Regulatory Compliance & Corporate Governance

ACKNOWLEDGEMENTS The Group would like to convey their sincere thanks to Professor for his unstinted support & guidance without which it would not have been possible for us to carry out the study. Page|2 of 31 . His valuable inputs on the subject ‘Legal Aspects of Management’ and deliberations in the class were knowledge enriching & facilitated in completing the project.

...................................................................... 6 The Evolution of Corporate Governance...................................................................................... 24 Dabur .............. 29 Conclusion .......... 4 What is Corporate Governance? ................................................................................................ 27 Toyota... 26 Tata Sons ...................... 18 Systemic Problem of Corporate Governance ............. 14 Corporate Governance in India .............................Contents Introduction .................................................................................................................................................................................... 9 International Corporate Governance ........................... 21 Best Corporate Experiences in Corporate Governance... 4 Structure of Corporate Governance ............................................................................................................................................................... 24 ONGC......... 31 Page|3 of 31 ............................................................................................................................................................................................................................................................................. 25 Royal Philips Electronics.................................................................................................................................. 19 Corporate Governance: Regulatory Compliance .... 24 Nokia........................................

) Parthasarathy. stakeholders. Year. procedures and rules governing the relationships between the shareholders. ethics. New Delhi> Corporate governance is all about the policies. Corporate governance governs the relationship among the many players involved (the stakeholders) and the goals for which the corporation is governed. The key elements of Corporate Governance principles include honesty. Publisher. ethics and disclosure.Biztantra.Introduction A country’s growth and progress.Biztantra. It consists of a set of processes. policies. openness. administered or controlled. Good Governance can help to create a healthy and effective development of the economy. and formal policies. the Company’s bylaws. <Swami (Dr.) Parthasarathy. customs. Corporate Governance is important for the economic health of Corporations and the Society in general. as defined by the applicable laws. accountability. Publisher. Primarily it is about managing top management. Mechanisms & Practice. its sustainability and consistency solely depend on the systematic approach and practice of good governance. policies. transparency. integrity. Page 3-4. Numerous countries have issued codes of Corporate Governance and the recommendations of these codes symbolize ‘Good Governance’ in the Corporation’s undoubted contribute towards increased transparency. customs. Mechanisms & Practice.2010. building in checks and balances to ensure that the senior executives pursue strategies that are in accordance with the corporate mission. the Corporate charter.2010. laws and institutions affecting the way of a corporation is directed. Corporate Governance – Principles. Corporate Governance has evolved and grown significantly as a burning issue in the last decade. responsibility. Directors and Managers in a company. New Delhi> What is Corporate Governance? Corporate Governance is the set of processes. Corporate Governance – Principles. morality. mutual respect and commitment to the Organisation. laws and institutions affecting the way a Corporation is directed or controlled. <Swami (Dr. Page|4 of 31 . Year. which in turn will provide equity and benefits to its shareholders. Page 3-4.

01. • • Reducing the risks normally faced by the company/ organization. <http://cab. principles and structure by which the business & affairs of the company are directed.edu/ethics/practicing/focusareas/. the then president of the World Bank has opined that corporate governance is about promoting corporate fairness.scu. 1999> <http://heritageinstitute.2010. 12.2011./ItiBose. • Ethics & Transparency are cardinals of Corporate Governance. Corporate Governance – Principles. regulators and society at large) • Harmonizing rights & interest of shareholders and stakeholders by continuous exercise of striking balance. managed and governed effectively.. employees. transparency and accountability. June 21.<www.11. Corporate Governance refers to the processes. customers. The ultimate goal is to enhance long term shareholder value by improving corporate governance and accountability.2011.pdf.2011. mechanism. Good Governance & Corporate Governance Page|5 of 31 . creditors.. Year.in/Lists/Knowledge%20Bank/Attachments/114/Corporate%20Governance. ppt. Page 3-4. 8:01 AM> Corporate Governance is a system by which companies are directed and controlled.Wolfensohn.12. <Quoted in Financial Times. 10:19 PM> The Integrity of corporations. Mechanisms & Practice. Publisher.com/governance/definitions. The objectives are• Protecting the long term interest and enhancing the values of shareholders and other stakeholders (viz. financial institutions and markets is particularly central to the health of economies & their stability. 22. <Swami (Dr.) Parthasarathy. bankers. New Delhi> J.org.htm.12.Biztantra. Responsibility to introduce and effectively implement Corporate Governance is exclusively of Board of Directors in a manner that it becomes way of organizational life and not merely written rules or regulations or code of ethics. 8:00 PM> Governance.

