INTRODUCTION TO CORPORATE GOVERNANCE

THE CONCEPT OF CORPORATE GOVERNANCE CORPORATE GOVERNANCE is defined as: The system by which corporations are directed, controlled and held to account.

The manner in which the power of, and power over, a corporation is exercised in the stewardship of its assets and resources so as to increase and sustain shareholder value as well as satisfying the needs and interests of all stakeholders.

SCOPE OF CORPORATE GOVERNANCE Corporate governance covers: “”Licence to Operate” – Public policy, national values, ethics Systems for supervising, monitoring, regulating and controlling corporations – regulatory authorities, national trade and business associations, professional bodies and society as a whole.

SCOPE OF CORPORATE GOVERNANCE Systems, practices and procedures by which the individual corporation regulates itself in order to remain competitive, sustainable, relevant and legitimate for competitiveness and sustainability. CACG/ PSCGT

This may be viewed from the perspective of: Society Shareholders Directors

INTEREST IN CORPORATE GOVERNANCE The society needs to reassure itself that: The corporate business enterprises are viable, sustainable and competitive; The corporations are held accountable; The corporations do not run amok; The corporations competitively attract investments; CACG/ PSCGT

Corporations are responsible corporate citizens; Corporations comply with the legal framework and remain relevant and legitimate in society; CACG/ PSCGT

INTEREST IN CORPORATE GOVERNANCE The Shareholder needs to reassure him/ herself that: There is corporate democracy, protection of the minority and transparent corporate reporting; There is recognition of shareholder rights fairness and equitable treatment of all investors; CACG/ PSCGT

There is corporate leadership for efficiency and probity; The corporation is responsible, responsive, accountable, transparent, competitive and sustainable; CACG/ PSCGT

There are increased profits and opportunities for investment. CACG/ PSCGT

INTEREST IN CORPORATE GOVERNANCE The Directors are interested in corporate governance because: Their roles are increasingly becoming more professional and much more demanding; They need to clearly understand their roles, duties, responsibilities and liabilities; CACG/ PSCGT

They need to gain/ have an adequate knowledge of the business they direct as well as good corporate governance principles and practices. CACG/ PSCGT

FORCES DRIVING INTEREST IN CORPORATE GOVERNANCE These include: Corporate failures and scandals; The Asian financial crisis The fight against money laundering, corruption, bribery and abuse of corporate power; CACG/ PSCGT

FORCES DRIVING INTEREST IN CORPORATE GOVERNANCE Shareholder activism The global “governance revolution” Globalization and economic liberalization’ The green [environment] movement; CACG/ PSCGT

FORCES DRIVING INTEREST IN CORPORATE GOVERNANCE The power of transnationals and multinationals; The enhanced separation of ownership from control; The need to make corporations viable destinations for investment in a competitive global market; CACG/ PSCGT

FORCES DRIVING INTEREST IN CORPORATE GOVERNANCE The realisation that good corporate governance has “an economic payoff”; CACG/ PSCGT

AIMS OF GOOD CORPORATE GOVERNANCE Increased profitability and efficiency of corporation; Enhanced ability to create wealth for shareholders; Increased employment opportunities; CACG/ PSCGT

AIMS OF GOOD CORPORATE GOVERNANCE Increased benefits to stakeholders; Sustainability and enhanced competitiveness of enterprises; Increased capacity of corporations to attract investment; CACG/ PSCGT

AIMS OF GOOD CORPORATE GOVERNANCE Enhanced legitimacy, responsibility and responsiveness of the corporation; Transparency, accountability and probity of corporation; CACG/ PSCGT

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CORPORATE GOVERNANCE AS AN INCLUSIVE APPROACH Note: The corporation operates in society, on society and for society; Therefore, they must create relationships with all stakeholders; Directors’ decisions affect investments, shape the economy and even our lives for a long-time to come; CACG/ PSCGT

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CORPORATE GOVERNANCE AS AN INCLUSIVE APPROACH It is in the interest of the business enterprise and in the very best long-term interest of shareholders to ensure the enterprise does not short-change its customers, exploit its labour, pollute the environment, antagonize its suppliers, lenders or the host community CACG/ PSCG

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