GLOBAL CORPORATE GOVERNANCE PRACTICS AND

GUIDELIONES

AUTHOR: JYOTSANA

INSTITUTION: A.S.COLLEGE,KHANNA( LUDHIANA), COMMERCE

DEPARTMENT

E.MAIL ID: Jyotsana88.jv@gmail.com

ABSTRACT:

This research paper studied various global corporate governance practices and
guidelines for good corporate governance system. Qualitative method has been used
for data collection. Corporate governance system is different in different countries
because of differences in their cultures, environment, beliefs, people expectations etc.
In India, there are also some of the companies that adopted corporate governance.
The study, therefore shows that corporate governance should not only transparent and
fair but it also seems to be fair and transparent too.

INTRODUCTION:

Corporate governance is old idea of governance, only the phrase is new. Corporate
governance phrase didnt come into use until the 1980s. Corporate governance in
India got prominent place after 1990s and introduced by CII (Confederation of Indian
industry) association as a voluntary measure to be adopted by Indian corporations.
Moreover, corporate governance has resulted from many corporate scandals and
widespread dissatisfaction, failure of functioning of companies in the financial markets.

In addition, corporate governance is not a to companies greenwash to clean the sign

of pollution and not a whitewash to provide facelift to companys public image.
Corporate governance is good way of doing business or doing business with ethics.
There is no single definition which defines the corporate governance, but we can say
that corporate governance is concerned with exercise of power over corporate entities.
Now, there is need to explore other definitions of corporate governance. The different
definitions reflect different views regarding the corporate governance:-

First corporate governance report, Cadbury report (1992), defines corporate

governance as the system by which companies are directed and controlled and
board of directors are liable for governance of their companies.

According to Shleifer & Vishny(1997), corporate governance deals with the way
suppliers of finance assures themselves of getting a return on their investment.

Sir Adrain Cadbury, said about Global Corporate Governance forum of the World Bank
in 2000, Corporate governance is concerned with holding the balance
between economic and social goals and between individual and communal goals. The
corporate governance framework is there to encourage the efficient use of resources
and equally to require accountability for the stewardship of those resources. The aim is
to align as nearly as possible the interests of individuals, corporations and society.

Moreover, the central government established regulatory control over the stock
markets through the formation of SEBI , which was earlier only an advisory body in
1988. Under Securities and exchange board of India Act of 1992, SEBI was granted the
authority to regulate the securities market.

After liberalization period the period which is considered as the boom period. Various
fake companies are came out, which are now nowhere. After LPG reforms, Indian
companies started business globally which required greater transparency and
transparency demanded by foreign investors also which results into good corporate
governance practices in India as well as globally and improves ethical corporate
climate also.

The concept of corporate governance also included focus on wealth maximization of all
the stakeholders, while earlier it was only concerned with fairness, transparency,
accountability with which organisation is doing business.
SCOPE OF CORPORATE GOVERNANCE:

Figure shows parties involved in various perspectives on corporate governance:

Cental to corporate governance thinking & practices are the shareholders, the board of
directors and the management. The corporate governance codes focus on this set of
players as does much company law. External auditors play a crucial role in corporate
governance although they are not often presented as cental to its study.

For public listed companies, the stock market and their listing rules are clearly,
vitally significant to corporate governance. Stock markets around the world also play
an important role in the creation and policing of corporate governance codes.
Perspectives focuses on the interrelations between the company and its shareholders.
OBJECTIVES:-

To study the corporate governance practices across the world.

To study the corporate governance practices in India.
To discuss the guidelines of good corporate governance system.

