- managing the risk of corporate
fraud
- combating against management
Corporate Governance misconduct and corruption
• Promote the efficient use of scarce Corporate Governance - Definition
resources
the system by which business
• Promote the trust of investors corporations are directed and
controlled
• Good corporate governance has a
positive link to economic development
specifies the distribution of rights and
and good corporate performance
responsibilities among different
• Funds will flow to entities which are participants in the corporation, such as
seen to have internationally accepted the board, managers, shareholders
standards of corporate governance and other stakeholders
Why is it imoportant:
• Proliferation of financial scandals and spells out the rules and procedures for
crisis making decisions on corporate affairs
provides the structure through which
• Loss of trust of investors the company objectives are set, and
• Globalization lead to increasing cross- the means of attaining those
border investment opportunities but objectives and monitoring
investors may not have knowledge performance
about the regulatory framework of
overseas investees
The OECD Principles of
Corporate Governance
• Investors are not willing to invest in 1. Ensuring the basis for an effective
countries/companies that are corrupt, corporate governance framework
prone to fraud, poorly managed and
lacking sufficient protection for 2. The rights of shareholders and key
investors’ rights ownership functions
• Securities and company law protection 3. The equitable treatment of
may help, but not enough shareholders
• Corporate Governance supplements 4. The role of stakeholders in corporate
the legal framework governance
5. Disclosure and transparency
• Corporate Governance also plays an 6. The responsibilities of the board
important role in
The corporate governance framework
- maintaining corporate integrity should ensure
- the strategic guidance of the • Segregation of the management of the
company, board and the day-to-day management
- the effective monitoring of of the corporate’s business
management by the board,
• Balance of power at board level to
- and the board’s accountability to
avoid concentration of power in a
the company and the shareholders.
single individual
Corporate Governance in practice
• Separation of Chairman and CEO
What do the investors expect?
• Division of responsibilities between
“the Code of Corporate Governance Practices” Chairman and CEO clearly laid down in
writing
Board of Directors
• Assume responsibility of leadership
and control of the corporate Chairman
• Direct and supervise the corporate’s • Provide leadership for the board
affairs
• Ensure the board works effectively and
• Make decisions in the interests of the discharges its responsibilities
corporate
• Ensure good corporate governance
• Regular meetings practices and procedures are in place
• Active participation • Ensure all directors are properly
briefed on issues arising at board
• Freedom to include items in agenda
meeting
• Sufficient notice for board meetings
• Responsible for ensuring appropriate
• Access to advice and services of information received by directors
company secretary and independent
• Encourage full and active contribution
professional advice
to the board’s affair
• Full record of board/committee
• Ensure effective communication
minutes, and available for inspection
between board and the shareholders
• Independent non-executive directors
• Hold annual meetings with non-
should be present at board meetings to
executive directors
discuss matter involving conflict of
interest • Ensure constructive relationships
between executive and non-executive
• Abstain from voting if conflict of
directors
interest exists
• Insurance coverage in respect of legal
action against directors Board Composition
Chairman and CEO • Balance of skills and experiences
• Balanced composition of executive and • Contribute sufficient time and
non-executive directors resources to serve the corporate
• Non-executive directors should be of • Attend AGMs to share the views of
sufficient calibre shareholders
• Independent non-executive directors
should be expressly identified
Non-executive directors
• List of directors updated and their
• Active participation in board meetings
respective role and function identified
• Bring in independent judgment
• Take lead if conflict of interest arise
Appointment, re-election and removal of
directors • Serve on committees
• Formal and transparent procedure for • Monitor the corporate’s performance
appointment in achieving pre-set goals
• Succession plan Information access by directors
• Re-election at regular intervals Directors should be provided with accurate
and appropriate information in order to make
• Proper explanation for
informed decision and to discharge their
resignation/removal of directors
responsibilities
• Specific term for non-executive
• Agenda and board papers should be
directors
sent in full in a timely manner to
• All directors subject to retirement by directors
rotation at regular interval
• Information supplied must be
• Nomination committee formed to complete and reliable
make recommendation on
• Directors should have access to the
appointment of directors and
senior management for information
succession planning for directors,
chairman and CEO • Information supplied should be of form
and quality to facilitate informed
Responsibilities of directors
decision
• Keep abreast of the responsibilities as
a director
Remuneration of directors and senior
• Exercise duties of care, skill, integrity
management
and diligence expected
• Transparency of directors’
• Ensure proper understanding of the
remuneration policy
operation, business and the regulatory
requirement • Remuneration should be sufficient but
not excessive
• Each director not to involve in deciding • Ensure the maintenance of sound and
his/her own remuneration effective internal controls to safeguard
assets
Remuneration Committee
• Conduct regular reviews of the
• Remuneration committee to be
effectiveness of the internal control
formed, mainly from non-executive
system, covering financial, operational,
directors
compliance and risk management
• Consult Chairman/CEO if needed control functions
• Access to professional advice, market • Prevent fraud, corruption, and
comparable information malpractices
• Make recommendation on policy and Audit Committee
structure of remuneration
• Have clear terms of reference
• Determine specific remuneration
• A formal and transparent arrangement
packages of all executive directors and
to apply the financial reporting and
senior management
internal control principles and
• Review and approve performance- maintain appropriate relationship with
based remuneration external auditors
• Review and approve compensation • Full minutes of audit committee to be
arrangement in connection with loss or kept
termination of office, dismissal or
• Provided with sufficient resources to
removal of directors for misconduct
discharge its duties
Accountability and Audit
• Independent from external auditors
– Financial Reporting
• Make recommendation for
• Management provide explanation and
appointment and removal of external
information to the board to enable
auditors
them to make informed assessment of
financial and other information • Monitor the effectiveness of the audit
process, ensuring auditor’s
• The board should present
independence and objectivity
comprehensive assessment of the
corporate’s performance, position and • Monitor the integrity of the financial
prospects in annual and interim disclosures
reports, price-sensitive
• Oversight of the financial reporting and
announcements and other financial
internal control procedures
disclosures
Delegation by the Board
Accountability and Audit
– Internal Control • Formal schedule of matters specifically
reserved to the board for decision
• Clear directions to management as to • Inform shareholders about procedure
matters requiring board approval for voting by poll
before decision made
• Ensure proper compliance to
• Clear directions to the delegation of regulatory requirement about voting
the management and administration by poll
functions as well as the powers of
management
• Review the arrangement for
segregation of duties between board Corporate Governance is a dynamic process
and management regularly and is continually evolving and It has no
boundaries or limits
• Board Committee to be formed, with
specific terms of reference, as needed
Communication with Shareholders
- Effective communication
• Maintain on-going dialogue with
shareholders and make use of annual
general meetings or other general
meetings to communicate with
shareholders
• Transparency in corporate governance
practices and business performances
through proper and adequate
disclosures
• Encourage shareholders’ participation
• Separate resolution for each separate
issue
• Chairman of the board and chairman of
each board committees be present in
general meetings to answer questions
at any general meeting
• Chairman of independent board
committee be present to answer any
questions in any general meeting to
approve transaction requiring
independent shareholders’ approval
Communication with Shareholders
- Voting by Poll
