corporate governance

[maani]

what does corporate governance actually means

Ace

[Pracs]

As a chartered accountant and a financial professional it is imperative that we understand and play an important role in the process.

The topic itself warrants many forums and books, however as in introduction, I reproduce below a brief article on 'Corporate Governance'


Corporate governance refers to the manner in which a corporation is directed, and laws and customs affecting that direction. It includes the laws governing the formation of firms, the bylaws established by the firm itself, and the structure of the firm. Issues of fiduciary duty and accountability are often discussed within the framework of corporate governance.

In the United States, a corporation is governed by a board of directors, which has the power to choose an executive officer, usually known as the chief executive officer. The CEO has broad power to manage the corporation on a daily basis, but needs to get board approval for certain major actions, such as hiring his/her immediate subordinates, raising money, acquiring another company, major capital expansions, or other expensive projects. Other duties of the board may include policy setting, decision making, monitoring management's performance, or corporate control.


The board of directors is nominally selected by and responsible to the shareholders, but perverse incentives have pervaded many corporate boards in the developed world, with board members beholden to the chief executive whose actions they are intended to oversee.


Corporations are chartered institutions, and have a long history in Europe and the United States. In the nineteenth century, state corporation law enhanced the rights of corporate boards to govern without unanimous consent of shareholders in exchange for statutory benefits like appraisal rights, in order to make corporate governance more efficient. Since that time, and because most corporations in America are incorporated under corporate administration friendly Delaware law, and because America's wealth has been increasingly securitized into corporate entities, the rights of owners and shareholders have become derived and dissipated. The concerns of shareholders over administration pay and stock losses periodically has led to more frequent calls for Corporate Governance reforms.


Corporate Governance concerns have been widely studied. For the United States, an analysis of these concerns has been published by the New York Society of Securities Analysts in their 2003 Corporate Governance Handbook. For an international survey of the scientific literature see [http//ssrn.com/abstract=343461 Becht, Bolton and Roell 2002].



"Allah does not change the state of people unless they change what is within themselves" Quran 1311

[Mr. Whappaaaa]

YES, the explaination of Carporate Governance is good enough as mentioned above by PRACS, but i would like to say further more that WHAT are the basic need to be implemented of Carporate Governance(CG),and what are the overall structure of CG.

NEED OF IMPLEMENTING CG

The concept of CG was introduced in late 1980s in UK. & USA. The basic objective of CG is the tranparency of Management(Board Of Director)and reduction of irregularities like fraud, misapropriation of assets,falsification of documents and records, etc. Before the requirement of CG
1 The directors often used to borrow a LOAN in any financial institution, say 15% interest, and then transferred it to his own FIRM at least interest cost,say 8%.
2 They used to select their remuneration package himself which was often much enough to abilities,skills & services .
3 they used to plaey a Line management role himself e.g they used to hire FINANCE MANAGER, MARKETING MANAGER etc. which is not suitable for that specific job.
Hence, for the sake of creditors, shareholders and other stakeholders the requirement of CG was established to reduce as such irregularities.

OVERALL STRUCTURE OF CG

For the purpose of making effective and efficient structure, it was said that every public listed company establish an AUDIT COMMITTEE,SUPERVISORY BOARD & in order to make an efficient internal control system and assessing the level of risk the organization must also establish INTERNAL AUDIT DEPPT. Now SUP. BOARD include major investor, representative of employee etc.(becuase his beneficial interest is more include due to his shareholding) major decision is overseen by it. Similarly an audit committe include Non-Executive director and Committee's basic job include to see independence, co-ordination of external auditor, control work of internal auditor, assessing the risk of organizaion,effieicent conduct of internal control system,authorization of large or unusual transaction etc. Internal audit functions is also overseen by Audit committee




ASIF ALI

[maani]

thankyou pracs and mr whappaaaa

Ace