Basic

presentation

Corporate Governance
Presented By: Shantal Johnson
Date: January 2024
INSTRUCTOR: Tashani
Wildman
 Agenda
• Corporate Governance what is it?

• Benefits of Corporate Governance

• Principles of Corporate Governance

• 4 P’s of Corporate Governance

• Board structure and practice

• Shareholder rights and engagement

• Stakeholder interests

• Final tips & takeaways

 Corporate Governance what is it?
Corporate Governance is the system of rules, practices, and processes that a company uses to direct and control
its operations. It is the framework that ensures that a company is run in the best interest of the company many
stakeholders which can include shareholders, senior management, customers, suppliers, lenders, the
government and the community. As such, cooperate governance encompasses practically every sphere of
management, from action plans and internal controls to performance measurement and cooperate disclosure.

 A company's board of directors is the primary force influencing corporate governance.

 Bad corporate governance can destroy a company's operations and ultimate profitability.

 The basic principles of corporate governance are accountability, transparency, fairness, responsibility, and
risk management.
Benefits of Corporate Governance
 Good corporate governance creates transparent rules and controls, guides leadership, and aligns the interests of shareholders,

directors, management, and employees.

 It helps build trust with investors, the community, and public officials.

 Corporate governance can give investors and stakeholders a clear idea of a company's direction and business integrity.

 It promotes long-term financial viability, opportunity, and returns.

 It can facilitate the raising of capital.

 Good corporate governance can translate to rising share prices.

 It can reduce the potential for financial loss, waste, risks, and corruption.

 It is a game plan for resilience and long-term success.

Principles of Corporate Governance
 Fairness: The board of directors must treat shareholders, employees, vendors, and communities fairly and
with equal consideration.
 Transparency: The board should provide timely, accurate, and clear information about such things as
financial performance, conflicts of interest, and risks to shareholders and other stakeholders.
 Risk Management: The board and management must determine risks of all kinds and how best to control
them. They must act on those recommendations to manage risks and inform all relevant parties about the
existence and status of risks.
 Responsibility: The board is responsible for the oversight of corporate matters and management activities.
It must be aware of and support the successful, ongoing performance of the company. Part of its
responsibility is to recruit and hire a chief executive officer (CEO). It must act in the best interests of a
company and its investors.
 Accountability: The board must explain the purpose of a company's activities and the results of its
conduct. It and company leadership are accountable for the assessment of a company's capacity, potential,
and performance. It must communicate issues of importance to shareholders.
 Why is corporate Governance important?
Corporate governancethe
suppliers, financiers, involves the relationships
government, between various
and the community. stakeholders,
Corporate governanceincluding shareholders,
is important for severala reasons:
company’s management, its customers,

1. Protection of shareholder interests: Good corporate governance ensures that the interests of shareholders, who are the owners of the company,

are protected. It promotes transparency, accountability, and fairness in decision-making, preventing the abuse of power by company executives.

2. Risk management: Strong corporate governance helps identify and manage risks, including financial, operational, legal, and reputational risks.

Effective oversight and risk management mechanisms can prevent costly mistakes and crises.

3. Enhanced business performance: Good governance practices contribute to improved company performance and long-term sustainable growth.

Transparent financial reporting, ethical behaviour, and effective management practices attract investors and boost the company’s reputation.

4. Access to capital: Investors, especially institutional investors, are more likely to invest in companies with strong corporate governance

practices. This provides companies with better access to capital and lowers their cost of capital.

5. Stakeholder confidence: Transparent and ethical governance practices build trust and confidence among stakeholders, including employees,

customers, suppliers, and the public. This can positively impact the company’s brand and reputation.
Why is corporate Governance important?

6. Legal and regulatory compliance: Effective corporate governance helps companies adhere to legal and regulatory requirements.
Compliance with laws and regulations reduces the risk of legal actions and financial penalties.

7. Conflict resolution: Clear governance structures and mechanisms can help in resolving conflicts of interest among different stakeholders.
This reduces the potential for disputes that could harm the company’s operations and reputation.

8. Innovation and adaptability: Good governance practices when decision-making processes are transparent and flexible, companies can
more effectively respond to changes in the business environment.

