Corporate Governance; Bases & Cases

1. Basel O. Abu-Ali
‫الشركات‬ ‫حوكمة‬
CorporateGovernance
Bases &Cases

2. We are in a BIG Trouble!

3. Preface
• Started in the past decades
• due to Financial Crisis and Scandals
• all over the World starting Asia crisis
1997
• and lately 2008 financial crisis;
• many and huge firms collapsed or went
bankruptcy
3

4. Main
Reasons
• Ownership Management
• Weak internal controls
• The power of big shareholders
over small investors
4

5. led to:
• Trust shook in management
• Trust shook in disclosed financial results
• Trust shook in management's capabilities
for the future
5

6. Worries!
Investors Return
6
Employees
Creditors
Community
Stakeholders
Stability
Salary
Money back
AddedValue
Rights

8. Corporate
Governance?
No common or unanimous definition:
• Systems
• Policies & Procedures
• Processes
• Internal Controls
• ALL of the above
8

9. Corporate
Governance?
that
• Controls
• Manages
• Directs
all the parties in the organization
and the relationships between
each others;
RIGHTS & RESPONSIBILITIES
9

10. Corporate
Governance
Parties
Shareholders
Board of
Directors
Senior
Management
10

11. Corporate
Governance
Parties
Shareholders
Board of
Directors
Senior
Management
11
Reports
Preparing
Control &
Directing

12. Corporate
Governance
Parties
Shareholders
Board of
Directors
Senior
Management
12
Reports
Preparing
Control &
Directing

13. The 5 Rights Info
13

14. The 5 Rights
Info
System
14

15. The 5 Rights
Info System
People
15

16. The 5 Rights
Info System
PeopleTime
16

17. The 5 Rights
Info System
PeopleTime
Decision
17

18. The 5 Rights
Info System
PeopleTime
Decision
18
CG is a
decision
making
Mechanism!

19. Concerned
with
• The flows of the information
• Protecting shareholders’ wealth
• Achieving the goals
• Maintaining the reputation, brand, and
value of the business
plus,
• It determines the company’s culture
19

20. Corporate
Governance
Principles
20
Transparency
& Disclosure
Accountability
Responsibility
Equality
& Fairness

21. Benefits
•Better assets utilization
•Productivity and Growth
•Risk mitigation
•Better controls
•Attract outside investments
•Capital Markets stability
•Support the economy
•…
21

22. Investors Return
22
Employees
Creditors
Community
Stakeholders
Stability
Salaries
Money back
AddedValue
Rights

23. 23
CASES

24. 24
2001

25. History
 Enron
 Founded in 1985
 Energy, electricity and natural gas,
commodities and services
 In 2000, claimed revenue of $101
billion
 Fortune Magazine; “America’s most
innovative company”. For six years
in a row
25

26. 26
2003

27. History & Scandal
 Parmalat
 Italian diary and food corporation
 1997 began to enter world financial
markets (to finance international
acquisitions)
 2001 moved to derivatives
 2003 went bankruptcy ($14 billion debt)
 Identified by Bank of America
27

28. 28
2005

29. History & Scandal
 Ranbaxy
 India based pharmaceutical company
 Manufactures generic drugs for European
and US markets
 2005, by a whistleblower; a new product
with suspect or unreliable clinical data
 Inaccurate key information about the
product
29

30. 30
2010

31. History & Scandal
 British Petroleum
 Oil & Gas
 Explosion and fire sank the drilling rig
Deepwater Horizon
 In the Gulf of Mexico, April 2010
 Million gallons of oil spill for 86 days
31

32. 32
2012

33. History & Scandal
 Royal Bank of Scotland
 One of the three banks have been found
involved in manipulation of LIBOR rate to
maximize profits, in 2012 (LIBOR Scandal)
 Manipulated to benefit their derivatives
trading books
 Caught by the traders
33

34. 34
2014

35. History
 Founded in 2004
 Second Largest mobile operator KSA
 Etisalat UAE owns 27.46%
 In 2013 reported net profit of SAR 6.68 b
 In June (2Q) 2014 reported SAR 1.312 b
 Many investors bought the share
 Share price reach over SAR 93 in 30Sep14
35

36. Thank you …