PRINCIPLES OF CORPORATE GOVERNANCE

PRINCIPLES OF CORPORATE GOVERNANCE

Project submitted to
Dr. Deepak Das
Faculty, Corporate Law

Project submitted by
Kunal Jain
Semester VI
Section ‘C’
Roll no. 74

HIDAYATULLAH NATIONAL LAW UNIVERSITY

RAIPUR, C.G.
 PRINCIPLES OF CORPORATE GOVERNANCE

TABLE OF CONTENTS

CERTIFICATE OF DECLARATION........................................................................................2

ACKNOWLEDGEMENT............................................................................................................3

INTRODUCTION.........................................................................................................................4

RESEARCH METHODOLOGY.................................................................................................6

OBJECTIVES................................................................................................................................7

CHAPTERISATION.....................................................................................................................8

CHAPTER 1................................................................................................................................8

CHAPTER 2..............................................................................................................................10

CHAPTER 3..............................................................................................................................12

CONCLUSION............................................................................................................................15

BIBLIOGRAPHY........................................................................................................................17

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CERTIFICATE OF DECLARATION

I hereby declare that the project work entitled “PRINCIPLES OF COPORATE

GOVERNANCE”submitted to HNLU, Raipur, is record of an original work done by me under
the guidance of Dr. Deepak Das, Faculty Member, HNLU, Raipur.
Kunal Jain
Roll. No. 74
Semester – VI

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ACKNOWLEDGEMENT

I am highly elated to carry out my research on the topic, “PRINCIPLES OF CORPORATE

GOVERNANCE”. I would like to give my deepest regard to my course teacher Dr. Deepak Das,
who held me with his immense advice, direction and valuable assistance, which enabled me to
march ahead with this topic. I would like to thank my friends, who gave me their precious time
for guidance and helped me a lot in completing my project by giving their helpful suggestion and
assistance. I would like to thank my seniors for their valuable support. I would also like to thank
the library staff and computer lab staff of my university for their valuable support and kind
cooperation

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 PRINCIPLES OF CORPORATE GOVERNANCE

INTRODUCTION

India has the largest number of listed companies in the world, and the efficiency and well-being
of the financial markets is critical for the economy in particular and the society as a whole. It is
imperative to design and implement a dynamic mechanism of corporate governance, which
protects the interests of relevant stakeholders without hindering the growth of enterprises. The
scale of the financial crisis triggered by the bankruptcy of Lehman Brothers in autumn 2008 and
linked to the inappropriate securitization of US subprime mortgage debt led governments around
the world to question the effective strength of financial institutions and the suitability of their
regulatory and supervisory systems to deal with financial innovation in a globalized world. The
massive injection of public funding in the US and Europe – up to 25% of GDP – was
accompanied by a strong political will to learn the lessons of the financial crisis in all its
dimensions to prevent such a situation happening again in the future. In its Communication of 4
March 20091, effectively a programme for reforming the regulatory and supervisory framework
for financial markets based on the conclusions of the Larosière report 2, the European
Commission announced that it would (i) examine corporate governance rules and practice within
financial institutions, particularly banks, in the light of the financial crisis, and (ii) where
appropriate, make recommendations, or even propose regulatory measures, in order to remedy
any weaknesses in the corporate governance system in this key sector of the economy.
Strengthening corporate governance is at the heart of the Commission's programme of financial
market reform and crisis prevention. Sustainable growth cannot exist without awareness and
healthy management of risks within a company. As highlighted by the Larosière report, it is clear
that boards of directors, like supervisory authorities, rarely comprehended either the nature or
scale of the risks they were facing. In many cases, the shareholders did not properly perform
their role as owners of the companies. Although corporate governance did not directly cause the
crisis, the lack of effective control mechanisms contributed significantly to excessive risk-taking
on the part of financial institutions. This general observation is all the more worrying because
corporate governance has been relied upon as one of the ways of regulating business life.
Consequently, there is a need to address the fundamental question of whether the existing
corporate governance regime is deficient as far as financial institutions are concerned or whether
1
COM (2009) 114 final.
2
Report of the High-Level Group on Financial Supervision in the EU published on 25 February 2009.

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it has rather been poorly implemented. In the financial services sector, corporate governance
should take account of the interests of other stakeholders (depositors, savers, life insurance
policy holders, etc), as well as the stability of the financial system, due to the systemic nature of
many players. At the same time, it is important to avoid any moral hazard by not diminishing the
responsibility of private stakeholders. It is therefore the responsibility of the board of directors,
under the supervision of the shareholders, to set the tone and in particular to define the strategy,
risk profile and appetite for risk of the institution it is governing.
This projects aims at enumerating the principles of the concept of corporate governance over the
period of time in the corporate sector and has tried to draw out an analogy between the older and
more recent norms of the corporate governance and thereafter find its relevance in the extremely
nascent and dynamic Indian corporate society.

