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Corporate Governance
Why and What
Anand Subramaniam

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“There has been in recent years excessive
emphasis on a citizen's rights and
inadequate stress put upon his duties and
responsibilities.”
- Paxton Blair
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Highlights
 Corporate Governance – Overview
 Corporate Governance – Pillars
 Corporate Governance - Elements
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Corporate Governance - Overview

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Why Corporate Governance?
 Better access to external finance
 Lower costs of capital – interest rates on loans
 Improved company performance – sustainability
 Higher firm valuation and share performance
 Reduced risk of corporate crisis and scandals
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Corporate Governance - Parties
Share- Manager
Directors
holders
Who use the
Guardians of Company’s
Those that own the Company’s assets
the company assets for the
Shareholders
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Corporate Governance vs. Management
Accountability
Accountability
and
and Corporate
Supervision Corporate
Supervision Governance
Governance
Strategic
Strategic
Management
Management
Executive Mgmt. Corporate
Executive Mgmt. Corporate
-Decision and Control- Management
- Decision and Control - Management
Operational Mgmt.
Operational Mgmt.
Source: Robert Tricker,Corporate Governance, 1984
Source: Robert I. Tricker, Corporate Governance, 1984
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Corporate Governance is NOT..
 Corporate governance ≠ corporate /
financial management
 Corporate governance ≠ corporate social
responsibility or business ethics
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What is Corporate Governance?
If management is about running
the business, corporate
governance is about seeing that
it is run properly.
All companies need managing
and governing.
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10.
Corporate Governance - Pillars

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Accountability
Fairness
Transparency
Corporate Governance - Pillars
Independence
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Accountability
 Ensure that management is accountable
to the Board
 Ensure that the Board is accountable to
shareholders
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Fairness
 Protect Shareholders rights
 Treat all shareholders including minorities,
equitably
 Provide effective redress for violations
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Transparency
 Ensure timely, accurate disclosure on all
material matters, including the financial
situation, performance, ownership and
corporate governance
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Independence
 Procedures and structures are in place so
as to minimise, or avoid completely
conflicts of interest
 Independent Directors and Advisers i.e.
free from the influence of others
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Corporate Governance - Elements

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Corporate Governance - Elements
Well-
Good defined
Board share-
practices holder
rights
Control Board
Environ- Elements commit-
ment ment
Trans-
parent
P/E Ratio
disclo-
sure
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Good Board Practices
 Clearly defined roles and authorities
 Duties and responsibilities of Directors understood
 Board is well structured
 Appropriate composition and mix of skills
 Appropriate Board procedures
 Director Remuneration in line with best practice
 Board self-evaluation and training conducted
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Control Environment
 Internal control procedures  Independent audit committee
established
 Risk management framework
present  Internal Audit Function
 Disaster recovery systems in  Management Information
place systems established
 Media management  Compliance Function
techniques in use established
 Business continuity  Independent external auditor
procedures in place conducts audit
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Transparent Disclosure
 Financial Information disclosed
 Non-Financial Information disclosed
 Financials prepared according to International
Financial Reporting Standards (IFRS)
 Companies Registry filings up to date
 High-Quality annual report published
 Web-based disclosure
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Well-Defined Shareholder Rights
 Minority shareholder rights formalised
 Well-organised shareholder meetings conducted
 Policy on related party transactions
 Policy on extraordinary transactions
 Clearly defined and explicit dividend policy
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Board Commitment
 The Board discusses corporate governance issues and has created a
corporate governance committee
 The company has a corporate governance champion
 A corporate governance improvement plan has been created
 Appropriate resources are committed to corporate governance initiatives
 Policies and procedures have been formalised and distributed to relevant
staff
 A corporate governance code has been developed
 A code of ethics has been developed
 The company is recognised as a corporate governance leader
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“When a man says he approves of
something in principle, it means he hasn't
the slightest intention of carrying it out in
practice.”
- Otto von Bismarck
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Good Luck
http://www.linkedin.com/in/anandsubramaniam
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