Dr. M.

Mohanasundari
Assistant Professor
Department of Management Studies
Kongu Engineering College, Perundurai.
 2

Dr. M. Mohanasundari

Corporate Governance (CG)

• Effective CG systems promote the development of
strong financial systems and have an unmistakably
positive effect on economic growth and poverty
reduction.
• CG broadly refers to the mechanisms, processes and
relations by which corporations are controlled and
directed.
 3

Dr. M. Mohanasundari

Definition of Corporate Governance (CG)

• A system of law and sound approaches by which
corporations are directed and controlled focusing on the
internal and external corporate structures with the
intention of monitoring the actions of management and
directors and thereby, mitigating agency risks which may
stem from the misdeeds of corporate officers.
 4

Dr. M. Mohanasundari

Definition of CG (Contd.)
 5

Dr. M. Mohanasundari

Definition of CG (Contd.)
 6

Dr. M. Mohanasundari

Definition of CG (Contd.)

OECD stands for Organization for Economic Corporation and Development

 7

Dr. M. Mohanasundari

Definition of CG (Contd.)
 8

Dr. M. Mohanasundari
 9

Dr. M. Mohanasundari
 10

Dr. M. Mohanasundari
 11

Dr. M. Mohanasundari
 12

Dr. M. Mohanasundari
 13

Dr. M. Mohanasundari
 14

Dr. M. Mohanasundari
 15

Dr. M. Mohanasundari
 16

Dr. M. Mohanasundari
 17

Dr. M. Mohanasundari
 18

Dr. M. Mohanasundari
 19

Dr. M. Mohanasundari
 20

Dr. M. Mohanasundari
 21

Dr. M. Mohanasundari
 22

Dr. M. Mohanasundari
 23

Dr. M. Mohanasundari
 24

Dr. M. Mohanasundari
 25

Dr. M. Mohanasundari
 26

Dr. M. Mohanasundari
 27

Dr. M. Mohanasundari
 28

Dr. M. Mohanasundari

Principles of CG

• Rights and equitable treatment of shareholders

• Interests of other stakeholders
• Role and responsibilities of the board
• Integrity and ethical behaviour
• Disclosure and transparency
 29

Dr. M. Mohanasundari

Importance of CG
• Presence of an active group of independent directors
ensures confidence in the market
• Foreign institutional investors are increasingly
depending of CG to invest in
• Have a positive influence on the share price of the
company
• Easier for companies to source capital at more
reasonable costs
 30

Dr. M. Mohanasundari

Reasons for Development of CG

• Becht has identified five reasons why CG became so
prominent:
▫ The worldwide privatization wave
▫ Pension fund reforms and other institutional investors
▫ Mergers and takeovers
▫ Deregulation and capital market integration
▫ Economic crises
 31

Dr. M. Mohanasundari

Structure of CG
 32

Dr. M. Mohanasundari

Role of Capital
Market and
Governance
 33

Dr. M. Mohanasundari

Innovation Governance
• It provides the leadership and scrutiny instruments that
encourage the right behaviour, structures and processes
to become embedded across an organization.
• It is not directly about how innovation is managed by
practitioners, but about how the Board of Directors,
CEOs and Senior Leaders promote and review
innovation practice on behalf of their stakeholders.
 34

Dr. M. Mohanasundari

Innovation Governance
• It is important, since:
▫ It is the foundation of growth and competitive advantage,
creating and appropriating value in the private sector
▫ It is the only way to make significant advances to deliver
better for less in the public sector.
 35

Dr. M. Mohanasundari

Future of CG
• CG, in the future, will reflect an increasing emphasis on
customer satisfaction as a way of measuring the
adaptability of the organization over time.
• By focusing too strongly on financial records (and audit
committee work), the organization lose sight of the fact
that departments like operations and HR are very
important components (in forecasting future success).