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RESEARCH METHODOLOGY

The method of research adopted for the project is the analytical and descriptive method. The
texts that were used for the project include articles, research papers and news given in various
websites as well as online journals.

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OBJECTIVES

 To discuss the concept of Corporate Governance in Financial Institutions.

 To discuss about the various corporate governance initiatives taken in India till date.
 To discuss about the recent policy steps taken by SEBI for ensuring better governance in
listed companies.

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 PRINCIPLES OF CORPORATE GOVERNANCE

CHAPTERISATION

CHAPTER 1

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CHAPTER 2
Corporate governance initiatives taken in India till date
There have been several major corporate governance initiatives launched in India since the mid-
1990s. The first was by the Confederation of Indian Industry (CII), India’s largest industry and
business association, which came up with the first voluntary code of corporate governance in
1998. The second was by the SEBI, now enshrined as Clause 49 of the listing agreement. The
third was the Naresh Chandra Committee, which submitted its report in 2002. The fourth was
again by SEBI, the Narayana Murthy Committee, which also submitted its report in 2002. Based
on some of the recommendation of this committee, SEBI revised Clause 49 of the listing
agreement in August 2003. Subsequently, SEBI withdrew the revised Clause 49 in December
2003, and currently, the original Clause 49 is in force.

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CONCLUSION

The remedy was to improve the operation of the company's vital organs such as the executive
board. The question of disciplining the controlling shareholder and defending minority
shareholders in the Indian corporate sector (whether it's the public sector, multinationals or the
Indian private sector).

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BIBLIOGRAPHY

A. PAHUJA, B.S. BHATIA “DETERMINANTS OF CORPORATE GOVERNANCE DISCLOSURES: EVIDENCE

FROM COMPANIES IN NORTHERN INDIA”, IUP Journal of Corporate Governance, vol. 9(3), pp. 69-
88, (2010).
J.P. WALSH, J.K. SEWARD, “ON THE EFFICIENCY OF INTERNAL AND EXTERNAL CORPORATE
CONTROL MECHANISMS” The Academy of Management Review,vol. 15, NO.3, 421–458, (1990).
N. BALASUBRAMANIAM, “TOWARDS EXCELLENCE IN BOARD PERFORMANCE ”, The
IIMBManagement Review, pp. 67-84, January-March, ((1997).
N. SIVAKUMAR, "VALUES-BASED CORPORATE GOVERNANCE AND ORGANIZATION BEHAVIOR

GUIDELINES FROM MANUSMRITI FOR ETHICAL AND SOCIAL RESPONSIBILITY ," IUP Journal of
Corporate Governance, vol. 9(5), pp. 573-585, (2009).
R. BAJAJ, DRAFT CODE ON CORPORATE GOVERNANCE, CONFEDERATION OF INDIAN INDUSTRY,

(1997).
S. K. BARUA, & J. R. VARMA, “FERA IN REVERSE GEAR; MNCS STRIKE GOLD”, ECONOMIC
TIMES, NOVEMBER 12, 1993.

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what does good governance mean before we can improve local government we need to agree on
what good governance is effectiveness we expect government to achieve results and use
resources widely police patrols trash gets picked up and taught holes are repaired without
wasting money equity government policies should benefit all of us not just the majority orally to
promote economic racial and gender equity government can support programs that consider our
unique circumstances and perspective rather than a one-size-fits-all approach strategic vision
public officials should take a long-term perspective like planning cost-effective infrastructure
upgrades that improve safety and reduce traffic congestion over 20 years rather than just
focusing on today's news transparency we should be able to see why and how government makes
decisions like having access to explanations about government votes policies budgets and
campaign finance information accountability public officials should do what they promised
explain their decisions and be held responsible for consequences without spinning facts like
keeping officials accountable using budget audits program evaluation and ethics committee
participation we should all have a voice in public decision even if we're not well-connected or
don't shout the loudest like listening to our concerns and aspiration through voting public
meetings and comments consensus orientation government should work with different interests
to find common ground and solutions that work for everyone like talking with residents police
ex-offenders researchers and political leaders to solve complicated issues of Public Safety and
incarceration trust we should be able to trust that our public officials are working in our best
interests for example when government enters a contract that's not the lowest bid we can trust
that it's for a good reason like the contractor does quality work or pays FeO agent we need to be
able to trust public officials to prioritize our interests over their own when we talk about good
governance we mean do you agree would you add any other or is one more important to you than
others what does good governance mean to you

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