Principles of CG

Leads to achieve the goals and the objectives. For self regulation

Accepted principles of CG 1.Management of risk. Integrity and ethical behaviour. 3. 5. d. Disclosure and transparency: a.Clarity of dividend policy. Interest of other stakeholders. c. Internal control.Transparency of appointments. Role and responsibilities-ability to deal with the business issues diligently. 4. 2. b. Rights and equitable treatment of shareholders. .

but to effectively and intelligently solve the problems ‡ Principles of CG are continuously evolving along with the needs and experiences and changes of the world order. .‡ CG has to be flexible in accordance to the external factors ‡ Task of CG is to not avoid the risk of business which is always a part of the business .

Models of CG ‡ Essence of CG is to effectively deal with the issues of corporate world and be truly accountable to the stakeholders. ‡ Scope of CG is drastically changing due to cross listing at stock exchanges . institutional investments rather than the individual investments.flow of international funds. .

UK.Models ‡ Two main models: liberal model and coordinated model. ‡ This model encourages radical innovation and continuous improvements. ‡ Coordinated models ±found in Continental Europe and Japan . ‡ Liberal model is common in Anglo-American countries in US.british colonies like India.Srilanka.customers and sharholders. .it recognizes the roles of workers .managers .suppliers.

and monitoring ‡ However the individual shareholders are not given much powers. which makes their interest compromised often. ‡ Duties of the Board is to include of decision-making.which constantly puts pressure on the management for innovation and to grow profitably. which has the power to choose CEO. policy making. ‡ CEO needs approval by the Board for the important decisions. ‡ On the whole the priority is given to shareholders interest .The Anglo-American Model ‡ Calls for governance by the board of directors. .

employees.The coordinated model ‡ Prevalent in Europe and Japan.customers.this model has less chances of immoral ethics as it emphasis on general health of the community.suppliers . . gives more priority managers.

‡ Companies owned by families. however do not harm the interest of shareholders . dominate the market.The family-owned company model ‡ Found in Asian and Latin American countries. ‡ This model is more directed towards self serving gains from business.

± Ketan Parekh scandal in 2001 ± Tata Finance scandal (Serious financial irregularities in the amount of rupees 400crores (86.95 million dollars) were detected ) ± Accounting and financial reporting frauds .History of CG in india ‡ Corporate Scandals ± The stock market scandal (Harshad Mehta) in 1992.

accountable. .‡ Corporate Governance as ± the efficient supervision which encourages `doing everything better' and ± protects the interest of the company ± while conforming to all established laws and ethics.smart. moral. ‡ Corporate governance in any organisation needs to be principle based and ‡ SMART. responsive and transparent. ‡ Corporate governance has to be principle-based not rule-based.

‡ The corporate governance movement in India began in 1997 with a voluntary code framed by the CII :Desirable Corporate Governance: A Code ± In the next three years. almost 30 large listed companies accounting for over 25 per cent of India's market capitalisation voluntarily adopted the CII code .

‡ Several committees on Corporate Governance ‡ Kumar Mangalam Birla Committee report ± the introduction of Clause 49 in the standard Listing Agreement in 2000. ± All listed companies are mandatorily required to comply with the clause .

Clause 49 ‡ Clause 49 of the Listing Agreement to the Indian stock exchange comes into effect from 31 December 2005. It has been formulated for the improvement of corporate governance in all listed companies . ‡ Clause 49 requires all companies to submit a quarterly compliance report to stock exchange in the prescribed form .

Risk management. Mandatory disclosures on related party transactions. Laying down a code of conduct for board members. Mandatory reporting on corporate governance along with annual report. etc. . Certification on financial statements and internal controls by the CFO (chief financial officer).The key aspects of CG ‡ Composition of the board with optimum number of independent directors ‡ Constitution of audit committee with the chairman ‡ ‡ ‡ ‡ ‡ being an independent director.

CG awards in India ‡ ITC Ltd and Abhishek Industries Ltd received the Institute of Company Secretaries of India National Award for Excellence in Corporate Governance 2006. ‡ ITC Ltd has won the `Golden Peacock Award for Excellence in Corporate Governance 2005 Mahindra & Mahindra Ltd (M&M) has been assigned `Governance and Value Creation Rating (GVC) .

. Aside from weak enforcement.With the exception of a handful of large businesses. despite reforms to Indian corporate governance regulations.Negative side ‡ Indian companies¶ disclosure of financial information is still poor while pressure from Indian investors to improve corporate transparency remains weak. most companies do not follow international best practice in disclosing information to investors. the World Bank cites a lack of interest from investors as a major reason for the failure of these laws to improve disclosure according to a report from the World Bank.

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