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corporate goverance & Steakholder ,what is company and Function of Company

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What is company ,Types of company, Characteristics of Company,Introduction and other

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corporate goverance & Steakholder ,what is company and Function of Company

  1. 1. 1 Corporate GovernanceCorporate Governance Presented ByPresented By Imran TariqImran Tariq Roll No 8559Roll No 8559 M.Com 4M.Com 4thth GC University FaisalabadGC University Faisalabad
  2. 2. 2 What is it about?What is it about?  CorporateCorporate  GovernanceGovernance
  3. 3. 3 CompanyCompany  What is a company?What is a company?  Characteristics of a CompanyCharacteristics of a Company  Types of CompaniesTypes of Companies
  4. 4. 4 Characteristics of a CompanyCharacteristics of a Company  Ownership in sharesOwnership in shares  Freely transferable sharesFreely transferable shares  Separate entity apart from shareholdersSeparate entity apart from shareholders  Liability of shareholdersLiability of shareholders  Indefinite lifeIndefinite life  Board of directorsBoard of directors
  5. 5. 5 Types of CompaniesTypes of Companies  Limited or UnlimitedLimited or Unlimited  Limited by shares or by guaranteeLimited by shares or by guarantee  Private or PublicPrivate or Public  Listed or UnlistedListed or Unlisted
  6. 6. 6 Hierarchy of a CompanyHierarchy of a Company  ShareholdersShareholders  Own the company, do not run it.Own the company, do not run it.  Board of DirectorsBoard of Directors  Elected by and reporting to shareholdersElected by and reporting to shareholders  ManagementManagement  Appointed by and reporting to directorsAppointed by and reporting to directors  Includes executive directorsIncludes executive directors
  7. 7. 7 Top PlayersTop Players  Shareholders: Voting powerShareholders: Voting power  Chairman:Chairman:  May be executive or non-executiveMay be executive or non-executive  DirectorsDirectors  May be executive or non-executiveMay be executive or non-executive  Chief Executive OfficerChief Executive Officer  May or may not be a directorMay or may not be a director  Senior Managers:Senior Managers:  May or may not be directorsMay or may not be directors
  8. 8. 8 Classification of StakeholdersClassification of Stakeholders  OwnersOwners  LendersLenders  EmployeesEmployees  Business AssociatesBusiness Associates  Suppliers and CustomersSuppliers and Customers  SocietySociety  Includes governmentIncludes government
  9. 9. 9 Opportunity to protectOpportunity to protect individual interestsindividual interests  Managers and Employees have the greatestManagers and Employees have the greatest opportunity to protect their interest(s)opportunity to protect their interest(s)  Suppliers and Clients essentially go by eachSuppliers and Clients essentially go by each transaction or contract.transaction or contract.  Lenders and Shareholders are most vulnerable.Lenders and Shareholders are most vulnerable.  Society depends entirely on lawSociety depends entirely on law
  10. 10. 10 Classified onClassified on basis of Rolebasis of Role in the Companyin the Company Classified on basis of opportunity to protect individual interestsClassified on basis of opportunity to protect individual interests Those withThose with Full OpportunityFull Opportunity Those with aThose with a Partial OpportunityPartial Opportunity Those withThose with Virtually No opportunityVirtually No opportunity OwnersOwners ControllingControlling ShareholdersShareholders Institutional InvestorsInstitutional Investors with Board representationwith Board representation Minority and individualMinority and individual shareholders with no boardshareholders with no board RepresentationRepresentation LendersLenders Financial institutionsFinancial institutions with elaborate lendingwith elaborate lending ContractsContracts Buyers of listed bondsBuyers of listed bonds with trustee arrangementswith trustee arrangements Other lendersOther lenders EmployeesEmployees Executive DirectorsExecutive Directors Senior ManagersSenior Managers Other employeesOther employees on regular oron regular or contract termscontract terms Business AssociatesBusiness Associates Suppliers who sellSuppliers who sell only on cash termsonly on cash terms Major Suppliers andMajor Suppliers and clients with contractsclients with contracts Smaller suppliersSmaller suppliers and smaller clientsand smaller clients SocietySociety GovernmentGovernment Public at largePublic at large Classification of StakeholdersClassification of Stakeholders
