INTRODUCING CORPORATE

GOVERNANCE

Session 1
Objectives
By the end of this session, participants will be able to:

Define corporate governance (CG)

Describe the features and benefits of CG

Identify diverse factors shaping CG systems

2
What is Corporate Governance?

Sound corporate governance is an important element of sustainable private sector

development -- not only because it strengthens businesses' ability to attract investment and
grow but also because it makes companies and those running them more accountable.

Corporate Governance is the system by which

If management is about companies are directed and controlled.
Shareholders provide
running business, funding
governance is about
seeing that it is run
properly. All companies
need governing as well as
managing.

Prof. Bob Tricker, 1984 Management runs the Board of Directors

companys daily develops strategy
operations and oversees
management

3
Internal and External Environments of CG

Shareholders Stakeholders Regulators

Standards
Accounting
Board of Directors Auditing
Accountants Other
Lawyers Laws and Regulations
Reports to Appoints & Credit Rating Agencies
monitors Investment Bankers
Financial Media Financial Sector
Management Investment Advisors Debt
Research Equity
Governance Analysts
NGOs
Communities, etc.
Markets
Operations Competitive factors
Products and resources
Foreign Direct Investment
Corporate control

Source: Adapted from World Bank publication on Corporate Governance

4
Benefits of Corporate Governance

Accessing capital or
reducing cost of capital

Facing external
Achieving better market
operational results pressures

Motivation

Balancing (sometimes)
Ensuring
diverging shareholder
sustainability
interests
Resolving governance
issues in family-owned
businesses

5
Shaping Factors of Corporate Governance (CG)

Capital Markets Business Environment/Globalization

Who is your owner? What do different How to manage multiple & often conflicting
groups expect? How to achieve a interests? How to meet standards,
match between company and owners? integrate cultures, and achieve diverse
interests of the board?

Strategy Personalities

Which strategy is best for the business Who are the right people? Which
model? Which strategy is best for the qualifications needed? How to develop
market? What governance is best for the respect and trust among best qualified?
strategy?

!
Advice

Corporate governance systems are influenced by many factors.

6
Differing Focus and Priority Issues?

Focus Point

Developed Markets Emerging Markets

Executive compensation vs. Regulation of related party transactions
Board composition vs. Competence of directors
Investor activism vs. State intervention
Market-driven incentives vs. Non-market mechanisms
Fiduciary duty to shareholders vs. Subpar disclosure and internal controls
Board-management relations vs. Independence from controlling shareholder
Regulating increasingly sophisticated vs. Capacity gaps for rigorous enforcement
issues
Cycles of scandals, corruption and vs. More of the same (nepotism, self-dealing,
collapse market abuse)
Multinationals and listed companies vs. Family- or state-controlled companies

7
Key Messages

As a Nominee Director I am different but not alone

The problems I am facing can happen only in my company, yet I see others in
similar situations

8
Thank You!