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Corporate governance is "the system by which companies are directed and

controlled". It involves regulatory and market mechanisms, and the roles and
relationships between a company’s management, its board, its shareholders and
other stakeholders, and the goals for which the corporation is governed. In
contemporary business corporations, the main external stakeholder groups are
shareholders, debt holders, trade creditors, suppliers, customers and
communities affected by the corporation's activities. Internal stakeholders are
the board of directors, executives and other employees.
 01. A Sole Proprietorship: A Sole Proprietorship Is one individual or
married couple in business alone? Sole proprietorship's are the most
common form of business structure
 02. A General Partnership: A General Partnership Is composed of two or
more persons (usually not a married couple) who agree to contribute
money, labor, and/or skill to a business.
 03. A Limited Partnership: A Limited Partnership is composed of one or
more general partners and one or more limited partners. The general
partners manage the business and share fully in its profits and losses
 04. A Limited Liability Limited Partnership: A Limited Liability
Limited Partnership by including a statement to that effect in its certificate
of limited partnership. Status as a limited liability limited partnership
provides general partners with a shield from liability for obligations of the
limited liability limited partnership.
 05. The Limited Liability Company (LLC): An LLC is formed by one or
more individuals or entities through a special written agreement. The
agreement details the organization of the LLC, including: provisions for
management, assign ability of interests, and distribution of profits or losses.
 06. A Corporation: A Corporation is a legal entity; a corporation has
certain rights, privileges, and liabilities beyond those of an individual.
Doing business as a corporation may yield tax or financial benefits, but
these can be offset by other considerations, such as decreased personal
control.
 07. A Nonprofit Corporation: A nonprofit corporation is a legal entity and
is typically run to further some sort of ideal or goal, rather than in the
interests of profit.
 08. The Charitable Solicitations Program: The Charitable Solicitations
Program registers individuals, organizations, and commercial fundraisers
that solicit charitable donations from the general public.
1. Purpose: Ownership Guidelines are intended to align Company
executive’s and shareholder’s interests through shared financial risk.
2. Affected Employees: Any executive participating in (receiving)
Performance Share (PSP) grants under the Corporation’s Long Term
Incentive Plan.
3. Ownership timeframe: Since the PSP is a new element of the LTI
Plan, is consistent with industry practice, and in consideration of the
level of at-risk level of compensation
4. Evaluation Period: Holdings are analyzed annually, in advance of PSP
grants and awards using then-current base salary. This is then reported to
the ECC.
5. Ownership Value– All shares in the possession of the executive at the
point of disclosure are considered in the evaluation of holding
requirements. While only PSP shares are restricted until holding
requirements are met, all shares, both Company source and individually
owned are used to consider holding levels.
1. Ensuring the Basis for an Effective Corporate Governance Framework:
2. The Rights of Shareholders and Key Ownership Functions:
3. The Equitable Treatment of Shareholders:
4. The Role of Stakeholders in Corporate Governance:
5. Disclosure and Transparency:
6. Disclosure and Transparency:
 Anyone who starts or buys a business is always faced with the question of
whether to organize the firm as a proprietorship, a partnership or a
corporation. Enterprise which was started as single proprietorship may find
it better to become partnerships or corporations later as the venture
develops into big business. The decision as to what business form to follow
in the establishment of the business enterprise depends upon the following
factors:
 01. Nature of the Business - if the business is small, a single proprietorship may be considered.

 02. Capital - one major factor is the investment. If the investment is small, it has to be reinforced
from the outside.

 03. Number of people interested to join the business - the availability of people with capital who
are interested to join a business is a factor that affects business ownership

 04. Prevailing business climate - whatever is the existing business atmosphere determines the type
of business ownership to choose.

 05. Management know-how - the knowledge on how to run a business also affects the type of
ownership to choose because a person who ahs capital but who asks the knowledge to run
a business well look for people who can mange a business to join him/her.

 06. Prevailing government business policies - favorable business policies will also affect the
choice of business ownership because entrepreneurs will consider incentives given by government
which are favorable to a certain type of ownership.
 The term "corporate control" refers to the authority to make the decisions
of a corporation regarding operations and strategic planning, including
capital allocations, acquisitions and divestments, top personnel decisions,
and major marketing, production, and financial decisions.

