Roles and

Responsibilities of
Other Corporate
Governance
Participants
 Hello!
We Are :

LUTPI MAULANA MUALIP 11150000438

SALMAN ALFARIZI 111500004

2
I. LEGAL COUNSEL
The legal counsel role in corporate governance has
traditionally been to stand outside the corporate
structure and provide legal advice to ensure compliance
with applicable laws, rules, and regulations and to keep
the company's conduct within the boundaries of the law.
Thus, a lawyer's role in corporate governance has been
as the outside gatekeeper to promote legal corporate
behavior and to protect the interest of the company.

4
Legal counsel plays an important role in presenting and
analyzing relevant information, as well as providing valuable
advice to the company's board of directors, committees,
officers, and employees in effectively discharging their
assigned responsibilities. Corporate legal counsel should
coordinate their activities and serve as :
1. Counselors to the board, its committees, and directors in
carrying out their oversight responsibilities and fiduciary
duty
2. Advisors to management in participating in the negotiation,
development, process, documentation, and restoration of
material business transactions
3. Gatekeepers to ensure compliance with all applicable
regulations
4. Enforcement agents to evaluate risks associated with legal
issues and to prevent violation of securities laws and
engagement in corporate malfeasance, misconduct, and
fraudulent activities. 5
The Task Force of the ABA (American Bar Association)
suggests that :

The board of directors should establish a

practice of regular and executive session
meetings between the general counsel
and a committee of independent directors

The retained outside lawyers should

communicate with the employed inside
lawyers or general counsel and advise
them of material or potential violations of
applicable laws or duties.

6
 A. Communication With Legal Counsel

1. Communication between general counsel and independent

directors.
Legal counsel plays an important role in corporate governance by
providing professional advice to the company's directors, officers,
and other key employees, and ensuring that the company is in
compliance with all applicable regulations. The general counsel
usually works with senior management and reports to the CEO or
other senior executives. This established practice should require
the general counsel to
a. Thoroughly investigate relevant legal issues
b. Determine actual or potential violations of laws or breaches of
duty by the company or its directors, officers, employees, or
agents
c. Communicate these legal matters to the individuals involved
d. Take appropriate steps to correct the violations and prevent
their recurrences
e. Proceed up the corporate ladder to a committee of
independent directors or the entire board of directors in
instances in which the resolution could not previously be
achieved. 7
 A. Communication With Legal Counsel

2. Communication between outside counsel and general

counsel.
Public companies usually retain numerous outside
lawyers who are either selected by or work with the
company's directors, officers, and employees in providing
them with legal advice relevant to their activities. The
Task Force of the ABA recommends that the general
counsel,
a. Establish policies and procedures for outside lawyers
to communicate with the general counsel facts and
cases where an officer or employee is engaged in
material violations of law or fiduciary duty
b. Require outside lawyers provide important information
and analysis of legal matters to the general counsel
where appropriate action can be taken.

8
 B. Responsibilities Of Legal Counsel

The primary Ensure compliance with all applicable laws,

roles of regulations, and rules
corporate
legal counsel
are to
Provide legal advice and analysis regarding
legal compliance issues

Communicate material potential or ongoing violations

of law and breaches of fiduciary duties to the general
counsel and independent directors or a committee of
independent directors.
9
When an attorney becomes
aware of violations, the attorney
must immediately report the
matter to the chief legal officer
(CLO), both CLO and CEO, or
qualified legal compliance
committee (if it exists). The
reporting attorney may ultimately
report the violations to the audit
committee or another committee
consisting solely of independent
directors on unsatisfactory
responses from either the CEO or
the CLO.
10
If the reporting attorney does not receive a satisfactory response within a reasonable
time period, then the attorney must explain the concerns to the CLO and CFO, or
their equivalents, and then take the matter up the ladder as follows :

The audit committee

If there is no audit committee, to another committee of the board of

directors that is composed solely of independent directors

If there is no such committee, to the board of directors

If the reporting attorney was discharged from employment or a retainer as a

result of making such a report, the attorney may notify the board of directors or
its representative in the audit committee.

11
 II. FINANCIAL ADVISORS

Financial advisors, through their discretionary authority to manage

investments on behalf of their clients (investors) and participate in
proxy voting, play an important role in corporate governance.
Investment advisors are required to exercise due diligence,
maintain objectivity, and service their clients to the best of their
ability. Conflicts of interest may arise when the investment
advisors have personal or business relationships with the
company, its directors, or participants in proxy contents.

