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A Brief History ofA Brief History of
Corporate GovernanceCorporate Governance
Dr Safdar A ButtDr Safdar A Butt
CG as field of studyCG as field of study
 CG has existed for as long as companies haveCG has existed for as long as compa...
Corporate Wrongs -1Corporate Wrongs -1
 Loss of ethicsLoss of ethics
 Earnings became every thing.Earnings became every ...
Corporate Wrongs - 2Corporate Wrongs - 2
 Short term goals and considerations.Short term goals and considerations.
 Coll...
Some Scandals in USA -1Some Scandals in USA -1
 WorldComWorldCom
 Overstatement of profits by $3.8 billionOverstatement ...
Some Scandals in USA - 2Some Scandals in USA - 2
 TycoTyco
 Evasion of sales tax on personal purchases.Evasion of sales ...
Some Scandals in UKSome Scandals in UK
 BCCIBCCI
 Improper accounting and policiesImproper accounting and policies
 Bar...
Some Scandals in PakistanSome Scandals in Pakistan
 Crescent BankCrescent Bank
 Islamic Investment BankIslamic Investmen...
Evolution of CGEvolution of CG
 Cadbury Report 1992, UKCadbury Report 1992, UK
 Greenbury Report 1995, UKGreenbury Repor...
Organization for economic andOrganization for economic and
cooperation and developmentcooperation and development
(OECD) P...
More ReportsMore Reports
 Basle Committee Guidelines 1999 (banks)Basle Committee Guidelines 1999 (banks)
 Myners Report ...
CG Related International BodiesCG Related International Bodies
 World Bank and IMFWorld Bank and IMF
 Global CG ForumGlo...
The Two PerspectivesThe Two Perspectives
 CG problem in WestCG problem in West
 CG problem in PakistanCG problem in Paki...
Thank you.Thank you.
S A ButtS A Butt
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Corporate Governance (Brief history)..

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Corporate Governance (Brief history)..

  1. 1. A Brief History ofA Brief History of Corporate GovernanceCorporate Governance Dr Safdar A ButtDr Safdar A Butt
  2. 2. CG as field of studyCG as field of study  CG has existed for as long as companies haveCG has existed for as long as companies have existed.existed.  But as a field of study it is less than 70 years old.But as a field of study it is less than 70 years old.  Last 40 years:Last 40 years:  A lot of activity in this field.A lot of activity in this field.  Codes, reports and laws have come out.Codes, reports and laws have come out.  Number of research papers and theories haveNumber of research papers and theories have evolved.evolved.
  3. 3. Corporate Wrongs -1Corporate Wrongs -1  Loss of ethicsLoss of ethics  Earnings became every thing.Earnings became every thing.  Ineffective boards, smart executives.Ineffective boards, smart executives.  Huge remunerations for executive directors.Huge remunerations for executive directors.  Greed leading to disparity among seniorGreed leading to disparity among senior managers and other employees.managers and other employees.
  4. 4. Corporate Wrongs - 2Corporate Wrongs - 2  Short term goals and considerations.Short term goals and considerations.  Collusion between directors and auditors.Collusion between directors and auditors.  Pressure from institutional investorsPressure from institutional investors  Loss of interest by small investors in bigLoss of interest by small investors in big companies.companies.  In Pakistan, family control of companies.In Pakistan, family control of companies.
  5. 5. Some Scandals in USA -1Some Scandals in USA -1  WorldComWorldCom  Overstatement of profits by $3.8 billionOverstatement of profits by $3.8 billion  Adelphia CommunicationsAdelphia Communications  Illegal loan to founderIllegal loan to founder  EnronEnron  Gross misuse of power by directorsGross misuse of power by directors  Waste Management Inc.Waste Management Inc.  Overstatement of earnings by $17 billion over 6 yrsOverstatement of earnings by $17 billion over 6 yrs
  6. 6. Some Scandals in USA - 2Some Scandals in USA - 2  TycoTyco  Evasion of sales tax on personal purchases.Evasion of sales tax on personal purchases.  Peregrine SystemsPeregrine Systems  Overstatement of earnings by $100 million.Overstatement of earnings by $100 million.  Imclone SystemsImclone Systems  Insider trading by CEOInsider trading by CEO  Rite AidRite Aid  Accounting and securities fraud.Accounting and securities fraud.
  7. 7. Some Scandals in UKSome Scandals in UK  BCCIBCCI  Improper accounting and policiesImproper accounting and policies  Barings BankBarings Bank  Ineffective internal controls, $1.4 billion lossIneffective internal controls, $1.4 billion loss  Mirror GroupMirror Group  Gross misappropriation of funds including pensionsGross misappropriation of funds including pensions  Polly PeckPolly Peck  Diversion of funds to personal use.Diversion of funds to personal use.
  8. 8. Some Scandals in PakistanSome Scandals in Pakistan  Crescent BankCrescent Bank  Islamic Investment BankIslamic Investment Bank  Bankers EquityBankers Equity  Pakistan Steel MillsPakistan Steel Mills  Indus BankIndus Bank
  9. 9. Evolution of CGEvolution of CG  Cadbury Report 1992, UKCadbury Report 1992, UK  Greenbury Report 1995, UKGreenbury Report 1995, UK  Hampel Report 1998, UKHampel Report 1998, UK  Combined Code 1998, UKCombined Code 1998, UK  Turnbull Report 1999, UKTurnbull Report 1999, UK  OECD Principles of CG, 1999OECD Principles of CG, 1999
  10. 10. Organization for economic andOrganization for economic and cooperation and developmentcooperation and development (OECD) Principles(OECD) Principles  Rights of shareholders must be protected.Rights of shareholders must be protected.  All shareholders to be treated equitably.All shareholders to be treated equitably.  All stakeholders to be allowed to play due role.All stakeholders to be allowed to play due role.  Timely and accurate disclosures.Timely and accurate disclosures.  Accountability and responsibility of directors.Accountability and responsibility of directors.
  11. 11. More ReportsMore Reports  Basle Committee Guidelines 1999 (banks)Basle Committee Guidelines 1999 (banks)  Myners Report 2001, UKMyners Report 2001, UK  Cromme Report 2002, GermanyCromme Report 2002, Germany  Higgs Review 2003, UK (INEDs)Higgs Review 2003, UK (INEDs)  Smith Report 2003, UK (Audit committees)Smith Report 2003, UK (Audit committees)  Revised Combined Code, 2003, UKRevised Combined Code, 2003, UK  Kings Reports 1994, 2000, 2009, South AfricaKings Reports 1994, 2000, 2009, South Africa  Sarbanes Oxley Act 2002, USASarbanes Oxley Act 2002, USA
  12. 12. CG Related International BodiesCG Related International Bodies  World Bank and IMFWorld Bank and IMF  Global CG ForumGlobal CG Forum  International CG NetworkInternational CG Network  Commission on public trust and privateCommission on public trust and private enterprise.enterprise.
  13. 13. The Two PerspectivesThe Two Perspectives  CG problem in WestCG problem in West  CG problem in PakistanCG problem in Pakistan
  14. 14. Thank you.Thank you. S A ButtS A Butt

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