CORPORATE GOVERNANCE PRACTICES IN DIFFERENT

COUNTRIES:-
Corporate governance issues have come to the fore in China particularly since
the late 1970s, because the development of the corporate governance system is
recognized as a vital component of the restructuring of SOEs. Before the economic
reforms, Chinese industry was dominated by state ownership, and SOEs were the
major economic contributors. Managers in SOEs were required to fulfill the production
plans specified by the government rather than maximize the investment returns for
the only investor the state. The governance structure of SOEs was an integral part
of the general government framework. At that time, SOEs were characterized by low
productivity and efficiency, high input and low output.
Take Korean auto manufacturers, for example. As companies that make a lot of
standard-quality automobiles, their money-making strategy is to get big as fast as they
can in order to sell more low-cost cars. Consequently, their corporate governance
structure is one in which the government, through banks, has influence over what goes
on in the company, and the car maker has a say in government issues. That
relationship influences Korean corporate governance.
French corporate governance is another prime example of the effectiveness of
different strategies. French corporations are often criticized for a governance
approach that involves an intricate network of public agencies, large firms and banks.
As a result, these companies excel at producing a specific type of product. The French
do certain things very well when it comes to products that require that kind of
collaboration between government and business. Moreover, French-designed high-
speed trains and nuclear reactors are among the best in the world.
 Theres a very important connection between corporate governance and the
competitive strategy of firms, he adds. Its not as simple as saying, Oh, were going
to change corporate governance so that we all have the same rules. The system of
corporate governance interacts with many other things in an economy, such as the
way labor laws are regulated, tax laws and bankruptcy legislation. If you change one
component without changing the others, youre essentially causing trouble. Corporate
governance focus on how companies are directed, governed and controlled.
Corporate governance of European countries is based on number of practices as
delegation of authority from executive management while corporate governance
defines relationship between a companys management, its board and other
stakeholder. Moreover following are practices used in European countries:-
i. Professional decision making by an effective team.
ii. European companies disclose more information about business affairs than
required by law.
iii. European company directors are aware of that activities of company
should not be in favour of themselves or particular shareholder.
iv. With the long-term interest of company, consistent alignment of incentives
are given.
v. Checks and balances are maintained to ensure that no one person
unbounded power over decision making.

First version of the U.K. corporate governance code was produced in 1992 by
Cadbury committee. This recommended some further changes to the existing
principles in the Cadbury Code:

Each board should have a remuneration committee composed without

executive directors, but possibly the chairman

The Chairman of the board should be seen as the "leader" of the non-executive
directors

Institutional investors should consider voting the shares they held at meetings,
though rejected compulsory voting.
 All kinds of remuneration including pensions should be disclosed.

German corporate governance fundamentals and practices are generally

based on the provisions of the German Stock Corporation Act, the German
Codetermination act, the German Corporate Governance Code. German Stock
Corporations typically have three corporate bodies as well, which are the board of
management. A few key differences between the governance boards in the US and
Germany may be influencing the amount that top executives are paid. This has to
do with the fact that duality is legal in the United States. In Germany, it is not
allowed. Another important difference is the fact that Germany has a dual board
structure while the U.S. has a unitary board structure. Germanys boards are
divided into two tiers. The supervisory tier has the ability to decide compensation
structure for the managerial tier (made up of executives). Germanys supervisory
boards also usually have representation from employees, either through actual
employees or union representatives. This representation and separation could
explain why Germany has a smaller pay gap between executives and average
employees than the U.S.

In China, state-owned firms have preferential access to finance from state-

owned banks compared with private firms; there are severe restrictions to bank
loans for certain types of businesses, especially privately owned and riskier
enterprises. In India, the position is more favorable for smaller firms, with over
half of small businesses having active bank credit lines or overdraft facilities and
a lower reliance on retained earnings than in China or Brazil. Russias position on
formal access to finance is poor .

Corporate governance practices in India: As opposed to developed countries,

developing countries paid no attention to governance issues until the financial
crisis of East Asia in the late 90sIn India, despite shareholder and creditor rights
formally having been well set up, there are issues in terms of how effectively
these rights are enforced. We noted that in part this is a regional issue, with some
states having effective legal rights and in others (such as Bihar) the rule of law
not being well established. China and India as both having pervasive corruption,
but India having arbitrary corruption in addition, which would tend to undermine
formal institutions and place greater onus on the role of the informal institutions
in the governance of firms. In India SAIL published a Social Income Statement and
a Social Balance Sheet to measure the social benefits to employees, public and the
community and the cost involved. the efforts made by SAIL in fulfilling its social
objectives and responsibilities. The latest study of CSR practices in India was
conducted by Raman(2015) Raman used content analysis technique to examine
the chairmans message section in the annual reports of the top 50 companies in
India to identify the extent and nature of social reporting. This study concluded
that the Indian companies placed emphasis on product improvements and
development of human resources. Community development issues were given
relatively less space in the chairmans messages.

