Corporate Governance: PK Thomas

Corporate
Governance
PK Thomas
Corporate Governance
Corporate governance is the set of processes, policies and practices that affect the way
a company is directed, administered and controlled. Corporate governance also
includes relationships among many stakeholders and the goals for which the company
is governed.
Good governance is about doing the right thing. The long-term viability and success of
the enterprise are significantly attributed to being fair to key stakeholders – customers,
employees, investors, suppliers, communities and wider society
Corporate Governancene
Corporate governance is the system by which companies are directed &

controlled.
It encompasses a variety of issues, ranging from shareholder rights to a
company’s internal decision-making processes and control systems.
Benefitse
Corporate Governancene
Aa
Corporate Governance: Check List
Aa
Why Corporate Governance
Effective CG
Good CG for SMEs in Emerging Markets
Corporate Governance Parties
Board of Directors
Manageme
nt Banks and lenders
Customers
Shareholders
Employees Environment &
the community at large
Regulators
Suppliers
4
OECD Principles for CG
 Ensuring the basis of an effective corporate governance framework (MCA & SEBI)
 The rights of shareholders and key ownership functions (Special resolution for most matters, E-Voting, NCLT-Insolvency
Bankruptcy code)
 The equitable treatment of shareholders (prevention of oppression and mismanagement)
 The role of stakeholders in corporate governance (Creditors: IBC)
 Disclosure and transparency (Financial situation, Performance, ownership and corporate Governance report)
 The responsibilities of the board (Fairness, Accountability and Transparency, Strategic Guidance & monitoring the Management)
Objective of Good Corporate Governance
1. Strengthen management oversight functions and accountability
2. Balance skills, experience and independence on the board

appropriate to the nature and extent of company operations
3. Establish a code to ensure integrity
4. Safeguard the integrity of company reporting
5. Risk management and internal control
6. Disclosure of all relevant and material matters
7. Recognition and preservation of needs of shareholders

Constituents of Corporate Governance
 The Board of Directors

 Pivotal role
 Accountable to stakeholders
 Directs management
 The Shareholders & Stakeholders

 To participate in appointment of directors
 To hold the BOD accountable for governance through proper disclosures
 The Management
 To act on the direction of the BOD
 To provide requisite information to the BOD for decision making
 To implement and monitor control systems
Corporate Governance-Mechanism
Internal
Board of Directors
Managerial Incentives-Compensation
Ownership Concentration
External
Market for Corporate Control: Takeovers
Corporate Governance: Pillarsne
Responsibility
Accountability
Fairness
Transparency
Board of Directors
 Assume responsibility of leadership and control of the corporate

 Direct and supervise the corporate’s affairs
 Make decisions in the interests of the corporate
 Regular meetings
 Active participation
 Freedom to include items in agenda
 Sufficient notice for board meetings
 Access to advice and services of company secretary and independent professional advice
thomas.academics@gmail.com
Board of Directors
 Full record of board/committee minutes, and available for inspection

 Independent non-executive directors should be present at board meetings to discuss matter
involving conflict of interest
 Abstain from voting if conflict of interest exists
 Insurance coverage in respect of legal action against directors
CXOs (CEO, CFO,CTO…)
 Segregation of the management of the board and the day-to-day management of the
corporate’s business
 Balance of power at board level to avoid concentration of power in a single individual
 Separation of roles and responsibilities CEO
 Division of responsibilities between Chairman and CEO clearly laid down in writing
Chairman
 Provide leadership for the board

 Ensure the board works effectively and discharges its responsibilities
 Ensure good corporate governance practices and procedures are in place
 Ensure all directors are properly briefed on issues arising at board meeting
 Responsible for ensuring appropriate information received by directors
 Encourage full and active contribution to the board’s affair
 Ensure effective communication between board and the shareholders
 Hold annual meetings with non-executive directors
 Ensure constructive relationships between executive and non-executive directors
Board Composition
 Balance of skills and experiences

