LAKE ROAD PTA SCHOOL

Corporate Governance Workshop 21st April 2012

Lake Road School, Lusaka, Zambia

Introduction to Corporate Governance Presenter: Chabuka J. Kawesha [Dr] Member – Institute of Directors [IOD]

Head – Corporate Communications & Government Relations, AirtelBoard Chairman, Pensions and Insurance Authority [PIA]Board of Governors Member – Policy Monitoring and Research Centre [PMRC]Vice President - South, Zambia Association of Chambers of Commerce and Industry [ZACCI] Chairperson - Financial Sector Development Plan [FSDP] Payment Systems Working Group, Bank of ZambiaMember - Digital Migration National Task Force [DMNTF], Ministry of Information and Broadcasting Services [MIBS] Member - E-Government Implementation Steering Committee, Ministry of Communications & Transport [MCT]Civil & Commercial Mediator [South Africa & UK] / Court Annexed Mediator [Zambia]

Corporate Governance

What is Corporate Governance?

Why Corporate Governance ?

Focus of Presentation

Recall and improve our understanding of corporate governance and board directors’ responsibilities

Share the competencies directors and management require to implement responsible corporate governance practices

Share director experiences and build networkswith peers

Goals of Presentation

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“Corporate governance is the systemby which companies are directed and controlled….”

Sir Adrian Cadbury, UK, 1992

“Corporate governance refers to the structures and processes for the

direction and control of companies.”

IFC

What is Corporate Governance?

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For efficiency – Compete, Job creation For probity [Honesty, Integrity, Honor] – Investor

confidence & assurance With responsibility – Address legitimate concerns Both transparent and accountable –Strong economy

“A skilled, predominantly independent and well-organized board of directors would make it possible to set the right strategy of the company and properly oversee its

management’s performance.” IFC

Corporate Governance Means Leadership

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The interest in the systematic way in which companies, and other Organisations are directed and controlled is relatively recent.

It was stimulated in the first place by concerns about fraud and later by the failure to correct evident managerial incompetence. Recently, there has been more concern to facilitate investment and capital flows.

The last 20 odd years have seen a proliferation of corporate scandals and corporate failures all over the world including Zambia.

Most of these failures have been traced to either the collapse or the non existence of good corporate governance practices in the affected organizations.

Here are some examples both from the Zambian scenario as well as the international corporate world.

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Why Corporate Governance ?

1. Bank of Credit and Commerce Int’l, BCCI

2. Meridian Bank 3. Commerce Bank

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4. Prudence Bank5. Zambia Airways6. Agriflora7. Enron & 8. WorldCom

Thus the focus on Corporate Governance achieved in the last 20 odd years has put the matter of Corporate Governance on the agenda of boards of directors around the world. TOYOTA 2010 ! 8m car recalls ???

Corporate Governance has become universal because of its importance to building investor confidence and strong capital markets across the world.

Why Corporate Governance ?

Agency And Stewardship

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Corporate Governance issues arise from the roles of agency and stewardship

Agency – Involves transfer of capital from shareholders

Stewardship – Directors’ role as guardians of the company’s assets

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A Company’s Corporate Governance System

Capital will flow elsewhere if a Country:

◦ Does not have a reputation for strong corporate governance practices

◦ Exhibits Bad governance /Lack of Governance prevails

◦ Investors are not confident of the level of disclosure

◦ Opts for lax accounting and reporting standards

◦ Weak regulatory governance

◦ Demonstrates a clear absence of regulatory transparency

Strong Corporate Governance attracts Investors

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Strong commitment to corporate governance reforms

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The five [5] key elements ofgood corporate governance

Five [5]Elements of Corporate Governance

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Accountability◦ Management to Board◦ Board to Shareholders◦ Public & Shareholder confidence

Fairness◦ Protect shareholders’ rights◦ Regulatory transparency

Transparency ◦ Timely & accurate disclosure◦ Regulatory transparency◦ International Best Practises [IBP]

