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Principles of Good Corporate Governance as drafted by Organization for Economic Cooperation and Development (OECD) include fairness, transparency, accountability, responsibility, and Independence.
a. Fairness The principle of fairness relating to equal treatment of stakeholders. The application of this principle can be implemented by : Issuing corporate rules to protect minority shareholders. Issuing corporate conduct and compliance policies to prevent fraud, act for personal interest and conflict of interest. Prepare the duties and obligations of directors, board of commissioners, management and committees including the audit system. Doing disclosure of all material information or full disclosure of all information that affects the sustainability of the company, for example, matters pertaining to operating performance, financial and business risks of the company. Introduce equal employment opportunity to all candidate employees and permanent employees who have worked for the company.
b. Transparency The principle of transparency can be achieved by improving the quality of corporate disclosure of performance information for an accurate and timely. Transparency shows the ability of the stakeholders to see and understand the process and the foundation used in the decision-making or in managing the company. The steps that can be taken to implement these principles are as follows: Develop an accounting system based on the Accounting Standard and Best Practices to ensure the quality of financial reporting and disclosure. Developing IT and MIS to ensure an appropriate measure of performance and effective decision-making process by the board of directors and management. Developing Enterprise Wide Risk Management to ensure that all significant risks are identified, measured, and can be managed at a level that has been determined. Announced to the public for job opportunity.
c. Accountability The principle of accountability with regard to the Board of Commissioners or Directors responsibility for decisions and outcomes in accordance with the authority delegated responsibility for managing the company in the implementation. The application of the principle of accountability can be realized among other things through the following ways: Preparation of financial statements performed in a timely and correctly. Prepare the Audit and Risk Committee is to enhance the function of monitoring by the Board of Directors. Develop and redefining duties and internal audit function as a strategic business partner based on the best practices so that not only do internal audit compliance audit, but also uses risk-based audit approach. Maintaining management contracts responsibly and resolves problems that arise. Enforce the law by arranging reward and punishment system. Using the External Auditor and qualified professionals.
d. Responsibility The principle of responsibility is a consequence of authority held by someone. The application of the principle of accountability can be realized among other things through the following: Building awareness of the responsibility to the public or parties related to the company, either directly or indirectly. Avoid the use / abuse of power. Behave professionally and have ethics.
e. Independence Independence means that the duty and authority to manage the company, the shareholders, the Board of Commissioners, and the Board of Directors fully detached from the various influences /
pressures that may harm the other party, interrupt the objectivity of decision-making and decrease the effectiveness of the management of the company's performance.
Corporate governance models around the world There are many different models of corporate governance around the world. These differ according to the variety of capitalism in which they are embedded. The Anglo-American "model" tends to emphasize the interests of shareholders. The coordinated or Multistakeholder Model associated with Continental Europe and Japan also recognizes the interests of workers, managers, suppliers, customers, and the community. A related distinction is between market-orientated and network-orientated models of corporate governance a. Continental Europe Some continental European countries, including Germany and the Netherlands, require a twotiered Board of Directors as a means of improving corporate governance. In the two-tiered board, the Executive Board, made up of company executives, generally runs day-to-day operations while the supervisory board, made up entirely of non-executive directors who represent shareholders and employees, hires and fires the members of the executive board, determines their compensation, and reviews major business decisions.
b. India India's SEBI Committee on Corporate Governance defines corporate governance as the "acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal & corporate funds in the management of a company." It has been suggested that the Indian approach is drawn from the Gandhian principle of trusteeship and the Directive Principles of the Indian Constitution, but this conceptualization of corporate objectives is also prevalent in Anglo-American and most other jurisdictions.
c. United States, United Kingdom The so-called "Anglo-American model" of corporate governance emphasizes the interests of shareholders. It relies on a single-tiered Board of Directors that is normally dominated by nonexecutive directors elected by shareholders. Because of this, it is also known as "the unitary system". Within this system, many boards include some executives from the company (who are ex officio members of the board). Non-executive directors are expected to outnumber executive directors and hold key posts, including audit and compensation committees. The United States and the United Kingdom differ in one critical respect with regard to corporate governance: In the United Kingdom, the CEO generally does not also serve as Chairman of the Board, whereas in the US having the dual role is the norm, despite major misgivings regarding the impact on corporate governance