 Balanced composition of executive and non-executive directors
 Non-executive directors should be of sufficient calibre
 Independent non-executive directors should be expressly identified
 List of directors updated and their respective role and function identified
Appointment, Re-election & Removal of Directors
 Formal and transparent procedure for appointment

 Succession plan
 Re-election at regular intervals
 Proper explanation for resignation/removal of directors
 Specific term for non-executive directors
 All directors subject to retirement by rotation at regular interval
 Nomination committee formed to make recommendation on appointment of directors and
succession planning for directors, chairman and CEO
Responsibilities of Directors
 Keep abreast of the responsibilities as a director

 Exercise duties of care, skill, integrity and diligence expected
 Ensure proper understanding of the operation, business and the regulatory requirement
 Contribute sufficient time and resources to serve the corporate
 Attend AGMs to share the views of shareholders
Non Executive Directors
 Active participation in board meetings

 Bring in independent judgment
 Take lead if conflict of interest arise
 Serve on committees
 Monitor the corporate’s performance in achieving pre-set goals
Information Access by Directors
 Agenda and board papers should be sent in full in a timely manner to directors
 Information supplied must be complete and reliable
 Directors should have access to the senior management for information
 Information supplied should be of form and quality to facilitate informed decision
Remuneration
 Transparency of directors’ remuneration policy

 Remuneration should be sufficient but not excessive
 Each director not to involve in deciding his/her own remuneration
Information Access by Directors
 Remuneration committee to be formed, mainly from non-executive directors

 Consult Chairman/CEO if needed
 Access to professional advice, market comparable information
 Make recommendation on policy and structure of remuneration
 Determine specific remuneration packages of all executive directors and senior management
 Review and approve performance-based remuneration
 Review and approve compensation arrangement in connection with loss or termination of
office, dismissal or removal of directors for misconduct
Accountability & Audit Financial Reporting
 Management provide explanation and information to the board to enable them to make
informed assessment of financial and other information
 The board should present comprehensive assessment of the corporate’s performance, position
and prospects in annual and interim reports, price-sensitive announcements and other financial
disclosures
Accountability & Audit Internal Control
 Ensure the maintenance of sound and effective internal controls to safeguard assets
 Conduct regular reviews of the effectiveness of the internal control system, covering financial,
operational, compliance and risk management control functions
 Prevent fraud, corruption, and malpractices
Communication with Shareholders
 Separate resolution for each separate issue

 Chairman of the board and chairman of each board committees be present in general meetings
to answer questions at any general meeting
 Chairman of independent board committee be present to answer any questions in any general
meeting to approve transaction requiring independent shareholders’ approval
 Inform shareholders about procedure for voting by poll
 Ensure proper compliance to regulatory requirement about voting by poll
The notion of a socially responsible corporation is potentially an oxymoron because of the

naturally conflicted nature of the corporation.
Divenney (2009)
Thank you
+91 9986431562

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Corporate

Corporate governance is the system by which companies are directed &

 The equitable treatment of shareholders (prevention of oppression and mismanagement)

 The role of stakeholders in corporate governance (Creditors: IBC)

2. Balance skills, experience and independence on the board

3. Establish a code to ensure integrity

4. Safeguard the integrity of company reporting

5. Risk management and internal control

6. Disclosure of all relevant and material matters

7. Recognition and preservation of needs of shareholders

 The Board of Directors

 The Shareholders & Stakeholders

 Assume responsibility of leadership and control of the corporate

 Full record of board/committee minutes, and available for inspection

 Provide leadership for the board

 Balance of skills and experiences

 Formal and transparent procedure for appointment

 Keep abreast of the responsibilities as a director

 Active participation in board meetings

 Transparency of directors’ remuneration policy

 Remuneration committee to be formed, mainly from non-executive directors

 Separate resolution for each separate issue

The notion of a socially responsible corporation is potentially an oxymoron because of the

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