Theoretical Approach for Corporate Governance
Theoretical Approach for Corporate Governance
What is corporate governance?
Definition
Governance is the term used to decide the role of person entrusted with the supervision, control and direction of an entity.
Corporate Governance in Sri Lanka
In Sri Lanka the corporate Governance requirements are guided by “The Code of Best Practice on Corporate Governance” issued by the Institute of Charted Accountants of Sri Lanka (ICASL) and Securities and Exchange Commission of Sri Lanka(SEC).
Parties responsible for Corporate Governance
-Board of Directors
-Audit committee
-Remuneration committee
-Nomination committee
Above committee members are the people who are charged with corporate governance.
Audit Committee charter
The board should establish formal and transparent agreement for considering how they should select and apply accounting policies, financial reporting and internal control principle and maintaining an appropriate relationship with the company’s auditors.
Member
The Audit Committee will consist of minimum two independent Non-Executive Directors. Members will be appointed by the board, a major of whom will also be independent.
The chairman of the committee should be a Non-Executive Director.
Meetings
Audit committee meetings will be held not less than two times a year so as to enable the committee to undertaken its role effectively.
The Audit Committee will keep minutes of its meetings.
Disclosure
The name of directors (persons in the parent company’s committee in the case of a group company) comprising the Audit Committee should be disclosed Annual report.
The committee should disclose the determination of the independence of the auditors in the Annual Report.
The Annual Report should contain a report by the compliance by the company in relation to the above, during the period to which the Annual report relates.
Applicationof Corporate Governance to Lanka ORIX Leasing Company PLC
LOLC has today developed from a pioneering leasing company to a financial services provider, from a single entity to the holding company of a diversified conglomerate. LOLC has always endeavored to instill the essence of good corporate governance throughout