
i) &roviding incentives andperormance measures to achievebusiness success
ii) &roviding accountability andtransparency to ensure the euitabledistribution o the resulting wealth
-
7/23/2019 9 Good Governance
9/29
Theories of Ideas inCorporate Governance
'n the Company (aw, governance is based onthe belief that:-
'tewardship (o the company) will bee+ercised by the directors to whom thecompany has delegated responsibility andauthority, with appropriate responsibility.
It is predicted on the belie in the ust andhonest men, acting or the good o others,under the law.
-
7/23/2019 9 Good Governance
10/29
Issues in
CorporateGovernance The massive use of corporate
form in modern business hasbecome over-e)tended andneeds a clearer
understanding. !ome ma*or issues that havearisen:-
-
7/23/2019 9 Good Governance
11/29
The Emergence of Private Companies
'ncorporations are used principally toraise outside+e)ternal capital.
'n todays term, it is known as publiccompanies that is permitted to o/er
their shares to the public. &owever, there are so many private
companies in e)istence nowadays, suchas family rms.
Growth of these companies come fromretained earnings, and not publicsubscriptions.
-
7/23/2019 9 Good Governance
12/29
The cale and Comple!it" of Corporate
Groups Corporate entity could ac0uire shares in
other companies.
Company mergers and asset ac0uisitions
are common. All ma*or corporations nowadays trade
through groups of subsidiary andassociated companies.
'n some cases, these groups are relativelysimple with small hierarchy of whollyowned companies under a common parentcompany.
-
7/23/2019 9 Good Governance
13/29
The igni#cance of Institutional Investors
'nstitutional investors, such as banks,trusts, and provident+pension funds, havebecome a signicant in1uence on thecorporation.
2ith huge market capitali3ation on manystock e)changes, these investors haveshown a tendency to wield in1uencethrough formal participation in shareholdermatters, and direct contacts with directors.
This could pre*udice the rights of othershareholders to e0ual treatment.
-
7/23/2019 9 Good Governance
14/29
Calls for more Chec$s and %alances at%oard &evel
$emand for greaterindependence at #oard level
with an audit committee. This audit committee toliaise with e)ternal auditors.
-
7/23/2019 9 Good Governance
15/29
Corporate
GovernancePrinciples !everal Corporate
Governance 4rinciples:-
onesty
%esilience
%esponsiveness Transparency
-
7/23/2019 9 Good Governance
16/29
Honesty Telling the truth at all times, regardless of
the conse0uences. 'mportant, in establishing a trusting
relationship among corporate governanceparticipants.
Also means, corporate communicationwith e)ternal and internal audiences,including public nancial reports, shouldbe accurate, fair, transparent, trustworthy.
-
7/23/2019 9 Good Governance
17/29
A reputation for honesty can be earned
through truthful and transparent corporatecommunication.
't can also be easily destroyed through lies,deception, concealments, fraud.
'n todays 'CT world, access to veriableinformation on corporate trustworthinessand honesty is easily and convenientlyavailable.
Thus, public companies should maintainhonesty and good reputation.
-
7/23/2019 9 Good Governance
18/29
Resilience 5esilient corporate governance
structure is sustainable and enduring inthe sense that, it will easily recuperatefrom setback and abuses.
Corporate governance mechanisms aredesigned to prevent, detect, and correctabuses.
-
7/23/2019 9 Good Governance
19/29
Responsiveness The companys appropriate responses to
the re0uests + desires of all stakeholdersshow that the company has respect forconcerns and interests of others.
6/ective corporate governance is alsoresponsive to emerging initiatives andchanges in political, regulatory, social,and environmental issues.
-
7/23/2019 9 Good Governance
20/29
Transparency 't means that the company is not hiding
relevant information. $isclosures are fair, accurate, and
reliable.
Transparent corporate governance is
open and understandable to allconcerned, in terms of its goals,principles, mechanisms, and functions.
-
7/23/2019 9 Good Governance
21/29
CODE O' CORPORATEGOVERANCE 'OR (A&A)IA
The "alaysian Code on CorporateGovernance was developed by the
2orking Group on #est 4racticesin Corporate Governance
"'CG
#"(5
-
7/23/2019 9 Good Governance
22/29
The Code aims:-
To set out principles and best practiceson structures and processes thatcompanies may use in their operationstowards achieving the optimal
governance ramework. These structures and processes include the
issues such as:-
The composition o the -oard,
procedures or recruiting new directors,remuneration o directors, the use o
-oard committees, their mandate andactivities.
-
7/23/2019 9 Good Governance
23/29
The signicance of the Code:-
It allows or a more constructiveand e+ible response to raisestandards in corporate governance.
It recogni/es the act that there areaspects o corporate governancewhere statutory regulation isnecessary, but other aspects are
sel0regulated and complementedby market regulation.
-
7/23/2019 9 Good Governance
24/29
The Approach *nder The
(ala"sian Code OnCorporate Governance
There are 7 broad approaches to the issue ofcorporate governance that have been
undertaken by *urisdictions around theworld:-
&rescriptive 1pproach
2on0&rescriptive 1pproachybrid 1pproach
-
7/23/2019 9 Good Governance
25/29
A 4rescriptiveApproach
standard of
corporate Governanceis set by specifyingdesirable practices
coupled with there0uirement to disclosecompliance with them.
A 8on-4rescriptiveApproach
approach that simplyre0uires CG practicesin a company to bedisclosed without
specifying any standard
The &ybridApproach
Combination of therst two
8eed for theprescribing particularprinciples 9 structure
and should then applythese 1e)ibly
-
7/23/2019 9 Good Governance
26/29
C+A&&ENGE TOCORPORATE GOVERNANCE
The implementation of a high
standard in corporategovernance is the most primaryevaluation and attraction of
foreign direct investment ;$'