CORPORATE

GOVERNANCE

Define Corporate Governance

• Is a set of structures, processes, policies and laws

that affecting the way a corporation directed,

administered or controlled to achieve maximum

performance in the interest of all stakeholders

OBJECTIVE

The basic and the foremost objective of Corporate

Governance are to enhance the value of shareholders in

keeping the view of the other stakeholders.

Management deals with daily operations, while

Governance is about the underlying ethics of a corporation.

Poor management can affect governance

Weak governance undermines the financial and operational performance of a corporation

Weak governance affects investors’ faith in the company.

Management vs. Governance

Corporate Governance Parties

• Shareholders – those that own the company

• Directors – Guardians of the Company’s assets for the

Shareholders

• Managers who use the Company’s assets

Needs of good Governancea. Good board practices

b. Control environment

c. Board Commitment

d. Transparent disclosure

e. Well Defined Shareholders

Good Board Practices

• Clearly defined roles and authorities

• Duties and responsibilities of Directors understood

• Board is well structured

• Plan appropriate board procedures

Control Environment

• Risk management framework present

• Disaster recovery system in place

• Safety environment and Media management techniques in use

Board Commitment

• Policies and procedures formalised and distributed to relevant staff

• Create a corporate governance committee

• The board needs sufficient relevant skills and understanding to review and

challenge management performance

Transparent disclosure

• Financial and non financial info disclosed

• Financial prepared according to IFRS

• High-Quality annual report published

• Web-based disclosure

• Companies Registry filings up to date

Well defined shareholders

• Shareholder meeting conducted

• Shareholders rights formalised

• Clearly defined and explicit dividend policy

FIVE ELEMENTS OF CORPORATE

GOVERNANCE

1. ACCOUNTABILITY

2. TRANSPARENCY

3. REGULATORY FRAMEWORK

4. BUSINESS ETHICS AND SOCIAL RESPONSIBILITY

5. ADMINISTRATIVE STRUCTURE

1. accountability

• Plan an good accounting system for its activities in order to prepare an effective financial statement and to

disclose the results in transparent manner.

• The design of reporting should be improved and perfect

2. transparency

• The extent to which a corporation's actions are observable by outsiders

• This is a consequence of regulation, local norms, and the set of information, privacy, and business policies concerning corporate decision making and operations openness to employees, stakeholders, shareholders and the general public.

• Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual information.

3. Regulatory framework

• Ensure the company managers and directors act in the interest of company

and of shareholders.

• The framework of rules and systems within and by which authority is

exercised and controlled in corporations

4. Business ethics and social responsibility

• Drive company strategy, business goals, policies and activities with a good

value and ethics

• Being responsible with regard to environmental and human rights issue

• Try to reduce waste and pollution

5. Administrative Structures

• A good admin structure indicates the information provided by the

corporation is efficient and correct

• Its indicates company probability of success or failure in long term

• Dishonesty between management and shareholders weaken the corporation

governance.

AUDIT COMMITTEE

• An operating committee of a company's board of

directors that is in charge of overseeing financial

reporting and disclosure

Structure of Audit Committee

• From amongst director which fulfill

the following requirement:

Not less than 3 member

Must be independent directors

Chairman – independent non-

executive directors

At least one of member :

Member of MIA

If not MIA, 3 years working

experiences

Passed examination

Member of one associations of

accountants

ROLES OF AUDIT COMMITTEE

• Role in oversight of financial reporting and accounting

• Role in oversight of the external auditor

• Role in oversight of risk management

• Role in monitoring the effectiveness of the internal control

process and of the internal audit

Role in oversight of financial reporting and

accounting

• often discuss complex accounting estimates and judgments made by

management and the implementation of new accounting principles or

regulations

• Audit committees interact regularly with senior financial management that

are in a position to comment on the capabilities of these managers.

• External auditor should report to them if they detect any fraud

Role in oversight of the external auditor

• Changing an external auditor typically also requires audit

committee approval

• Audit committees also help ensure the external auditor is

independent, meaning no conflicts of interest exist that might

interfere with the auditor's ability to issue its opinion on the

financial statements.

Role in oversight of risk management

• Organizations have a variety of functions that perform activities to

understand and address risks that threaten the achievement of the

organization's objectives

• The policies and practices used by the entity to identify, prioritize, and

respond to the risks (or opportunities) are typically discussed with the audit

committee

• Audit committee involvement in non-financial risk topics varies significantly

by entity.

Monitoring internal control and internal

audit

• Internal control includes the policies and practices used to control the

operations, accounting, and regulatory compliance of the entity

• Management and both the internal auditing function and external auditors

provide reporting to the audit committee regarding the effectiveness and

efficiency of internal control.

Advantages of Audit Committee

• Strengthening the role of non-executive directors.

• Strengthening the objectivity and credibility of financial reporting.

• Strengthening the independence of the internal audit function.

• Improving the quality of the accounting and auditing functions.

• Better monitoring of compliance with standards, laws and regulations.

• Improve communication between directors, auditors and management.