Introduction to Corporate Governance Presenter: Chabuka J. Kawesha [Dr]

1. LAKE ROAD PTA SCHOOLCorporate Governance Workshop21stApril 2012Lake Road School, Lusaka, Zambia Introduction to Corporate Governance Presenter: Chabuka J. Kawesha [Dr] Member – Institute of Directors [IOD] Head – Corporate Communications &Government Relations, Airtel Board Chairman, Pensions and Insurance Authority [PIA] Board of Governors Member – Policy Monitoring and Research Centre [PMRC] Vice President - South, Zambia Association of Chambers of Commerce and Industry [ZACCI] Chairperson - Financial Sector Development Plan [FSDP] Payment Systems Working Group, Bank of Zambia Member - Digital Migration National Task Force [DMNTF], Ministry of Information and Broadcasting Services [MIBS] Member - E-Government Implementation Steering Committee, Ministry of Communications & Transport [MCT] Civil & Commercial Mediator [South Africa & UK] / Court Annexed Mediator [Zambia]

2. Focus of Presentation Corporate Governance What is Corporate Governance? Why Corporate Governance ?

3. Goals of Presentation • Recall and improve our understanding of corporate governance and board directors’ responsibilities • Share the competencies directors and management require to implement responsible corporate governance practices • Share director experiences and build networkswith peers 3

4. What is Corporate Governance? “Corporate governance is the system by which companies are directed and controlled….” Sir Adrian Cadbury, UK, 1992 “Corporate governance refers to the structures and processes for the direction and control of companies.” IFC 4

5. Corporate Governance Means Leadership • For efficiency – Compete, Job creation • For probity [Honesty, Integrity, Honor] – Investor confidence & assurance • With responsibility – Address legitimate concerns • Both transparent and accountable –Strong economy “A skilled, predominantly independent and well-organized board of directors would make it possible to set the right strategy of the company and properly oversee its management’s performance.” IFC 5

6. Why Corporate Governance ? • The interest in the systematic way in which companies, and other Organisations are directed and controlled is relatively recent. • It was stimulated in the first place by concerns about fraud and later by the failure to correct evident managerial incompetence. Recently, there has been more concern to facilitate investment and capital flows. • The last 20 odd years have seen a proliferation of corporate scandals and corporate failures all over the world including Zambia. • Most of these failures have been traced to either the collapse or the non existence of good corporate governance practices in the affected organizations. • Here are some examples both from the Zambian scenario as well as the international corporate world.

7. Why Corporate Governance ? 4. Prudence Bank 5. Zambia Airways 6. Agriflora Enron & WorldCom 1. Bank of Credit and Commerce Int’l, BCCI 2. Meridian Bank 3. Commerce Bank • Thus the focus on Corporate Governance achieved in the last 20 odd years has put the matter of Corporate Governance on the agenda of boards of directors around the world. TOYOTA 2010 ! 8m car recalls ??? • Corporate Governance has become universal because of its importance to building investor confidence and strong capital markets across the world.

8. Agency And Stewardship Agency – Involves transfer of capital from shareholders Stewardship – Directors’ role as guardians of the company’s assets Corporate Governance issues arise from the roles of agency and stewardship 8

9. A Company’s Corporate Governance System

10. Strong Corporate Governance attracts Investors • Capital will flow elsewhere if a Country: • Does not have a reputation for strong corporate governance practices • Exhibits Bad governance /Lack of Governance prevails • Investors are not confident of the level of disclosure • Opts for lax accounting and reporting standards • Weak regulatory governance • Demonstrates a clear absence of regulatory transparency 10

11. The five [5] key elements ofgood corporate governance • Good board practices • Appropriate control environment and processes • Strong regime of • disclosure and transparency • Protection of (minority) shareowner rights Strong commitment to corporate governance reforms Five [5]Elements of Corporate Governance 11

