BY:
Ryan, Tabitha, Joel, Joey & Michael
Throughout this presentation we will be
discussing:
• Shareholders
- Joel
• The 5 Golden Rules of Corporate Government.
- Joel, Tabitha, Joey & Ryan
• Internal & External Controls - Ryan
• Problems of corporate government - Michael
• How it effects society - Joey
• International corporate government - Michael
Corporate Governance
Is the structure within a company concisely
stating the specific roles that the board of
directors, shareholders, employees and all
different parts of a company all have to ensure
goals, business efficiency and success.
Rule 1 : The Importance of
Business Ethnics
Business Ethics:
• The application of a moral code of conduct to the
strategic and operational management of a business.
"obedience to the
unenforceable“
- Lord Moulton
Factors in Business Ethics
•
Long term Growth
•
Cost & Risk reduction
•
Anti- Capitalist Sentiments
•
Public image
Long Term Growth
•
A corporation is only as good as it is in the
long term. Gradual but measurable increase in
profits by ethics means trumps surges in
profit by unethical means.
Examples of unethical actions
resulting in profit:
• Insider Trading
• Releasing false information
Cost & Risk Reduction
Businesses that follow ethical practices reduce costs
in the long run. These costs can stem from the
need to cover up previously unethical behaviour
(such as fraud).
Anti- Capitalist Sentiments
Credibility of capitalism is at an all time low after the
recession. People cannot trust CEOs of companies
anymore and resent their bonuses (bad publicity).
Public Image
Public image is what people perceive a company as.
This plays a pivotal role since it helps differentiate
your business from others.
Benefits of good public image:
• Consumer trust
• Increased profits
• Customer loyalty
• Greater pool of investors
Rule 2: Towards a common Goal
•
Good corporate governance can be/is
the difference between a successful
company sustaining success and not
sustaining it.
•
Not a written book necessarily
•
general understanding and agreement
over hierarchy of true power
•
Many different theories on where the
power really lies
•
Unlike code of ethics where in most
cases the same stuff is written
corporate governance is much more
controversial on the fortune 500 scale
for ex.
Capitalist ideologies do not apply with
publicly traded companies
•
•
•
Companies with controlling
shareholders have a slightly simpler
governance in that all decisions are
made collectively for the entire
company without debate.
Rule 3: The Importance of
Strategic Management
•
Strategic Management is a very important part of
Corporate Governance. Without the proper
communication, organization and planning that
Strategic Management provides any corporate
goal will only achieve success by accident and will
be vulnerable to all kinds of unexpected events.
•
A company that is Implementing proper Strategic
Management is organized and run according to rules which:
•
1.) Set a goal which matches the expectations of the
stakeholders
•
2.) Work out a feasible strategy to achieve that goal
•
3.) Put in place an organization which can carry out the
strategy and attain the goal
•
4.) set up a control and reporting function to permit
management to drive the organization effectively and make
necessary adjustments to the strategy or even the goal
Here are two main dangers in failing to align
business goals:
•
A.) Lack of a common, clear goal and strategic
direction. This leads at best to inefficiencies and at
worst business failure as decisions become
increasingly difficult, especially in reacting to
competitive pressure.
•
B.) Dissent among stakeholders. If the majority of
interested parties in a business are not aware (due to
a lack of effective corporate communications) or
disagree with the board's view of the business goal,
there are likely to be difficulties with stakeholder
relations which can disrupt the smooth running of
the business.
Rule 4: Organizational
Effectiveness for Good Corporate
Governance
Guiding the decisions about
organizational change will be:
•
•
clear-headed logic about
the natural way to
organize in the most
effective way,
disregarding the baggage
of current practices
paying due regard to the
experience of the past in
assessing what appears
to work well and what
appears to give problems
•
putting in place the
mechanism to deliver the
agreed strategy, with
whatever modifications
and additions are needed
There are two key elements to be considered
when designing for organizational effectiveness:

Shape: there are five basic types of organization
structure:





simple
Functional
multi-division
holding company
Matrix
Style: there are three basic styles of management:
 strategic planning
 financial control
 strategic control
Rule 5: The Importance of
Corporate Communication
So our Fifth Golden Rule of Corporate
Governance is that effective systems of
stakeholder communication are in place
to ensure transparency and
accountability.
In this Fifth Golden Rule, we are looking at setting up channels
of communication and how these channels - and the reporting
system as a whole (i.e. including internal, operations monitoring)
- should be used to
• ensure all stakeholders are happy with the proposed strategy.
• monitor progress from point A to point B in the strategy .
• ensure that stakeholders are receiving all the information they
require.
We need systems which have the following
characteristics:
they serve all the significant stakeholder groups, that is:
• customers
• owners
• employees
• suppliers and other trading partners
• local communities
In total they communicate the intention to run the company under systems
of good corporate governance, and in particular they have very specific
objectives in relation to each target group. Following the methodology, then,
They will thus include the four elements of:
• Ethics
• Goal
• Organization
• Reporting.
Corporate government controls
•
•
Rules or processes designed to monitor
corporations and insure that they do not break
any moral or ethical codes.
Encourages companies to act in the best
interest of the shareholders and society.
2 Types of Controls:
Internal Controls
Monitor actions from within the company and attempt to
take corrective action when necessary.
Examples include:
• Monitoring of companies’ activities by the Board of Directors
• Power balance amongst top executives
• Performance based compensation
• Internal control procedures/ audits
• Monitoring by large shareholders
External Controls
Includes all the controls that external stakeholders can
implement against a certain company.
Examples include:
•
Government regulations
•
Competition in the market
•
Media pressure
•
Public release of financial documents
•
Takeovers
International Corporate
Governance

India

Switzerland

Europe
Systemic Problems Of Corporate
Governance
•
Demand for information
•
Monitoring costs
•
Supply of accounting information
How Corporations Get Around
Rules
•
•
Following the rules but poorly applying the
rules.
ENRON
Economic Effects
•
A corporation with poor corporate governance
strategies can have a negative influence on the business
market and the larger economy. A lack of effective
corporate governance at the
executive and
management level can lead to bad business decisions,
which can lower the overall value of the company and
make it more difficult for the business to meet its
financial obligations.
•
Public Perception of Business
Corporate governance strategies can have an impact on
the public perception of a corporation. A company with
strong corporate governance strategies relating to
responsible spending, treatment of workers and
environmental concerns can generate a large amount of
good will among the people