What+is+CPresenation on corporate governance

8/20/2019 What+is+CPresenation on corporate governance

http://slidepdf.com/reader/full/whatiscpresenation-on-corporate-governance 1/34

What is CorporateWhat is Corporate

Governance?Governance?Alison Dillon KibirigeAlison Dillon Kibirige



Corporate GovernanceCorporate Governance

Contemporary corporate governanceContemporary corporate governance

started in 1992 with the Cadbury report instarted in 1992 with the Cadbury report in

the UKthe UK

Cadbury was the result of several highCadbury was the result of several highprofile company collapsesprofile company collapses

is concerned primarily with protectingis concerned primarily with protecting

weak and widely dispersed shareholdersweak and widely dispersed shareholdersagainst selfinterested Directors andagainst selfinterested Directors and

managersmanagers



Corporate Governance PartiesCorporate Governance Parties

!hareholders " those that own the!hareholders " those that own the

companycompany

Directors " #uardians of the Company$sDirectors " #uardians of the Company$sassets for the !hareholdersassets for the !hareholders

%anagers who use the Company$s assets%anagers who use the Company$s assets




&rimarily concerned with public listed&rimarily concerned with public listed

companies i'e' those listed on a !tockcompanies i'e' those listed on a !tock

()change()change

*ocused on preventing corporate collapses*ocused on preventing corporate collapses

such as (nron+ &olly &eck and the %a)wellsuch as (nron+ &olly &eck and the %a)well

companiescompanies




,hat relevance does it have to Africa,hat relevance does it have to Africa

where there are few public listedwhere there are few public listed

companiescompanies

%ost companies are nonlisted+ private%ost companies are nonlisted+ private

family owned businesses where thefamily owned businesses where the

shareholders and the managers are oftenshareholders and the managers are often

the same peoplethe same people



Four PillarsFour Pillars

of Corporate Governanceof Corporate Governance AccountabilityAccountability

*airness*airness

-ransparency-ransparency

.ndependence.ndependence



Accountability Accountability

(nsure that management is(nsure that management is

accountable to the /oardaccountable to the /oard

(nsure that the /oard is accountable(nsure that the /oard is accountable

to shareholdersto shareholders



FairnessFairness

&rotect !hareholders rights&rotect !hareholders rights

-reat all shareholders including minorities+-reat all shareholders including minorities+

e0uitablye0uitably

&rovide effective redress for violations&rovide effective redress for violations



TransparencyTransparency

(nsure timely+ accurate disclosure on all(nsure timely+ accurate disclosure on all

material matters+ including the financialmaterial matters+ including the financial

situation+ performance+ ownership andsituation+ performance+ ownership and

corporate governancecorporate governance



IndependenceIndependence

&rocedures and structures are in place so&rocedures and structures are in place so

as to minimise+ or avoid completelyas to minimise+ or avoid completely

conflicts of interestconflicts of interest

.ndependent Directors and Advisers i'e'.ndependent Directors and Advisers i'e'

free from the influence of othersfree from the influence of others



Corporate Governance in AfricaCorporate Governance in Africa

.n 199+ -he King eport in !outh Africa.n 199+ -he King eport in !outh Africa

also included within its Code of Corporatealso included within its Code of Corporate

#overnance re0uirements on sustainability#overnance re0uirements on sustainability

and ethical standardsand ethical standards

-his was due to the conte)t of a-his was due to the conte)t of a

developing country and business ethics indeveloping country and business ethics in

AfricaAfrica



SustainabilitySustainability

3o generally accepted definition3o generally accepted definition

%ost commonly used is from the%ost commonly used is from the

/rundtland eport for the ,orld/rundtland eport for the ,orldCommission on (nvironment andCommission on (nvironment and

Development 1945 which defines it as6Development 1945 which defines it as6



SustainabilitySustainability

7 7development that meets the needsdevelopment that meets the needs

of the present without compromisingof the present without compromising

the ability of future generationsthe ability of future generations

to meet their own needs$ to meet their own needs$



StakeholdersStakeholders

!ustainability recogni8es stakeholder!ustainability recogni8es stakeholder

rights i'e' the rights of interested partiesrights i'e' the rights of interested parties

e'g' employees+ the community+ suppliers+e'g' employees+ the community+ suppliers+

customers etc'customers etc'

(ncourage cooperation between the(ncourage cooperation between the

company and its stakeholders in creatingcompany and its stakeholders in creating

wealth+ obs and economic stabilitywealth+ obs and economic stability



Business thicsBusiness thics

(stablished values and principles a(stablished values and principles a

company uses to inform and conduct itscompany uses to inform and conduct its

activitiesactivities

!hould permeate a company$s culture and!hould permeate a company$s culture and

drive its strategy+ business goals+ policiesdrive its strategy+ business goals+ policies

and activitiesand activities

Usually found in a code of ethicsUsually found in a code of ethics



le!ents of Corporate Governancele!ents of Corporate Governance

#ood /oard practices#ood /oard practices

Control (nvironmentControl (nvironment

-ransparent disclosure-ransparent disclosure

,elldefined shareholder rights,elldefined shareholder rights

/oard commitment/oard commitment



Good Board PracticesGood Board Practices

Clearly defined roles and authoritiesClearly defined roles and authorities

Duties and responsibilities of DirectorsDuties and responsibilities of Directors

understoodunderstood

/oard is well structured/oard is well structured

Appropriate composition and mi) of skillsAppropriate composition and mi) of skills



