GOOD CORPORATE GOVERNANCE

GOOD CORPORATE GOVERNANCEMisbahuddin Azzuhri

Corporate Governancethe function of a company’s compliance with regulatory requirements and, to the extent that it is not required by

law, its adherence to standards that:

define relationships between a company’s management, its board, shareholders and

other stakeholders

provide a structure through which the company’s objectives are set, and how they

are achieved and monitored

recognise the value of business ethics and corporate awareness of society interests to

reputation and long-term success

Ethicsg Reflection in a company’s operations of the

values and moral principles used in the communities in which they operate

g Successful markets and corporate performance are founded on a commitment to basic ethical principles aligned as much as possible to the interests of individuals, corporations and society

g Ethical standards may be expressed in a company’s formal conduct requirements, or contained in generally stated principles that guide a company’s preferred conduct or behaviour

Frameworkg No single model for corporate governance g Corporate governance is a set of principles that

may be variously applied in particular circumstances by government, regulators, institutions and corporations

g Principles primarily designed to promote confidence in capital markets, but also have general application

g OECD has developed broad principles and supporting statements for best practice in corporate governance

g Interest shown in OECD principles by non-member Asian countries

Corporate Governance

• Defines relationships between management, board, shareholders and other stakeholders

• Provides structure through which company objectives are set, achieved and monitored

• Recognises the value of business ethics and corporate awareness of society interests to reputation and long-term success

COMPANY

Corporate Governance

g Defines relationships between management, board, shareholders and other stakeholders

g Provides structure through which company objectives are set, achieved and monitored

g Recognises the value of business ethics and corporate awareness of society interests to reputation and long-term success

Structure and

management of operations

to ensure consumer outcomes

COMPANY

Corporate Governance

• Defines relationships between management, board, shareholders and other stakeholders

• Provides structure through which company objectives are set, achieved and monitored

• Recognises the value of business ethics and corporate awareness of society interests to reputation and long-term success

Distribution

COMPANY

Consumption

Corporate Governance

• Defines relationships between management, board, shareholders and other stakeholders

• Provides structure through which company objectives are set, achieved and monitored

• Recognises the value of business ethics and corporate awareness of society interests to reputation and long-term success

Distribution

COMPANY

Consumption

g Employment

g Structure

Corporate Governance

• Defines relationships between management, board, shareholders and other stakeholders

• Provides structure through which company objectives are set, achieved and monitored

• Recognises the value of business ethics and corporate awareness of society interests to reputation and long-term success

Distribution

COMPANY

Consumption

g Employment

g Structure

g Quality

g Information

g Safety

g Redress

g Service

g Education

Corporate Governance

• Defines relationships between management, board, shareholders and other stakeholders

• Provides structure through which company objectives are set, achieved and monitored

• Recognises the value of business ethics and corporate awareness of society interests to reputation and long-term success

Distribution

COMPANY

Consumption

g Employment

g Structure

g Quality

g Information

g Safety

g Redress

g Service

g Education

Corporate Governance

• Defines relationships between management, board, shareholders and other stakeholders

• Provides structure through which company objectives are set, achieved and monitored

• Recognises the value of business ethics and corporate awareness of society interests to reputation and long-term success

Distribution

COMPANY

Consumption

g Employment

g Structure

g Quality

g Information

g Safety

g Redress

g Service

g Education

Community Standards

Industry Standards

Company Standards

Corporate Governance

• Defines relationships between management, board, shareholders and other stakeholders

• Provides structure through which company objectives are set, achieved and monitored

• Recognises the value of business ethics and corporate awareness of society interests to reputation and long-term success

Distribution

COMPANY

Consumption

g Employment

g Structure

g Quality

g Information

g Safety

g Redress

g Service

g Education

Local Values

and Culture

Community Standards

Industry Standards

Company Standards

Corporate Governance

• Defines relationships between management, board, shareholders and other stakeholders

• Provides structure through which company objectives are set, achieved and monitored

• Recognises the value of business ethics and corporate awareness of society interests to reputation and long-term success

Distribution

COMPANY

Consumption

g Employment

g Structure

g Quality

g Information

g Safety

g Redress

g Service

g Education

Local Values

and Culture

Community Standards

Industry Standards

Company Standards

Codes

GCG: THE PRACTICESmisbahuddin azzuhri

Good Governance di ASEANCorruption Perception Index

Good Governnace in The World

Quintile Countries/Territories

Top quintile: More than 32%

Albania, Cambodia, Cameroon, FYR Macedonia, Kosovo, Nigeria, Pakistan, Philippines, Romania, Senegal

Second quintile: 18 – 32%

Bolivia, Dominican Republic, Greece, India, Indonesia, Lithuania, Moldova, Peru, Serbia, Ukraine

Third quintile: 6 – 18%

Bulgaria, Croatia, Czech Republic, Luxembourg, Malaysia, Panama, Russia, Turkey, Venezuela, Vietnam

Fourth quintile: 2 – 6%

Argentina, Bosnia-Herzegovina, Finland, Hong Kong, Ireland, Portugal, South Africa, Spain, United Kingdom, United States

Bottom quintile: Less than 2%

Austria, Canada, Denmark, France, Iceland, Japan, South Korea, Netherlands, Sweden, Switzerland

% of respondents reporting they paid a bribe to obtain a service

Source: Transparency International Global Corruption Barometer 2007.

Bribery Practices Percentage

CGPI – 2005 (according to GCG practices in 2004)

CGPI – 2006 (according to GCG practices in 2005)

CGPI – 2006 (according to GCG practices in 2005)

CGPI – 2007 (according to GCG practices in 2006)

NEXT|Business Ethics in A Global EconomyMisbahuddin Azzuhri