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Corporate governance

Corporate governance

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Published by: samrulezzz on May 21, 2010
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01/16/2011

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CORPORATE GOVERNANC E

BY, KISHNA K. SHAMSHEER MIDHUN MARK J. MAHENDRA LOKESH

05/21/10

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INTRODUCTION
Corporate governance is the system by which organisations are directed and controlled. The Corporate governance structure specifies the distribution of rights & responsibilities among different participants in the corporation,such as board,managers,shareholders, & other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs.By doing this, it also provides the structure through which the company objectives are set and the means of attaining those objectives and monitoring performance. FROM-Organisation from Economic Co-operation and Development (April 1999)
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DEFINATION

BY Catherwood, Corporate governance means that company manages its business in a manner that is accountable & responsible to the shareholders.In a wider interpretation,corporate governance includes company’s accountability to shareholders and other stakeholders such as employees,suppliers,customers and local community.

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NEED OF CORPORATE GOVERNANCE
 

  

The doubt of the effectiveness of company’s accountability to its shareholders. Need for extending corporate accountability to its employees,creditors,consumers & to society. Society’s expectations Hostile take-overs Complications of relationship of holding company & its subsidries.
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PRINCIPLES
   

Transparency Accountability Independence Reporting

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CORPORATE GOVERNANCE IN INDIA THE MECHANISM
 1. 2. 3. 4.

5. 6.
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There are six mechanism to ensure Corporate governance in our country. The Companies Act 1956 The SEBI Act 1992 A market for corporate control Participation of block shareholders in the governance of companies Audit and Code of conduct
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COMPANIES ACT 1956
  1.

2.

3. 4. 5.

To ensure and protect the rights and interests of stakeholders Confers legal rights on shareholders Vote on every resolution placed before an annual general meeting Elect directors who are responsible for specifying objectives & lying down policies Determine remuneration of directors & the CEO Removal of directors Take annual part in the annual general meetings
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CII CODE ON CORPORATE GOVERNANCE

CONSTITUTION OF THE BOARD Any listed Co. with a turnover of Rs.100 cr. & above should have independent, non executive directors, who should constitute at least 30% of the board if the chairman is a non-executive director & at least 50% of the Board if the chairman & M.D. is the same person
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continue d

Appointment of Directors No single person should hold directorship in more than 10 companies  AUDIT COMMITTEE Listed companies with a turnover of over Rs.100 cr should setup audit committee consisting of at least 3 members all drawn from a companies non-executive directors, who should have adequate knowledge of finance of company & basic company law

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SEBI CODE

1. 2. 3. 4. 5. 6. 7. 8.

To promote & rise the standards of corporate governance among the companies listed in NSE the SEBI appointed a committee on corporate governance under the chairmanship of Kumar Manglam Birla. Board of directors Audit Committee Remuneration of Directors Board Procedure Management Shareholders Report on corporate governance Compliance
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PATTERN OF EQUITY OWNERSHIP
Types of co. Director & relatives 8.1% Corporate Bodies 33.8% Private companies belonging to business houses 9.2%

Foreign

Financial institution 4.4%

Public

34.5%

Private stand 21.6% alone co.

18.5%

7.2%

3.1%

46.5%

Foreign co

0.8%

18.3% 13.8%

42.0% 43.3%

4.3% 1.7%

22.45 30.0%

Foreign stand 2.8% alone co.

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All

15.7%

23.8%

9.9%

3.5%

41.0%

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K. BIRLA MANDATORY COMMITTEE REPORT
The Board of every listed company shall have an optimum combination of executive & non executive directors with no less than 50% of the board comprising of non-executive directors

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RECOMENDATION
Companies must strictly comply with listing norms 2. Boards should meet atleast 4 times a year 3. Setting up of an audit committee having 3 non-executive directors,majority of them being independent. It should ensure that financial disclosures are correct,sufficient and credible 4.Persons of calibre should be inducted as independent directors & they must be capable of aking quality contribution to the company.
1.
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contin ued

5. A person can become director in a maximum of 10 companies 6.The board should delegate its power of share transfer to transfer against register 7.Disclosure of quarterly reports by companies should be mandatory 8.The use of postal ballot system in critical matters like change of companies name, objectives, corporate restructuring & further issue of shares through preferential allotment
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NON MANDATORY RECOMENDATION
Financial institutions are not permitted in to the Board except in the case of default or a potential default

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SUGGESTIONS AND REFERENCES
Dr. Surekha Shenoy  Corporate Governance By Devi Singh & Subhash Garg Corporate Governance By Colley, Doyle, Logan & Stetinus Principles & Practice of Management By T. N. Chhabra

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