حوكمة الشركات وإدارة المخاطر

Introduction to Corporate Governance

• Corporate governance refers to the system of distributing rights and responsibilities among different parties in a company (board of directors, executives, shareholders).
• Its aim is to balance the economic, social, and environmental objectives of the company.
• It fosters transparency and accountability, ensuring long-term investment.

Origin of the Concept

• It emerged due to conflicts of interest between management and shareholders.
• Interest grew in the 1970s, with foundational concepts defined by researchers like Jensen & Meckling.
• A key development was the 1992 Cadbury Report, which laid the groundwork for effective governance.

Characteristics of Corporate Governance

• Transparency: Accurate and up-to-date information is provided to all stakeholders.
• Accountability: Responsibilities are clearly defined and individuals are held accountable.
• Independence: Decisions are made independently and free from external interference.
• Fairness: The rights of all parties are ensured.

Stakeholders in Corporate Governance

• Shareholders: They have the right to elect board members.
• Board of Directors: Responsible for setting general policies and overseeing the company.
• Management: Manages the company's daily operations.
• Stakeholders: Including creditors, suppliers, customers, and employees.

Advantages of Implementing Corporate Governance

• Societal Level: Enhances investment and sustainable development; combats corruption and increases productivity.
• Corporate Level: Improves performance, reduces costs, boosts investor confidence, and mitigates risks.

Differences Between Good and Bad Governance

• Good Governance: Active participation, transparency, clear reporting, increased investor confidence, and minimal risk.
• Bad Governance: Lack of accountability and transparency, inaccurate or incomplete information, diminished investor confidence, and heightened risk.

Fundamental Pillars of Corporate Governance

• Professional Ethics: Adherence to moral values and standards.
• Supervision and Accountability: Existence of internal and external oversight bodies.
• Risk Management: A system for managing and assessing risks.
• Stakeholder Roles: Encouraging stakeholder participation in oversight and decision-making.

Objectives of Corporate Governance

• Protecting shareholder rights and balancing stakeholder interests.
• Promoting transparency, fairness, and accountability.
• Ensuring the long-term sustainability and prosperity of the company.

Principles of Corporate Governance (OECD 2004)

• Establishing an effective framework: Clear legal and economic framework is required.
• Providing effective financial and institutional systems: These systems support economic and social objectives.
• Guaranteeing shareholder rights: Safeguarding rights such as voting and participation in general assemblies; ensuring equal treatment and protection from exploitation.
• Transparency and Disclosure: Complete and timely financial disclosure.
• Board Responsibility: Developing clear strategies and overseeing CEO and executive appointments.
• Stakeholder Roles: Ensuring the rights of all stakeholders are protected (creditors, customers, employees).

Corporate Governance Principles (World Bank)

• Transparency: Providing accurate and accessible information.
• Accountability: Clear expectations and mechanisms for performance measurement.
• Fairness: Equal treatment of all stakeholders.
• Responsiveness: Handling stakeholder concerns and needs effectively.

Corporate Governance Principles (IMF)

• Applying high standards of financial transparency and monetary policy.
• Improving regulatory oversight and financial reporting.
• Enhancing corporate governance to protect stakeholders' interests.

Corporate Governance Principles (BCBS)

• Implementing principles to improve transparency and risk management.
• Establishing guidelines for bank governance and supervision following financial crises.

Corporate Governance Principles (AICPA)

• Developing a framework for enhancing financial reporting and risk management.
• Fostering ethical conduct and accountability among corporate executives.

Corporate Governance and the Board of Directors

• Board of Directors: Responsible body for adopting and implementing corporate governance practices.
• Composition: Members with diverse backgrounds (law, business, accounting).
• Responsibilities: Protecting shareholder interests, resolving conflicts of interest, and guiding the organization toward its objectives.

Board of Directors Responsibilities

• Defining objectives and general policies.
• Overseeing company management and implementing strategies.
• Assessing potential risks and communicating with shareholders.
• Providing regular performance reports.

Characteristics of Board Members

• Extensive experience and knowledge.
• Analytical and decision-making capabilities.
• Independence to ensure impartiality.
• Active involvement and commitment.
• Effective communication and teamwork skills.

Board Committees

• Specialized committees (e.g., audit committee) are formed to enhance efficiency.
• 3-5 members typically.
• Operations are transparent.

Global Governance Models

• US Model: Separation of CEO and Chairman, emphasis on transparency.
• UK Model: Powerful role for non-executive directors.
• German Model: Dual supervisory and management board, including worker representation.
• Japanese Model: Consensus-based decision-making, corporate culture.
• French Model: Dual system, focusing on the relationship between shareholders and the board.

Corporate Governance Challenges and Issues

• Conflicts of interest.
• Lack of diversity in experience.
• Insufficient information for decision-making.
• Regulatory and legal changes.
• Risk management.
• Executive accountability.

Corporate Governance Advantages

• Increased transparency and enhanced trust.
• Improved organizational performance.
• Reduced risks, greater efficiency.
• Positive organizational reputation.

Role of the Audit Committee

• Plays a pivotal role in enhancing corporate governance through effective oversight of financial performance and operational integrity through internal and external audits.
• Supports the independence of external auditors and reviews internal controls, ensuring compliance with regulations and international standards.

Importance of International Financial Reporting Standards (IFRS)

• Enables accurate and standardized financial reporting.
• Improves comparability of financial data, thus assisting with global investment decisions.

External Audit and Corporate Governance

• External audit is a crucial aspect of corporate governance – an independent evaluation to determine the truthfulness of financial reporting.
• Enhanced transparency and accountability of financial records.
• Increased investor confidence, reduced reputational risks, and improved decision-making processes for stakeholders.

Corporate Governance and International Accounting Standards (IAS/IFRS)

• Supports transparent and consistent financial reporting across different jurisdictions.
• Helps improve comparability and trust between stakeholders.