corporate governance

what is corporate governance?

Corporate governance aims to ensure that the company serves and protects the interests of its shareholders and stakeholders.

who is shareholders?

Shareholders are the owners in public corporations, but they do not directly control all the decisions in their company. They have limited power over how the public corporation is managed.

who is board of directors?

The board of directors, usually consisting of a small number of people, hire professional corporate managers to manage and make decisions on daily operations of the corporation.This is known as the top management team, led by a chief executive officer (CEO).

aim of cg?

Corporate governance in public-listed companies aims to align the interests of the professional managers with those of the shareholders.

what is Concentrated ownership ?

Concentrated ownership refers to the large percentage of share ownership that belongs to an individual, a group of individuals, family groups or government institutions.

fam ownership?

– Family owners tend to have a close or tight control over thecompany they own as they have longer investment horizons

government ownership

Privatised corporations, known as government-linked companies (GLCs), greatly influence the performance and vibrancy of the Malaysian capital markets. They also play a prominent role as one of the key engines of economic growth in Malaysia.

purpose of malaysia code on cg mccg

The primary aim of this Committee was to establish and develop a world-class corporate governance framework, mainly for public corporations, for the market to follow.

types of approaches

• –  Prescriptive – it specifies corporate governance practices and requires

  legal compliance with them.

• –  Non-prescriptive – it places disclosure of actual practices undertaken and allows firms complete flexibility to determine their governance needs.

• –  Hybrid – takes elements of both the prescriptive and non-prescriptive approaches. Broad guidelines are introduced which should be flexibly implemented in the “comply or explain” reporting style. Firms are provided with a framework for disclosure of the implementation of various provisions of the corporate governance code.

theories in cg

the Agency and Stakeholder theories.

what is agency theory

attempts to explain the nature of the relationship between

shareholders and the professional managers. proposes that corporate governance problems exist due to theselfish tendencies of the professional managers that prompt them to engage in conflict of interest situations.

stakeholder theory

broadening the accountability of the professional managers to serving both the interests of shareholders as well as other stakeholders.

type of stakeholder

Primary stakeholders;

Have a direct stake in the company and its success

Secondary stakeholders;

Have a public or special interest stake in the company

**Uses of Stakeholder Model**

Descriptive understand how corporations are organized and managed.

Instrumentally a tool for managers . Profit seeking is the ultimate goal but the goal does not provide much help in the actual conduct of business.

Normative . the model can be used as a normative account of how corporations ought to recognize the interests of the stakeholders.