BEST CORPORATE GOVERNANCE PRACTICES IN INDIAN COMPANIES:

Following shows the percentage of disclosures made by some of the Indian

companies, whereas, INFOSYS is regarded as No.1 for corporate governance by IR
Global Rankings and No.2 for financial disclosures and disclose 82% of their
records, ACC ltd. Disclose 80% , Bharti airtel ltd. Scored at 78%, ITC ltd. at 78%,
infrastructure development finance co. ltd. discloses 80% its affairs, Reliance
Industries ltd. discloses 82% of its records.

GUIDELINES FOR GOOD CORPORATE GOVERNANCE:

This guidance is a voluntary technical aid for, among others, regulators and
companies in developing countries and transition economies. What and how
organisations disclose will depend considerably on local laws and customs. In
addition, particular industries may have some industry-specific disclosure
requirements. In order to facilitate the general usefulness of this document, the
focus is placed on widely applicable disclosure issues that should be relevant to
most enterprises. following guidelines can be used to make the corporate
governance effectively applicable :-

i. Financial disclosure: One of the major responsibilities of the board of

directors is to ensure that shareholders and other stakeholders are provided
with high-quality disclosures on the financial and operating results of the
entity that the board of directors have been entrusted with governing.
ii. Non- financial objectives: It includes disclosure regarding company
objectives, ownership and shareholder rights, changes in control and
transactions involving, governance structure and policies, member of board
and key executives, material issues regarding shareholders, independence of
external auditor.
iii. General meetings: Disclosure should be made of the process for holding and
voting at annual general meetings and extraordinary general meetings, as
well as all other information necessary for shareholders to participate
effectively in such meetings. Notification of the agenda and proposed
resolutions should be made in a timely fashion, and be made available in the
national language (or one of the official languages) of the enterprise as well
as, if appropriate, an internationally used business language. The results of a
general meeting should be communicated to all shareholders as soon as
possible.
iv. Timing and means of disclosure: All material issues relating to corporate
governance of the enterprise should be disclosed in a timely fashion. The
disclosure should be clear, concise, precise and governed by the substance
over form principle.
v. Good practices for compliance: Where there is a local code on corporate
governance, enterprises should follow a comply or explain rule whereby
they disclose the extent to which they followed the local codes
recommendations and explain any deviations. Where there is no local code
on corporate governance, companies should follow recognized international
good practices.
The enterprise should disclose awards or accolades for its good corporate
governance practices.
It is recognized that there is an increase in the number of corporate governance
accolades, awards, ratings, rankings and even corporate governance stock market
indexes where constituents are selected on the basis of exhibiting good practices
in corporate governance. Especially where such awards or recognitions come from
major rating agencies, stock exchanges or other significant financial institutions,
disclosure would prove useful since it provides independent evidence of the state
of a company's corporate governance.

FINDINGS:
i. There are various countries adopted the corporate governance in their practices,
and different countries have different corporate governance practices. Practices
should be so that provide fairness, transparency, and also provide fulfill
corporate social responsibility.
ii. In India, companies adopted corporate governance and now with the emerging
trends it becomes essential for the leading companies to disclose its financial as
well as non-financial affairs to the stakeholders.
iii. Guidelines are found in this, which are required to make disclosure regarding
affairs of corporate sector as, good corporate practices for compliance, general
meetings, timing and means of disclosure.

CONCLUSION :
To put into nutshell, we can say that there is no set system of corporate
governance rules, laws that can be followed globally. If we want to have good
corporate governance in our country than government and companies should
actively put efforts towards it. They should see long term benefits of good
corporate governance, rather than focusing on its short term cost, only than we
can have good corporate governance in our country and succeed nationally and
globally.

REFERENCES:
 https://www.infosys.com/newsroom/press-releases/Pages/corporate-governance-
practices.aspx
http://knowledge.wharton.upenn.edu/article/a-global-view-of-corporate-
governance-one-size-doesnt-fit-all/
https://www.ukessays.com/dissertation/examples/finance/corporate-governance-
practices-of-indian-listed-companies.php
http://www.applied-corporate-governance.com/best-corporate-governance-
practice.html
http://www.mcinnescooper.com/publications/legal-update-the-top-5-
corporate-governance-best-practices-that-benefit-every-company/