11. all of which would lead to enhanced accountability.11. wherever it is due. Corporate Governance is a way of life and not a set of rules.mcx-sx. <www.com/downloads/Corporate_Governance. Good Governance Good governance is about simplicity in processes combined with checks and balances. It is a way of life that necessitates taking into account the shareholders’ interest in every business decision. assignment of responsibilities and obligation.Governance Governance is not merely about ownership and control.pdf.org/T. 7:34 AM> Structure Governance The of Corporate Board of Directors Managers Corporate Governance structure specifies the relations and the distribution of rights and Shareholders Page|6 of 31 . 18.2011.ppt.2011. 25. Even an owner has to learn to govern.%20Mohandas%20Pai. while ensuring fairness to all stakeholders.%20V. Corporate Governance Corporate Governance encompasses commitment to values and to ethical business conduct to maximise shareholder values on a sustainable basis. clarity of roles. 9:21 PM> Poor Governance versus Good Corporate Governance Poor governance • Undermines integrity of corporations and discourages the use of public markets as a means to intermediate savings • Particularly the areas of transparency and disclosure have been a major factor behind instability in the financial markets across the globe Good corporate governance • • Essential pre-requisite for the integrity and credibility of capital market players Contributes to the development of a vibrant economy and robust capital markets <http://www.nfcgindia.

12.responsibilities among primarily three groups of participants i. 10:19 pm Performance Expectations of Stakeholders Page|7 of 31 . Publisher.edu/ethics/practicing/focusareas/. Mechanisms & Practice. <Swami (Dr.2011. Corporate Governance – Principles..2010. 12. New Delhi> www.scu. provides the structure through which the company objectives are set..) Parthasarathy.e. • • The Board of Directors Managers & • Shareholders The system spells out the rules & procedures for making decisions on Corporate Affairs./ItiBose. Corporate Governance helps in ensuring conditions whereby the Organisation’s Directors and Managers act in the larger interests of the Organisation and its shareholders and to ensure the means by which manager’s are held accountable to capital providers for use of assets.Biztantra. as well as the means of attaining and monitoring the performance of those objectives.pdf.Year.

Slide 4 <Corporate Governance Framework by Nadereh Chamlou. 6:20 AM> 4P’s of Corporate Governance Page|8 of 31 .2011.org. Magdi Iskande>.12.Biztantra.2010. Page 22.<Swami (Dr. 13.4.pps#383. Mechanisms & Practice. Corporate Governance – Principles. Publisher. Year.iirmworld. New Delhi> Corporate Governance Framework <http://www.in/ppt/yrkreddy.) Parthasarathy.

<Swami (Dr. 26. Publisher.) Parthasarathy. Business cannot run with only profits.com/.<http://lcgc. Corporate Governance – Principles. This is possible by Corporate Governance.2011.11.Biztantra.lifeforeveryone. New Delhi> The Evolution of Corporate Governance Page|9 of 31 . Mechanisms & Practice. where the people are formally either trained or helped to develop to work for a definite and defined purpose in applying the systematic processes consistently to give constant growth by better performance. 08:30 AM Corporate Governance can also be explained on the basis of 4P’s (People. but there must be recognition for human aspects too. Processes & Performance). Year. Page 27-32.2010. Corporate Governance has the integrated framework.

