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Corporate Governance

Corporate Governance

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Published by aj_mania21

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Categories:Types, Business/Law
Published by: aj_mania21 on Mar 25, 2010
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08/13/2012

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Introduction
Good Corporate Governance practices are important to encourage investment in acountry. Companies in global economy, where access to capital markets is in the interestof economy, assume greater significance. While the report of Kumar Mangalam Birlacommittee on Corporate Governance opined that a strong Corporate Governance was a prerequisite for the growth of capital market and was an important instrument of investor  protection, studies of various companies the world over revealed that markets andinvestors did take notice of well governed companies, responded positively to them andrewarded such companies with higher valuations as reflected in stock prices. GoodCorporate Governance leads to the efficiency of a business enterprise, to the creation of wealth of stakeholders and to the countries economy. The need is for the entire corporateworld to follow the principles of Corporate Governance.There is to need to monitor the functioning of Corporates for guarding theinterest of investors and creditors. With increasing awareness and access to information,investors do not solely depend upon regulators to protect them. They are conscious of their rights and strive to maximize their wealth, so does a company. The key differences,with everything else being common, will be the ability to create self driven, self-accessed, self-regulated organization with a conscience. This is ultimately all aboutCorporate Governance in India and elsewhere.Also the Satyam scandal has allowed us to look at the fundamental aspects of Corporate Governance—on whose behalf the company is governed, and how we candistribute power to ensure the longevity and effectiveness of the institution
What is Corporate Governance?
“Corporate Governance is the system by which companies are directed andcontrolled…” – 
Cadbury Report (UK), 1992
“…to do with Power and Accountability: who exercises power, on behalf of whom, how the exercise of power is controlled.”Sir Adrian Cadbury, in
 
 Reflections on Corporate Governance, Ernest Sykes Memorial Lecture, 1993 
A Canadian Definition
“…the process and structure to direct and manage the business and affairs of thecorporation with the objective of enhancing shareholder value, which includesensuring the financial viability of the business….” – 
Where were the Directors? Guidelines for Improved Corporate Governance in Canada, TSE, 1994 
 
An OECD Definition
 “Corporate governance involves a set of relationships between a company’smanagement, its board, its shareholders and other stakeholders also the structure
 
through which objectives of the company are set, and the means of attaining thoseobjectives and monitoring performance are determined.” – 
 Preamble to the OECD Principles of CorporateGovernance, 2004 
 
An Indian Definition
“…fundamental objective of corporate governance is the ‘enhancement of thelong-term shareholder value while at the same time protecting the interests of other stakeholders.” – 
 SEBI (Kumar Mangalam Birla) Report on CorporateGovernance, January, 2000
A Gandhian Definition
 –Trusteeship obligations inherent in company operations, where assets andresources are pooled and entrusted to the managers for optimal utilization in thestakeholders’ interests. 
Some Further Definitions
Corporate governance is essentially about leadership: –leadership for efficiency; –leadership for probity; –leadership with responsibility; and –leadership which is transparent and which is accountable. 
And according to me
Corporate Governance is:System of laws, regulations and a practice, which promotes enterprise, accelerates performance and ensures accountability.OR It may also be defined as a system of structuring, operating and controlling acompany.
 
Genesis of Governance
One may govern life in accordance with the revealed truth as one sees it or natural law or a simple percept of not treating others as just ends, or in the pursuit of the good life of contemplation prized by Aristotle. One may believe that morality lies in doing the bestone can do for oneself and one’s children and giving something back to the society, whenone can buy money or time. One may also think that morality is simply being responsiblefor one’s actions, not harming others, and when one can compensate people for their painand when one cannot. One may think that morality is simply doing whatever produces thegreatest good for the greatest number; others may believe that morality is nothing morethan maximizing one’s wealth. One may believe any of these things has a moral compassto direct one’s daily life. One should come to the realization that sometimes the ends donot justify the means and sometimes the ends themselves are not pursuing. But acompany/corporation has one end in mind. Corporations have nothing called systems or  beliefs. The result is that corporations are able to act without morality or accountability,for they are formed for that one purpose: To maximize pecuniary shareholder’s value.Therefore, to maintain the sanctity of a corporate self, the corporations self, thecorporations are required to follow a moral and ethical suit that has become more pronounced in the present scenario, and has indeed exceeded the axiom of wealthmaximization. 
Corporate G

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