You are on page 1of 4

Corporate governance Corporate Governance is the application of best Management practices, Compliance of law in true letter and spirit

and adherence to ethical standards for Effective Management and distribution of wealth and discharge of social Responsibility for sustainable development of all stakeholders. Corporate governance is concerned with set of principles, ethics, values, morals, rules regulations, procedures etc. Corporate governance establishes a system whereby directors are entrusted with duties and responsibilities in relation to the direction of the company!s affairs. "he term #governance means control i.e. controlling a company, an organi$ation etc or a company corporate governance is governing or controlling the corporate bodies i.e. ethics, values, principles, morals. %or corporate governance to be good the manager needs to meet its responsibilities towards its owners &shareholders', creditors, employees, customers, government and the society at large. Corporate governance helps in establishing a system where a director is showered with duties and responsibilities of the affairs of the company. "he concept of (corporate governance! is not an end) it!s *ust a beginning towards growth of company for long term prosperity. +,-".R/ 0EE1 .% C.R2.R3"E G.4ER030CE

Corporate governance concept emerged in ,ndia after the second half of 5667 due to economic liberali$ation and deregulation of industry and business. 8ith the changing times, there was also need for greater accountability of companies to their shareholders and customers. "he report of Cadbury Committee on the financial aspects of corporate Governance in the 9.:. has given rise to the debate of Corporate Governance in ,ndia. 0eed for corporate governance arises due to separation of management from the ownership. %or a firm success, it needs to concentrate on both economical and social aspect. ,t needs to be fair with producers, shareholders, customers etc. ,t has various responsibilities towards employees, customers, communities and at last towards governance and it needs to serve its responsibilities at the best at all aspects.

R.;E .% ;3 8 ,0 C.R2.R3"E G.4ER030CE ;aw can only provide a minimum code of conduct for proper regulation of human being or company.;aw is made not to stop any act but to ensure that if you do that act, you will face such conse<uences i.e. good for good and bad for bad. "hus, in the same manner, role of law in corporate governance is to supplement and not to supplant. ,t can not be only way to govern corporate governance but instead it provides a minimum code of conduct for good corporate governance. ;aw provides certain ethics to govern one and all so as to have ma=imum satisfaction and minimum friction. ,t plays a complementary role. Role of law in corporate governance is in Companies 3ct which imposes certain

restrictions on 1irectors so that there is no misrepresentation of documents, there is no e=cessive of power, so that it imposes duty not to make secret profit and make good losses due to breach of duty, negligence, etc, duty to act in the best interest of the company etc "he issues in corporate governance 5. 4alue based corporate culture> %or any organi$ation to run in effective way, it needs to have certain ethics, values. ;ong run business needs to have based corporate culture. 4alue based corporate culture is good practice for corporate governance. ,t is a set of beliefs, ethics, principles which are inviolable. ,t can be a motto i.e. 3 short phrase which is uni<ue and helps in running organi$ation, there can be vision i.e. dream to be fulfilled, mission and purpose, ob*ective, goal, target. ?. +olistic view> "his holistic view is more or less godly, religious attitude which helps in running organi$ation. ,t is not easier to adopt it, it needs special efforts and once adopted it leads to developing <ualities of nobility, tolerance and empathy. @. Compliance with laws> "hose companies which really need progress, have high ethical values and need to run long run business they abide and comply with laws of -ecurities E=change Aoard .f ,ndia &-EA,', %oreign E=change Regulation 3ct, Competition 3ct ?BB?, Cyber ;aws, Aanking ;aws etc. C. 1isclosure, transparency, and accountability> 1isclosure, transparency and accountability are important aspect for good governance. "imely and accurate information should be disclosed on the matters like the financial position, performance etc. "ransparency is needed in order that government has faith in corporate bodies and conse<uently it has reduced corporate ta= rates from @BD today as against 6ED during the late 56EBs. "ransparency is needed towards corporate bodies so that due to tremendous competition in the market place the customers having choices don!t shift to other corporate bodies. F. Corporate Governance and +uman Resource Management> %or any corporate body, the employees and staff are *ust like family. %or a company to be perfect the role of +uman Resource Management becomes very vital, they both are directly linked. Every individual should be treated with individual respect, his achievements should be recogni$ed. Each individual staff and employee should be given best opportunities to prove their worth and these can be done by +uman Resource 1epartment. "hus in Corporate Governance, +uman Resource has a great role. 7. ,nnovation> Every Corporate body needs to take risk of innovation i.e. innovation in products, in services and it plays a pivotal role in corporate governance. E. 0ecessity of Gudicial Reform "here is necessity of *udicial reform for a good economy and also in today!s changing time of globali$ation and liberali$ation. .ur *udicial system though having performed salutary role all these years, certainly are becoming obsolete

