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CORPORATE
GOVERNANCE
 INTRODUCTION
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 In the third century B.C in the pataliputhra

(Patna , kautilya(chanakya), its vizier wrote his
celebrated treatise on law of Economics.

 Corporate governnce brings into focus the

fiduciary and trusteeship role of the board to
align and direct the actions of the organisation
towards creating wealth and shareholder value
 Corporate governance (definition)
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The framework of how directors and management

perform their respective duties to add and create
shareholder value.

Meaning –
Do everything necessary to maximize long term
shareholder value.
 4 principles can be elaborated as
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under:
 Protect
 Enhance
 Maintenance
 safeguard
 Principles of governance
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 Rights and equitable treatment of shareholders
 Interest of other stakeholders
 Role and responsibilities of the board
 Integrity and ethical behavior
 Disclosure and transparency
Essentials of corporate governance
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Transparency
 The commitment of the management to run its

business transparently and ethically

Disclosure
 The convenience that the company should

voluntarily disclose all material finance and non-

finance facts to its shareholders
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Fairness
 All the shareholders must be fairly, especially

minority shareholders.
Independent supervision
 A professionally competent board of directors on

behalf of shareholders.
 Cornerstones of Corporate
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Governance
 Trusteeship
 Protect and enhance shareholder value
 Also responsible to other stakeholders
 Empowerment
 Vest decision-making powers at the most
appropriate levels
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 Incentives and Control

 Freedom of management should be exercised
within a framework of appropriate checks and
balances
 Ethical Corporate Citizenship
 Importance of tone at the top
 Transparency of Public Disclosures
 Possibly involves tradeoff between lower cost of
capital and disclosure of strategic information
 Best practice of corporate
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governance from Indian corporate
Empower the Board
Have an appropriate mix in the Board
Ensure that the Board is aware of its functions
Make use of the sub committee
Provide Transperancy
 Benefits of good governance
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 It improves communication and breaks down

systematic barriers to flow of information.
 Good governance allows decision making based on
data. It reduces risk.
 Good governance helps in creating a brand and
creates comfort for all stakeholders and society.
 Good corporate governance yields competitive
excellence and hence helps to compete in the
challenging international business environment.
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