Professional Documents
Culture Documents
governance
GROUP - E
What is corporate
governance?
§
§ Corporate Governance is concerned with holding
the balance between economic and social goals
and between individual and communal goals.
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§ The corporate governance framework is there to
encourage the efficient use of resources and
equally to require accountability for the
stewardship of those resources.
§
§ The aim is to align as nearly as possible the
interests of individuals, corporations and
society
•
Cont…..
• The primary purpose of corporate governance is to
create wealth legally and ethically.
• This translates to bringing a high level of
satisfaction to five constituencies -- customers,
employees, investors, vendors and the society-at-
large.
• The raison d'être of every corporate body is to
ensure predictability, sustainability and
profitability of revenues year after year.
• - N R Narayana Murthy
•
Governance and
performance
• Good governance leads to good performance
• It creates an open and transparent system
• It improves communication and breaks down
systematic barriers to flow of information
• Good governance allows decision making
based on data. It reduces risk
• Good governance helps in creating a brand
and creates comfort for all stakeholders and
society
•
•
Issues in Corporate
Governance
• Asymmetry of power
• Asymmetry of information
• Interests of shareholders as residual owners
• Role of owner management
• Theory of separation of powers
• Division of corporate pie among stakeholders
•
Corporate Governance
Mechanisms
• Internal Governance Mechanisms
• Board of director
• Managerial incentive compensation
• Ownership concentration
• External Governance Mechanisms
• Market for Corporate Control
•
Mechanism of control
•
• Monitoring by the board of directors.
• Internal control procedures and internal auditors.
• Balance of power.
• Remuneration
Parties to Corporate
Governance
• Responsibilities.
• International Use.
• Structure.
• In the Media.
• CEO Search Firms.
•
Board of Directors
• Use of corporate property.
• Transaction with Company.
• Conflict of duties and interest.
• Proper purpose.
• Classification
Management
• Basic function of management.
• Formation of the business policy.
• How to implement policies and strategy.
• Where policies and strategies fit in the planning
process.
• Areas and categories and implementation of
management.
• Multi divisional management hierarchy.
•
Share holders
• The right to propose shareholder resolution.
• The right to share in distributions of the
company's income.
• The right to purchase new shares issued by the
company.
• The right to a company's assets during, a
liquidation of the company.
•
Corporate governance & firm
performance
•
ICSI National Award for Excellence in
Corporate Governance
Best Governed Companies
Benefits of Good Corporate
Governance
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Purpose of ethics
•
•
• Ethics are the guiding principles.
•
• Where the proposed business activity/ operation of
the company borders on the unknown, the
company needs to apply the ethics principle to
decide on the project.
•
•
• Ethics help make relationships mutually pleasant
and productive- imbibes a sense of community
among members- a sense of belongingness to
society.
Current status on corporate
governance
• Insistence on forms and structures
• Overarching regulations
• Regulatory overkill
• Lack of adequate number of strong, independent
directors
• Large liabilities for companies and officers
• Has the pendulum swung too far?
• For the first time in the decade-long history of the Index
of Economic Freedom, the U.S. is no longer among
the top ten “most free” countries
• Wall Street Journal and the Heritage Foundation “Index
of Economic Freedom”
•
Concluding remarks
• By and large, Indian listed companies have been legally
mandated to follow fairly strict standards of corporate
governance and disclosure
• Comparisons will show that the standards are far stronger
than all Asian countries, and in general stronger than most
OECD countries
• Indian corporate sector regulators and companies have been
quick to incorporate some of the best international
corporate governance and disclosure practices
• The need of the day is more training… of directors, audit
committee members and senior executives of companies
• The challenge is to design and sustain a system that imbibes
the spirit of corporate governance… and not merely the
letter of the law
•
THANK YOU