Good Board proceduresGood Board procedures

Appropriate /oard proceduresAppropriate /oard procedures

Director emuneration in line with bestDirector emuneration in line with best

practicepractice

/oard selfevaluation and training/oard selfevaluation and training

conductedconducted



Control nviron!entControl nviron!ent

.nternal control procedures.nternal control procedures

isk management framework presentisk management framework present

Disaster recovery systems in placeDisaster recovery systems in place

%edia management techni0ues in use%edia management techni0ues in use




/usiness continuity procedures in place/usiness continuity procedures in place

.ndependent e)ternal auditor conducts.ndependent e)ternal auditor conducts

auditsaudits

.ndependent audit committee established.ndependent audit committee established




.nternal Audit *unction.nternal Audit *unction

%anagement .nformation systems%anagement .nformation systems

establishedestablished

Compliance *unction establishedCompliance *unction established



Transparent "isclosureTransparent "isclosure

*inancial .nformation disclosed*inancial .nformation disclosed

3on*inancial .nformation disclosed3on*inancial .nformation disclosed

*inancials prepared according to*inancials prepared according to

.nternational *inancial eporting.nternational *inancial eporting

!tandards :.*!;!tandards :.*!;



Transparent "isclosureTransparent "isclosure

Companies egistry filings up to dateCompanies egistry filings up to date

<igh=uality annual report published<igh=uality annual report published

,ebbased disclosure,ebbased disclosure



Well#"efined Shareholder $i%htsWell#"efined Shareholder $i%hts

%inority shareholder rights formalised%inority shareholder rights formalised

,ellorganised shareholder meetings,ellorganised shareholder meetings

conductedconducted

&olicy on related party transactions&olicy on related party transactions



Well#"efined Shareholder $i%htsWell#"efined Shareholder $i%hts

&olicy on e)traordinary transactions&olicy on e)traordinary transactions

Clearly defined and e)plicit dividend policyClearly defined and e)plicit dividend policy



Board Co!!it!entBoard Co!!it!ent

-he /oard discusses corporate governance-he /oard discusses corporate governance

issues and has created a corporateissues and has created a corporate

governance committeegovernance committee

-he company has a corporate governance-he company has a corporate governancechampionchampion

A corporate governance improvement planA corporate governance improvement plan

has been createdhas been created

Appropriate resources are committed toAppropriate resources are committed to

corporate governance initiativescorporate governance initiatives



Board Co!!it!entBoard Co!!it!ent

&olicies and procedures have been&olicies and procedures have been

formalised and distributed to relevant staff formalised and distributed to relevant staff

A corporate governance code has beenA corporate governance code has been

developeddeveloped A code of ethics has been developedA code of ethics has been developed

-he company is recognised as a corporate-he company is recognised as a corporate

governance leadergovernance leader



&ther ntities&ther ntities

Corporate #overnance applies to all typesCorporate #overnance applies to all types

of organisations not ust companies in theof organisations not ust companies in the

private sector but also in the not for profitprivate sector but also in the not for profit

and public sectorsand public sectors

()amples are 3#>s+ schools+ hospitals+()amples are 3#>s+ schools+ hospitals+

pension funds+ stateowned enterprisespension funds+ stateowned enterprises



Country PerspectiveCountry Perspective

Corporate #overnance is by way ofCorporate #overnance is by way of

legislation or best practice Codelegislation or best practice Code

U! adopted legislation in 2??2 !arbanesU! adopted legislation in 2??2 !arbanes

>)ley Act>)ley Act %ost other developed and emerging%ost other developed and emerging

market countries have adopted bestmarket countries have adopted best

practice Codes e'g' Combined Code in thepractice Codes e'g' Combined Code in the

UK+ Cromme Code in #ermany and theUK+ Cromme Code in #ermany and the

King .. Code in !outh AfricaKing .. Code in !outh Africa



Country perspective # CodesCountry perspective # Codes

-hese Codes are voluntary and are-hese Codes are voluntary and are

enforced by shareholdersenforced by shareholders

%ost of them operate on a 7comply or%ost of them operate on a 7comply or

e)plain$ approache)plain$ approach -he %edia also play a part in highlighting-he %edia also play a part in highlighting

good or bad practicesgood or bad practices



Country PerspectiveCountry Perspective

Countries in Africa have tended to adopt aCountries in Africa have tended to adopt a

hybrid approach whereby they havehybrid approach whereby they have

followed the 7comply and e)plain$followed the 7comply and e)plain$

approach but have enshrined some of theapproach but have enshrined some of theprinciples in law to assist in enforceabilityprinciples in law to assist in enforceability

-he reason is the weakness of the-he reason is the weakness of the

shareholder base and of the mediashareholder base and of the media



Why Corporate Governance?Why Corporate Governance?

/etter access to e)ternal finance/etter access to e)ternal finance

@ower costs of capital " interest rates on@ower costs of capital " interest rates on

loansloans

.mproved company performance ".mproved company performance "sustainabilitysustainability

<igher firm valuation and share<igher firm valuation and share

performanceperformance educed risk of corporate crisis andeduced risk of corporate crisis and

scandalsscandals



Why Corporate Governance?Why Corporate Governance?

.n 2??2+ @ Klapper and . @ove from the ,orld.n 2??2+ @ Klapper and . @ove from the ,orld/ank found evidence that improving a company$s/ank found evidence that improving a company$scorporate governance has proportionately greatercorporate governance has proportionately greaterimpact in countries with weak legalimpact in countries with weak legal

environments'environments'

-hey have suggested that companies can partially-hey have suggested that companies can partiallycompensate for ineffective laws and enforcementcompensate for ineffective laws and enforcementby establishing good corporate governance at theby establishing good corporate governance at thecompany level and providing credible investorcompany level and providing credible investorprotectionprotection



Convince your (ditorConvince your (ditor

Documents

What+is+CPresenation on corporate governance