COPORATE

GOVERNANCE
RONGALI SUNAYANA
19020195
IBM’19

Financial Markets Individual Assignment

India is now at crossroads where it has good intentions of making good reforms but still
looking for a solution to address challenges for the Indian background. Considering
mandatory regulations as per clause 49 of the Listing Agreement with the Securities
exchange board of India and the governance norms in the new Company Act, 2013, a
corporate governance performance (CGP) index is developed to measure the corporate
governance score of Indian companies. An organization's economic success does not only
depend upon innovation, efficiency, and quality management but also on corporate
governance principles. It impacts on improving financial performance and internal efficiency
of the companies.
Corporate governance purposes at enabling active monitoring and efficient control of the
business. A wider definition given by Maier (2005) states that “Corporate governance defines
a set of relationships between a company’s management, its board, its shareholders and its
stakeholders.”
Good corporate governance- It is a process that includes disclosure and transparency so that
it provides its regulators and shareholders along with the public with accurate information
about the financial, and operational aspects of the company.

Example:
Bad corporate governance is said when the companies are not reliable and the integrity is
lacking. which in return takes a huge toll on the firm’s financial health. An example for this is
Volkswagen AG. It had created a scandal back in September 2015 about supporting illegal
activities.
This affair was come to be known as “diesel gate” . it came out to the open that the
Volkswagen had a systematically rigged engine which will help to manipulate the pollution
test in America and Europe. When this news came out it did no good to the company. In the
following days they lost nearly half its value and its global sales in the first full month
following the news fell 4.5%.
The reason behind this emission in the 1st place was VW’s board of members. They were not
caught at 1st. in general most of the companies have one-tier board system, but in case of
Volkswagen they had a two-tier board system. Which was supervisory and management
board. The management board consists of the shareholders and the supervisory board was in
chare to keep an eye on management and to approve corporate decisions. But here in this case
the supervisory board was not given enough freedom to make their independent decisions, as
the management board depended on 90% of shareholders votes. Due to the this the complete
control lies in the hands of the management board, who were the reason behind the rigging of
the engine. Which cancelled the mission to look after the management and employees and the
operations within the company.
Therefore, bad corporate governance.

Recent developments in corporate governance norms in India-

India is now working on being transparent and having an accountable system of economics.
Due to the fiscal crisis in 1991, there has been liberalization and privatization in the Indian
economy. At that time all Indian companies required money for its growth and expansion.
This need for foreign investment brought the increase in the need of corporate governance
reforms in India. “Since then, good governance in capital market has always been on high
priority for SEBI. This is evident from frequent updating of guidelines, rules and regulations
by SEBI for ensuring transparency and accountability” (Sehgal and Mulraj, 2008).
Below you can see the different acts in India with its time line.

Below are the legal reforms along with timeline:

Legal reforms in corporate governance in India:
 The companies act, 1956- all listed and unlisted companies come under this act. There
were 24 amendments made to this law over the span of 1993, 1997 and 2003.

 The securities act , 1956- this act covered all the markets that included tradable
government paper, stock, shares, bonds, and other marketable securities.

 SEBI act, 1992- this was established along with the security and exchange board of
India, when this act came into force, to regulate and market all authorities as
independent units.

 Indian companies act, 2013- this was a major step to strengthen corporate
governance. This act replaces the companies act 1956 and focused on simplifying and
improving governance. It also increases the benefits of minor shareholders.
  The companies ( amendment) bill, 2017- this act focuses on identifying and amending
the difficulties in the companies act 2013.

Major committees of corporate governance:

Conclusion-
India has come a long way in the are of corporate governance. With all these changes and
developments, it is undoubted that the regulatory compliance will not burden the companies
anymore. Days are gone when investors and shareholders would be in the dark with respect
to their investments, relying on hearsay and tip-offs from friends and family while hoping
they were not taken advantage off by the promoters and management. In contrast to the
written, the Indian investor of today is satisfactorily authorized by healthy corporate
governance norms to make informed decisions. With effective implementation of the
evolving norms, the evolving next phase of corporate governance in India seems to be on a
fitting course.
 REFERENCES

 Apple. "Investor Relations. Leadership and Governance." Accessed Feb. 23, 2021.

 BBC. "Scandal Cuts VW Sales by 4.5% This Year." Accessed Feb. 23, 2021.

 Volkswagen Emissions Scandal. "Corporate Governance and Control Failures."

Accessed Feb. 23, 2021.

 CORE. "Corporate Governance Failure. The Case of Enron and Parmalat," Page 285.
Accessed Feb. 23, 2021.

 Corporate Secretary. "PepsiCo Finds Governance Success Through Evolution."

Accessed Feb. 23, 2021.

 The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide
Content Team. MSG Content Team comprises experienced Faculty Member,
Professionals and Subject Matter Experts. We are an ISO 2001:2015 Certified
Education Provider. To Know more, click on About Us. The use of this material is
free for learning and education purpose. Please reference authorship of content used,
including link(s) to ManagementStudyGuide.com and the content page url.

 Abatecola G, Caputo A, Mari M, Poggesi S (2012) Relations among corporate

governance, codes of conduct, and the profitability of public utilities: an empirical
study of companies on the Italian stock exchange. Int J Manag 29(2):611–626
 Google Scholar
 Afsharipour A (2009) Corporate governance convergence: lessons from the Indian
experience. Nw J Int'l L & Bus 29:335
 Aggarwal P (2013) Impact of sustainability performance of company on its financial
performance: a study of listed Indian companies
 Annalisa P, Yosef S (2011) Corporate governance and earnings Management in
Family-Controlled Companies. J Acc Audit Financ 26:199–227.
https://doi.org/10.1177/0148558X11401212
 Arif K, Syed N (2015) Impact of corporate governance on performance of a firm: a
comparison between commercial banks and financial services companies of Pakistan.
European Journal of Business and Management 7(10):54–60
 Arnold MC, Bassen A, Frank R (2012) Integrating sustainability reports into financial
statements: an experimental study
 Arora A, Bodhanwala S (2018) Relationship between corporate governance index and
firm performance: Indian evidence. Glob Bus Rev 19(3):675–689
 Ashraf M, Bashir A, Asghar N (2017) Impact of corporate governance on firms’
financial performance: textile sector of Pakistan. International Journal of Business and
Management Invention 6(5):13–19