12
A. Securities Analysts

Unlike other professionals, such as accountants and lawyers

who are either hired or retained by companies, securities
analysts are hired by brokerage firms to analyze financial
performance of the corporations they follow, assess the
quality of the company as an investment, and make
recommendations for investment opportunities based on their
analysis.

The global Association for Investment Management and

Research (AIMR) and the National Investor Relations Institute
have jointly proposed ethical guidelines governing the
relationship between public companies and their securities
analysts.

13
Corporations, on the other hand, must not :

Discriminate among analysts

based on their research and
recommendations

Withhold relevant information

from analysts or deny access to
the company's representatives
to influence their research

Exert pressure on analysts via

other business relationships,
including investment banking.
14
The proposed guidelines require analysts to
refrain from any conflicts of interest with
companies they cover. The proposed
guidelines address that analyst-compensated
research is appropriate when :

1. Companies engage qualified, competent,

and objective analysts
2. Analysts fully disclose in their research
report the nature and extent of the
compensation received.
15
The guidelines provide five standards of best practices governing the relationship
between corporations and their analysts. The standards are :

STANDARD I: INFORMATION FLOW

Analysts, investors, and public companies must not disrupt or threaten to disrupt
1. the free flow of information between corporations, investors, and analysts in any
manners that inappropriately influence the behavior of those with whom they are
communicating.

STANDARD II: ANALYST CONDUCT

Analysts must conduct their research and recommendations with utmost objectivity,
independence, fairness, and unbiased opinion by :
1. issuing objective research and recommendations that have a reasonable bias and
sufficient evidence supported by thorough, diligent, and appropriate investigation
2. 2. differentiating between fact and opinion
3. ensuring the transparency and completeness of the information presented in their
reports
4. engaging in no bias or threat to use their research reports or recommendations to
improve their relationship with the corporations they cover. 16
 3. Standard III: Corporate Communication And Access
Corporation Must
Provide access to the company's management,
officers, and other knowledgeable officials to
qualified persons or entities, including analysts
and investors
Establish and adhere to policies that address how
the company defines access, prioritizes requests
for access or information, and responds to each
request, and under what circumstances and to
whom different types or levels of access will be
granted.
Corporation Must Not
Discriminate among recipients of information
disclosed based on the recipient's prior research,
recommendations, earnings estimates, conclusions,
or opinions
Deny or threaten to deny information or access to
company representatives to influence the research
recommendations or actions of investment
professionals and analysts
Influence the research, recommendations, or
actions of analysts or investment professionals by
exerting pressure through other business
relationships.
17
The guidelines provide five standards of best practices governing the relationship
between corporations and their analysts. The standards are :

STANDARD IV: REVIEWING ANALYST REPORTS OR MODELS

Analysts, prior to the publication of their reports, may request that corporations
4. review for factual accuracy only those portions of the research report that do not
contain analysts' conclusions, recommendations, valuations, or price targets.
Corporations may also comment on historical or forward-looking information that is
already in the public domain.

STANDARD V: ISSUER-PAID RESEARCH REPORTS

Analysts who engage in research paid by corporations must :
1. Only accept cash compensation
5. 2. Not accept any compensation contingent
3. Disclose in the report
4. Certify that the analysis or recommendations in the report represent the true
opinion
18
 III. INVESTMENT BANKS

Investment banks have been criticized for their involvement in reported financial
scandals. Several investment banks that were once the major players in providing
financial advice and financing Enron's operations, including J.P. Morgan Chase & Co.;
Toronto-Dominion Bank; Citigroup, Inc.; Deutsche Bank AG; Merrill Lynch & Co.;
Barclays Bank PLC; and Credit Suisse Group are now being sued by Enron for
helping it hide liabilities and inflate earnings. Enron filed lawsuits against these banks,
contending that the banks could have prevented the company's collapse if they had
not aided and abetted fraud, and is now settling its lawsuits with them. Enron
shareholders are seeking damages from Merrill Lynch & Co. on the grounds that
investment banks played key roles in Enron's scheme to defraud.18 For example, J.P.
Whoa!
Morgan Chase & Co. That’s a big
paid $350 number,
million aren’t
in cash and droppedyou
$660proud?
million in claims
against the company, whereas Toronto-Dominion paid $60 million in cash and
dropped $60 million of its claims. These investment banks also settled for several
billion dollars with Enron shareholders. Several investment banks had lawsuits settled
against them alleging their engagement in the Enron debacle. 19
Thank You!
Any questions?

20