- requires a broad and long-term perspective on

Chapter 1: Introduction to Corporate what is needed for sustainable human development

Governance and how to achieve the goals of such development
- can only result from an understanding of the
Governance historical, cultural, and social contexts of a given
- process where elements in society wield power, society or community
authority, and influence and enact policies and
decisions concerning public life and social 6. Equity and Inclusiveness
upliftment - ensures that all its members feel that they have a
stake in it and do not feel excluded from the
Characteristics of Good Governance mainstream of society
- requires all groups, but particularly the most
1. Participation vulnerable, have opportunities to improve or
- could be either direct or through legitimate maintain their well being
institutions or representatives
- needs to be informed and organized 7. Effectiveness and Efficiency
- means freedom of association and expression on - processes and institutions produce results that
one hand and an organized civil society on the meet the needs of society while making the best
other use of resources at their disposal
- concept of efficiency in the context of good
2. Rule of Law governance also covers the sustainability use of
- requires fair legal frameworks that are enforced natural resources and the protection of the
impartially environment
- requires full protection of human rights,
particularly minorities 8. Accountability
- impartial enforcement of laws requires an - key requirement of good governance
independent judiciary and an impartial and - also private sector and civil society organizations
incorruptible police force must be accountable to the public and to their
institutional stakeholders
3. Transparency - who is accountable to whom varies depending on
- means that decisions taken and their enforcement whether decisions or actions taken are internal or
are done in a manner that follows rules and external to an organization or institution
regulations - an organization or an institution is accountable to
- means that information is freely available and those who will be affected by its decisions or
directly accessible to those who will be affected by actions
such decision and their enforcement - cannot be enforced without transparency and the
- enough information is provided and it is provided rule of law
in easily understandable forms and media
Corporate Governance
4. Responsiveness - system of rules, practices, and processes by
- serving the needs all stakeholders within a which business corporations are directed and
reasonable timeframe controlled

[Link] Oriented - involves balancing the interests of a company’s

- mediation of the different interests in society to many stakeholders, management, customers,
reach a broad consensus on what is in the best suppliers, financiers, and government and the
interest of the whole community and how this can community
be achieved
- the corporate governance structure specifies the Chapter 2: Corporate Governance
distribution of rights and responsibilities among Responsibilities and Accountabilities
different participants in the corporation such as the
board, managers, shareholders, and other
stakeholders, and spells out the rules and
procedures for making decisions on corporate
affairs

Purpose: to enhance shareholder value and

protect the interest of other stakeholders by
improving corporate performance and
accountability
Parties and their Responsibilities
Objectives:
1. Shareholders
1. Fair and equitable treatment of shareholders - provide effective oversight through election of
board members, approval of major initiatives such
2. Self-assessment - those with a strong corporate as buying or selling stock, annual reports on
governance system ar better able to limit exposure management compensation, from the board
to regulatory risks and fines
2. Board of Directors
3. Increase Shareholders’ Wealth - firms with - ensure that the organization is run according to
better corporate governance are seen to have the organization’s charter and there is proper
higher valuation attached to their shares accountability

4. Transparency and Full Disclosure a.​ Overall operations

- vision, mission, values and ethical
standards
Basic Principles of Effective Corporate - business relationship with CEO
Governance - appointment of CFO and corporate
secretary
1. Transparency and Full Disclosure - delegating authority to management
2. Accountability
3. Corporate control b.​ Performance
- ensuring organization’s long term viability
- includes both strategic and operational risk and enhancing financial position
management - implementation of corporate strategy
- approving plan, budget, and corporate
policies
- overseeing risk management framework
- monitoring major capital expenditure,
capital management and acquisitions and
divestitures

