Study Material for Management Student

1. UNIT 5
Corporate
Governance
PROF. KANCHAN KUMARI

2. Corporate Governance-Introduction
 Corporate governance is the system by which companies are directed and
controlled. Boards of directors are responsible for the governance of their
companies. The shareholders' role in governance is to appoint the directors
and the auditors and to satisfy themselves that an appropriate governance
structure is in place.
 Corporate governance is the combination of rules, processes and laws by
which businesses are operated, regulated and controled

3. Corporate Governance-Example
• Governance Frameworks. ...
• Governance Documentation. ...
• Policies in line with law and applicable regulations. ...
• Documenting processes and procedures. ...
• Effective board reporting. ...
• Agenda and minutes. ...
• Director training and board evaluations. ...
• Subsidiary governance policies.

4. Concept of Corporate Governance
The five principles of corporate governance are
 responsibility,
 accountability,
 awareness,
 impartiality
 transparency.

5. Need of Corporate Governance
 Wide Spread of Shareholders
 Changing Ownership Structure
 Corporate Scams or Scandals
 Greater Expectations of Society of the Corporate Sector
 Hostile Take-Overs
 Huge Increase in Top Management Compensation
 Globalisation

6. Definitions
 business author Gabrielle O’Donovan defines corporate governance as “an
internal system encompassing policies, processes and people, which serve the
needs of shareholders and other stakeholders, by directing and controlling
management activities with good business savvy, objectivity, accountability
and integrity. Sound corporate governance is reliant on external marketplace
commitment and legislation, plus a healthy board culture which safeguards
policies and processes.”

7. Parties to Corporate Governance
 Key parties involved in corporate governance include stakeholders such as
the board of directors, management and shareholders. External
stakeholders such as creditors, auditors, customers, suppliers, government
agencies, and the community at large also exert influence

8. Parties to Corporate Governance

9. Agency Theory

10. Stewardship Theory

11. Stewardship Theory
 Simply, the stewardhip theory is a theory that managers, left on their own,
will act as responsible stewards of the assets they control, and describes the
existence of a strong relationship between satisfaction and organizational
success. This theory was introduced by Donaldson and Davis (1989).

12. Popular Model for Governance ,Anglo-
American Model
 The Anglo-US model, also known as the Anglo-Saxon model, was crafted by
the more individualistic business societies in Great Britain and the United
States. This model presents the board of directors and shareholders as the
controlling parties. The managers and chief officers ultimately have
secondary authority.

13. Japanese Model
 The Japanese Model
Governance patterns take shape in light of two dominant legal relationships:
one between shareholders, customers, suppliers, creditors, and employee
unions; the other between administrators, managers, and shareholders. There
is a sense of joint responsibility and balance to the Japanese model.

14. Indian Perspective of Corporat Governance
 Corporate Governance in India is a set on internal controls, policy and
procedures which form the framework of a company's operations and its
dealings with various stakeholders such as customers, management,
employees, government and industry bodies.

15. Thank You !
Prof. Kanchan Kumari