Corporate Governance

Legal & Statutory Compliances

Opportunities & Constraints
Pavan Kumar Vijay

What is Corporate Governance??

Corporate Governance is a process

to achieve Corporate Excellence

Corporate Governance rests with the Vision and Perception of the Leadership .

and A Leader need to adopt a Vision for Corporate Governance .

compliance of law in letter and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders” The Institute of Company Secretaries of India .Corporate Governance ”Corporate Governance is the application of best management practices.

Corporate Governance Framework Wealth Creation Output – Input = Wealth Created Wealth Management Wealth Sharing Happiness and Prosperity of all Stakeholders SUPPLIERS Adequate Returns ? Reinvestment Distribution Enhanced Capabilities HUMAN ASSETS Adequate Remuneration Sustainability CUSTOMERS Affordable Prices Research and Development HR Development Infrastructure Risk Management PUBLIC Payment of Taxes and Partnership in National Development Projects Best Management Practices are Vital Here Law and Ethics are Vital Here .

Stakeholders in Value Chain ROLE OF STAKEHOLDERS Supply Funds. Human Resources and Customers PUBLIC Biological. Materials and Services Value Addition and Management of Resources Give Opportunity to Co. Economic and Cultural Environment PUBLIC EXPECTS PARTNERHIP FOR SUSTAINABLE DEVELOPMENT . to Satisfy their Needs SUPPLIERS HUMAN RESOURCE CUSTOMERS Adequate Returns for Funds. Material and Services Supplied Adequate Salary and Security for leading a Happy Life Best Quality Products and Customer Care at Minimum Prices EXPECTATIONS OF STAKEHOLDERS Potential Suppliers.

Principles of Corporate Excellence Fairness to all stakeholders Mutual Trust. Success Stories and Experience Sharing Happiness and Concerns . Transparency and Togetherness Unrestricted Communication and Continuous Feedback Sharing Knowledge.

these principles are the foundation of Best Governed Organisations irrespective of their form and size .Infact.

Advantages of applying Best Corporate Governance Practices .

Growing Revenues Growing Profits Growth Growing Market Value .

Widening Customer Base Ready Market for New Products Widespread Goodwill and Brand Reputation Access to Global Markets Better Access to Human Capital .


Leading to… .

Environment SUSTAINABLE DEVELOPMENT Civil Society Business Society .

Companies that have followed principles of Corporate Governance have .

Consistently earned high returns. increased their net worth and enhanced their shareholders wealth .

Invested significantly in proactive research and development .

Developed people into „achievers‟ than just „performers‟ .

government and business partners .Dealt ethically with customers.

Maintained and updated their professional management culture. system and processes .

and accomplished ...


Professional’s Role & responsibility For achieving Corporate Excellence .

Excellence in Corporate Governance leads to National Excellence Social Excellence Corporate Excellence Excellence in Corporate Governance National Excellence .

Professionals are acting as Catalyst in applying best practices in Corporate Governance .

Professionals are adequately developed to take this challenging job .

We have to Commit our self for well-being and progress of all stakeholders Which is our age old mantra .

Satyam Vada Dharmam Chara .Taittariya Upanishad .

“Forever speak the truth and follow the dharma” .

Truth : Disclosure of Actual State of Affairs (Transparency in operations and transactions) .

Dharma : “Dharma is for the stability of society. Verse-58 in Chapter 69 .” . the maintenance of social order and the general well-being and progress of humankind.Karna Parva of the Mahabharata.

This is our own age old mantra of

Good Governance

Professionals are expected to use their
Capacity, Knowledge and Resources

Maximisation of stakeholders‟ value and wellbeing and progress of humankind THROUGH


Transparency, accountability and truthful disclosure of state of affairs

• • • • • • Ethical Behavior Unmatched Competency Multifacet effective value addition Expert knowledge & implementation Competent services International standards

To implement Corporate Governance process which lead to… .

Wealth Creation Distribution Management .

Clause 49 of the listing agreement Tries to manage this process… .

Composition .Clause 49 of the Listing Agreement Provision Board of directors .Code of Conduct Purpose Better governance and management .Procedure .Committees .

Clause 49 of the Listing Agreement Provision Independent & Qualified Audit Committee Purpose Independent view Expert opinion Suggestions for development .

Clause 49 of the Listing Agreement Provision Purpose Subsidiary Company Governance of Group Company Affairs Part of Wealth creation & Management .

rules & regulation Purpose Ethical conduct of affairs Part of Wealth Management .Clause 49 of the Listing Agreement Provision Compliance of all the applicable legal provisions.

Clause 49 of the Listing Agreement Provision Purpose Avoidance of undue advantage to the related parties Part of Wealth Management Related party transactions .

Clause 49 of the Listing Agreement Provision Purpose Disclosure of accounting treatment Governance of affairs of the company. transparency Part of Wealth Management .

