ON CORPORATE GOVERNANCE

 Ali Iqbal (Group leader) MBP  Nabeel Ahmad Butt MBP  Zain Fayyaz Butt MBP  Weheb Abid MBP  Amna Khan MBP  Huma Khalid MBP-11552

In 1983 it appeared as the title of a paper “In perspective on Management” Earl (1983) and in 1984 as the title of report of “The American Law Institute” on the Principles of Corporate Governance and also as the title of a book “Corporate Governance – practices, procedures and power” in British companies and their board of directors…

 Corporate Governance means a company in a value based manner.  Corporate Governance is the system by which companies are directed & controlled.

EXECUTIVE DIRECTORS BOARD OF DIRECTORS OWNER DIRECTORS MANAGEMENT CORPORATE SHAREHOLDERSSTAKEHOLDERSCREDITORS SUPERVISORY & ENFORCEMENT AUTHORITIES INDEPENDENT DIRECTORS

 Enhancement of Shareholders value keeping in view the interest of other Stakeholders.  Key Constituents;  Share holders  Board of Directors  Management

 Gompers et al. (2003) view a corporation as a republic. The ultimate authority rests with voters (shareholders). These voters elect representatives (directors) who delegate most decisions to bureaucrats (managers).

 As in a republic, the actual power sharing relations depend upon the specific rules of governance. A republic with significant voters rights may be called “Democratic” where as a republic with significant restrictions to voter rights may be called “Dictatorial”

 High profile corporate scandals where directors held accountable  Questionable behavior of directors  Excessive bonuses despite poor performance  Decisions based on own interests rather than the interest of shareholders.  Good corporate governance practices, companies can reduce vulnerability to financial crises.

 Corporate Reputation is a multi-stakeholder concept that is reflected in the perceptions that stakeholders have of an organization (Smidtset al., 2001).Smidtset al., 2001  There is much evidence that reputations with different stakeholder groups interact. In particular, reputation with employees is seen to have an impact on reputation with customers and communities (Carmeli, 2005).Carmeli, 2005  When managing their Corporate Reputation, organizations should therefore take account of not only their relationships with stakeholders but also monitor how stakeholders influence each other (Dutton et al., 1994).Dutton et al., 1994

 Corporate governance competition among firms is based upon the following factors  Transparency(true and fair facts & figure)  Accountability(responsible)  Equanimity(equal treatment) It involves letting Investors know how the company in which they have invested is utilizing their money?

 Ethics is the integral part of corporate governance. The board of directors established the code of ethics for management and staff which is considered to be the tasks. This covers penalty of punishment of those who fail to comply, so all the staff must follow strictly the implication and supervision of the code of ethics is applied through the existing management system.

 Corporate Ethics involves  Transparency among firms decisions an shareholders  Effective board of directors  Clearly defined responsibilities  Operate in shareholders interest  Reliable financial statements  Fair remuneration  Open communication

CORPORATE RESPONSIBILITY CORPORATE FINANCIAL RESPONSIBILITY CORPORATE ENVIRONMENTAL RESPONSIBILITY COPRORATE SOCIAL RESPONSIBILITY

 Outsider (shareholders) model  Insider (stakeholders) model

 A priority to market regulation  the owners of firms tend to have a transitory interest in the firm  The absence of close relationships between shareholders and management  the existence of an active `market for corporate control´ - takeovers, particularly hostile ones  the primacy of shareholder rights over those of other organisational groups

 The priority to stakeholders control  The owners of firms tend to have an enduring interest in the company  They often hold positions on the board of directors or other senior managerial positions  The relationships between management and shareholders are close and stable  There is little by way of a market for corporate control  the existence of formal rights for employees to influence key managerial decisions

 Increasing integration of economies around the world  Particularly through trade and financial flows  Also refers to the movement of (labour) and knowledge (technology)  across international borders. IMF

 Shareholders are the owners of the company. They control the company by appointing board of directors to act as representatives. Shareholders are eligible to make decisions on any of significant corporate changes. Therefore the company encourages the shareholders to exercise their right. Board of directors realizes the importance of shareholders, meeting as revealed in the policies to facilitate all shareholders equally to maintain governance policies.

 The board of directors values the right of stakeholder that they provide mechanism to promote cooperation between the company and its stakeholders along with customers, employees, suppliers, shareholders, investors, creditors, government competitors, external auditors etc.

 The primary responsibility for administration and performance of the company lies with the directors. The directors administer the company on behalf of shareholders and their powers and duties are covered in the statue.

 The company has the policy that through independent directors or audit committee, stakeholders can communicate with the board any concerns about illegal or unethical practices, incorrect financial reporting, insufficient internal control etc. so the investigation could be carried out and reported to the board of Directors.

 The system by which a company is directed and controlled Internal Control Safeguard the assets Maintain adequate accounting records Prepare financial statements Directors must identify Objectives of the entity Business & Governance risks How to manage those risks

 External auditor  Checks the integrity of financial statements.  Form an opinion on companies compliance with local corporate governance regulations  Review the system & controls for weakness  Internal auditor  Monitor & controls with in the entity.  Reports to the directors on effectiveness of procedure and control system and report to the management about governance policies.

Set of questionable, unethical, and/or illegal actions that a person or persons within a corporation engage in.

 There is no doubt that a strong correlation exists between good governance practices & levels of economic development in a nation.  Good governance leads to good performance and create a positive impact on corporate performance & national economy.  Leaders should understand this link and respond effectively.