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Corporate GovernanceEthics

andThe Role of CG Officer

Corporate Governance

Ethics

andThe Role of CG Officer

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 Areas Covered

Corporate Social Responsibility 

Reputation & Reputational Risk 

Role of Officer designated to look afterCorporate Governance

 Whistleblowing

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Concepts of CG

Openness, honesty and transparency 

Independence (of the Board)

 Accountability (of all persons holdingpower)

Responsibility 

Fairness

Reputation and reputational risk 

Social Responsibility 

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Reputation

Good reputation takes years to build.

Shades of reputation:

Products Management

Profits

Social posture

It takes just one incidence to destroy thereputation of a company.

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Reputational Risk 

 What can bring a company into disrepute?

 What is the price of disrepute?

Is it worth losing/keeping reputation?

 What if there is no direct potential of losing reputation?

Defending and Sustaining Reputation: Sustaining reputation is painstaking

Defending reputation may often be self-defeating.

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Code of Ethics

 Avoiding conflict of interest

Use / abuse of position, power or property 

Confidentiality  Fair dealing with all

Protection of company property 

Compliance with laws, rules Encouraging reporting of illegal or

unethical behavior.

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CSR and Reputation Risk 

Financial Implications:

Impact on market performance

Failure to get good employees

Cost of deflecting negative publicity 

Lower earnings / share price

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Shades of CSR 

Official posture and reality 

Spending more on publicizing CSR thanactually doing it.

Lip service / Strings attached Welfare

IPPR Report says most CSR is lip service /

ulterior motive based.

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Formulating CSR Policy 

Set a Code of Ethics outlining CSR Valuesto be upheld

Establish current position on CSR values

Discuss with relevant stakeholders

Employees

Pressure groups

Clients

Set up a system

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CSR Policy 

Devise CSR Policy 

Prescribe systems

Establish responsibility for each party  Set realistic strategies and targets

Keep all concerned informed

Monitor achievements

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Bench Marking in CSR 

 You do as much as others are doing.

Can any one set “minimums”? 

 Who ensures compliance? How to monitor compliance?

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Sustainability Report

Report on social, ethical, health andenvironmental policies.

More focused on environment (i.e.sustainability of the society) than any thing else.

Not a report on company’s sustainability (financial or otherwise).

Not yet mandatory in Pakistan.

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The Triple Bottom Line

Prescribed by Global Reporting Initiative:

Financial Performance

Impact on environment and naturalresources

Social benefits and costs

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Economic Indicators

Revenue

Earning

Dividend per share Sales Volume

Market Share

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Environmental Indicators

Global energy use

Global carbon dioxide emissions

Global non-recycled waste Global waste consumption

Company sites certified to ISO 14001

standards

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Public Sector

Commonwealth Association for CorporateGovernance (CACG) Guidelines:

Major or significant companies aregovernment owned.

Directors are political nominees, notindependent.

Severe shortage of able directors.

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 Whistleblowers

 Who is a whistleblower?

Connection of WB with CG

Honest and Malicious whistleblowers  Area of concern:

Employees (can) have access to all data

 Whistleblowers are punished, not rewarded Disregard as gripe

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 WB – Best Practice

Recognize the importance.

Set a procedure / prescribe channels

Involve non-executives

Confidentiality 

Legal Protection to whistleblowers

UK’s Public Interest Disclosure Act 1998 

Gagging clause in employment agreement

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Disclosure

Internal and External Disclosures

Good faith

No personal gain

Reasonableness

 Violation of law, rules of the company, injustice,financial malpractice, risk to public

Internal before external Laws have so far not been effective

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Recommended Guide on WB

Documented procedure

Named office to handle WB

Examples of what is or is not misconduct Consequences of false or malicious

allegations spelt out

External route also indicated Investigation procedure

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CG Officer

 Who:

CEO

Chairman, Board

CFO

COO

CS

Specially assigned officer

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Thank youDr Safdar A Butt