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CORPORATE GOVERNANCE

Prepared by : Ankit Mody Jimi Shah Ravin Mehta Hirenv Shilu Ankit Panchasara Bhavin Yogi

Definition
 Corporate

governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled.

 The primary objective of the management of any publicly-

traded enterprise is to enhance its value.

Factors

Corporate governance depends upon two factors.

1)

First relates to the commitment of management towards the principle of integrity and transparency in business operations.
Second factor involves the legal and administrative framework created by the government of the country in which the business operates.

2)

the core objectives of corporate governance can be classified as follows: Strategic Focus Predictability Transparency Participation Accountability Efficiency and Effectiveness Stakeholder Satisfaction 1) 2) 3) 4) 5) 6) 7) .Objectives Of Corporate Governance  On the basis of definition.

  . The second principle is about the impact of a corporate governance system on the economic efficiency of the company. There are a number of studies that show that companies with good governance protocols have been able to demonstrate higher earnings.Principles Of Corporate Governance  The first principle of corporate governance is that of agency issues.

Evolution of Corporate Governance •In first half of 1990 – due dssmisal of a few high profile CEO. •In 2001 high profile collapse of US firms like Enron Corporation and Worldcom •Formation of sir George Adrian Hayhurst Cadbury. •In 1997 east asian financial crisis occurred. .

•Foreign capital infusion started • With formation of WTO movement of capital started globally this required better and more corporate governance. . New role of mutual funds. Aderance to ecological and environmental standards.Development of Corporate Goverance in India •In 1960 – Licence Raj. Better goverance and management of corporate bodies. •It included Increasing FDI. •In 1990 liberlization took place.

CII Code ‘97 • No need for two tiered board • Single person should not hold directorships in more than 10 listed companies. Birla Committee (SEBI) ‗00 • At least 50% are non executives members. • Information should be presented to every members. • No need to present in the code. • Chairman should have office and be paid. Narayana murthy ‗03 • Training of board members is suggested. • Compensation should be fixed by board . . • Key information listed in the code.

Committee should be responsible for appointment. nonexecutive & with clear terms of reference. Narayana Murthy • Whistle blowers should have direct access to information. AGM to answers shareholders. with one at least financial and accounting knowledge.Audit Committee Cii • Companies With Turnover Over Rs 1 Billion should have an audit committee with 3 members. . removal and remuneration. Birla • Minimum 3 members.

Birla • committee decide packages.Remuneration committee CII • Reduction in number of nominee directors. • Code of conduct for board of members and senior management. . FIs should withdraw nominee directors from companies with individual shareholding. • Board will decide on remuneration for non executives directors Narayana Murthy • Subsidiaries should follow the parent companies rules and regulations.

Discloser And Transparency CII • Companies to inform their shareholders about prices and performance. • Analysis of report tells performance of the company. . Birla Narayana Murthy • Consolidated accounts for subsidiaries. • Followed by auditor‘s comment management should provide clear descriptions. • Stock exchange requires ceos and cfos certificate. • Justify deviation from accounting standard.

. Birla • Quarterly results should be communicated to investors.Other issues CII • FIs rewrite loan in some case. • Same disclosure norms for foreign and domestic creditors. Audit committee advise to board for action in this matter. Narayana Murthy • Companies making IPO should inform to audit committee of funds. • Board committee should look into shareholder complaints.

which have three key aspects relating to scope.  It allows more constructive and flexible responds to raise the standards in running and managing a company as opposed to strict statutory requirements. transparency. .  These are defined as accountability.Key Aspects of Corporate Governance  The fundamental concern of corporate governance is to ensure the conditions under which an organization‘s directors and managers act in the larger interests of the organization and shareholders in particular. importance and ambit of corporate governance.  Corporate Governance in India. and equality of treatment for all stakeholders. is mainly on based Birla Committee‘s guidelines.

keeping in view the interests of other stakeholder‖ [B] Framework for both private and public sector companies .― Enhancement of shareholder value..Size.if an Executive Chairman – 1/3 Independent Directors in board .Non executive directors [D] Code Chairman of Board and Chief Executive: .mandatory requirements [C] Code section relating ― Board of Directors‖ .50 %.G. Some of the key aspects of governance are as follows : [A] Focus on Shareholders and Stakeholder :  Objective of C.if Executive Chairman – 1/2 Independent Directors in board .two type (i) Mandatory requirements (ii) Non.

O.All elements of the remuneration disclosures in the annual report .object .D decide the remuneration of the non-executive director [H] Framework for board meetings and board procedures : .independent director.chairman – also independent director.B. [F] Code for Audit Committee : .4 times a year with a maximum of 4 months between any two meetings .at least one director – appropriate finance knowledge [G] Code for remuneration committee: . . .BOD meeting . .three non executive members.[E] As per debt funding covenants and for financial or investment institution : .Nominate the director for protect shareholders‘ interest for it in board.Director should not be involved in more than 10 committee or act as chairman of more than five committee across all companies with which he is a director.