Clause 49 of the Listing Agreement Provision Purpose Risk management Insurance / disaster management Part of Wealth Management .

preferential issues etc. rights issues.Clause 49 of the Listing Agreement Provision Purpose Proceeds from public issues. Utilization of funds for the specified purpose / transparency Part of Wealth creation & Management .

Clause 49 of the Listing Agreement Provision Purpose Management Discussion & analysis report Development / new avenues / future strategy Part of Wealth creation & Management .

Clause 49 of the Listing Agreement Provision Purpose Shareholders grievance redressal mechanism Stakeholders interest / effective complaints redressal Part of Wealth creation & Management .

Clause 49 of the Listing Agreement Provision Purpose Transparency Remuneration of directors Part of wealth distribution & management .

accounting policies   .Clause 49 of the Listing Agreement Provision Purpose Good governance Transparency Part of wealth management CEO/ CFO Certification  financial statement authenticity  No misleading or fraudulent transaction internal controls.

Clause 49 of the Listing Agreement Provision Purpose Report on Corporate Governance – separate section on Corporate Governance in the Annual Reports Non Compliance of any mandatory requirement with reasons thereof Quarterly compliance report to the stock exchanges within 15 days from the close of quarter Disclosure – – .

 Disclosure of the compliances of mandatory & adoption/ non-adoption of non-mandatory requirements shall be made in the section on corporate governance of the annual report. & to the stock exchanges along with annual report filed by the co. to be sent annually to all the shareholders of the co.Clause 49 of the Listing Agreement Provision Purpose Compliances Independent  Certificate from auditor / Practicing certification Company Secretaries (PCS) regarding compliance of conditions of corporate governance. .

Voluntary Corporate Governance Practices followed by the companies .

Senior Management. and employees – Personnel/HR policy – Supply Chain Management – Formulation of Vision and Mission • Secretarial Audit other than the SEBI Audit is being undertaken by the companies • Companies are following secretarial Standards issued by ICSI.New Practices Followed • Companies have started complying with revised clause 49 of listing agreement which will come into effect from 1st January 2006 • Following policies/codes have been formulated: – Code of Corporate Governance – Code of Conduct for Directors. .

. • Companies are conducting survey to know the level of shareholder satisfaction • remuneration committee to govern management remuneration distribution.New Practices Followed • Audited half yearly results to shareholders • Social Responsibility & insurance • Performance Appraisal system in the companies for evaluation of contribution of Directors.

• Concept of Lead Independent Director has been introduced • Succession planning is being done. the position of Chairman and CEO/MD is being held by different persons . • To ensure the separation of ownership and management.New Practices Followed • Policy for induction of independent directors • Disclosure of criteria for appointment of independent directors in the annual report. In some companies nomination committee constantly works with the Board to evolve succession planning.

It can be visualized as… .

New Opportunities For Professionals New Responsibilities .

Opportunity is always clubbed with responsibility .

New Opportunities • Segment wise role & responsibilities – Specialized Knowledge & expertise – Compliance mechanism for all the applicable laws – Applicable national & international accounting standards • Vigilance and surveillance as independent director • Expert services under Audit Committee & BOD committees .

New Opportunities contd. • Guidance and Board Procedures Code of Conduct • Guidance & implementation Good Governance Practices • Implementation of International practices • Implementation of time bound flawless compliance mechanism .

Opportunities & Responsibilities As a Independent Director As a Professional in Employment As a Professional in Practice .

As a independent director Expectations Value addition Expert Guidance Vigil on the affairs Responsibility Knowledge Applicable legal provisions Information extraction True & effective governance Unbiased opinion .

As a professional in employment Expectations as CEO/CFO Compliance of all provisions Better management & governance Vigil on the affairs Expertise utilization for the growth of the organization Responsibility True & correct representation Specialized Guidance to the management Information extraction Evaluating future growth potential .

As a professional in practice Expectations Extended Expertise Multifacet and updated knowledge Compliance of all applicable provisions Implementation of effective policy and practice Responsibility True & Independent representation Specialized Guidance to the management Regular & quick updation to the management Proactive actions in the interest of the company .

To cater these responsibilities We need Process System Policy .

Companies need help of professionals to formulate these processes. systems & policies to maximize the benefits of Corporate Governance .

Constraints .

Protection of independent directors ?? .

1948 – Environment Laws – Labour Laws – Other stringent liabilities under plethora of national & international laws . 1961 – Factories Act. 1956 – Income Tax Act.Your negligence can make you liable under • Provisions of : – Companies Act.

Example Provision Signing of Prospectus Liability Criminal liability for any misstatement in the prospectus All the directors Imprisonment 2 Years .

Conclusion • Corporate Governance has bought up new opportunities coupled with hard responsibilities • Professionals need to be cautious about the constrains and maintain extra vigilance and care while discharging their responsibilities . .www.

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