9. Long-term perspective: Corporate governance encourages a focus on long-term goals rather than short-term gains. This can lead to more
sustainable business practices and better alignment with the interests of various stakeholders.

10.Social responsibility: Companies are increasingly expected to consider the broader social and environmental impacts of their actions.
Effective governance ensures that these considerations are integrated into the company’s strategy and operations.
 Why is corporate Governance important?
Corporate governance is important because it provides a framework for responsible and effective management of a
company, safeguarding the interests of shareholders and stakeholders, promoting ethical behaviour, and contributing to an
organisation’s overall success and sustainability

corporate governance principles are rooted in internationally accepted standards and are locally guided by and subjected
to:

 The Government of Jamaica Corporate Governance Framework for Public Bodies (2012)

 The Public Bodies Management Accountability Act (2012)

 Financial Administrative & Audit Act

 Companies Act of Jamaica (2004)

What Are the 4 Ps of Corporate
Governance?
 Board Structure and Practices
What is a board of Directors?
There must be a board of directors for all publicly
owned companies. Private companies often have
boards of directors as well. Boards typically meet
a few times a year.
The board of directors is an organisation’s governing body. It
consists of a group of individuals elected by shareholders. The structure of a typical board of directors
Boards of directors set company policies and supervise the  Inside directors (executives and managers)
managers of the organisation. Good governance is about
separating ownership and control.  Outside directors (non-executive directors)

Company shareholders own the company, but its managers  A chairperson

control its operations.
In an ideal world, the directors would work to align
shareholders, and managers’ interests and the company’s best
interests should remain their top priority.
Directors on a board can either be insiders or outsiders. Good boards do
include non-executive directors.

Executives, such as the chief executive officer (CEO), are considered inside
directors. In addition to serving on the company’s governing body, these
people handle managerial duties.

A non-executive director or NED is not part of the company’s executive team. Key responsibilities of the board of directors
• Recruiting top executives
They are independent professionals selected based on their industry
• Establishing executive compensation
experience and expertise. In addition, NEDs serve only one role, which is to • Monitoring executive performance
serve as directors. This makes them more unbiased than company managers. • Dismissing executives as needed
• Approving the issuance of stock
The chairperson can be either an inside or an outside director. • Paying dividends
• Managing internal controls and corporate governance
• Establishing other company policies
 Role of Independent Directors
Independent directors are essentially outside directors who play an important role in corporate governance.
They provide unbiased advice, perspective, and judgment to the board of directors. They’re also responsible
for evaluating the strength of their board, especially monitoring conflicts of interest and complying with
corporate governance guidelines.

While they’re a key part of the company’s board of directors, they bring a unique perspective, mainly
because they have no material relationship with the company.
 Board Committees and their responsibility
The independent directors’ duties and responsibilities typically include:

 On matters such as finances, strategy, performance, risk management, and key appointments, they must give
independent judgment to the board.
 Play an active role in succession-planning.
 Protect the interests of all stakeholders.
 Balance the interests of all stakeholders while making deliberations.
 Set appropriate remuneration levels for the company’s top executives and managers.
 Provide an objective perspective and opinion regarding the organization’s status and key corporate decisions.
 Monitor the integrity of financial information and risk management, ensuring relevant controls are in place.
 Report unethical behavior, fraud, or violations of company policies.
 Board Committees and their responsibility

Why have board committees?

The board can accomplish a lot of its work through committees, and they are an effective way to delegate work.

Committees can focus specifically on areas such as governance, internal affairs, or external affairs.

A committee’s size will depend on the board’s needs, and it is helpful to recognise that the more committees you set up, the more meetings will need to
take place.

Committee members should be selected based on their experience and skills.

Each board member should serve on at least one committee, but preferably no more than two.

Essentially, a committee provides expert advice and counselling to the board.

However, the committee’s suggestions still need to be approved by the board (they are not obligated to go with a committee’s advice).
What does an effective committee look like?
The main characteristics of an effective board committee should be that it:

 Has a clear purpose and goals

 Has a chairperson
 Is aligned with the board, and its members understand the time commitment involved
 Understands its role is an advisory one and that it doesn’t make decisions
 Has an evaluation process

Some organisations operate a zero-based committee structure which means that each year is started with a clean slate, and new
committees are created only as needed.
This avoids stagnation and ensures that unnecessary committees are dissolved, some boards may find that no committees are necessary
and that tasks can be effectively delegated to individual board members; however, this would take a lot of commitment
from every board member.
What are the main benefits of having board committees?

