BY: Ryan, Tabitha, Joel, Joey & Michael

Throughout this presentation we will be discussing: Shareholders - Joel The 5 Golden Rules of Corporate Government. - Joel, Tabitha, Joey & Ryan Internal & External Controls - Ryan Problems of corporate government - Michael How it effects society - Joey International corporate government - Michael

Corporate Governance Is the structure within a company concisely stating the specific roles that the board of directors, shareholders, employees and all different parts of a company all have to ensure goals, business efficiency and success.

Rule 1 : The Importance of Business Ethnics Business Ethics: The application of a moral code of conduct to the strategic and operational management of a business. "obedience to the unenforceable“ - Lord Moulton

Factors in Business Ethics Long term Growth Cost & Risk reduction Anti- Capitalist Sentiments Public image

Long Term Growth Examples of unethical actions resulting in profit: Insider Trading Releasing false information A corporation is only as good as it is in the long term. Gradual but measurable increase in profits by ethics means trumps surges in profit by unethical means.

Cost & Risk Reduction Businesses that follow ethical practices reduce costs in the long run. These costs can stem from the need to cover up previously unethical behaviour (such as fraud).

Anti- Capitalist Sentiments Credibility of capitalism is at an all time low after the recession. People cannot trust CEOs of companies anymore and resent their bonuses (bad publicity).

Public Image Public image is what people perceive a company as. This plays a pivotal role since it helps differentiate your business from others. Benefits of good public image Benefits of good public image: Consumer trust Increased profits Customer loyalty Greater pool of investors

Rule 2: Towards a common Goal Good corporate governance can be/is the difference between a successful company sustaining success and not sustaining it. Not a written book necessarily general understanding and agreement over hierarchy of true power Many different theories on where the power really lies Unlike code of ethics where in most cases the same stuff is written corporate governance is much more controversial on the fortune 500 scale for ex. Capitalist ideologies do not apply with publicly traded companies Companies with controlling shareholders have a slightly simpler governance in that all decisions are made collectively for the entire company without debate.

Rule 3: The Importance of Strategic Management Strategic Management is a very important part of Corporate Governance. Without the proper communication, organization and planning that Strategic Management provides any corporate goal will only achieve success by accident and will be vulnerable to all kinds of unexpected events.

A company that is Implementing proper Strategic Management is organized and run according to rules which: 1.) Set a goal which matches the expectations of the stakeholders 2.) Work out a feasible strategy to achieve that goal 3.) Put in place an organization which can carry out the strategy and attain the goal 4.) set up a control and reporting function to permit management to drive the organization effectively and make necessary adjustments to the strategy or even the goal

Here are two main dangers in failing to align business goals: A.) Lack of a common, clear goal and strategic direction. This leads at best to inefficiencies and at worst business failure as decisions become increasingly difficult, especially in reacting to competitive pressure. B.) Dissent among stakeholders. If the majority of interested parties in a business are not aware (due to a lack of effective corporate communications) or disagree with the board's view of the business goal, there are likely to be difficulties with stakeholder relations which can disrupt the smooth running of the business.

Rule 4: Organizational Effectiveness for Good Corporate Governance Guiding the decisions about organizational change will be : clear-headed logic about the natural way to organize in the most effective way, disregarding the baggage of current practices paying due regard to the experience of the past in assessing what appears to work well and what appears to give problems putting in place the mechanism to deliver the agreed strategy, with whatever modifications and additions are needed

There are two key elements to be considered when designing for organizational effectiveness:  Shape: there are five basic types of organization structure: simple Functional multi-division holding company Matrix Style: there are three basic styles of management: strategic planning financial control strategic control

Rule 5: The Importance of Corporate Communication So our Fifth Golden Rule of Corporate Governance is that effective systems of stakeholder communication are in place to ensure transparency and accountability. In this Fifth Golden Rule, we are looking at setting up channels of communication and how these channels - and the reporting system as a whole (i.e. including internal, operations monitoring) - should be used to ensure all stakeholders are happy with the proposed strategy. monitor progress from point A to point B in the strategy. ensure that stakeholders are receiving all the information they require.

We need systems which have the following characteristics: they serve all the significant stakeholder groups, that is: customers owners employees suppliers and other trading partners local communities In total they communicate the intention to run the company under systems of good corporate governance, and in particular they have very specific objectives in relation to each target group. Following the methodology, then, They will thus include the four elements of: Ethics Goal Organization Reporting.

Corporate government controls Rules or processes designed to monitor corporations and insure that they do not break any moral or ethical codes. Encourages companies to act in the best interest of the shareholders and society.

2 Types of Controls: Internal Controls Monitor actions from within the company and attempt to take corrective action when necessary. Examples include: Monitoring of companies’ activities by the Board of Directors Power balance amongst top executives Performance based compensation Internal control procedures/ audits Monitoring by large shareholders

External Controls Includes all the controls that external stakeholders can implement against a certain company. Examples include: Government regulations Competition in the market Media pressure Public release of financial documents Takeovers

International Corporate Governance  India  Switzerland  Europe

Systemic Problems Of Corporate Governance Demand for information Monitoring costs Supply of accounting information

How Corporations Get Around Rules Following the rules but poorly applying the rules. ENRON

Economic Effects A corporation with poor corporate governance strategies can have a negative influence on the business market and the larger economy. A lack of effective corporate governance at the executive and management level can lead to bad business decisions, which can lower the overall value of the company and make it more difficult for the business to meet its financial obligations. Public Perception of Business Corporate governance strategies can have an impact on the public perception of a corporation. A company with strong corporate governance strategies relating to responsible spending, treatment of workers and environmental concerns can generate a large amount of good will among the people