The public sector, also called the state sector, is the part of the economy composed of both public services and public enterprises. Public sectors include the public goods and governmental services such as the military, law enforcement, infrastructure, public transit, public education, along with health care and those working for the government itself, such as elected officials. The public sector might provide services that a non-payer cannot be excluded from (such as street lighting), services which benefit all of society rather than just the individual who uses the service.[1] Public enterprises, or state-owned enterprises, are self-financing commercial enterprises that are under public ownership which provide various private goods and services for sale and usually operate on a commercial basis. Organizations that are not part of the public sector are either part of the private sector or voluntary sector. The private sector is composed of the economic sectors that are intended to earn a profit for the owners of the enterprise. The voluntary, civic, or social sector concerns a diverse array of non-profit organizations emphasizing civil society. In the United Kingdom, the term "wider public sector" is often used, referring to public sector organizations outside central government

1. A Brief History of
Corporate Governance

2. CG as field of study
 CG has existed for as long as companies have
existed.
 But as a field of study it is less than 70 years old.
 Last 40 years:
 A lot of activity in this field.
 Codes, reports and laws have come out.
 Number of research papers and theories have
evolved.

3. Corporate Wrongs -1
 Loss of ethics
 Earnings became every thing.
 Ineffective boards, smart executives.
 Huge remunerations for executive directors.
 Greed leading to disparity among senior
managers and other employees.

4. Corporate Wrongs - 2
 Short term goals and considerations.
 Collusion between directors and auditors.
 Pressure from institutional investors
 Loss of interest by small investors in big
companies.
 In Pakistan, family control of companies.

5. Some Scandals in USA -1
 WorldCom
 Overstatement of profits by $3.8 billion
 Adelphia Communications
 Illegal loan to founder
 Enron
 Gross misuse of power by directors
 Waste Management Inc.
 Overstatement of earnings by $17 billion over 6 yrs

6. Some Scandals in USA - 2
 Tyco
 Evasion of sales tax on personal purchases.
 Peregrine Systems
 Overstatement of earnings by $100 million.
 Imclone Systems
 Insider trading by CEO
 Rite Aid
 Accounting and securities fraud.

7. Some Scandals in UK
 BCCI
 Improper accounting and policies
 Barings Bank
 Ineffective internal controls, $1.4 billion loss
 Mirror Group
 Gross misappropriation of funds including pensions
 Polly Peck
 Diversion of funds to personal use.

8. Some Scandals in Pakistan
 Crescent Bank
 Islamic Investment Bank
 Bankers Equity
 Pakistan Steel Mills
 Indus Bank

9. Evolution of CG
 Cadbury Report 1992, UK
 Greenbury Report 1995, UK
 Hampel Report 1998, UK
 Combined Code 1998, UK
 Turnbull Report 1999, UK
 Organization for Economic Cooperation and
Development (OECD) Principles of CG, 1999

10. OECD Principles
 Rights of shareholders must be protected.
 All shareholders to be treated equitably.
 All stakeholders to be allowed to play due role.
 Timely and accurate disclosures.
 Accountability and responsibility of directors.

11. More Reports
 Basle Committee Guidelines 1999 (banks)
 Myners Report 2001, UK
 Cromme Report 2002, Germany
 Higgs Review 2003, UK (INEDs)
 Smith Report 2003, UK (Audit committees)
 Revised Combined Code, 2003, UK
 Kings Reports 1994, 2000, 2009, South Africa
 Sarbanes Oxley Act 2002, USA

12. CG Models
 Anglo American Model (AAM)
 Japanese Model
 German Model

13. Anglo American Model
 Free economy based: Market sets the price of
capital and expectations of returns.
 Company runs for shareholders’ benefits, i.e. to
maximize their wealth.
 Triangular structure: SH/Board/Management
 Most companies run by people owning less than
a quarter of the company.
 Major agency and CG issues.

14. Japanese CG Model
 Keiretsu system of ownership:
 Large groups own the companies.
 Inter-locking directorates and shareholding.
 All policies made by the group.
 Group funds, controls and helps where needed.
 Management kept alert all the term.
 Agency issues still persist.

15. German CG Model
 Group ownership is common. Strong hold of
investors over the boards.
 Two tier boards by law.
 Lower tier-management board-executive directors.
 Upper tier-institutional investors and employees.
 Representation of workers and shareholders in
Supervisory Board.
 Size of Supervisory Board cannot be changed by
the company; regulated by law.

16. CG Related
International Bodies
 World Bank and IMF
 Global CG Forum
 International CG Network
 Commission on public trust and private
enterprise.

17. The Two Perspectives
 CG problem in West
 CG problem in Pakistan

18. Thank you.