Corporate Governance: The Nuts and Bolts of Running a Company

1. Synopsis of Presentation on Corporate Governance at the Workshop on Corporate LawsOrganized by KTBA on 10th December 2011by Fasihul Karim Siddiqi

2. What is Corporate Governance? “The nuts and bolts of how the company is run” (Kaushik & Dutta 2005) “ A system by which business corporations are directed and controlled” (OECD 1999) “Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the directors include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The Board’s actions are subject to laws, regulations and the shareholders in general meeting.” (Cadbury Report: 1992)

3. What is Corporate Governance? Since the corporation’s aim is to maximize profits, Corporate governance which is the entire process by which corporation are managed and controlled, ensures that the profits are made by adhering to universally accepted corporate governance principles of FAIRNESS, ACCOUNTABILITY, RESPONSIBILITY & TRANSPERANCY ------- The four pillars of corporate Governance. Every organization has a Corporate Governance --- a governance system that concerns the distribution of power & responsibilities between the investors/owners represented by the BOD and CEO representing the management of the company. Corporate Governance defines accountability for the organization’s performance.

4. What is Corporate Governance? • Corporate Governance establishes clear structures regarding accountability, responsibility and transparency at the head of the company and defines the role of boards and management. This definition differentiates CG from other management themes in several ways: First, it deals only with the company’s top management (but sometimes also with specific CG implications further down the corporate ladder, such as subsidiary governance or compliance issues). It does not deal with the content of a specific strategy and the organization as such, but specifically with how accountability and responsibility are allocated-especially between the top management and the board- and how this is made transparent to the stakeholders. • In short: who is responsible for what? • Transparency is not only concerned with the accountability dimension, because it would be difficult to hold someone accountable without being able to benchmark performance. CG does not, however, justify this benchmark, it simply describes the process; how a specific corporation has indentified this benchmark

5. History of Corporate Governance – A tale of crime and crisis (Steger and Amann 2008)

6. Need for Governance • Just as a democracy is a government of the peoples, by the people and for the people • A corporate entry is a creation of law, of the society, by the society and existing for the society. State Corporate Entity Governor Board of Directors (Members of the legislature elected by people) Management CEO (The President and the council Managerial Staff Minister to govern it) Governed Shareholders and (People in the country) the stakeholders

7. Philip Kotler’s Marketing 3.0 SIX DECADES OF MARKETING Marketing 1.0 50’s & 60’s Product Management The four ‘Ps’ The Marketing Mix Focus on Product 70’s & 80’s Customer Management Focus on Customer More ‘Ps’ added (People, Process, Public - Opinion, Political Power) Marketing 2.0 90’s & 20’s Brand Management 1989 appearance of personal computer. Networking of computers & humans resulting in consumers interconnections Focus on Human Emotions Birth of Emotional Marketing, experimental marketing and brand equity

8. Philip Kotler’s Marketing 3.0 SIX DECADES OF MARKETING The Financial Crisis of the 2007 -- Deepest recession after the Great Depression of 1930’s, results in lost of customer confidence in corporations ability to deliver goods for lack of Good Governance Marketing 3.0 To revive customers lost confidence Marketing has to change its traditional approaches and focus on Human spirits Corporations must move to connecting with Community “Communitization”.

9. Value Addition Beyond Corporate Laws and Corporate Governance Towards Business Sustainability Model Profitability Operational Performance Fairness Transparency Customer Loyalty Employee Loyalty Compliance Corporate Business With Governance Disclosures Sustainability Corporate Law Personal Social Accountability Responsibility Responsibility Corporate Social Responsibility Communitization ( Connect with Human Spirit)

10. “Good Corporate Governance is a necessity, and no longer a luxury. Unless a corporation follows the highest degree of transparency and the best principles of corporate governance, it will not attract world-class investors. Most importantly, corporations have to be fair to all stakeholders. Sustainable success is not possible otherwise.” N. R. Narayana Murthy Chairman Infosys Technologies Ltd