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

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Corporate GovernanceCorporate Governance
Presented ByPresented By
Imran TariqImran Tariq
Roll No 8559Roll No 8559
M.Com 4M.Com 4thth
GC University FaisalabadGC University Faisalabad

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What is it about?What is it about?
 CorporateCorporate
 GovernanceGovernance

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CompanyCompany
 What is a company?What is a company?
 Characteristics of a CompanyCharacteristics of a Company
 Types of CompaniesTypes of Companies

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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

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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

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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

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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

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Classification of StakeholdersClassification of Stakeholders
 OwnersOwners
 LendersLenders
 EmployeesEmployees
 Business AssociatesBusiness Associates
 Suppliers and CustomersSuppliers and Customers
 SocietySociety
 Includes governmentIncludes government

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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

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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

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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.

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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?

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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

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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

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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

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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?

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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.

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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

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Key IssuesKey Issues
 Financial reportingFinancial reporting
 Directors’ remunerationDirectors’ remuneration
 Risk managementRisk management
 Effective communicationEffective communication
 Corporate Social ResponsibilityCorporate Social Responsibility

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Financial ReportingFinancial Reporting
 AccuracyAccuracy
 ReliabilityReliability
 Internal and external auditInternal and external audit
 ComprehensivenessComprehensiveness
 TimelinessTimeliness

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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

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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?

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CommunicationCommunication
 TransparencyTransparency
 Regular communicationRegular communication
 With who?With who?
 In what format?In what format?

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Corporate Social ResponsibilityCorporate Social Responsibility
 Business EthicsBusiness Ethics
 Being a good citizenBeing a good citizen
 Doing business responsiblyDoing business responsibly

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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

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Thank youThank you
Safdar H.TahirSafdar H.Tahir