Colleges of Business Administration

and Entrepreneurship

Introduction to
Corporate Governance

Week 2:
 PRAYER

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1. Describe what governance involves
2. Enumerate the different context in which governance can
be applied
3. Name and explain the characteristics of good governance
4. Explain the meaning. purpose and objectives of corporate
governance
5. Know and describe the principles of effective corporate
governance
6. Understand how the principles of good corporate
governance can be applied
WHAT IS GOVERNANCE?

The word “governance”

came from the Latin verb
“gubernare,” or more
originally from the Greek
word “kubernaein,” which
means “to steer.”

Webster dictionary define

governance as the act or
process of governing or
overseeing the control and
direction of something
 WHAT IS GOVERNANCE?
The author Ms. Cabrera define this in their
book for Corporate Governance as,
governance refers to a process whereby
elements in society wield power, authority
and influence and enact policies and decision
concerning public life and social upliftment.

Governance therefore means the process of

decision-making and the process by which
decisions are implemented (or not
implemented) through the exercise of power
or authority by leaders of a country and/or
organizations.
Characteristics of Good Governance
Characteristics of Good Governance
Participation
• Participation by both men and women
is a key cornerstone of good
governance
• Participation could be either direct or
through legitimate institutions or
representatives.
• Best practices for good corporate
governance include highlighting the
importance of multiple perspectives in
the boardroom.
• Participation needs to be informed and
organized
Characteristics of Good Governance
Accountability

• Accountability is a key requirement

of good governance
• Governmental institutions, private
sector and civil society must be
accountable to the public and to
their institutional stakeholders
• In general, an organization or an
institution is accountable to those
who will be affected by its decisions
or actions.
Characteristics of Good Governance
Effectiveness & Efficiency

• Process and institutions produce

results that meet the needs of
society while making the best
use of resources at their
disposal.
• Covers the sustainable use of
natural resources and the
protection of the environment.
• Effectiveness and efficiency
pertain to material resources and
time.
Characteristics of Good Governance

Equity and Inclusiveness

• Each board director has an equal

seat at the board table
• No one should feel left out or
feel that their opinions have less
meaning than others
• This ensures that all its members
feel that they have a stake in it
and do not feel excluded from
the mainstream of society.
Characteristics of Good Governance
Consensus Oriented

• The boardroom is an appropriate

forum for hosting robust
discussions and debates.
• Required mediation on the different
interest in society to reach abroad
consensus on what is in the best of
the whole community and how this
can be achieved.
• A broad consensus typically serves
the best interests of communities
and companies.
Characteristics of Good Governance

Responsiveness

• good governance are usually able to

find time to better communicate to
shareholders and stakeholders
within a reasonable timeframe

• in ways that enable them to provide

honest answers to the direction of
the organization.
Characteristics of Good Governance
Transparency

• decisions taken and their

enforcement are done in a manner
that follows rules and regulations
• information is freely available and
directly accessible to those who will
be affected by such decisions and
their enforcement
• stakeholders should be informed of
whom the contact is that can
answer questions and explain
reports
Characteristics of Good Governance
Rule of Law

• boards should be fair and impartial

in their collaborations and in their
decision-making
• requires boards to act ethically,
honestly and with the utmost
integrity and requires fair legal
frameworks that are enforced
impartially
• requires full protection of human
rights, particularly those of
minorities
CORPORATE GOVERNANCE: AN OVERVIEW

• Corporate governance is defined as

the system of rules, practices and
processes by which business
corporations are directed and
controlled
• Basically involves balancing the
interest of a company’s many
stakeholders
• As it relates to corporations, 
good governance typically leads
corporations to achieve their goals.
Purpose of Corporate Governance

• To facilitate effective,
entrepreneurial and prudent
management that can deliver long-
term success of the company

• To enhance shareholder’s value and

protect the interest of the
stakeholders by improving the
corporate performance and
accountability
 Objective of Corporate Governance
1. Fair and Equitable Treatment of Shareholders
• ensures equitable and fair treatment of all shareholders of the
company
• is safeguard by all good governance structure in the
organization
2. Self-Assessment
• enables firms to asses their behavior and actions before they
are scrutinized by regulatory agencies
• strong corporate governance limit exposure to regulatory risks
and fines
• successfully point out deficiencies or loopholes in the
company operations and help solve issues internally on a
timely basis
 Objective of Corporate Governance
3. Increases Shareholders Wealth
• Firms with strong corporate governance structure are seen to
have higher valuation attached to their shares by businessmen
• Reflects the positive perception that good corporate
governance induces potential investors to decide to invest in a
company

4. Transparency and Full Disclosure

• aims at ensuring a higher degree of transparency in an
organization by encouraging full disclosure of transactions in
the company accounts
 9 Positive Impacts of Corporate
Governance in Companies

1. Ensures that the management of a company considers the best

interests of everyone;
2. Helps companies deliver long-term corporate success and
economic growth;
3. Maintains the confidence of investors and as consequence
companies raise capital efficiently and effectively;
4. Has a positive impact on the price of shares as it improves the
trust in the market;
5. Improves control over management and information systems
6. Gives guidance to the owners and managers about what are the
goals strategy of the company;
7. Minimizes wastages, corruption, risks, and mismanagement;
8. Helps to create a strong brand reputation
9. Makes companies more resilient
Basic Principles of Effective Corporate
Governance
 Basic Principles of Effective Corporate
Governance

A. Transparency and Full Disclosure

1. Does the board meet the information needs to

investment communities?
2. Does it safeguard integrity in financial reporting?
3. Does the board have sound disclosure policies and
practices?
• Does it make timely and balanced disclosure?
• Can an outsider meaningfully analyze the
organization’s actions and performance?
 Basic Principles of Effective Corporate
Governance
B. Accountability

1. Does the board clarify its role and that of management?

• Does it promote objective, ethical and responsible
decision making?
• Does it lay solid foundation for management
oversight?
• Does the composition mix of board membership
ensure an appropriate range and mix of expertise,
diversity, knowledge and added value?
• Is the organization’s senior official committed to
widely accepts standards of correct and proper
behavior?
 Basic Principles of Effective Corporate
Governance

C. Corporate Control

1. Has the board built long-term sustainable growth in

shareholders’ value for the corporation?
2. Does it create an environment to take risk?
• Does it encourage enhanced performance?
• Does it recognize and manage risk?
• Does it remunerate fairly and responsibly?
• Does it recognize the legitimate interest of
stakeholders?
• Are conflicts on interest avoided such that the
organization’s best interest prevail at all times?