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Title: Corporate Governance. MGM 4136. Name Matric No Lim Kim Ling 129338 Tan Sok Foon 129342 Tai Mei Erh 129544 Choong Lai Yoke 129545 Ng Kia Khee 129667. Corporate Governance. Also called as: Governance Enterprise Governance Increasing attention:
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Title: Corporate Governance MGM 4136 Name Matric No Lim Kim Ling 129338 Tan Sok Foon 129342 Tai Mei Erh 129544 Choong Lai Yoke 129545 Ng Kia Khee 129667
Corporate Governance Also called as: Governance Enterprise Governance Increasing attention: abuse of corporate power and alleged criminal activity by corporate officers.
What is corporate governance? • Different people have come up with different definitions that basically reflect their special interest in the field. “Answering to The Highest Power”, Investors Digest, mid-November 2003.
Organization of Economic Cooperation and Development's (OECD) - corporate governance as the `set of relationships between the company's management, its board, its shareholders and other stakeholders • World Bank indicated the purpose of corporate governance is to create `fairness, transparency and accountability' to all stakeholders • Anglo-Saxon model where corporate governance has the aim of maximizing profits, that is, maximize shareholder value and nothing else is more important.
Franco-German model aims to protect awider circle of stakeholders, incorporating each stakeholder’s claims, rights and obligations. • Islamic view of corporate governance boils down to one package - accountability. In Islam, Man is made accountable to God both in his legal and ethical conduct.
In general corporate governance has come to mean two things: • The rules, processes, or laws by which businesses are operated, regulated, and controlled. • A field in economics, which studies the many issues arising from the separation of ownership and control.
Parties to corporate governance • Regulatory body • Chief Executive Officer • board of directors • management • shareholders • Other stakeholders • Suppliers • employees • creditors • customers • the community at large.
Well-known Organization for Economic Cooperation & Development (OECD) have stated the 5 major principles of corporate governance.
Wu & Cheng’s empirical study (2005) indicates that the higher the 5 dimensions in corporate governance, the higher the organizational performance will be.
5 Major Principles ofCorporate Governance • Enhancing the directorate function • Appropriate mix of executive and non-executive directors. • The same person should not hold the key roles of chairperson and CEO.
(b) Protecting the rights of stakeholders, such as employee • To promote the rights of investors, employees and other stakeholders. • To obtain the trust of the society and the public at large.
(c) Enhancing information transparency • Clarify and make publicly known the roles and responsibilities of board & management. • Independently verify & safeguard financial reporting.
(d) Protecting shareholders’ right • Respect the rights of shareholders (e) Elaborating the supervisor’s function • Develop a code of conduct for directors & executives that promotes ethical & responsible decision-making.
CORPORATE GORVERNANCE GUIDELINES • Board Functions and Responsibilities • to oversee management performance on behalf of the shareowners • to ensure that the long-term interests of the shareowners are being served, • to promote the exercise of responsible corporate citizenship
CORPORATE GORVERNANCE GUIDELINES • Board Composition • Requisite Skills and Characteristics • Board Size • Election of Directors
CORPORATE GORVERNANCE GUIDELINES • Board Meetings • Meetings • Attendance • Setting Board Agenda.
CORPORATE GORVERNANCE GUIDELINES • Director Orientation and Continuing Education • Director Compensation
Case Study: Robert Maxwell & Mirror Group Newspapers(MGN)
Re-acquired Pergamon Press Ltd in 1974. • Acquired British Printing Corporation plc in 1980. • Acquired MGN from Reed International on 12 July 1984. • MGN & Pergamon had strong cash flows. • Maxwell controlled the movement of cash. • Cash was borrowed from pension funds.
Carefully managed companies financial position & the pension funds in the annual accounts. • In 1987, business operation ran into difficulties & debts built up. • Started to make greater use of pension funds. • In 1990, companies faced financial crisis. • Selling 49% of the share.
In 1991, banks requested repayment of loans. • Repayment unable to make, banks started to sell Maxwell’s share, share price fells. • Maxwell drowned after falling from his yacht on 5 Nov 1991. • At the end, Maxwell’s empire collapsed.
Criminal charges of fraud were brought against Maxwell’s sons but they were cleared. • Overall, Maxwell undoubtedly behaved in a highly unethical & socially irresponsible manner.
Recommendation The dominating style of the MGN CEO should have separation of the offices of chairman and chief executive to prevent abuses of the authority. HRM and development is essential monitor and review the performance of both directors and employees.
Conclusion • Organizations should focused increasing attention on CG, as a mean of ensuring that Board operate effectively, responsibly and in the best interests of its shareholders and others stakeholders. • No point for law and regulation without enforcement.
