Page 4 - Al-Rashed Newsletter June 19

POTPOURRI
CORPORATE GOVERNANCE

Corporate governance is the system by which companies are directed and
controlled. It needs no reiteration that the Boards are responsible for the
governance of their companies, since shareholders appoint the board purely for that
purpose. The board is supposed to set the company’s strategic goals, provide a
leadership to execute these goals, review the management of the business, and
report the progress to shareholders. In a nutshell, corporate governance is about
ensuring that the company management is acting in the larger interests of
shareholders. In fact, a key facet of corporate governance is the role that
independent directors on the board play and how they act as a sounding board
when the promoter group is straying from its core objective.

Why corporate governance is very important today?
Corporate governance is the way a corporation polices itself. In short, it is a method
of governing the company like a sovereign state, instating its own customs, policies
and laws to its employees from the highest to the lowest levels. Corporate
governance is intended to increase the accountability of your company and to avoid
massive disasters before they occur. Failed energy giant Enron in the US & Satyam
Computers in India, and its bankrupt employees and shareholders, is a prime
argument for the importance of solid corporate governance. Well-executed
corporate governance should be similar to a police department's internal affairs unit,
weeding out and eliminating problems with extreme prejudice. A company can also
hold meetings with internal members, such as shareholders and debtholders - as
well as suppliers, customers and community leaders, to address the request and
needs of the affected parties.