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Corporate Governance

By: Muhammad Faizan

Answer to Q1: I fully agree to the given statement that poor corporate governance leads to poor performance in the long run. And same is the case with the given company in the case study. They were going pretty well initially but over the last few years their performance decreased.

Answer to Q2: Major problems that a company is facing is the CEO-Chairman duality first. Because decision made were biased and were not giving positive wave to the companys performance. Over the years companys performance was declining, thus resulted in low profits at every year that passes by. Chairman had the most power. Most of the decisions were made by him actually. That resulted in weak independent committees. And the role of Chairmans family member in financial decision was not appreciable.

Answer to Q3: All the three committees i.e. executive committee, human and audit committees were ineffective. The role they played isnt worth mentioning, as they just approve things up suggested by the chairman of the company. Few members of board and committees were close friends and relatives to the chairman, which effects the independence of the boards members and results in poor performance. Overall the committees were ineffective.

Answer to Q4: Yes, I agree with the GM finance of the Care International Hospital as he rightly suggested to let the human, audit, and executive committees work independently so they can keep a check on management performance. And moreover, the decisions and policies will not be biased, and if all decisions are made independently then company performance will improve.

Answer to Q5: I think ABC Bank Ltd performance is pretty good. Because they took steps to improve the governance of the company as per notified by an investor. And I think they did care for stakeholders too, because they

were the one who asked the company to restructure the board and committees, which will benefit stakeholders.

Answer to Q6 Yes, definitely prof. Bilgramis report should be shared with ABC Bank and with other stakeholder because it is going to benefit both parties in future. Secondly, its their right to know what company is going through and why. Thirdly bank and stakeholder can make right decision on Election Day by choosing the right candidate for their company. Answer to Q7: The company must avoid the duality of CEO-Chairman because of duality performance of board is decreasing day-by-day. Similarly committees are not independent and cannot make decisions which are good for the company. Thus making them ineffective. Board is unable to keep a proper check on management which is resulting in high turnover in the company. So keeping two different persons CEOChairman should be the main concern.