 Economists frequently corporate control in four different ways to indicate:


1. (i ) the means of production;
2. (ii) an investment which may not be represented by the means of
production;
3. (iii) finance and external capital; or even
4. (iv) just credit created by contract; for example bank debt and junk
bonds.
1. A focus on critical points. For example, controls are applied where failure cannot be tolerated or where
costs cannot exceed a certain amount. The critical points include all the areas of an organization's
operations that directly affect the success of its key operations.

2. Integration into established processes. Controls must function harmoniously within these processes
and should not bottleneck operations.

3. Acceptance by employees. Employee involvement in the design of controls can increase acceptance.

4. Availability of information when needed. Deadlines, time needed to complete the project, costs
associated with the project, and priority needs are apparent in these criteria. Costs are frequently
attributed to time shortcomings or failures.

5. Economic feasibility. Effective control systems answer questions such as, “How much does it cost?”
“What will it save?” or “What are the returns on the investment?” In short, comparison of the costs to
the benefits ensures that the benefits of controls outweigh the costs.

6. Accuracy. Effective control systems provide factual information that's useful, reliable, valid, and
consistent.
1. Bureaucratic control uses "formal rules, standards, hierarchy, and
legitimate authority", and this type of control system works well with
specific tasks that are done by independent workers
2. Market control uses "prices, competition, profit centers, and exchange
relationships" to establish control, and it works well where "tangible
output can be identified and market can be established between parties"
3. Clan control involves shared culture, beliefs, standards, and trust. This
control system works best where no one is strictly the decision maker and
employees are encouraged to provide input, make choices, and act
independently.
4. Some advantages of bureaucratic control systems are lack of confusion
about decision making and lack of confusion in expectation and
standards required from employees.
 An advantage of market control systems is a flexible system, but this is
also a disadvantage because value is always changing and employees may
suffer from companies being repeatedly

 A clan control system is advantageous because it provides a company with


more possibilities of innovation and ideas, but it lacks a direct form of
control or strict authority which can lead to confusion of responsibility.

 Control systems are valuable to management in business, and


understanding the three basic control systems is important when
implementing a control system in a business.
1. Governmental control: The first disadvantage is governmental control. This has
already been alluded to in speaking of the reasons why many banking and
brokerage houses are not incorporated.
2. Expensive and laborious: Most corporations require to submit periodical and
detailed reports to boards or officials; this causes considerable trouble and
expense, but, as necessitating system in keeping corporate records, it is sometimes
worth all the labor it entails.
3. Corporation’s regulation: The charter and by-laws of a corporation give a
certain fixedness to its organization and its powers which may at times prove more
or less embarrassing.
4. Combination of labor: In the corporation, many managers, employees, workers,
labor union, suppliers and also government involve so it is very difficult to
monitor and control them.
5. Double taxation: Corporations doing business in more than one state are also
liable to be taxed by several states on the same property, while at the same time
their shareholders may also be paying taxes on their respective interests in the
stock, making a double or treble tax on the same property.
 Leadership can be defined as one's ability to get others to willingly follow.
Every organization needs leaders at every level.

 You look for the following character traits. A leader must be able to
communicate his or her vision in terms that cause followers to buy into it.
He or she must communicate clearly and passionately, as passion is
contagious.
 1) Integrity is the integration of outward actions and inner values. A
person of integrity is the same on the outside and on the inside. Such an
individual can be trusted because he or she never veers from inner values,
even when it might be expeditious to do so.
 2) Honest dealings: Honest dealings, predictable reactions, well-controlled
emotions, and an absence of tantrums and harsh outbursts are all signs of
integrity.
 3) Dedication: Dedication means spending whatever time or energy is
necessary to accomplish the task at hand. A leader inspires dedication by
example, doing whatever it takes to complete the next step toward the
vision.

4) Magnanimity: Magnanimity means giving credit where it is due. A
magnanimous leader ensures that credit for successes is spread as widely as
possible throughout the company.
 5) Humanity: Leaders with humility recognize that they are no better or worse than other
members of the team. A humble leader is not self-effacing but rather tries to elevate everyone.

