Corporate Governance
Definition and Practice
Bolaji Okusaga

1. Principles

The Need for Corporate Governance
Increasing scale and
activity of corporations
• Trans-national
Corporations like Apple,
Exxon-Mobil, Chevron
are becoming larger than
Countries and have great
impact on economies
The Sub-prime Mortgage
Bust
• Deregulation of
International financial
markets
• The Financial
Supermarket Model
which created a situation
where Retail Deposits
are channeled to risky
investment assets
Corporate Infractions and
Reporting Errors
• Issues with Enron
involving Arthur
Anderson, the Worldcom
Collapse and others
• These issues created a
heightened recognition
that governance matters
for accountability and
business performance.
As trust becomes a scare commodity, there is a general trend in society towards openness, transparency and disclosure

Defining Corporate Governance
THE FLOW OF RESPONSIBILITY
Corporate Governance defines the
relationship between the ownership
as typified by the Shareholders, the
wielders of supervisory authority
vested by ownership in the Board of
Directors, who in turn gives the
mandate for the day to day running of
the organization in the management
headed by the CEO.
THAT DEFINES BUSINESS
OPERATIONS AND REPORTING
Corporate Governance deals with to
the governing system of an
organization
It is the method by which companies
are directed and managed.

OECD Definitions
•“Involves a set or relationships between a company’s
management, its board, its shareholders, and other
stakeholders. Corporate governance also provides the
structure through which the objectives of the company are
set, and the means of attaining those objectives and
monitoring performance are determined.” (OECD,
Principles of Corporate Governance, 1999; 2004)
Corporate governance framework ensures the strategic
guidance of the company, the effective monitoring of
management by the board, and the board’s
accountability to the company and the shareholders.

The Pillars of Corporate Governance
Accountability
Render Explanation on
Business Stewardship –
Board to Shareholders
and Management to
Board
Fairness
Be equitable in
business dealings
Protection of
Shareholders Rights
Transparency
Be open in dealings and
render full disclosure to
regulators,
shareholders and other
stakeholders
Independence
Expression of self-
regulating thought and
action
Avoidance of conflicts
of interest

Hierarchy and Expectations
Market Expectations Transparent and Timely Reports
Shareholders Expectations
Share appreciation
Dividend
Board Expectations
Business Performance
Profit
Management Expectations
Sound Business
Retention of Going Concern
Customers Expectation
Business Delivery
Sustainability

2. Practice

9
Board Composition
Balance of skills
and experiences
Balanced
composition of
executive and
non-executive
directors
Non-executive
directors should
picked on the
basis of skill and
representation
List of directors
updated and
their respective
role and
function
identified
Independent
directors may be
picked for better
scrutiny and
governance

10
Appointment, re-election and removal of directors
Formal and transparent
procedure for
appointment
• Specific term for non-
executive directors
Succession plan
• Nomination committee
formed to make
recommendation on
appointment of directors
and succession planning for
directors, chairman and CEO
All directors subject to
retirement by rotation
at regular interval
• Re-election at regular
intervals
• Proper explanation for
resignation/removal of
directors

11
Chairman and CEO
Separation of Board from
Management
Separation of the
board from the day-to-
day management of
the company’s business
Balance of power at
board level to avoid
concentration of power
in a single individual
Separation of
Chairman and
CEO
Division of
responsibilities
between Chairman and
CEO clearly laid down
in writing

12
Role of the Chairman
THE LEADER
Heads the board and
provides strategic
direction
Ensure the board
works effectively and
discharges its
responsibilities
THE SOUL
Ensure good
corporate governance
practices and
procedures are in
place
Ensure all directors
participate at board
meeting
THE
REPRESENTATIVE
Protects
Shareholder’s interest
Responsible for
ensuring appropriate
information received
by Shareholders

13
Responsibilities of Directors
Represents the
interest of
Shareholder
Blocks
Attend Board
Meetings to
share the views
of shareholders
Exercise duties
of care, skill,
integrity and
diligence
expected
Ensure proper
understanding
of the
operation,
business and
the regulatory
requirement
Contribute
insights and
perspective to
enrich
Management’s
view of the
business

14
Non-executive directors
Active participation in
board meetings
Bring in independent
judgment
Take lead if conflict of
interest arise
Serve on committees
Monitor the
corporate’s
performance in
achieving pre-set goals

15
Access to Information
ACCESS TO INFORMATION
• Directors should be provided with
accurate and appropriate
information in order to make
informed decision and to discharge
their responsibilities
• Directors should have access to the
senior management for information
• Information supplied should be of
form and quality to facilitate
informed decision
PROCESS
• Agenda and board papers should be
sent in full in a timely manner to
directors
• Information supplied must be
complete and reliable

16
Remuneration of directors and senior management
PRINCIPLE
PRACTICE
•Transparency of directors’ remuneration policy
•Remuneration should be sufficient but not excessive
•Each director not to involve in deciding his/her own
remuneration
•Remuneration committee to be formed, mainly from
non-executive directors
•Consult Chairman/CEO if needed
•Access to professional advice, market comparable
information
•Make recommendation on policy and structure of
remuneration
•Determine specific remuneration packages of all
executive directors and senior management

3. Process

18
Remuneration Committee
Review and approve
performance-based
remuneration
Review and approve
compensation
arrangement in
connection with loss
or termination of
office, dismissal or
removal of directors
for misconduct

19
Audit Committee
PRINCIPLE
Have clear terms of reference
A formal and transparent
arrangement to apply the financial
reporting and internal control
principles and maintain appropriate
relationship with external auditors
PRACTICE
Full minutes of audit committee to be
kept
Provided with sufficient resources to
discharge its duties
Independent from external auditors
PRIORITIES
Make recommendation for
appointment and removal of external
auditors
Monitor the effectiveness of the audit
process, ensuring auditor’s
independence and objectivity
Monitor the integrity of the financial
disclosures
Oversight of the financial reporting
and internal control procedures

20
Financial Reporting
Management provide explanation and information to the board to enable them to make
informed assessment of financial and other information
The board should present comprehensive assessment of the corporate’s performance,
position and prospects in annual and interim reports, price-sensitive announcements and
other financial disclosures
Ensure the maintenance of sound and effective internal controls to safeguard assets
Conduct regular reviews of the effectiveness of the internal control system, covering
financial, operational, compliance and risk management control functions
Prevent fraud, corruption, and malpractices

21
Delegation by the Board
Formal schedule of matters
specifically reserved to the
board for decision
Clear directions to
management as to matters
requiring board approval
before decision made
Clear directions to the
delegation of the
management and
administration functions as
well as the powers of
management
Review the arrangement for
segregation of duties
between board and
management regularly
Board Committee to be
formed, with specific terms
of reference, as needed

22
Communication with Shareholders
STANDARD
• Maintain on-going dialogue
with shareholders and make
use of annual general
meetings or other general
meetings to communicate
with shareholders
• Transparency in corporate
governance practices and
business performances
through proper and
adequate disclosures
• Encourage shareholders’
participation
SPECIAL
• Separate resolution for each
separate issue
• Chairman of the board and
chairman of each board
committees be present in
general meetings to answer
questions at any general
meeting
• Chairman of independent
board committee be present
to answer any questions in
any general meeting to
approve transaction
requiring independent
shareholders’ approval
STRATEGIC
• Inform shareholders about
procedure for voting by poll
• Ensure proper compliance
to regulatory requirement
about voting by poll

Thank you.