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Corporate governence final


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Corporate governence final

  1. 1. Presented by-<br />Deepak khandelwal<br />
  2. 2. Corporate<br /><ul><li>A corporation is an organization created (incorporated) by a group of shareholders who have ownership of the corporation.
  3. 3. The elected board of directors appoint and oversee management of the corporation .</li></li></ul><li>governance<br /><ul><li>Oxford English dictionary defines “governance "as the act, manner , fact or function of governing sway control.
  4. 4. The word has Latin origins that suggest the notion of “steering". it deals with the processes and systems by which an organization or society operates.
  5. 5. Governance can be used with reference to all kind of organizational structure e.g.
  6. 6. Ngo –not for profit organization
  7. 7. Municipal corporation /gram panchyat
  8. 8. Central/state government
  9. 9. Partnership firm</li></li></ul><li>Corporate governance<br /><ul><li>It is a broad concept and has been defined and understood differently by different groups and at different points of time .
  10. 10. The Cadbury committee report defines it as “the system by which companies are directed and controlled”.
  11. 11. It is generally understood as the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in corporations” </li></li></ul><li>Difference between<br />
  12. 12. Brief history of corporate governance in India<br />Unlike South-East and East Asia, the corporate governance initiative in India was not triggered by any serious nationwide financial, banking and economic collapse<br />The initiative in India was initially driven by an industry association, the Confederation of Indian Industry<br />In December 1995, CII set up a task force to design a voluntary code of corporate governance.<br />The final draft of this code was widely circulated in 1997.<br />In April 1998, the code was released. It was called Desirable Corporate Governance: A Code.<br />Between 1998 and 2000, over 25 leading companies voluntarily followed the code: Bajaj Auto, Hindalco, Infosys, Dr. Reddy’s Laboratories, Nicholas Piramal, Bharat Forge, BSES, HDFC, ICICI and many others<br />
  13. 13. Brief history of corporate governance in India<br />Following CII’s initiative, the Securities and Exchange Board of India (SEBI) set up a committee under Kumar Mangalam Birla to design a mandatory-cum-recommendatory code for listed companies<br />The Birla Committee Report was approved by SEBI in December 2000<br />Became mandatory for listed companies through the listing agreement, and implemented according to a rollout plan:<br />2000-01: All Group A companies of the BSE or those in the S&P CNX Nifty index… 80% of market cap.<br />2001-02: All companies with paid-up capital of Rs.100 million or more or net worth of Rs.250 million or more.<br />2002-03: All companies with paid-up capital of Rs.30 million or more <br />
  14. 14. Brief history of corporate governance in India<br />Following CII and SEBI, the Department of Company Affairs (DCA) modified the Companies Act, 1956 to incorporate specific corporate governance provisions regarding independent directors and audit committees.<br />In 2001-02, certain accounting standards were modified to further improve financial disclosures. These were:<br />Disclosure of related party transactions.<br />Disclosure of segment income: revenues, profits and capital employed.<br />Deferred tax liabilities or assets. <br />Consolidation of accounts.<br />Initiatives are being taken to (i) account for ESOPs, (ii) further increase disclosures, and (iii) put in place systems that can further strengthen auditors’ independence.<br />
  15. 15. FRAMEWORK OF GOVERNANCE<br /><ul><li>Supervisory board/committee/team
  16. 16. Audit committee
  17. 17. Internal audit
  18. 18. Statutory audit
  19. 19. Disclosure of information
  20. 20. Risk management framework
  21. 21. Internal control framework</li></li></ul><li>OBJECTIVES OF GOOD CORPORATE GOVERNANCES<br /><ul><li>Strengthen management oversight functions and accountability.
  22. 22. Balance skills, experience and independence on the board appropriate to the nature and extent of company operations.
  23. 23. Establish a code to ensure integrity.
  24. 24. Safeguard the integrity of company reporting.
  25. 25. Risk management and internal control.
  26. 26. Disclosure of all relevant and material matters.