and outdated over the years. "he delay in *udiciary is due to several interests involved in it. Aut then with changing scenario and fast growing competition, the *udiciary needs to bring reforms accordingly. ,t needs to speedily resolve disputes in cost effective manner. H. Globali$ation helping ,ndian Companies to become global giants based on good governance> ,n today!s age of competition and due to globali$ation our several ,ndian Corporate bodies are becoming global giants which are possible only due to good corporate governance. 6. ;essons from Corporate %ailureI7J> Every story has a moral to learn from, every failure has success to learn from, in the same way, corporate body have certain policies which if goes as a failure they need to learn from it. %ailure can be both internal as well as e=ternal whatever it may be, in good governance, corporate bodies need to learn from their failures and need to move to the path of success.

Mainly we will deal with the perspectives of corporate governance from three points of view> 5. -hareholders &Capital Market' K Control perspective ?. .rgani$ation &Management' K Control perspective @. -takeholders L Control perspective 5. -hareholders> as providers of a risk capital have final control on resource allocation decisions. ?. .rgani$ation> have the main purpose is to control i.e. through skills, intelligence, innovation, ideas, professionalism etc. "herefore, here in this perspective, resource allocation decision should rest with them. @. -takeholders> here, it says that for long term business, only shareholders value ma=imi$ation should not be seen as sole goal but it should be for well being of all groups with stake of long run of business and it should be goal of corporate governance. %uture prospect of corporate governance ,ndia has become one of the fastest emerging nations to have aligned itself with the international trends in Corporate Governance. 3s a result, ,ndian companies have increasingly been able to access to newer and larger markets around the world) as well as able to ac<uire more businesses. "he response of the Government and regulators have also been admirably <uick to meet the challenges of corporate delin<uency. Aut, as the global environment changing continuously, there is a greater need of adopting and sustaining good corporate governance practices for value creation and building corporations of the future. ,t is true that the Mcorporate governanceM has no uni<ue structure or design and is largely considered ambiguous. "here is still lack of awareness about its various issues, like, <uality and fre<uency of financial and managerial disclosure, compliance with the code of best practice, roles and responsibilities of Aoard of

1irectories, shareholders rights, etc. "here have been many instances of failure and scams in the corporate sector, like collusion between companies and their accounting firms, presence of weak or ineffective internal audits, lack of re<uired skills by managers, lack of proper disclosures, nonLcompliance with standards, etc. 3s a result, both management and auditors have come under greater scrutiny. Aut, with the integration of ,ndian economy with global markets, industrialists and corporates in the country are being increasingly asked to adopt better and transparent corporate practices. "he degree to which corporations observe basic principles of good corporate governance is an increasingly important factor for taking key investment decisions. ,f companies are to reap the full benefits of the global capital market, capture efficiency gains, benefit by economies of scale and attract long term capital, adoption of corporate governance standards must be credible, consistent, coherent and inspiring. Nuality of corporate governance primarily depends on following factors, namely>L integrity of the management) ability of the Aoard) ade<uacy of the processes) commitment level of individual Aoard members) <uality of corporate reporting) participation of stakeholders in the management) etc. -ince this is an important element affecting the longLterm financial health of companies, good governance framework also calls for effective legal and institutional environment, business ethics and awareness of the environmental and societal interests. +ence, in the years to come, corporate governance will become more relevant and a more acceptable practice worldwide. "his is easily evident from the various activities undertaken by many companies in framing and enforcing codes of conduct and honest business practices) following more stringent norms for financial and nonLfinancial disclosures, as mandated by law) accepting higher and appropriate accounting standards) enforcing ta= reforms coupled with deregulation and competition) etc. +owever, inapt application of corporate governance re<uirements can adversely affect the relationship amongst participants of the governance system. 3s owners of e<uity, institutional investors are increasingly demanding a decisive role in corporate governance. ,ndividual shareholders, who usually do not e=ercise governance rights, are highly concerned about getting fair treatment from controlling shareholders and management. Creditors, especially banks, play a key role in governance systems, and serve as e=ternal monitors over corporate performance. Employees and other stakeholders also play an important role in contributing to the long term success and performance of the corporation. "hus, it is necessary to apply governance practices in a right manner for better growth of a company