1. Ethics and Governance
Governance 2

2. Board of Directors: Executive Directors
Employed by the company in managerial role
Intimate knowledge of company operations
Executive compensation is primary source of earned income and creates potential conflict of interest

3. Board of Directors: Non-Executive Directors
Not a company employee
Contribute to strategic planning
Evaluate the performance of executive directors
Board compensation is not primary source of earned income
Majority of NEDs should be independent of company

4. Chairman of the Board Runs the board
Ensures availability of accurate, timely information
Holds meetings with NEDs
Chairs the annual general meeting
Ensures an independent board presence

5. Chief Executive Officer
Runs the company
Reports to the board of directors
Implement policies for strategy execution
Implement adequate control systems
Build an effective management team

6. Approaches to Corporate Governance: Rules-Based Approach
Example: Sarbanes-Oxley Act 2002 (USA)
Regulation-based governance rules
Assumes “one size fits all”
Leads to a “checklist” mentality
Can be overly burdensome for small companies

7. Approaches to Corporate Governance: Principles-Based
Example: Cadbury Code 1992 (UK)
Guidance rather than law
Companies use “comply or explain” principle
Allows flexibility for size and circumstances
The market, not the law, evaluates compliance