12. Pillars Of Corporate Governance • Accountability • Management to Board • Board to Shareholders • Public & Shareholder confidence • Fairness • Protect shareholders’ rights • Regulatory transparency • Transparency • Timely & accurate disclosure • Regulatory transparency • International Best Practises [IBP] • Responsibility • Recognise stakeholders’ rights • Strong regime of zero regulatory capture 12

13. Ethical Values • Honesty • Transparency • Integrity • Openness • Trustworthiness • Respect • Truthfulness • Responsibility

14. CorporateGovernance System 14

15. Competing Tensions “If management is about running business, governance is about seeing that it is run properly. All companies need governing as well as managing.” Prof. Bob Tricker, 1984 15

16. Aligning Corporate, Shareowner, Public Interests “An effective system of corporate governance must strive to channel the self-interest of managers, directors and the advisors upon whom they rely into alignment with the corporate, shareholder and public interest.” Ira Millstein Senior Partner, Weil Gotshal & Menges, LLP Senior Associate Dean, Corporate Governance, Yale School of Management Chair Emeritus, the Forum’s Private Sector Advisory Group 16

17. OECD Principles • Ensuring the basis for an effective corporate governance framework • Rights of shareowners and key ownership functions • Equitable treatment of shareowners • Role of stakeholders in corporate governance • Disclosure and transparency • Board responsibilities • OECD - Organization for Economic Co-operation and Development 17

18. The Business Case For Corporate Governance Companies / Institutions with good governance: • Have better access to capital • Command a premium from investors • Improve oversight, monitoring • Perform better operationally/financially • Ensure effective decision-making • Draws regulatory confidence [In case of Public institutions]

19. The Five Key Elements & the Business Case for Corporate Governance • Good board practices • Clearly defined roles and authorities • Duties and responsibilities of directors understood • Board is well structured • Appropriate composition and mix of skills • Appropriate board procedures • Director remuneration in-line with best practice Board self-evaluation and training conducted • Control environment • Independent audit committee established • Risk-management framework present • Internal control procedures • Internal audit function • Independent external auditor conducts audits • Management information systems established • Compliance function established • Transparent disclosure • Financial information disclosed • Non-financial information disclosed • Financials prepared according to IFRS • High-quality annual report published • Web-based disclosure • Well defined shareowner rights • Minority shareowner rights are formalized • Well-organized general assembly conducted • Policy on related-party transactions • Policy on extraordinary transactions • Clearly defined and explicit dividend policy • Board commitment • The board discusses corporate governance issues and has created corporate governance committee • The company has a corporate governance champion • A corporate governance improvement plan has been created • Appropriate resources are committed • Policies and procedures have been formalized and distributed to relevant staff • A corporate governance code has been developed • The company is publicly recognized as a corporate governance leader 19

20. Education Evolution • Globalization: The knowledge economy • Governance paradigm shift: Neo-liberalization • Technological change, including: • Digitalization and convergence • Global institutional pressures, including: • Increased role of supranational institutions • MDG commitments • Economic pressures, including: • Need to attract capital investment in Education sector • Increase in Private schools • Demand for new services • Political pressures, including: • Zambia – Social and political transformation

21. Stakeholder, Issues Focus

22. Conclusion Accordingly, Lakeroad PTA School should continuously review all the currently installed instruments of Corporate Governance in the Company and ensure that you remain up-to-date. These should include the following areas amongst others: * Composition of Boards of Directors and Management * Composition and responsibilities of Committees of the Board. * The Organisation’sCorporate Governance Code of Conduct * The Organisation’sCorporate Values * Maintain membership of theInstitute of Directors of Zambia.

23. Citations / References Global Corporate Governance Forum Institute of Directors (IOD), Zambia International Finance Corporation (IFC) OECD - Organization for Economic Co-operation and Development 23

24. Thank you Contact me: http://www.chabukakawesha.webs.com Tel: +260 977 770069 /8981000