Topic 4: Corporate Governance & Corporate Social Responsibility

CORPORATE GOVERNANCE & CORPORATE SOCIAL RESPONSIBILITY

What is corporate governance?

• Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals.
• The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. 

Why study corporate governance?

• Enhance the performance of companies.
• Enhance access to capital.
• Enhance long term prosperity.
• Impact of society as a whole.

Corporate governance purposes

• Promote the trust of an investor.
• Good corporate governance has a positive link to economic development and good corporate performance.
• Funds will flow to entities which are seen to have internationally accepted standards of corporate governance.

Parties to corporate governance

• Employees
• Government
• Creditor
• Shareholders
• Board of directors
• Vendors

Ethics and corporate governance

• Rights and equitable treatment of shareholder.
• Protection of interest of other stakeholders.
• Role and responsibilities of the board.
• Integrity and ethical behavior.
• Disclosure and transparency.

Good corporate governance

• Accountability of both internal and external.
• Recognition of stakeholders and shareholders rights.
• Ongoing financial scrutiny and control.
• Transparency and openness.
• Legal compliance.

Accountability 

• Ensure that management is accountable to the board.
• Ensure that Board is accountable to shareholders.

Fairness

• Protect shareholders/ stakeholders rights.
• Treat all shareholders/ stakeholders including minorities, equitably.
• Provide effective redress for violations.

Transparency 

• Ensure timely, accurate disclosure on all material matters, including the financial situation, performance, ownership, and corporate governance.

Compliance 

• The process by which an organisation ensures that it observes and complies with the external statutory laws and regulations. 

Financial Audit 

• Effective monitoring of company's expenditure-and ultimately the exercise of effective control over it.

CORPORATE SOCIAL RESPONSIBILITY

Definition: CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. 

The Pyramid Of Social Responsibility