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Corporate Governance

Corporate Governance. Corporate Governance. Ethics and The Role of CG Officer. Ethics and The Role of CG Officer. Reputation. Good reputation takes years to build. Shades of reputation: Products Management Profits Social posture

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Corporate Governance

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  1. Corporate Governance Corporate Governance Ethics and The Role of CG Officer Ethics and The Role of CG Officer

  2. Reputation • Good reputation takes years to build. • Shades of reputation: • Products • Management • Profits • Social posture • It takes just one incidence to destroy the reputation of a company.

  3. Reputational Risk • What can bring a company into disrepute? • What is the price of disrepute? • Is it worth losing/keeping reputation? • What if there is no direct potential of losing reputation? • Defending and Sustaining Reputation: • Sustaining reputation is painstaking • Defending reputation may often be self-defeating.

  4. Ethics • What is right? • How to enforce what is right: • Law • Regulations • Codes • Standards • Generally Accepted Practices

  5. Code of Ethics • Avoiding conflict of interest • Use / abuse of position, power or property • Confidentiality • Fair dealing with all • Protection of company property • Compliance with laws, rules • Encouraging reporting of illegal or unethical behavior.

  6. Corporate Social Responsibility • Minimize damage to environment • Liberal employment policy • Investment in local communities • Conducting business ethically • Respect for human rights • Fairness to all

  7. CSR and Reputation Risk • Financial Implications: • Impact on market performance • Failure to get good employees • Cost of deflecting negative publicity • Lower earnings / share price

  8. Shades of CSR • Official posture and reality • Spending more on publicizing CSR than actually doing it. • Lip service / Strings attached Welfare • IPPR Report says most CSR is lip service / ulterior motive based.

  9. CSR – Who is watching what? • Institutional investors • PIRC provide web based data on how companies are acting on CSR, ethics, environment, etc. • Regulators / Kings Report in SA • Disclosure Requirements

  10. Formulating CSR Policy • Set a Code of Ethics outlining CSR Values to be upheld • Establish current position on CSR values • Discuss with relevant stakeholders • Employees • Pressure groups • Clients • Set up a system

  11. CSR Policy • Devise CSR Policy • Prescribe systems • Establish responsibility for each party • Set realistic strategies and targets • Keep all concerned informed • Monitor achievements

  12. Bench Marking in CSR • You do as much as others are doing. • Can any one set “minimums”? • Who ensures compliance? • How to monitor compliance?

  13. Sustainability Report • Report on social, ethical, health and environmental policies. • More focused on environment (i.e. sustainability of the society) than any thing else. • Not a report on company’s sustainability (financial or otherwise). • Not yet mandatory in Pakistan.

  14. The Triple Bottom Line • Prescribed by Global Reporting Initiative: • Financial Performance • Impact on environment and natural resources • Social benefits and costs

  15. General Motors Model • Economic Indicators • Environmental Indicators • Social Indicators

  16. Economic Indicators • Revenue • Earning • Dividend per share • Sales Volume • Market Share

  17. Environmental Indicators • Global energy use • Global carbon dioxide emissions • Global non-recycled waste • Global waste consumption • Company sites certified to ISO 14001 standards

  18. Social Indicators • Community donations and sponsorships • Employees (number) • Diversity: %of workers female • Diversity: %of workers minority groups • Number of discrimination charges brought against the company • Employee satisfaction • Injuries

  19. Public Sector • Commonwealth Association for Corporate Governance (CACG) Guidelines: • Major or significant companies are government owned. • Directors are political nominees, not independent. • Severe shortage of able directors.

  20. Whistleblowers • Who is a whistleblower? • Connection of WB with CG • Honest and Malicious whistleblowers • Internal & External Whistleblowing • Area of concern: • Employees (can) have access to all data • Whistleblowers are punished, not rewarded • Disregard as gripe

  21. WB – Best Practice • Recognize the importance. • Set a procedure / prescribe channels • Involve non-executives; avoid executives • Confidentiality • Legal Protection to whistleblowers • UK’s Public Interest Disclosure Act 1998 • Gagging clause in employment agreement

  22. Disclosure • Internal and External Disclosures • Good faith • No personal gain • Reasonableness • Violation of law, rules of the company, injustice, financial malpractice, risk to public • Internal before external • Laws have so far not been effective

  23. Recommended Guide on WB • Documented procedure • Named office to handle WB • Examples of what is or is not misconduct • Consequences of false or malicious allegations spelt out • External route also indicated • Investigation procedure

  24. CG Officer • Who: • CEO • Chairman, Board • CFO • COO • CS • Specially assigned officer

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