c.​ Compliance / Legal Conformance

- understanding and protecting financial
position
 - monitoring legal and regulatory ●​ Act as conduit between the board and the
compliance with accounting standards, organization
unfair trading legislation, and occupational ●​ Develop financial and other reports that
health and safety and environmental meet public, stakeholder and regulatory
standards requirements
- approving annual financial reports and
other documents 5. Audit Committees of the Board of Directors
- provide oversight of the internal and external audit
3. Non-executive or Independent Directors function and the process of preparing the annual
- same as the broad role of entire board of directors financial statements as well as public reports
internal control
Specific activities include:
●​ To assist management in keeping Specific activities include:
performance objectives at the top of agenda ●​ Selecting the external audit firm
●​ To understand that his role is not to act as ●​ Approving any non-audit work performed by
auditor, but as member of the management audit firm
team ●​ Selecting or approving the appointment of
●​ To respect nature of board’s decisions the Chief Audit Executive (internal auditor)
●​ Prepare for and attend board meetings ●​ Reviewing and approving the cope and
●​ Seek info on a timely basis to contribute to budget of the internal audit function
the discussion ●​ Discussing audit findings with internal
●​ To ask appropriate questions relative to auditor and external auditor and advising
operations the board and management on actions that
should be taken
4. Management
Broad role: operations and accountability and 6. Regulators
manage the organization effectively; provide a. Board of Accountancy (BOA)
accurate and timely reports to shareholders and - set accounting standards dictating underlying
other stakeholders financial reporting and auditing concepts; set the
expedition of audit and accounting quality
Specific activities include:
●​ Recommend strategic decision and Specific activities include:
translate the strategic plan into the ●​ Conducting CPA licensure exams
operations of the business ●​ Approving accounting principles and
●​ Manage the company’s human, physical, auditing standards
and financial resources to achieve ●​ Interpreting previously issued standards
objectives ●​ Educating members on audit and
●​ Assume day to day responsibility for the accounting requirements
organization’s conformance with relevant
laws and regulations and its compliance b. Securities Exchange Commission (SEC)
framework - ensure the accuracy, timeliness, and fairness of
●​ Develop, implement and manage risk public reporting of financial and other information
management and internal control for public companies
frameworks
●​ Implement and update policies and Specific activities include:
procedures ●​ Reviewing filings with the SEC
●​ Provide information to the board ●​ Interacting with the financial reporting
standards council
 ●​ Specifying independence standards - involves making the moral and right decisions
required of auditors that report on public while engaging in such business activities as
financial statements manufacturing and selling a product and providing
●​ Identify corporate frauds, investigate a service to customers
causes, and suggest remedial actions
- based on personal values and standards of each
7. External Auditors person engaged in business
- perform audits of company financial statements to
ensure that they are free of material misstatements
including fraud Purposes:
- to help business and would-be business to
Specific activities include: determine what business practices are right and
●​ Audit of public company FS what are wrong
●​ Audits of nonpublic company FS
●​ Other services such as tax or consulting - to guide in making the right business decisions

Special Purpose:
8. Internal Auditors
1. To make businessmen realize they cannot
- performs audits of companies for compliance with
employ double standards to the actions of other
company policies and laws, to evaluate efficiency of
people and to their own actions
operations and periodic evaluation and tests of
controls 2. To show businessmen that common practices
which they have thought to be right because they
Specific activities include: see other businessmen doing it, are really wrong
●​ Reporting results and analyses to
management and audit committees 3. To serve as a standard or ideal upon which
●​ Evaluating internal controls business conduct should be based

●​ The business world today does not have one

Chapter 3: SEC Code of Corporate Gvoernance
universal standard code of ethics
-​

Scope and Impact:

- covers all conduct, behavior, judgement in
business which includes the slightest deviation from
what is illegal and dishonest acts that are
punishable by law

- actions that are not forbidden by law are ethical

except in some cases that violate ethical principles
which is included in the scope

- based on personal values and standards or each

Chapter 6: Business Ethics
person; may vary; no uniform standard
Business Ethics
Fair Business Competition - achieving success
- standards of moral conduct, behavior, and
solely by offering better products, services, and
judgement in business
terms than the competitor; form of business
competition where success is gained by the merits A manager should:
of one’s goods or services ●​ Acknowledge his role to serve the business
enterprise and the community

Economic Impact ●​ Avoid all abuse of executive power for personal

- through the wages to employees, materials gain, advantage, or prestige
bought from suppliers, and prices charged to ●​ Reveal the fact to his superior whenever his
customers personal business of financial interests conflict
with those of the company
- would have a positive social impact on employees
if they are paid fair living wages and benefits ●​ Be actively concerned with the problems of
subordinates, treat them fairly and by example,
- would have a positive effects on suppliers when lead them effectively, assuring to all the right of
they pay fairly and on time reasonable access and appeal to superiors

- would have a positive effect on customers if good ●​ Recognize that his subordinates have a right to
value for the products or services are offered information on matters affecting them, and
make provision for its prompt communication
unless such communication is likely to
Social Impact undermine the security and efficiency of the
- contributes to the ethical climate of society business

●​ Fully evaluate the likely effects on employees

- if businesses offer bribes, or engage in accounting
and the community of business plans for the
fraud or regulatory breaches, the ethics of society
future before taking a final decision
suffer
●​ Cooperate with colleagues and not attempt to
- corruption may unfairly raise the price of goods for secure personal advantage at their expense
consumers or quality of products is compromised

Ethical Challenges in Today’s World

Environmental Impact
- key area of business influence on society According to Pope Francis in his Ecumenical
“Evangeli Gaudium”:
- business implementing good environmental
policies to use energy more efficiently, lighten their - With the advancement in science and technology,
footprint and reduce internal costs which promote we have an economy of exclusion and inequality
positive image of the company
- In a system that idolizes increased profit,
everything standing in its way is pushed aside,
- initiatives often force competitors to take similar
which lurks a rejection of ethics
action for increased beneficial effect on
environment - Ethics is seen as a threat because it condemns
the manipulation and debasement of the person
and that ethics leads to a call for a committed
Impact on Business Managers response
- the manager is expected to act in the best interest
of the business, not in a manner that is contrary to
law or to his conscience
According to Pope Benedict XVI’s Encyclical
Caritas in Veritate:
- Humanity has a mission and the means to
transform the world in justice and love in human
relations, even in the social and economic field

- Market economics must be underpinned by

commitments to particular moral goods and certain
version of the human person if it is to serve rather
than to undermine humanity’s common good.

- The economy needs ETHICS in order to function

correctly, not an ethics which is people-oriented