Responsibility ◦ Recognise stakeholders’ rights◦ Strong regime of zero regulatory capture

Pillars Of Corporate Governance

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Corporate Governance

is essentially

about leadership

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Honesty Transparency Integrity Openness Trustworthiness Respect Truthfulness Responsibility

Ethical Values

It is Important to recall &

uphold ethical values

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Corporate Governance System

“If management is about running business, governance is about seeing that it is run properly. All companies need governing as well as managing.” Prof. Bob Tricker, 1984

Competing Tensions

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“An effective system of corporate governance must strive tochannel the self-interest of managers, directors and the

advisorsupon whom they rely into alignment with the corporate,

shareholderand public interest.”

Ira MillsteinSenior Partner, Weil Gotshal & Menges, LLPSenior Associate Dean, Corporate Governance, Yale School of ManagementChair Emeritus, the Forum’s Private Sector Advisory Group

Aligning Corporate, Shareowner, Public Interests

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Ensuring the basis for an effective corporate governance framework

Rights of shareowners and key ownership functions

Equitable treatment of shareowners Role of stakeholders in corporate governance Disclosure and transparency Board responsibilities

OECD - Organization for Economic Co-operation and Development

OECD Principles

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Companies / Institutions with good governance:

Have better access to capital Command a premium from investors Improve oversight, monitoring Perform better operationally/financially Ensure effective decision-making Draws regulatory confidence [In case of

Public institutions]

The Business Case For Corporate Governance

The Five Key Elements & the Business Case for Corporate Governance

Board commitment The board discusses corporate governance issues and has created corporate governance committee The company has a corporate governance champion A corporate governance improvement plan has been created Appropriate resources are committed Policies and procedures have been formalized and distributed to relevant staff A corporate governance code has been developed The company is publicly recognized as a corporate governance leader

Good board practices Clearly defined roles and authorities Duties and responsibilities of directors

understood Board is well structured Appropriate composition and mix of skills Appropriate board procedures Director remuneration in-line with best practice

Board self-evaluation and training conducted

Transparent disclosure Financial information disclosed Non-financial information disclosed Financials prepared according to IFRS High-quality annual report published Web-based disclosure

Well defined shareowner rights Minority shareowner rights are formalized Well-organized general assembly conducted Policy on related-party transactions Policy on extraordinary transactions Clearly defined and explicit dividend policy

Control environment Independent audit committee established Risk-management framework present Internal control procedures Internal audit function Independent external auditor conducts audits Management information systems established Compliance function established

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Globalization: The knowledge economy Governance paradigm shift: Neo-liberalization Technological change, including:

◦ Digitalization and convergence Global institutional pressures, including:

◦ Increased role of supranational institutions◦ MDG commitments

Economic pressures, including:◦ Need to attract capital investment in Education sector◦ Increase in Private schools◦ Demand for new services

Political pressures, including:◦ Zambia – Social and political transformation

Education Evolution

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Stakeholder Issues

Employees Bribery, corruption

Customers Gifts, entertainment, Regulatory capture

Suppliers Conflicts of Interest

Community Confidential information

Shareowners Use of company assets

Stakeholder, Issues Focus

Accordingly, Lakeroad PTA School should continuously review all the currently installed instruments of Corporate Governance in the Company and ensure that you remain up-to-date. These should include the following areas amongst others:

* Composition of Boards of Directors and Management

* Composition and responsibilities of Committees of the Board.

* The Organisation’s Corporate Governance Code of Conduct

* The Organisation’s Corporate Values* Maintain membership of the Institute of

Directors of Zambia.22

Conclusion

Citations / References

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1. Global Corporate Governance Forum2. Institute of Directors (IOD), Zambia3. International Finance Corporation (IFC)4. OECD - Organization for Economic Co-operation and Development

Contact me:http://www.chabukakawesha.webs.com

Tel: +260 977 770069 /8981000

Thank you