 6) Openness: Openness means being able to listen to new ideas, even if they do not conform
to the usual way of thinking

 7) Creativity: Creativity is the ability to think differently, to get outside of the box that
constrains solutions.

 8) Fairness: Fairness means dealing with others consistently and justly. A leader must check
all the facts and hear everyone out before passing judgment.
8) Assertiveness: Assertiveness is not the same as aggressiveness. Rather, it is the ability to
clearly state what one expects so that there will be no misunderstandings. A leader must be
assertive to get the desired results.

 9) Sense of Humor: A sense of humor is vital to relieve tension and boredom, as well as to
defuse hostility. Effective leaders know how to use humor to energize followers.
10) Intrinsic Traits: Intrinsic traits such as intelligence, good looks, height and so on are not
necessary to become a leader.
 Establish standards to measure performance.
 Measure actual performance
 Compare performance with the standards.
 Take corrective actions.
Financial controls:

 Financial statements provide management with information to monitor financial


resources and activities.
 Income statement shows the results of the organization's operations over a period of
time, such as revenues, expenses, and profit or loss.
 Balance sheet shows what the organization is worth (assets) at a single point in time,
and the extent to which those assets were financed through debt (liabilities) or owner's
investment (equity).
 Financial audits, or formal investigations, are regularly conducted to ensure that
financial management practices follow generally accepted procedures, policies, laws,
and ethical guidelines. Audits may be conducted internally or externally.
Financial ratio analysis examines the relationship between specific figures on
the financial statements and helps explain the significance of those figures:

 Liquidity ratios measure an organization's ability to generate cash.


 Profitability ratios measure an organization's ability to generate profits.
 Debt ratios measure an organization's ability to pay its debts.
 Activity ratios measure an organization's efficiency in operations and use of
assets.
Budget controls: A budget depicts how much an organization expects to
spend (expenses) and earn (revenues) over a time period. Amounts are
categorized according to the type of business activity or account, such as
telephone costs or sales of catalogs.

1. Top-down budgeting. Managers prepare the budget and send it to subordinates.

2. Bottom-up budgeting. Figures come from the lower levels and are adjusted and
coordinated as they move up the hierarchy.

3. Zero-based budgeting. Managers develop each new budget by justifying the


projected allocation against its contribution to departmental or organizational
goals.

4. Flexible budgeting. Any budget exercise can incorporate flexible budgets, which
set “meet or beat” standards that can be compared to expenditures.
Marketing controls:

1. Marketing controls help monitor progress toward goals for customer satisfaction
with products and services, prices, and delivery. The following are examples of
controls used to evaluate an organization's marketing functions:

2. Market research gathers data to assess customer needs—information critical to an


organization's success. Ongoing market research reflects how well an organization is
meeting customers' expectations and helps anticipate customer needs. It also helps
identify competitors.

3. Test marketing is small-scale product marketing to assess customer acceptance.


Using surveys and focus groups, test marketing goes beyond identifying general
requirements and looks at what (or who) actually influences buying decisions.
Human resource controls: Human resource controls help managers regulate the
quality of newly hired personnel, as well as monitor current employees'
developments and daily performances. On a daily basis, managers can go a
long way in helping to control workers' behaviors in organizations.

1. Performance limitations. Although management information systems have


the potential to increase overall performance, replacing long-time
organizational employees with information systems technology may result in
the loss of expert knowledge that these individuals hold.
2. Behavioral limitations. Information technology allows managers to access
more information than ever before.
 Family control
Family interests dominate ownership and control structures of some
corporations, and it has been suggested the oversight of family controlled
corporation is superior to that of corporations "controlled" by institutional
investors (or with such diverse share ownership that they are controlled by
management).

 Diffuse shareholders
The significance of institutional investors varies substantially across
countries. In developed Anglo-American countries (Australia, Canada,
New Zealand, U.K., U.S.),
1. Monitoring by the board of directors:
2. Internal control procedures and internal auditors:
3. Balance of power:
4. Remuneration:
5. Monitoring by large shareholders and/or monitoring by banks and
other large creditors:
1. competition
2. debt covenants
3. demand for and assessment of performance information (especially
financial statements)
4. government regulations
5. managerial labor market
6. media pressure
7. takeovers