Corporate Governance
Corporate Governance
Corporate Governance
Sanati Dode Fam (Sadaf) Co. is a knowledge-based company implementing the six principles of the Organization for Economic Cooperation and Development (OECD). It has implemented the general provisions of which, among them, it is possible to point out the formation of the necessary specialized committees, the drafting of certain charters, etc. It is worth noting that corporate governance is a set of methods that defines the relationships between shareholders, board members, and company management and affects how the company functions. Corporate governance provides a structure through which the company’s goals, the means to achieve those goals, and how to monitor the company’s performance are determined.
The Six Principles of Corporate Governance
1. Creating the necessary infrastructure for the implementation of effective corporate governance
2. Protecting the rights of major and partial shareholders
3. Treat all shareholders equally
4. Attention to the role of stakeholders in corporate governance
5. Transparency and disclosure of information
6. Determining the responsibilities of the board of directors
What are the Corporate Governance Guidelines?
To answer the corporate governance directive question, it is essential to clearly define corporate governance and the guidelines set forth by stock exchange authorities. Additionally, it is crucial to disseminate the content of articles 2 and 3 from the corporate governance guidelines of issuers registered with the Securities and Exchange Organization. These guidelines were communicated to relevant institutions in December 2022, resulting in the annulment of procedures established in 2018.
The objective of corporate governance encompasses the relationships among various stakeholders within a company, including the manager, board of directors, shareholders, and other interested parties. It facilitates the establishment of a framework that serves as a means to pursue and attain the company’s objectives. This framework guides progress towards the company’s goals and oversees its performance. Corporate governance is a methodical and progressive procedure that ultimately contributes to enhancing and sustaining the company’s performance and overall excellence.
Stock issuers are companies whose securities have been admitted to the stock exchange by searching for their symbol on the codal.ir publishers’ comprehensive system site and viewing their status, you can see their acceptance into the stock exchange.
The head of the corporate governance directive stipulates: “To protect the rights of investors, prevent violations and organize and develop a transparent and fair securities market, according to clauses 2, 8, 11 and 18 of Article 7 of the Securities Market Act of the Islamic Republic of Iran. Approved 2005), corporate governance guidelines were approved.”
Article 2 of the second chapter of the directive stipulates, respectively: “The purpose of the principles of corporate governance is to assist policymakers in evaluating and improving the legal, regulatory and institutional framework for corporate governance to support the effectiveness, efficiency, sustainable growth, and financial stability of the company.”
Article 3 of the same directive also stipulates: “The board of directors must take action regarding the creation, continuation, and strengthening of effective mechanisms to obtain reasonable assurance of the realization of the principles of corporate governance, as described in this directive. For this purpose, the actions taken should be reflected in a separate chapter in the activity report of the board of directors and presented to the shareholders in the ordinary general meeting.
According to the second and third paragraphs of the article and the mentioned materials, in response to the question, what are the guidelines for corporate governance? The corporate governance directive is a directive that is approved and communicated by the stock exchange organization for stock exchange issuers and trusted auditing institutions of this organization.
Corporate governance aims to safeguard the interests of investors, deter infractions, and assist policymakers in assessing and enhancing the legal, regulatory, and institutional framework governing corporate governance. It ensures the highest level of protection for the rights of investors, shareholders, and the issuing company while promoting transparency and fairness in the securities market.
Advantages of Employing Corporate Governance Principles for Organizations
Adhering to corporate governance guidelines yields several advantages for company proprietors and executives:
- Risk Mitigation and Management
- Enhancing Organizational Resilience
- Facilitating Mergers, Acquisitions, and Partnerships
- Facilitating Access to Financial and Investment Markets
- Providing a Framework for Business Strategies
- Enabling Ownership Transfer and Capital Exits
Benefits of Using Corporate Governance Guidelines for Shareholders
Shareholders of both listed and over-the-counter companies stand to gain several benefits from effective corporate governance, which include:
- Streamlining Performance Oversight of Managers and Companies
- Safeguarding Shareholders’ Capital
- Providing Financial Incentives for the Board of Directors
- Facilitating the Pursuit and Attainment of Financial Benefits
- Simplifying Oversight of the Company’s Financial Decisions and Events
Rules and Guidelines of Corporate Governance
Key regulations and guidelines about corporate governance include:
Following the second chapter of the corporate governance guidelines, a company must establish a practical corporate governance framework. This framework serves the dual purpose of safeguarding shareholders’ rights and ensuring equitable treatment. Additionally, it aims to facilitate shareholders in exercising their rights and upholds the interests of beneficiaries. The corporate governance framework strives to establish transparent incentives throughout the investment chain, promoting sound corporate governance among stock market participants.
Corporate governance must oversee the adherence to principles and mechanisms across affiliated subsidiaries. This oversight extends to all significant company matters, encompassing financial and operational affairs and the timely and accurate disclosure of cash flows. Article 39 of the directive stipulates that the company must disclose expenses and furnish a report on the board of directors’ activities during the ordinary general assembly.
As stated in Note 4 of Article 7 and further reiterated in Note 5, the board of directors must engage an official expert appointed by the competent legal authorities for critical transactions involving related parties. It pertains to transactions involving “tangible fixed assets, intangible assets, and investments.” The board must promptly disclose pertinent details of the transaction to the public, including the nature of the transaction, its pricing, the methodology used to determine the price, and the rationale behind opting not to engage non-affiliated parties for the marketing.
Building on the previous point and referring to Note 5, Article 7 of the Corporate Governance Guidelines, the audit committee is tasked with providing an evaluation of related party transactions. This assessment encompasses considerations of fairness, comprehensive disclosure, and the exclusion of the beneficial manager from participating in the voting process.
Given the extensive nature of corporate governance guidelines and regulations, a downloadable PDF file containing the full text of the policies will be provided for further reference.