Today, one of the most sensitive issues involves

directors’ remuneration, and a committee focusing
on this area would be considered an essential
element of good governance. In general, committees
bring in different opinions and viewpoints, improve
communication, and reduce the workload of the
board.
 Shareholder Rights and engagement

As an investor, you want to select companies

Howthat
to practice good corporate
assess Corporate governance in
Governance asthe
anhope that you can thereby avoid losses and other
Investor
negative consequences such as bankruptcy.
You can research certain areas of a company to determine whether or not it's practicing good corporate governance. These areas include:

 Disclosure practices
 Executive compensation structure (whether it's tied only to performance or also to other metrics)
 Risk management (the checks and balances on decision-making)
 Policies and procedures for reconciling conflicts of interest (how the company approaches business decisions that might conflict with its
mission statement)
 The members of the board of directors (their stake in profits or conflicting interests)
 Contractual and social obligations (how a company approaches issues such as climate change)
 Relationships with vendors.
 Complaints received from shareholders and how they were addressed
 Audits (the frequency of internal and external audits and how any issues that those audits raised have been handled)
 Stakeholder
Interests

- Identifying Key Stakeholders

- Balancing Stakeholder Interests with Corporate Growth
- Corporate Social Responsibility and Ethics

https://youtu.be/QkFQYChSoKk?si=3tJyM0EBmBJs0-ME
 Corporate Governance: Bad and Good

Types of bad governance practices include:

 Companies that do not cooperate sufficiently with auditors or do not select auditors
with the appropriate scale, resulting in the publication of spurious or noncompliant
financial documents.
 Executive compensation packages that fail to create an optimal incentive for
corporate officers.
 Poorly structured boards that make it too difficult for shareholders to oust
ineffective incumbents.
 Bad Corperate Governance
Stocks and Security Limited (SSL) - Usain Bolt $12 million missing from his account with only $12,000 remaining.
(SSL)Stocks and Security Limited Was flagged 2019 by the Financial Services Commission mainly because they
didn’t uphold with the principles of corporate governance.

The SSL never held a formal board meeting.

FSC’s findings, shows that Stocks and Security limited (SSL’s) board was apparently not reliable in the execution of
its fiduciary responsibilities. It is through meetings that the directors can keep abreast of what is happening. The
absence of meetings of the full board denies all members to be apprised. This would be further compounded by the
absence of the relevant committees having been formed and convening meetings to carry through on their respective
mandates. Since it is the board’s ultimate responsibility to see to the proper running of the organisation, it would have
failed in its fiduciary responsibility to the organisation, and by extension to those who invested funds with SSL.

 FSC reviewed meeting minutes which revealed that no committee member, having read and reviewed the minutes, to
endorse the accuracy of the contents.
 Good Corperate Governance
The Factories Corporation of Jamaica
During the fifth staging of the Public Bodies’ Corporate Governance Awards, The Factories Corporation of
Jamaica (FCJ) Ltd. emerged the night’s biggest winners as the recipients of the Greta Bogues Award for
Excellence in Corporate Governance and the Finance Minister’s Award for Board Composition, Functions and
Structure. The event was held on Thursday, December 1, 2022, at the Jamaica Pegasus Hotel.

Factories Corporation Jamaica is the government agency that has primary responsibility for the
development and management of industrial and commercial space in the public sector. The Company
is in the business of leasing and managing industrial, commercial and office spaces to investors since
 Reference

https://www.thecorporategovernanceinstitute.com/insights/lexicon/what-is-corporate-governance/

https://www.jamaicaobserver.com/2023/02/11/governance-lessons-for-boards-from-the-ssl-debacle/

https://www.thecorporategovernanceinstitute.com/insights/lexicon/what-is-corporate-governance/

https://fastercapital.com/content/Shareholder-Rights--Know-Your-Rights--Safeguarding-Shareholder-
Interests.html#Safeguarding-Shareholder-Interests