  27. 27. Recognition and preservation of needs of shareholders. </li></li></ul><li>PARTIES TO CORPORATE GOVERNANCE<br /><ul><li>Board of directors
  28. 28. Managers
  29. 29. Workers
  30. 30. Shareholders or owners
  31. 31. Regulators
  32. 32. Customers
  33. 33. Suppliers
  34. 34. Community(people affected by the actions of the organization.) 12</li></li></ul><li>PRICIPLES OF CORPORATE GOVERNANCE<br /> Directors<br /><ul><li>Every listed company should be headed by an effective boardwhich should lead and control the company.
  35. 35. There should be board balance of executive & non executive directors such that no individual can dominate the board decision making.
  36. 36. The board should be supplied with timely information to enable it to discharge its duties.
  37. 37. There should be formal and transparent procedure for the appointment of new directors to the board.
  38. 38. All directors should be required to submit themselves for re-election at regular intervals and at least every three years.</li></li></ul><li>FACTORS INFLUENCING QUALITY OF GOVERNANCE<br /><ul><li>Integrity of the management
  39. 39. Ability of the board
  40. 40. Adequacy of the process
  41. 41. Commitment level of individual board members
  42. 42. Quality of corporate reporting
  43. 43. Participation of stakeholders in the management</li></li></ul><li>TRENDS IN CORPORATE GOVERNANCE<br /><ul><li>Demand for greater transparency and accountability
  44. 44. Written job descriptions detailing roles and responsibilities of chairman and board members.
  45. 45. Core competencies for board members are defined and those without skills or expertise not invited.
  46. 46. Development of performance criteria and annual evaluations of the board.
  47. 47. Orientation for new members.
  48. 48. Ongoing training
  49. 49. Succession planning</li></li></ul><li>THE BOARD RESPONSIBILITIES<br /><ul><li>Overseeing strategic development & planning
  50. 50. Management selection, supervision and upgrading.
  51. 51. Maintenance of good member relations.
  52. 52. Protecting and optimizing the organization’s assets.
  53. 53. Fulfilling legal requirements.</li></li></ul><li>Corporate Governance<br />Fairness<br />Accountability<br />Transparency<br />Responsibility<br />Fundamental Pillars of Corporate Governance<br />
  54. 54. Accountability<br />Clarifying governance roles & responsibilities, and supporting voluntary efforts to ensure the alignment of managerial and shareholder interests and monitoring by the board of directors capable of objectivity and sound judgment.<br />Transparency<br />Requiring timely disclosure of adequate information concerning corporate financial performance<br />
  55. 55. Responsibility<br />Ensuring that corporations comply with relevant laws and regulations that reflect the society’s values<br />Fairness<br />Ensuring the protection of shareholders’ rights and the enforceability of contracts with service/resource providers<br />
  56. 56. Corporate Governance<br />Investors are Willing to Pay More For a Company With Good Board Governance Practices<br />83<br />81<br />89<br />Companies are willing to pay 18 % to 28% more for better governance.<br />
  57. 57. ICSI National Award for Excellence in <br />Corporate Governance<br />Best Governed Companies<br />
  58. 58. Concluding Observations<br /><ul><li>Code of CG should be redesigned to reflect international best practices
  59. 59. Stringent enforcement of Law
  60. 60. More effective coordination and cooperation between SEBI, DCA
  61. 61. CG mechanism should be flexible and suitable
  62. 62. Overall ethical values in all segments should be promoted for effective
  63. 63. accounting, auditing, disclosure and transparent system.</li></li></ul><li>Mandated CG guidelines and disclosures<br />Board of Directors: information that must be supplied<br /><ul><li>Annual, quarter, half year operating plans, budgets and updates.
  64. 64. Quarterly results of company and its business segments.
  65. 65. Minutes of the audit committee and other board committees.
  66. 66. Recruitment and remuneration of senior officers.
  67. 67. Materially important legal notices and claims, as well as any accidents, hazards, pollution issues and labor problems.
  68. 68. Any actual or expected default in financial obligations.</li></li></ul><li><ul><li>Details of joint ventures and collaborations.
  69. 69. Transactions involving payment towards goodwill, brand equity and intellectual property.
  70. 70. Any materially significant sale of business and investments.
  71. 71. Foreign currency and other risks and risk management.
  72. 72. Any regulatory non-compliance.</li></li></ul><li>Thank you<br />