1. CORPORATE GOVERNANCE TRENDS IN THE 21 st CENTURY PRESENTED BY MERVYN E KING S.C.

2. 1.Era of entrepreneur  19 th Century – first half 20 th Century 2.Era of professional manager  Post war – to last decade of 20 th Century 3.Wealthy Families to World War II  Institutions conduit 4.Shareowner revolution  Institutions needed to get back in control  Unhappy with management  Remedy only to sell shares?  Governance guidelines developed 5.21 st century is era of corporate governance.

3. Can we in 21st Century?  Continue shareowner dominance to the exclusion of other stakeholders ?  Have financial focus only ?  Ignore the changed world ?  Human rights, environment, e-commerce  Have backward looking financial measurements only ?  Perform but not conform ?  Not be a responsible corporate citizen ?

4. Trends  Exclusive / Inclusive  Accountable / Responsible  Non financial aspects  Shareowner activism  Conform / Perform  Risk Management  Sustainability.

5. Exclusive / Inclusive  Inclusive recognizes CCES  Contractual & non contractual  Purpose  Value  Identify stakeholders  Strategy combine all three  Reciprocal relationships  E.g. – parcel delivery service.

6. Accountable/Responsible  Liable to render account  Liable to be called to account  Accountablity  Responsibility  Accountable to everyone – no one. Changed world To whom ? Activism How ? Common law To Whom ? Statute How ?

7. Non financial aspects  Financial focus 19 th & 20 th centuries  Backward looking  Changed world  Forward looking approach  Scorecard approach – information at a glance  Measurements for sustained success.

8. Non financial aspects  Examples of non financial aspects:  Innovation  Learning and training  Reciprocal relationships with stakeholders  Management credibility  How incentivise talent & attract talent  Technology  Licence to operate check  Conformance aspects.

9. Shareowner Activism  Era of deference gone  Institutions visit companies  Measure good governance  SEE factors  Guidelines for investment  Animal Cruelty League – Huntingdon  Comparex, Primedia & OTK.

10. Conform / Perform  McKinsey – Institutional investors  Pay more for good governance  Premium differs by country  Borderless world  Quality of information  Capital a scarce resource  “Capital will flow elsewhere”. Importance of Conformance:

11. Conform / Perform  Conform - constraint on managers  But business success essential  Performance while conforming  Balance for success and sustainability. Balance:

12. Risk Management: Risk for reward The risk accepted in business objective Uncertain future events Identify them Some prudent some not Mitigation plan Appetite for risk Pursue opportunities with greater confidence.

13. Sustainability: Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

14. Integrated Sustainability Reporting Social, economic and environmental Triple bottom line - Shell Stakeholder Relations Ethical Practices Safety, Health and the Environment (SHE) Social and Transformation Issues (including Black Economic Empowerment) Human Capital.

15. Four Pillars  Fairness  Accountability  Responsibility  Transparency.

16. Board responsibilities under Inclusive Approach (A)  Purpose, values, stakeholders  Strategy for all three  Implementation and monitor  Financial aspects  KRA’s, and KPI’s – risk management  Going concern  Human resources – appointments, succession, morale etc.

17. Board responsibilities under Inclusive Approach (B)  Effective communication – internal & external  Internal controls & MIS  Licence to operate check  Non financial aspects – sustainability  Accountable & responsible  Perform but conform – balance.

18. How to carry all this out?  Survey –studied corporate law – stakeholders  One-minute manager – Ken Blanchard  One-minute governor  Four questions, two guidelines and one foundation.

19. How to carry all this out? Question one:  Is there any conflict?  Personal or immediate family  No interest  Disclose & vote or recuse from voting  Conflict leads to deceit by omission and/or commission.

20. How to carry all this out? Question two:  Do I have all the facts to enable me to make a decision?  Objectively speaking  Past prejudices & present needs  Facts not assumptions.

21. How to carry all this out? Question three:  It this a rational decision based on all the facts?  Risk and reward  Time might show wrong decision  Legal microscope years later  Law reports – 50% winners & 50% losers.

22. How to carry all this out? Question four:  Is the decision in the best interests of the company?  Long term rather than short term.

23. Guideline one:  Transparent communication & reporting  Substance over form  Negatives & positives  Non financial aspects  Prompt – no surprises.

24. Guideline two:  The board must ensure that the company acts in a socially responsible manner  Good corporate citizen  Non discriminatory  Non exploitative  Safety, health, environment  Ethics.

25. Foundation:  Integrity  Honesty in business is the first chapter of the book of commercial wisdom  A commentary on the times in which we now live is that “honesty” is often preceded by the phrase “old fashioned”  The moral world like the physical world is not exempt from the law of ceaseless change  Intellectual honesty is, however, immutable  Independence of directors.

26. A Company:  Driver of industrial revolution  A privilege  Driver of capitalism as we know it today  Inanimate, immortal but needs directions from natural individuals  Good Corp Gov starts and ends in boardroom & executive’s offices  Self regulatory system  Each morning puts a corporation on trial & each evening passes judgment on it.

27. A Company:  The director is the heart, mind and soul of that corporate citizen – look to person on the right of you  An awesome responsibility  But a privileged role – cherish it and carry it out with dignity, hard work and intellectual honesty.