Detailed slides on chapter 1 of CG

1. What is Corporate Governance?
• System of rules, practices & processes to
direct and control a company
• Defines how decisions are made, monitored &
held accountable
• Focus on shareholders, board, management &
stakeholders

2. Why Corporate Governance Matters
• Protects shareholder interests & ensures
transparency
• Promotes fairness & long-term sustainability
• Reduces fraud, scandals & increases investor
confidence

3. Consequences of Poor Governance
• Fraud, mismanagement, scandals
• Loss of investor trust & share price decline
• Legal penalties, reputational loss

4. Key Players: Shareholders
• Provide capital & elect board
• Expect ROI, protection of rights & fair
treatment

5. Key Players: Board of Directors
• Set strategy & oversee management
• Hire/monitor/remove CEO
• Oversee risk, compliance & major decisions

6. Types of Directors
• Executive Directors: managers + board
members
• Non Executive Directors: external oversight
‑
• Independent Directors: unbiased judgment,
no ties

7. Management
• Led by CEO & executive team
• Run daily operations & implement strategy
• Report honestly to board

8. Other Stakeholders
• Employees, customers, creditors, regulators &
society
• Expect fairness, quality, compliance &
responsibility

9. Principles of Corporate Governance
• Accountability: clear responsibility chain
• Transparency: accurate & timely disclosures
• Fairness: equal treatment of shareholders
• Responsibility: ethical & lawful behavior
• Independence: avoid concentration of power

10. Internal Mechanisms
• Board structure & independence
• Board committees: Audit, Remuneration,
Nomination
• Internal controls & audits
• Codes of Conduct & Ethics Policies

11. External Mechanisms
• Laws & regulations
• Market for corporate control
• External audits
• Creditors, rating agencies, media

12. The Agency Problem
• Principals: shareholders | Agents:
management
• Agents may act in self interest
‑
• Governance reduces agency conflict via
monitoring & incentives