Corporate Governance



and liabilities distinct from those of its members. • Characteristics of corporation are PCV 2 . privileges. need for greater number of investors to support larger firms and acceptance of private ownership of private property as a social norm .Corporation • American Heritage Dictionary defines corporation as: • “A body of persons granted a charter legally recognizing them as separate entity having its own rights.” • The economy of scale and mass production. have led to the evolution of Corporations.

• Characteristics of corporations are Limited liability.superiority of civil structure. holding purchasing power. success and fulfillment. Expectations of society. • Purposes of Corporations are. Legal Personality and Centralized management. Identity as a moral person influencing structure and policies.Characteristics & Purpose of Corprn.Human Satisfaction. Needs of Security. Efficiency and Efficacy. Mobility and flexibility. -. Transferability of stakes in stock. Social Structure. PCV 3 . Expectations of market .

PCV 4 . going there. Governance • External Focus • Governance assumes Open systems • Concerns with where the Co.Corporate Governance & Corporate Management • Corp. is going • Strategy Oriented. • Corporate Management • Internal Focus • Management assumes a closed system • Task Oriented • Concerned with Co.

• Rise in hostile activities of Predators (takeovers). • Need for Restructuring of Boards.Principles of Good Governance • Corporate Governance addresses three Issues: • Ethical issues. PCV 5 . • Importance of Institutional Investors. Accountability issues. • Other issues are being seen as needed to be addressed by Corporate Governance are: • Growth of Private Companies. • Changes in Auditing Practices. • Magnitude and Complexity of Corporate Groups. • Insider Trading. • Litigation against Directors. Efficiency issues.

Could I permit everyone to take the same action? • Justice – Will the least advantaged amongst us be treated as the worst? • Liberty – Will this reduce our opportunities for free . informed choice? PCV 6 .Basic Reasoning in Analysis of Issues • Beneficiency – Who is going to be hurt and how badly. • Consistency.

Japanese Model.Theories of Corporate Governance • Stewardship theory– Monitoring only to curtail the misconduct of human working in corporations (co. • Agency theory– Agent/ Manager will maximize long term owner value. trust-worthiness). PCV 7 . • There are three main models on corporate governance– Anglo-American model. German model. Agents can’t be trusted and should be monitored and controlled to follow set policies. law.

Anglo-American model Board of Directors (Supervises) & (appoints) Shareholders (Elect). Creditors Managers Manage the Company Stakeholders Legal System PCV 8 .

German Model Supervising Board Appoints1/2 Rest ½ by Employees &Labor unions Management Board Shareholders own including Labor Relation Director Independently Runs day to day working COMPANY PCV 9 .

monitors acts in Emergency.Banks . .Loans President consults Executive Management (Primary BOD) Managers Company PCV 10 .JAPANESE MODEL Supervising Board (Including President) Ratifies President’s decisions Provides managers Shareholders Appoint own.

Thank You ! PCV 11 .

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