Explain the principle & important elements of Corporate Governance?

Elements of Good Corporate Governance

1. Role & Power of Board:

The foremost requirement of good governance is the clear identification of

power, roles, responsibilities accountability of Board, CEO, Chairman of
Board. The role of Board should be clearly documented in a Board charter.

2. Management Environment:

Management Environment includes setting up clear objectives & appropriate

ethical framework, establishing due processes, providing transparency &
accountability.

3. Board Skills:

To be able to undertake its function effectively & efficiently the Board must
possess the necessary blend of qualities, skills, knowledge & experience.

4. Board Appointments:

To see that most competence persons are appointed in the Board. All the
directors should be provided with a letter of appointment setting out in detail
their duties & responsibilities.

5. Independent Board:

Independent Board is essential for sound Corporate Governance. This goal

may be achieved by associating sufficient number of independent directors
with the Board.

6. Board Resources:

Board members should have sufficient resources to enable them to discharge

their duties effectively. It includes an access for director to independent legal
& professional advice at the company’s expense. The cost of supporting the
Board should be transparent & reported.

7. Board Induction & Training:

 Directors must have a board understanding of the area of operation of the
company’s business, corporate strategy and challenges being faced by the
board. Attendance at professional development programs is essential to
ensure that the Directors remain present at all the programs.

8. Code of conduct:

It is essential that the organizations explicitly prescribed norms of ethical

practices & code of conduct are communicated to all stakeholders & are
clearly understood & followed by each member of the organization.

9. Financial & Operational Reporting:

The Board requires comprehensive, regular, reliable, timely, correct &

relevant information in a form & of a quality that is appropriate to discharge
its function of monitoring corporate performance.
1. CONCEPT OF CORPORATE GOVERNANCE RATING (CGR)

The CGR is meant to indicate the extent to which a company

adopts and follows such practices and conventions that would provide
its stakeholders an assurance on the quality of Corporate Governance
practices.

The CGR would indicate ICRA’s current opinion on the relative

level to which an organization accepts and follows the codes and
guidelines of Corporate Governance Practices.
2. FEATURES OF CORPORATE GOVERNANCE RATING (CGR)

1. It is mandate driven, not unsolicited

2. It is public rating-disclosed only on acceptance

3. Confidential rating-Company may accept and disclose only to select

entities

4. It is accepted ratings subject to regular surveillance

5. It has exist option with a notice of 1 year

3. IMPORTANCE OF CGR

1. CGR assists corporate to develop a credible opinion on its

management quality and responsiveness towards the interests of all its
financial stakeholders.

2. Improved perception of investors may in turn influence its valuation

and facilitate rising of funds at favourable terms.

3. Though CGR is not an indicator of statutory compliance, a higher

CGR rating may also improve the comfort level of the statutory
authorities and regulators.

4. It can also be used as a check to determine the relative standing of the

company with respect to the benchmarks of best corporate practices in
the industry.