Scribd Logo
Upload

Welcome to Scribd!

  • 23 views

    Lecture 25 Nov

    Uploaded by

    amsalali
    The document summarizes key aspects of corporate governance as defined by the OECD. It outlines the OECD's mission and identifies common elements of good governance systems, including separation of executive, board, and supervisory roles. It describes the basic design of governance systems and the 2005 OECD principles focused on transparency, shareholder rights, equitable treatment, and disclosure. It discusses board composition and the role of independent directors. The summary provides an overview of the document's coverage of corporate governance best practices.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd

    Lecture 25 Nov

    Uploaded by

    amsalali
    23 views10 pages
    The document summarizes key aspects of corporate governance as defined by the OECD. It outlines the OECD's mission and identifies common elements of good governance systems, including separation of executive, board, and supervisory roles. It describes the basic design of governance systems and the 2005 OECD principles focused on transparency, shareholder rights, equitable treatment, and disclosure. It discusses board composition and the role of independent directors. The summary provides an overview of the document's coverage of corporate governance best practices.

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPT, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document summarizes key aspects of corporate governance as defined by the OECD. It outlines the OECD's mission and identifies common elements of good governance systems, including separation of executive, board, and supervisory roles. It describes the basic design of governance systems and the 2005 OECD principles focused on transparency, shareholder rights, equitable treatment, and disclosure. It discusses board composition and the role of independent directors. The summary provides an overview of the document's coverage of corporate governance best practices.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    23 views10 pages

    Lecture 25 Nov

    Uploaded by

    amsalali
    The document summarizes key aspects of corporate governance as defined by the OECD. It outlines the OECD's mission and identifies common elements of good governance systems, including separation of executive, board, and supervisory roles. It describes the basic design of governance systems and the 2005 OECD principles focused on transparency, shareholder rights, equitable treatment, and disclosure. It discusses board composition and the role of independent directors. The summary provides an overview of the document's coverage of corporate governance best practices.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 10

    Corporate governance

    Lecture 25th November


    OECD –CORPORATE GOVERNANACE
     OECD took over from OEEC in 1961. Since then, its mission has been to help its
    member countries to achieve sustainable economic growth and employment and to raise
    the standard of living in member countries while maintaining financial stability – all this
    in order to contribute to the development of the world economy.

     There is no single model of good corporate governance.


    However, work carried out in both OECD and non-OECD
    countries and within the Organization has identified some
    common elements that underlie good corporate governance
    A basic design of existing corporate
    governance systems
    Executive Owner Independent
    directors directors Directors

    Board of
    Directors
    Supervisory &
    Management enforcement
    authorities

    Corporate

    Shareholders Stakeholders Creditors


    Principles of OECD code on Corporate
    Governance 2005
     The corporate governance system should promote transparent
    and efficient markets; should be consistent with rule of law and
    should lay down clear roles of various regulatory and
    enforcement authorities.
     Corporate governance system should protect and facilitate shar
    eholder rights.
     The system should facilitate equitable treatment to all
    shareholders, including minority and foreign shareholder.
     Corporate governance should recognise the rights of
    stakeholders established by law or mutual contract; should
    encourage cooperation between the corporate and the
    stakeholders to create value
     Disclosure and transparency: System should ensure timely and
    accurate information about financial situation, performance,
    ownership and governance
     Board management structure
    OECD principle – shareholder rights
     OECD principles on shareholders’ rights
    – Basic shareholder rights: registration and transfer of shares, right
    to vote at meetings, obtain relevant information, appoint and
    remove directors and share in the profits
    – Fundamental corporate structure changes to require shareholder
    participation
    – Shareholders to vote on directors’ and KMP’s remuneration and
    equity options
    – Voting in absentia
    – Market for transfer of control to be transparent
     In practice, shareholders’ rights have largely been a myth:
    – Widespread shareholding, including cross-border holding
    – Role of the institutional investors
    OECD principle – equitable treatment to all
    shareholders
     Protection of minority interest
     Impediments to cross border voting
    should be removed
     Insider trading and abusive self-dealing
    should be prohibited
     Board members and KMPs to disclose
    their interest in material contracts
    OECD principle: Stakeholders’ interest
     Employees participation in management:
    performance enhancing mechanisms to be
    promoted
     Whistle-blowers’ interest to be protected
     Creditors’ rights:
    – Through security interest enforcement and
    bankruptcy laws:
    • Current enforcement is tardy
    OECD principle: disclosure and
    transparency
     Disclosures on:
    – The financial and operating results of the company.
    – Company objectives.
    – Major share ownership and voting rights.
    – Remuneration policy for board and KMPs, and information about board
    members, their qualifications, the selection process, other company directorships
    and whether they are regarded as independent by the board.
    – Related party transactions.
    – Foreseeable risk factors.
    – Issues regarding employees and other stakeholders.
    – Governance structures and policies
     Annual audit by independent and competent auditor.
    – Non-audit functions of auditors are being restricted in many countries
     External auditor should be accountable to the shareholder and should owe a
    duty of professional care in conduct of the audit.
     Corporate governance to be complemented by a system that promotes the
    provision of advice, analysis, rating, etc. for shareholders to make informed
    decisions; however, system should avoid conflicts of interest.
    OECD principle: Board composition
    and structure
     Some key functions should be fulfilled by Board:
    – Strategy formulation, budgets, business plans, etc.
    – Monitoring the effectiveness of the company’s governance practices;.
    – Selecting, compensating, monitoring key executives and overseeing succession
    planning.
    – Executive and board remuneration;
    – Ensuring a formal and transparent board nomination and election process.
    – Monitoring and managing potential conflicts of interest of management, board
    members and shareholders, including misuse of corporate assets and abuse in
    related party transactions.
    – Ensuring the integrity of the corporation’s accounting and financial reporting
    systems, including the independent audit, ensuring control systems for risk
    management, financial and operational control, and compliance.
    – Overseeing the process of disclosure and communications.
     Ability to exercise independent decision:
    – The most current theme is the number and role of independent
    directors
    – Sufficient independent directors
    – Mandate of committees to be clear
     Back to OECD principles
    Who are Independent Directors
    As per Clause 49 of the Listing Agreements an ‘independent director’ shall mean non-
    executive director of the company who
    a. apart from receiving director’s remuneration, does not have any material pecuniary
    relationships or transactions with the company, its promoters, its senior management or
    its holding company, its subsidiaries and associated companies;
    b. is not related to promoters or management at the board level or at one level below the
    board;
    c. has not been an executive of the company in the immediately preceding three financial
    years;
    d. is not a partner or an executive of the statutory audit firm or the internal audit firm that is
    associated with the company, and has not been a partner or an executive of any such firm
    for the last three years. This will also apply to legal firm(s) and consulting firm(s) that
    have a material association with the entity.
    e. is not a supplier, service provider or customer of the company. This should include
    lessor-lessee type relationships also; and
    f. is not a substantial shareholder of the company, i.e. owning two percent or more of the
    block of voting shares.
    [Institutional directors on the boards of companies shall be considered as independent
    directors whether the institution is an investing institution or a lending institution.]

    You might also like