Directors etc. . in annual report with compliance report.send certificate from auditors to shareholder and to stock exchange and attached with directors report [L] The effectiveness of this framework depend upon the corporate response to support the regulatory framework. ability of regulatory to monitor and pressure from shareholder. its outlook etc.) .disclose all information.smooth running .right to vote [J] Role of key management (CEO.[I] Code for the annual general meeting : .disclose all material related financial and commercial transactions which have potential of conflict [K] Code for separate section on C.G. . results and documents presentations .appointment or reappointment of directors .directors‘ report and management discussion and analysis‘ report about position .non compliance report also highlighted in report any with mandatory recommendations . . performance.

 Ownerships remains highly concentrated and family business groups continue to be dominant business model. which focus on the control mechanism and assets values. .  Many groups varying interests such as traditional ones. and new generations groups which focus on investment protection and multi-stakeholder interest.Critical Appraisal Of Corporate Governance In India  The post liberalization period of the IT sector have increased inflows of foreign capital and private equity investments.

 There is a cross sectional relationship between measure of governance and mesures of firm performance.  According to Balsubramanian survey (2008) compliance with legal norms is reasonably high in most areas but not complete. . Most of India‘s corporate governance short-comings are no worse than in other Asian countries.

.Corporate Governance Models Across The World  America :• The main problem is conflict of interest between wildly depressed shareholders & powerful managers.  Europe :• The differing voting rights of ownership are tightly held by families through pyramidal ownership and dual shares.

 The CEO has broad power to manage the corporation on a daily basis on all operations issues. Anglo-American: Liberal model of corporate governance. . It encourages radical innovation and cost competition. acquisition of business major capital expansion or other projects require broad approval.  However fund raising.

 principles and codes develop in different countries and issued by stock exchanges. managers. suppliers and the community in the corporate governance framework. .  The continental model is recognizes the interest of workers. Companies are primarily regulated by the state in which they are incorporated.  The companies choose a comfortable regulatory framework and the highest number of companies is incorporated in Delaware.

 OECD (Organization For Economic Cooperation and Development) revised a proponent of corporate governance principles throughout the world in 2004. .  Good governance ensures that all these are done appropriately and reported objectively and transparently. objectivity and protecting interest of executive management.  Corporate governance focuses on transparences.  Ethical factors are more or less covered by ―must do‖ requirements of guidelines through CSR.

in a truthful manner. . When in doubt. Corporate       governance standards should go beyond the law Be transparent and maintain a high degree of disclosure levels. • Corporate Governance Philosophy  Satisfy the spirit of the law and not just the letter of the law.Corporate Governance at Infosys  Corporate governance is about commitment to values and ethical business conduct. disclose Make a clear distinction between personal conveniences and corporate resources Communicate externally. about how the Company is run internally Comply with the laws in all the countries in which we operate Have a simple and transparent corporate structure driven solely by business needs Management is the trustee of the shareholders' capital and not the owner.

.  ICRA  It has assigned Infosys 'CGR 1‘  Infosys is the first company in India to be assigned the highest CGR by ICRA.Corporate Governance Ratings  CRISIL  It has assigned Infosys 'CRISIL GVC Level 1‗-Governance & value creation certificate.

Corporate Governance Guidelines  Board Composition  Board Meetings  Board Committees  Management Review & Responsibility  Shareholders .

Corporate Social Responsibility CSR .” .Definition “Corporate Social Responsibility is a commitment to improve community well being through discretionary business practices and corporate resources.

Disaster management Income generation. health & hygiene. Community & Society Health and environment care and safety consciousness . NG0. social unrest.Social Responsibility Stakeholders & affected Environment. health and environment education Community & Society. Employee &Contractors Impact/ Risk Pollution. Citizens 4 Employees. Resource Usage. Global Warming. legal noncompliance Health care and safety. education Strategic action plans Supported Improving the quality of life 1 Environmental Leadership 2 Health & Safety Quality of life. Community &Society. safety and health sustainability Improving the quality of life. Government. environmental. partnership with society and social license to operate Quality of life and EHS sustainability 3 Public conduct/ interaction with community & society for capturing their concerns Safety. NGOs. unemployment. Ecological imbalance. legal noncompliance.

Initiatives  Tata group – pioneer of CSR in India TATA CONSULTANCY SERVICES (TCS)  Reduction of waste at source    Reuse of material wherever possible Recycling Purchasing of products with recycled content .

Tata MOTORS  Reducing Pollution   Restoring Ecological Balance End of Life Vehicle Treatment and Recycling  At Tata Steel major CSR programme are managed by three organizations — Tata Steel Rural Development Society (TSRDS).  TSRDS started with 32 villages around Jamshedpur now covers over 700 villages in the states of Jharkhand and Orissa. Tata Steel Family Initiatives Foundation (TSFIF) and the Tribal Culture Society (TCS). 29 .

Institutions  Indian Institute of Science (IISc)  JRD TATA Ecotechnology Centre (JRDTEC)  TATA Institute of Fundamental Research (TIFR)  TATA Institute of Social Sciences (TISS) Healthcare  TATA Memorial Centre  TATA Medical Centre 30 .

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