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SBL Summary Notes - Chapter 3

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SBL Summary Notes - Chapter 3

Uploaded by

zikrihelmi19
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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CHAPTER 3: IMPACT OF CORPORATE GOVERNANCE ON STRATEGY

Corporate Governance: BOARD RESPONSIBILITIES:

- A set of relationships between a company’s - Responsible for promoting the success of


management, board, shareholders, and the company by directing and supervising
stakeholders. the company’s affairs.

- Provides structure and systems which - Provides entrepreneurial leadership of the


company is directed, and its objectives are company.
set and the means of attaining those
objectives and monitoring performance
- Set company’s strategic aims.
are determined.

Core principles: - Ensure the necessary financial and human


resources are in place for the company to
1. Integrity – high moral character; honesty. meet its objectives and review
management performance.
2. Fairness – balance; respecting the rights and
views of any group. Membership:

3. Judgment – making complex decisions that Size: – balance needs to be struck between the
enhance the organization’s prosperity. benefits of having varied views and opinions.

4. Independence – being free from bias and Diversity: – mix in terms of gender, ethnicity,
undue influence. backgrounds, experience.
5. Skepticism – considering all parts of a Inside/outside mix: – split between executive
business with an open mind. decision-making directors and non-executive
directors.
6. Transparency – providing open and clear
disclosure.
Leaving the board:
7. Probity – being truthful and not misleading.
1. Resignation
8. Responsibility – acknowledgement of praise 2. Failing to be re-elected
or blame. 3. Death in service
4. Reaching the retirement age
9. Accountability – answer for consequences 5. Removed from office
of actions. 6. Dissolution of the company
7. Prolonged absence
10. Innovation – change happens. 8. Disqualified
11. Reputation – other people’s perceptions or
expectations.

Responsibilities of Chairman: Responsibilities of CEO:

- Provide leadership to the board. - Provide leadership to the business.


- Ensuring the board receives accurate - Providing accurate and timely
and timely information. information.
- Ensuring effective communication - Communicating effectively with
with shareholders. significant stakeholders.
- Facilitate effective contribution from - Facilitate the effective implementation
NEDs. of board decisions.
- Take the lead in providing an - Co-operate in induction and
induction programme for new development.
directors.

REGULATORY GUIDANCE Principles:

Organisation for Economic Co-operation and 1. Ensuring the basis for an effective
Development (OECD) corporate governance framework
2. The rights and equitable treatment of
- Non-binding principles, intended to assist shareholders and key ownership functions
governments to evaluate and improve legal 3. Institutional investors, stock markets, and
framework for corporate governance. other intermediaries.
- Provide guidance for stock exchanges, 4. Disclosure and transparency
investors, and companies. 5. The responsibilities of the board
6. Sustainability and resilience.

International Corporate Governance Limitations of international codes:


Network (ICGN)
• Assume ‘one size fits all’ approach which
- Set out the corporate governance may not appropriate in different parts of
responsibilities that board and institutional world.
shareholders should adhere to. • Non-binding reduces their relevance.
- Provide practical guidance for corporate • Different countries and regions have their
boards to use when attempting to meet the own legislative approach.
expectations of investors. • Ignore the fact that countries have
different preferences.
• Leads to lowest common denominator
mentality which heightens the scope for
poor quality governance.

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