  11. 11. 11 Need for Corporate GovernanceNeed for Corporate Governance  To protect and serve individual interest of eachTo protect and serve individual interest of each stakeholderstakeholder  To protect and serve the collective interest of allTo protect and serve the collective interest of all stakeholdersstakeholders  To ensure no one benefits at the expense ofTo ensure no one benefits at the expense of anotheranother  To ensure no stakeholder has monopoly ofTo ensure no stakeholder has monopoly of decision-making.decision-making.
  12. 12. 12 Governance & ManagementGovernance & Management  How do these terms differ?How do these terms differ?  Does Governance include Management?Does Governance include Management? OrOr  Does Management include Governance?Does Management include Governance?
  13. 13. 13 Governance & ManagementGovernance & Management GovernanceGovernance FunctionFunction ManagementManagement Approval of PlansApproval of Plans PlanningPlanning Preparation of plansPreparation of plans Providing overallProviding overall leadershipleadership LeadingLeading Leading those whoLeading those who implement plansimplement plans ArrangingArranging resourcesresources OrganizingOrganizing Tasks division &Tasks division & resource usageresource usage Controlling managersControlling managers ControllingControlling ControllingControlling employeesemployees
  14. 14. 14 GovernanceGovernance  StrategicStrategic  Setting ObjectivesSetting Objectives  Devising plans to achieve these objectivesDevising plans to achieve these objectives  Setting rules or parametersSetting rules or parameters  Not directly concerned with routine affairsNot directly concerned with routine affairs  Protection of Interests of all stakeholdersProtection of Interests of all stakeholders
  15. 15. 15 ManagementManagement  Current & Operational AffairsCurrent & Operational Affairs  Taking directions from the BoardTaking directions from the Board  Implementing the PlansImplementing the Plans  Developing Suggestions and AlternativesDeveloping Suggestions and Alternatives
  16. 16. 16 Approaches toApproaches to Corporate GovernanceCorporate Governance  Shareholders ApproachShareholders Approach  Stakeholders ApproachStakeholders Approach  Enlightened Shareholders ApproachEnlightened Shareholders Approach  Which approach is best?Which approach is best?
  17. 17. 17 Corporate SinsCorporate Sins  SlothSloth  Unwillingness to take initiative or risk, prefer statusUnwillingness to take initiative or risk, prefer status quo, be lazy.quo, be lazy.  GreedGreed  Putting self above companyPutting self above company  FearFear  Not annoy or stand up to any stakeholder /Not annoy or stand up to any stakeholder / investor / boss.investor / boss.
  18. 18. 18 Agency TheoryAgency Theory  What is Agency Theory?What is Agency Theory?  Does it apply to companies?Does it apply to companies?  Two-party and three-party modelTwo-party and three-party model  Principal-Watchdog-AgentPrincipal-Watchdog-Agent
  19. 19. 19 Key IssuesKey Issues  Financial reportingFinancial reporting  Directors’ remunerationDirectors’ remuneration  Risk managementRisk management  Effective communicationEffective communication  Corporate Social ResponsibilityCorporate Social Responsibility
  20. 20. 20 Financial ReportingFinancial Reporting  AccuracyAccuracy  ReliabilityReliability  Internal and external auditInternal and external audit  ComprehensivenessComprehensiveness  TimelinessTimeliness
  21. 21. 21 Directors Related IssuesDirectors Related Issues  RemunerationRemuneration  PowersPowers  Balance between:Balance between:  executive and non-executivesexecutive and non-executives  Election and re-electionElection and re-election  RepresentationRepresentation
  22. 22. 22 Risk ManagementRisk Management  Risk profileRisk profile  What risks to take?What risks to take?  Avoidable and non-avoidable risksAvoidable and non-avoidable risks  What not to take?What not to take?  How to handle risks taken?How to handle risks taken?
  23. 23. 23 CommunicationCommunication  TransparencyTransparency  Regular communicationRegular communication  With who?With who?  In what format?In what format?
  24. 24. 24 Corporate Social ResponsibilityCorporate Social Responsibility  Business EthicsBusiness Ethics  Being a good citizenBeing a good citizen  Doing business responsiblyDoing business responsibly
  25. 25. 25 Why is CG Important?Why is CG Important?  Good reputation is good businessGood reputation is good business  Protection of stakeholders’ interestProtection of stakeholders’ interest  Support to capital marketsSupport to capital markets  Support to societySupport to society  Every one winsEvery one wins
  26. 26. 26 Thank youThank you Safdar H.TahirSafdar H.Tahir

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