Strategic Management


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Strategic Management

  2. 2. Corporate Governance"Corporate governance is about maintaining an appropriate balance of accountability between three   key players: the corporations owners, the directors whom the owners elect, and the managers whom the directors select.Accountability requires not only good transparency, but also an effective means to take action for poor performance or bad decisions."
  3. 3. Corporate GovernanceCorporate governance is about commitment to values and ethical business conduct.It is about how an organization is managed.This includes its corporate and other structures, its culture, policies and the manner in which it deals with various stakeholders.
  4. 4. Corporate GovernanceAccordingly, timely and accurate disclosure of information regarding the financial situation, performance, ownership and governance of the company is an important part of corporate governance.This improves public understanding of the structure, activities and policies of the organization.Consequently, the organization is able to attract investors, and enhance the trust and confidence of the stakeholders
  5. 5. Corporate Governance– Set of mechanisms used to manage the relationships (and conflicting interests) among stakeholders, and to determine and control the strategic direction and performance of organizations (aligning strategic decisions with company values) Effective CG interest to nations as it reflects societal standards
  6. 6. Corporate Governance“ An internal system encompassing policies, processes andpeople, which serves the needs of shareholders and otherstakeholders, by directing and controlling managementactivities with good business objectivity, accountability andintegrity. It is a system of structuring, operating and controlling acompany with a view to achieve long term strategic goals tosatisfy shareholders, creditors, employees, customers andsuppliers, and complying with the legal and regulatoryrequirements, apart from meeting environmental and localcommunity needs.
  7. 7. Corporate GovernanceThe perceived quality of a companys corporate governance can influence its share price as well as the cost of raising capital.Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes.
  8. 8. Corporate Governance in IndiaIn India, the Confederation of Indian Industry (CII) took the lead in framing a desirable code of corporate governance in April 1998.This was followed by the recommendations of the Kumar Mangalam Birla Committee on Corporate Governance.This committee was appointed by the Securities and Exchange Board of India (SEBI).The recommendations were accepted by SEBI in December 1999, and are now incorporated in Clause 49 of the Listing Agreement.
  9. 9. Corporate Governance in IndiaSEBI also instituted a committee under the chairmanship of N. R. Narayana Murthy which recommended enhancements in corporate governance. SEBI has incorporated the recommendations made by the Narayana Murthy Committee on Corporate Governance in clause 49 of the Listing Agreement. The revised clause 49 was made effective from January 1, 2006.
  10. 10. Principles of corporate governanceRights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights.They can help shareholders exercise their rights by effectively communicating information that is understandable and accessible and encouraging shareholders to participate in general meetings.
  11. 11. Principles of corporate governanceInterests of other stakeholders: Organizations should recognize that they have legal and other obligations to all legitimate stakeholders.
  12. 12. Principles of corporate governanceRole and responsibilities of the board:The board needs a range of skills and understanding to be able to deal with various business issues and have the ability to review and challenge management performance.It needs to be of sufficient size and have an appropriate level of commitment to fulfill its responsibilities and duties.
  13. 13. Principles of corporate governanceIntegrity and ethical behavior:Ethical and responsible decision making is not only important for public relations, but it is also a necessary element in risk management and avoiding lawsuits.Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making.
  14. 14. Principles of corporate governanceDisclosure and transparency:Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide shareholders with a level of accountability.They should also implement procedures to independently verify and safeguard the integrity of the companys financial reporting.Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual information.
  15. 15. corporate governance controlsINTERNAL• Monitoring by the board of directors• Internal control procedures and internal auditors• Balance of power
  16. 16. corporate governance controlsEXTERNAL• competition• demand for and assessment of performance information (especially financial statements)• government regulations• labour market• media pressure