Chapter 2 Governance and Management

Master of Banking and Finance (Day 1st Batch)
Corporate Governance –
Principles, Policies and Practices
Chapter - 2 Governance and Management
Presented by Group 1
1. Aye Hnin Maw (Roll No-4)
2. Ei Ei Myat (Roll No-8)
3. Lei Yin Htwe (Roll No-37)
4. Lwin Mie Mie Htay (Roll No-38)
5. May Phyu Sin (Roll No-40)
6. Naw Tin Moe Moe Swe (Roll No-53)
7. Phoo Pwint Mon (Roll No-55)
8. Zayar Lynn (Roll No-85)
9. Zin Zin Wint Phyu Oo (Roll No-90)
Governance and management
Key Points
• definitions of corporate governance
• the scope of corporate governance
• the significance of constitutions for corporate
entities
• the difference between governance and
management
• the performance and conformance aspects of
governance
• alternative board structures
Definitions of corporate governance
Definitions vary according to the perspective of

the user
• operational
• relationship
• stakeholder
• financial economics
• societal
Operational Perspective
Corporate governance is the process by which
companies are directed and controlled
(Cadbury Report 1992 and OECD 1999)
Relationship Perspective
• is the relationship among various participants in
determining the direction and performance of
corporations. The primary participants are the
shareholders, the management and the board of
directors (Monks and Minow 2001)
• The corporate governance structure specifies the

distribution of rights and responsibilities among the
different participants in the organization – such as the
board, managers, shareholders and other stakeholders –
and lays down the rules and procedures for decision-
making (OECD 2002)
Stakeholder Perspective
Corporate governance is the process by which

corporations are made responsive to the
rights and wishes of stakeholders
(Demb and Neubauer, 1992)
Financial economics perspective
Corporate governance deals with the way

suppliers of finance assure themselves of
getting a return on their investment
(Shleifer and Vishny, 1997)
Societal Perspective
The whole set of legal, cultural, and institutional
arrangements that determine what public corporations
can do, who controls them, how control is exercised,
and how the risks and return from the activities they
undertake are allocated
(Blair, 1995)
Corporate governance is concerned with holding the
balance between economic and social goals and
between individual and communal goals.
(Cadbury, 2000)
Defining corporate governance ᾶ overall
Corporate governance is the exercise of power

over a corporate entities
(Tom Clarke, 2004)
The Scope of Corporate Governance
Governance and Management
Every corporate entity needs a constitution
The significance of Constitutions for corporate entities
Incorporating a joint stock limited liability company
Companies Registrar
Memorandum
– name of company
– objectives
– registered office
– share capital
– liability of shareholders limited
Articles of Association
– detailed rules for running the entity
– Table A
Types of limited liability company
• Private companies limited by shares
• Private companies limited by guarantee
• (Private unlimited companies)
• Public companies
– offer to general public
– in UK title XYZ Plc
– prospectus needed to offer shares
Other forms of incorporation
– Savings and loans association, building societies
– Co-operatives: supplier (Canada), customer (UK)
– State corporate entities
• Federal National Mortgage Association (Fannie Mae)
• QUANGOs Quasi-autonomous non-governmental
organisation
– Not for profit entities
e.g. Charities, sports associations, arts and cultural societies
Trust law, friendly societies law, charities law etc.
The difference between governance and management
The Essence of governance
Management involves an organizational hierarchy
Governance is different from management
The work of the board of

directors or other
governing body
the work of the

executive management
team
Management runs the business; the board

ensures that the business is well run and
running in the right direction
• Wherever management is separate from ownership or
membership, organizations need governing
– Public listed company – board of directors
– Small/medium company - board of directors
– Subsidiary/associate/joint venture – board
– Company limited by guarantee
– University, college – council, governing body
– Charity, club, hospital – board, committee
– Quasi-governmental bodies– council, committee, board
– Family firm
• Many corporate governance ideas are universal and can be applied
to any governing body
(contrast organizations where management and governance are in the same
hands – sole traders, small partnerships)
The basic board perspectives and processes
Framework for analyzing board activities
The conformance and performance aspects of a
board's work
Outward Looking
Inward Looking
Past and Present Future

Guidelines for a board strategy seminar or workshop
• Careful planning, well in advance, is essential

• Agree a time when all directors can attend
• Fix a location where all directors can participate
• Define the objectives clearly, for example:
– to explore the strategic situation
– to discuss the implications
– to consider alternative strategies
– to determine the next steps to be taken
(but not to take strategic decisions immediately)
• All directors must be fully informed about the objectives
• All directors should be supportive of the event
• All directors need briefing with relevant data in advance
Guidelines for a board strategy seminar or workshop
(continued)
• Do not hold the event in the board-room (the board-room culture is
decision orientated)
• Decide who is going to run the event (this need not be the chairman)
• Decide whether other people should be invited to participate
(senior executives to brief the directors, external experts
to give briefings, experts to contribute to process)
• At the first session establish the ground-rules
– this is not a board meeting to make decisions, but a freeranging exchange of
views and nsights
– strategic decisions will not be made
– call for imaginative contributions however unusual
– discourage negative comment ('we tried that - it won't work', 'no good for us')
• The output of the strategy session should be an agreed list of next actions,
and who is responsible for taking them and by when.
Alternative board structures
• All executive board
• Majority executive board
• Majority non-executive board
• All non-executive board
– Supervisory board
– Two-tier board
• Board structures around the world
• Some complex structures
The all-executive board
The majority-executive board
The majority non-executive board
Directors and board architecture
Directors and board architecture
Summary
• definitions of corporate governance
• the scope of corporate governance
• the significance of constitutions for corporate
entities
• the difference between governance and
management
• the performance and conformance aspects of
governance
• alternative board structures
Thanks for your kind attention
Thanks for your kind attention
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Chapter 2 Governance and Management

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Chapter 2 Governance and Management

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What are the different perspectives of defining corporate governance?

What are the basic board structures discussed?

Master of Banking and Finance (Day 1st Batch)

Definitions vary according to the perspective of

• The corporate governance structure specifies the

Corporate governance is the process by which

Corporate governance deals with the way

Corporate governance is the exercise of power

The work of the board of

the work of the

Management runs the business; the board

Past and Present Future

• Careful planning, well in advance, is essential

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