This document provides a brief history of corporate governance as a field of study. It discusses how corporate governance has existed as long as companies have, but it emerged as a distinct field of study less than 70 years ago. Over the last 40 years, there has been significant activity in this field including numerous codes, reports, laws, and research. The document also outlines some major corporate scandals and wrongdoings in countries like the US, UK, and Pakistan. It then discusses various reports and principles that helped shape modern corporate governance standards and regulations, such as the Cadbury Report, OECD Principles, and Sarbanes-Oxley Act. Finally, it notes there are two perspectives on corporate governance - issues in western

1. A Brief History ofA Brief History of
Corporate GovernanceCorporate Governance
Dr Safdar A ButtDr Safdar A Butt

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. The Two PerspectivesThe Two Perspectives
 CG problem in WestCG problem in West
 CG problem in PakistanCG problem in Pakistan

14. Thank you.Thank you.
S A ButtS A Butt