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PRINCIPLES OF CORPORATE
GOVERNANCE
Objective
To understand the governance structure.
To have a detailed understanding of the roles,
1. Elements of Corporate
Governance
Good Board practices
Control Environment
Transparent disclosure
Well-defined shareholder rights
Board commitment
understood
Board is well structured
Appropriate composition and mix of skills
practice
Board self-evaluation and training conducted
Control Environment
Internal control procedures
Risk management framework present
Disaster recovery systems in place
Media management techniques in use
Control Environment
Business continuity procedures in place
Independent external auditor conducts audits
Independent audit committee established
Control Environment
Internal Audit Function
Management Information systems established
Compliance Function established
Transparent Disclosure
Financial Information disclosed
Non-Financial Information disclosed
Financials prepared according to
Transparent Disclosure
Companies Registry filings up to date
High-Quality annual report published
Web-based disclosure
Well-Defined Shareholder
Rights
Minority shareholder rights formalised
Well-organised shareholder meetings
conducted
Policy on related party transactions
Well-Defined Shareholder
Rights
Policy on extraordinary transactions
Clearly defined and explicit dividend policy
Board Commitment
The Board discusses corporate governance
Board Commitment
Policies and procedures have been
Other Entities
Corporate Governance applies to all types of
structure
Board of Directors
Some key board roles
Key Board Committees
Shareholders
The term shareholders may seem quite
Stakeholders
The term stakeholders can encompass a wide
Board structure
Unitary board or two tier (dual) board
structure.
Implications of board structure
Examples of unitary structure
Examples of two tier structure
Unitary Board
Is characterized by one single board
information flow
Two tier system: embodies a clearer, formal
separation between the supervisory body and
those being supervised
Principle Responsibilities of
the Board - MCCG
Principle Responsibilities of
the Board - MCCG
Succession planning, including appointing,
purpose
The duty to exercise discretion properly
The duty to avoid conflict and selfdealing
2. Duty to use reasonable care skill and
diligence
Core Competencies
Personal
Qualities
Leadership
Strategic
Work ethics
Professionalis
m
Competencies
Industry
knowledge
Business
judgment
Expertise
Special skills
Independent Directors
A board is strengthened
Role of Chairman
Monitor the workings of the board, especially the
Role of CEO
The role of CEO is seen as critical to the
performance of company. A CEO is expected
to provide:
Leadership
Strategic vision
High- level business judgment and wisdom.
The ability to meet immediate performance
targets without neglecting longer-term
growth opportunities of the company.
Senior Independent
Director
Senior Independent
Director
of the Chairman.
Maintain sufficient contact with major
shareholders, when requested, to understand
their issues and concerns thereby assisting the
Board to develop a balanced understanding.
Attend the Company's AGM and be available for
discussion with shareholders.
Company Secretary
Must act in good faith and avoid conflict of
interest.
Responsibilities:
Facilitating the work of the board by ensuring
that the directors have all information they need
for the main board and board subcommittees.
Advise the boards via the chairman on all
governance matters.
governance
2. Supports the board and chairman
3. Appointment a new directors
4. Compliance with filling and
administrative requirements.
Board Committees
Boards can delegate powers to committees but
Audit Committee
The audit committee is fundamental to the
Audit Committee
The Audit Committees primary purpose is to:
1.Assist the Board in its oversight responsibilities to
Audit Committee
The Audit Committees primary duties and responsibilities
are to:
Monitor the integrity of the Companys internal controls
over financial reporting.
Monitor the qualifications, independence and performance
of the Companys independent auditor and internal auditing
function.
Provide a channel of communication among the Board, the
independent auditor, internal auditing function, management
and other concerned individuals.
As a committee of the Board of Directors, assist the Board
in meeting its fiduciary duties to shareholders and the
Company.
Remuneration committee
The remuneration committee is established to ensure that
Remuneration committee
A remuneration committee will, in accordance with
Nomination Committee
The nomination committee has two responsibilities:
RISK COMMITTEE
The Risk Committee must assist the
Non-executive directors
(NEDs)
executive directors, that is, independent nonexecutive directors help provide balance on the
board
Contribution to the overall leadership and
development of the company
Independence of NEDs
Independence means that the non-executive
director is not:
Employed by the company
Former employee of company (within last 5 years)
Closely related to the company by economic or
other ties
Closely related to the directors or advisers of the
company (no family ties)
Serving on board for more than 10 years
Representing a significant shareholder
Concluding comments
Boards may be one tier (unitary) or two tier
(dual)
Under both types of system there is usually a
supervisory function and a managerial function
(a distinction more formalised in the two tier
system)
Role, duties, and responsibilities of directors
concern strategic decisions based on adequate
information, and with accountability to
shareholders (and other stakeholders as
appropriate).
governance.
Principles and best practices recommendations
in code of corporate governance (differences
between countries)