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    16) Corporate Governance

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    kasimranjha

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    16) Corporate Governance

    Uploaded by

    kasimranjha
    7 views4 pages

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    7 views4 pages

    16) Corporate Governance

    Uploaded by

    kasimranjha

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    Corporate Governance

    It is the system by which companies are directed and controlled by senior officers.

    Who is responsible for corporate governance?

    Executive Directors (EDs)


    They are involved in day-to-day activities, that is, provide the direction for the operations.
    Examples:-

    Non-Executive Directors (NEDs)


    They are not involved in the day-to-day operations, but they are involved in the top level
    meetings.
    NOTE:-

    Corporate Governance 1 By:- Haris Hanif


    NEDs should be Neutral, that is, Independent
    - No major stakeholder should be NED

    - No relative of ED should be NED

    - Former (previous) ED should NOT be the NED of the same company.

    - No business relation (customers/suppliers) with the company.

    - No salary of NEDs, no commission, no PRP, they should be only remunerated with


    the meeting fees.

    - No Cross directorship.

    Workings of NEDs
    - Scrutinise the work of E.D.s

    - Challenge the work of E.D.s in constructive manner.

    - Ensure that decision making should be in favour of the company.

    - Give healthy advice to the BOD

    - Ensure the long term decision making.

    - Bring/share the outside expertise the company.

    Corporate Governance 2 By:- Haris Hanif


    Company and the Structure of BOD

    Nomination Committee
    - Consider the skills of the BOD
    - Nominate the suitable candidates for the BOD
    - Present capable directors in AGM – for final approval of shareholders.

    Remuneration Committee

    Risk Committee

    Corporate Governance 3 By:- Haris Hanif


    Audit Committee
    - At least 3 members on audit committee – this is for large P.L.C.
    - At least 2 members on audit committee – this is for S.M.E.s
    - At least 1 person should be the member of professional accountancy body.
    - Chairman of the company should NOT sit in the audit committee.

    Roles of Audit Committee


    - Recommendations in the appointment/removal of auditors and also advice on their
    remuneration.
    - Discuss and resolve the ethical, professional issues of the auditors.
    - Review the financial statements, internal controls and also take part in the risk
    management.
    - Oversight the audit.
    - Encouraging whistle blowing provisions in the company.

    Features of GOOD Corporate Governance


    - At least 50% NEDS on the BOD.
    - Chairman and CEO should be two different individuals.
    - Chairman should be NED.
    - Greater independency and Transparency.
    - No misleading information.
    - Greater accountability of directors.
    - Good internal controls.
    - Establishing internal audit department.
    - All NEDs should be independent and should NOT serve more than 9 years.
    - Sub-BOD committees.
    - Maximum disclosures in the F.S.
    - Conduct AGM along with the proxy access.
    - Less/No dominancy of EDs.
    - BOD should focus on the long term and performance and reward system should be
    based on the long term performance.
    - Maximum healthy debate in the BOD meetings.
    - EDs should not serve for too much long time period, there should be re-election.

    Corporate Governance 4 By:- Haris Hanif

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