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Coporate Goverance

Coporate Goverance

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Published by Ansu Mishra

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Published by: Ansu Mishra on Jun 09, 2009
Copyright:Attribution Non-commercial


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“Corporate governance is the system by which companies are directed and controlled….” 
Cadbury Report (UK) 1992
“Corporate governance deals with the ways in which suppliers of finance tocorporations assure themselves of getting a return on their investment.” 
 Shleifer and Vishny
Some further Definitions…!!!
Leadership for efficiency.
Leadership probity.
Leadership with responsibility.
Leadership which is transparent and accountable.
A Board Culture of Corporate Governance
business author GabrielleO'Donovan defines corporate governance as 'an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity and integrity. Sound corporate governance is reliant onexternal marketplace commitment and legislation, plus a healthy board culturewhich safeguards policies and processes'.O'Donovan goes on to say that 'the perceived quality of a company's corporategovernance can influence its share price as well as the cost of raising capital.Quality is determined by the financial markets, legislation and other externalmarket forces plus how policies and processes are implemented and how peopleare led. External forces are, to a large extent, outside the circle of control of any board. The internal environment is quite a different matter, and offers companiesthe opportunity to differentiate from competitors through their board culture. Todate, too much of corporate governance debate has centred on legislative policy, todeter fraudulent activities and transparency policy which misleads executives totreat the symptoms and not the cause.'
It is a system of structuring, operating and controlling a company with a view toachieve long term strategic goals to satisfy shareholders, creditors, employees,
customers and suppliers, and complying with the legal and regulatoryrequirements, apart from meeting environmental and local community needs.Report of SEBIcommittee (India) on Corporate Governance defines corporategovernance as the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trusteeson behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal & corporatefunds in the management of a company.” The definition is drawn from theGandhian principle of trusteeship and the Directive Principles of the IndianConstitution. Corporate Governance is viewed as ethics and a moral duty.
India Reports On Corporate Governance
1.Kumara Mangalam Birla Committee on CorporateGovernance (2000)
Naresh Chandra Committee on Corporate Governance(2002)
Narayana Murthy Committee onCorporateGovernance(2003)
Impact of Corporate Governance
The positive effect of good corporate governance on different stakeholdersultimately is a strengthened economy, and hence good corporate governance is atool for socio-economic development
1.Too much of power with few individual2.Large scale diversion of funds to associated companies& risky ventures3.Unfocussed business decisions leading to losses4.Preferential allotment of sweat equity at low prices
5.Spinning off profitable business operations tosubsidiary companies
Clause 49 – Corporate Governance
SEBI has advised all stock exchanges to amend theirlisting agreements by inserting new clause 49 whichdeals with good corporate governance practices tobe adopted by all listed private & public sector banks
Corporate governance implies that the companywould manage its affairs with diligence,transparency, responsibility and accountability, andwould maximize shareholder wealth.
Companies are needed to at least have policies andpractices in conformity with the requirementsstipulated under Clause 49 of the Listing Agreement
The company agrees to comply with thefollowings provision
Shareholders’/Investors’ GrievanceCommittee

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