Strategic management 4th module mg university

1. Laws of corporate Management
BY
MANOL V TOMS

2. Corporate Governance are the policies, procedures and rules governing the
relationships between the shareholders, directors and managers in a company,
as defined by the applicable laws, the corporate charter, the company’s bylaws,
and formal policies.
Key Players In Corporate Governance
Management
Board of Directors
Customers
Shareholders
Employees
Regulators
Suppliers

3. PRINCIPLES IN CORPORATE GOVERNANCE
• Rights and equitable treatment of shareholders
• Interests of other stakeholders
• Role and responsibilities of the board
• Integrity and ethical behavior
• Disclosure and transparency
In 1996, Confederation of Indian Industry (CII), took a special initiative on
Corporate Governance.
On April 12, 1988, SEBI was established with objective of protecting the
rights of small investors and regulating and developing the stock markets in
India.

4. In 1992, the Bombay Stock Exchange (BSE),the leading stock exchange in
India, witnessed the first major scam masterminded by Harshad Mehta.
As a result the Government of India brought in a separate legislation by the
name of ‘SEBI Act 1992’and conferred statutory powers to it.

5. SEBIandClause49
SEBI asked Indian firms above a certain size to
implement Clause 49, a regulation that strengthens the
role of independent directors serving on corporate
boards.
On August 26, 2003, SEBI announced an amended
Clause 49 of the listing agreement which every public
company listed on an Indian stock exchange is required
to sign. The amended clauses come into immediate
effect for companies seeking a new listing.

6. Mandatory requirements of corporate governance
Composition of Board of Directors – The board of directors of the company
shall have an optimum combination of executive and non executive directors
with not less than 50% of the total number of directors comprising of non
executive directors.
Director’s pecuniary relationship – All pecuniary relationship or
transactions of the non executive director’s vis-àvis the company should be
disclosed in the Annual Report.

7. Audit Committee – Every company is required to set up a Audit Committee
consisting of minimum three members, all being non executive
directors, majority of them being independent and at least one member
having financial and accounting knowledge. They should meet at least 3
times in an year, once in every six months.
Director’s remuneration – The remuneration of non executive
directors shall be determined by the board of directors and the
following disclosure shall be in the annual report :
(a) All elements of remuneration package of all the directors
(b)Details of fixed and performance related components of remuneration
(c) Service contracts, notice period etc.

8. Board meetings – Minimum four board meetings should be conducted in
a year. There should not be a time gap of more than four months between
any two board meetings.
Management – The management of the company must disclose to its
Board details relating to all material, financial and commercial transactions
Shareholders – In case of appointment of a director, shareholders should
be provided with a brief resume of the person. The company should publish
in their website details regarding information on stock exchanges.

9. Report on corporate governance – Every listed company shall have a separate
section on corporate governance in the annual report of the company with a detailed
compliance report on corporate governance.

10. Audit Committee:- Financial statements and the draft audit report of
management discussion and analysis of
Financial condition
Result of operations of compliance with laws
Risk management letters
Letters of weaknesses in internal controls issued by statutory
Internal auditors
Removal and terms of remuneration of the chief internal auditor
Whistleblower Policy :- This policy has to be communicated to all
employees and whistleblowers
should be protected from unfair treatment and termination.
Subsidiary Companies:- 50% non-executive directors & 1/3 &
½independent directors depending on whether the chairman is non-
executive or executive.