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 companies have
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
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.
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
In Pakistan, family control of companies.In Pakistan, family control of companies.
Some Scandals in USA -1Some Scandals in USA -1
Overstatement of profits by $3.8 billionOverstatement of profits by $3.8 billion
Adelphia CommunicationsAdelphia Communications
Illegal loan to founderIllegal loan to founder
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
Some Scandals in USA - 2Some Scandals in USA - 2
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.
Some Scandals in UKSome Scandals in UK
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.
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
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
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.
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
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
The Two PerspectivesThe Two Perspectives
CG problem in WestCG problem in West
CG problem in PakistanCG problem in Pakistan