1. Corporate Governance

2. Ethical Thoughts
Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals.
The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations, and society.

3. Corporate Governance
The system that is used by firms to control and direct their operations and the operations of their representatives, the employees.
Through the corporate governance structure, firms can ensure that the needs of all stakeholders are satisfied.
Provides a means to measure and validate the ethical vision.

4. Corporate Governance The corporate governance system:
Incorporates the objectives of the stakeholders
Ensures that the behavior of the employees within the firm is fair, just, and transparent

5. Board of Directors
Designed to represent the interests of the stockholders
Agency theory – based on the belief that managers are ‘agents’ of the stockholders because they should be making decisions to benefit the stockholders
The board is a corporate governance mechanism to help ensure that the agents do their job of maximizing returns

6. Classifications
Inside Board Member: person who has direct financial ties to the firm
Management team
Outside Board Member: person who has not direct financial ties to the firm.
President of a University

7. Responsibilities for Board Members
Establishing an maintaining internal financial controls
Communicating financial situations internally and externally
Establishing and revising the company’s code of ethics and ethical standards
Selecting the external auditor
Establishing different board committees

8. Core Values to Guide board Members’ Behavior
Honesty
Integrity
Loyalty
Responsibility
Fairness
Citizenship
Note: Stakeholders must be proactive

9. Typical Decisions Made by Board Members
Remember that every board of directors is as unique as the firm it represents
Major Decisions:
The annual business plan of the firm
The hiring and compensation of the board members and other officials of the firm
The investments in capital structure and level of firm indebtedness
The issuance of dividends

10. Typical Decisions Made by Board Members
Discussions pertaining to risk management and insurance policies
Fines and penalties greater than a stated amount
Restructuring of the firm that may exceed a particular amount
Tax settlements that are greater than a certain amount
Contingent liabilities issues greater than a particular amount
Pension contributions that exceed a stated amount

11. Benefits of A Strong Board of Directors
Having good corporate governance supports not only the ethical requirements established by the stakeholders, but also the financial requirements established by the shareholders

12. Corporate Compliance Systems and Global Corruption
Corruption: the conscious abuse of public roles and resources for the private benefit of a firm and/or the individuals of the firm; the use of bribery, extortion and/or embezzlement for the benefit of one’s own interests
Bribery: giving a financial benefit in return for influencing the decision of a person in a position of trust
Extortion: the use of intimidation or power in return for financial benefit
Embezzlement: the taking of money illegally from a firm or other source

13. Corruption
Petty Corruption: occurs when private individuals give illegal financial incentives to non-elected public officials in exchange for favorable dealings with certain government transactions
Grand Corruption: occurs when illegal financial incentives are given to higher ranked public officials
Influence Peddling: occurs when illegal transactions take place along with legal transactions

14. US Foreign Corrupt Practices Act
Passed into law in 1977 and amended in 1988
Prohibits any US firm and its foreign subsidiaries from giving foreign government officials any financial incentives in exchange for either obtaining or retaining any government business in that country

15. Corporate Governance and Stakeholders
Employees, suppliers, and communities want and expect an honest and transparent relationship with the firm
Stockholders expect the firm to perform at the maximum financial performance level