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CORPORATE GOVERNANCE

CORPORATE GOVERNANCE. By, Dr. ZULKARNAIN BIN MUHAMAD SORI B Acc (UPM), MSc (UPM), PhD (Cardiff) CA (M) DEPARTMENT OF ACCOUNTING & FINANCE FACULTY OF ECONOMICS & MANAGEMENT UNIVERSITI PUTRA MALAYSIA Tel: 03-89467742 Fax: 03-89486188 E-Mail: zms@putra.upm.edu.my. CORPORATE GOVERNANCE.

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CORPORATE GOVERNANCE

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  1. CORPORATE GOVERNANCE By, Dr. ZULKARNAIN BIN MUHAMAD SORI B Acc (UPM), MSc (UPM), PhD (Cardiff) CA (M) DEPARTMENT OF ACCOUNTING & FINANCE FACULTY OF ECONOMICS & MANAGEMENT UNIVERSITI PUTRA MALAYSIA Tel: 03-89467742 Fax: 03-89486188 E-Mail: zms@putra.upm.edu.my

  2. CORPORATE GOVERNANCE • Accountant/auditor – • one of the major players in the corporate environment and the corporate governance area, and • responsible for safeguarding the interests of shareholders and stakeholders

  3. CORPORATE GOVERNANCE Corporate governance reform in Malaysia => • to increase public confidence in the local capital market • as a response to the Asian Financial Crisis and audit failures in the international capital market

  4. DEFINITION “corporate governance is a phrase easily understood but difficult to define” The Malaysian Finance Committee on Corporate Governance (FCCG)

  5. DEFINITION Corporate Governance has been defined differently

  6. DEFINITION CG is a relationship among various participants to determine the direction and performance of corporations, which contributes to financial stability and prosperity through underpinning market confidence, financial market integrity and economic efficiency

  7. DEFINITION “the process and structure used to direct and manage the business and affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realising long term shareholder value, whilst taking into account the interests of other stakeholders” Finance Committee Corporate Governance

  8. KEY CHARACTERISTICS “it helps to ensure that an adequate and appropriate system of control operates within a company and hence assets may be safeguarded”; “it also prevents any single individual having too powerful an influence”; (Mallin, 2004)

  9. KEY CHARACTERISTICS “it is concerned with the relationship between a company’s management, the board of directors, shareholders, and other stakeholders”, “it aims to ensure that the company is managed in the best interest of the shareholders and the other stakeholders”; (Mallin, 2004)

  10. KEY CHARACTERISTICS “it tries to encourage both transparency and accountability which investors are increasingly looking for in both corporate management and corporate performance” (Mallin, 2004)

  11. CORPORATE GOVERNANCE Corporate governance is not only limited to ensuring the accountability of agents; more importantly, it covers the aim to achieve business prosperity Ali Abdul Kadir (2001)

  12. CORPORATE GOVERNANCE • McKinsey (2000) noted that in the Asian region, both local and foreign institutional investors are willing to pay a 20% to 30% premium for shares of companies that show good corporate governance. • Credit Lyonnais Securities Asia (CLSA) study on emerging markets in 2000 indicates that companies with good governance significantly outperform those that do not practice good governance standards.

  13. CORPORATE GOVERNANCE Corporate governance is essential for establishing an attractive investment climate characterised by competitive companies and an efficient capital market White Paper on Corporate Governance in Asia (OECD, 2003)

  14. CORPORATE GOVERNANCE • Corporate governance is related to the need to make sure that managers run firms honestly and effectively • Managers should behave ethically and competently in managing the resources entrusted to them.

  15. CORPORATE GOVERNANCE Since the 1990s, corporate governance has been highly valued by the community, and has attracted immense attention

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