Corporate Governance Principles & Benefits

What are the Objectives of the Lebanon Corporate Governance Task Force?
1. Assessing the current status and practice of CG in Lebanon. (see survey results, carried out in 2004)
2. Raising awareness and promoting transparency and ethics in the private sector.
3. Promote the implementation of better CG standards at the financial markets' level, the private level, and the public level.

What are the Principles of Corporate Governance? (OECD)
Principles I and II: The rights and equitable treatment of shareholders.
Principle III: The role of stakeholders in Corporate Governance.
Principle IV: Disclosure and Transparency.
Principle V: The responsibilities of the board.

Benefits of Adopting Corporate Governance (CG) Principles

Benefits to Companies: Compliance with CG principles can benefit the owners and managers of companies and increase transparency and disclosure by:
	Improving access to capital and financial markets;
	Help them survive in an increasingly competitive environment through mergers, acquisitions, partnerships, and risk reduction through asset diversification;
	Provide an exit policy and ensure a smooth inter-generational transfer of wealth and divestment of family assets, as well as reducing the chance for conflicts of interest to arise.
	Also, adopting good CG practices leads to a better system of internal control, thus leading to greater accountability and better profit margins.
	Good CG practices can pave the way for possible future growth, diversification, or a sale, including the ability to attract equity investors – from Lebanon and abroad – as well as reduce the cost of funding for Lebanese companies.
	Businesses seeking new funds often find themselves obliged to undertake serious corporate governance reforms at a high cost and upon the demand of outsiders, often in a time of crisis. When the foundations are already in place investors and potential partners will have more confidence in investing in or expanding the company’s operations.
Benefits to Shareholders:
	Good CG can provide the proper incentives for the board and management to pursue objectives that are in the interest of the company and shareholders, as well as facilitate effective monitoring.
	Better CG can also provide Shareholders with greater security on their investment.
	Better CG also ensures that shareholders are sufficiently informed on decisions concerning fundamental issues like amendments of statutes or articles of incorporation, etc.
Benefits to the Lebanese Economy:
	Empirical evidence and research conducted in recent years support the proposition that it pays to have good CG. It was found out that more than 84% of the global institutional investors are willing to pay a premium for the shares of a well-governed company over one considered poorly governed but with a comparable financial record.
	The adoption of CG principles - as good CG practice has already shown in other markets - can also play a role in increasing the corporate value of a company.

“If a country does not have a reputation for strong corporate governance practices, capital will flow elsewhere. If investors are not confident with the level of disclosure, capital will flow elsewhere. If a country opts for lax accounting and reporting standards, capital will flow elsewhere. All enterprises in that country suffer the consequences.” (Arthur Levitt, former chairman of the US Securities & Exchange Commission)