several corporate governance guidelines and regulations have been prepared in different parts of the world.UK and France (1997) Market Specific Principles. Page|10 of 31 .Global Corporate Governance Principles (1996) Market Specific Principles.Policy Statement on Corporate Governance (September 1997) Business Roundtable. Recommended that: (i) The boards of Directors should report on the effectiveness of companies systems of internal control. 20.Statement on Corporate Governance (September 1997) Hampel Report on Corporate Governance. Issues included the role of the board of directors. The Committee• Aimed to improve information to shareholders. standard s of financial reporting.pdf. (iii) Each listed company should establish an audit committee of at least three nonexecutive directors.UK (January 2003) <www. United Kingdom 1995 The objective of the Cadbury committee was to investigate how large public companies should adopt corporate governance guidelines with a focus on the procedures of financial report production and the role of the accounting profession. (ii) The directors service contracts should not exceed three years without approval by the shareholders.UK (January 1998) The Sarbanes-Oxley Act – USA (August 2002) The Higgs Report.nfcgindia.Since the mid-1990s.USA (April 1998) TIAA-CREF.2011. • • Produced the Cadbury Code of Best Practice. reinforce self-regulation and strengthen auditor independence.11.org/library/cgitp. Some of the guidelines are: • • • • • • • • • • Cadbury Committee Report (1992) CalPERS. 09:53 AM> The evolution of the corporate governance guidelines is elaborated below:Cadbury Report. accountability of the auditors and directors pay.Japan and Germany (1997) Core Principles and Guidelines.

• Argued against statutory control and for strengthening accountability by the proper allocation of responsibility for determining director’s remuneration. 10:15 PM> Hampel Report. the proper reporting to shareholders. and greater transparency in the process.12. United Kingdom. The Committee• Aimed to provide an answer to the general concerns about the accountability and level of directors.) Parthasarathy.12.nfcgindia. 12.2010. 10:15 PM> Greenbury Report. 12. <Swami (Dr. Publisher.pdf. Recommended that: Page|11 of 31 . New Delhi> <www. Publisher. New Delhi> <www.Biztantra. Disclosure iii. Year. It also provided suggestions on the disclosure of remuneration and the setting up of remuneration policy and service contracts and compensation. Remuneration Committee ii.org/pdf/corporate_governance_report.) Parthasarathy. Page 195-197. Year. Produced the combined code.pdf.org/pdf/corporate_governance_report. 1998 Four major issues were discussed with practical guidelines offered.2011. 1995 The report dealt with the remuneration of executives and non-executives board members and recommended the setting up of a remuneration committee in each public company to determine remuneration packages for the board members. Service contracts and compensation. The Hampel Report• • • Developed the Cadbury report. Page 195-197.nfcgindia. Mechanisms & Practice.2011. Corporate Governance – Principles.<Swami (Dr. (a) the role of directors (b) directors compensation (c) the role of shareholders (d) accountability and audit. Remuneration Policy iv. Corporate Governance – Principles. • Produced the Greenbury Code of best practice which was divided into four sections thus: i.Biztantra. Mechanisms & Practice. United Kingdom.2010.

effective use of the power and influence of institutional shareholders. Publisher. <Swami (Dr. Page 195-197. • Provided guidance to assist companies in implementing the requirements of the combined code relating to internal control. Introduced the combined code that consolidated recommendations of extant corporate governance reports(Cadbury and Greenbury) The Turnbull Committee It was set up by the ICAEW in 1999 to provide guidance to assist companies in implementing the requirement of the combined code relating to internal control. 1999 The mandatory recommendations of the Kumar Mangalam committee include the constitution of Audit Committee and Remuneration Committee in all listed companies. which are non. Kumara Mangalam Birla Committee.Biztantra. India. Corporate Governance – Principles. • Recommended that where companies do not have an internal audit function. recognition of the leadership role of the Chairman of a company. the obligation to make more disclosures in annual financial reports. Page|12 of 31 . • Recommended that boards of directors confirm the existence of procedures for evaluating and managing key risks. 1998 This was the first of the voluntarily evolved codes in India. Companies that do not already have an internal audit function should free time to time review their need for one. Mechanisms & Practice. and so on. The Committee also recommended a few provisions.i. The auditor maintains and reviews all controls. the board should consider the need for carrying out an internal audit annually. iii. ii. appointment of one or more independent directors in them.2010. Year. New Delhi> CII Voluntary Code of Corporate Governance.mandatory.) Parthasarathy. enforcement of Accounting Standards.

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