Ethics - Corporate Governance


Published on

Responsibilities of CEO, Investors, Shareholders.

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Ethics - Corporate Governance

  1. 1. Introduction Corporate governance is "the system by whichcompanies are directed and controlled". It involves regulatory and market mechanisms, and the roles and relationships between a company’s management, its board, its shareholders and other stakeholders, and the goals for which thecorporation is governed. In contemporary business corporations, the main external stakeholder groups are shareholders, debtholders, trade creditors, suppliers, customers and communities affected by the corporations activities. Internal stakeholders are the board of directors, executives, and other employees.
  2. 2. Scope of Corporate Governance: To enhance the long term value and economic efficiency of the company. It encompasses all shareholders and integrates all the participants involved in the process. To elevate the reputation of the corporation and the esteem of the esteem of its management. To attract, employ and retain talent and motivate employees to give their best. A more open and participative style of management ensures free exchange of ideas and frank appreciation at all levels.
  3. 3. Scope of Corporate Governance To create and adopt, code of conduct with wholehearted commitment and improve the moral and ethical standards of performance to the utmost level. To have a right balance, knowledge, and competence to set strategies and lead the organization. To use the resources entrusted to the management, in the most economic, productive and effective ways, for the benefit of shareholders as well as for the society at large. To set the high standards of business ethics based upon humanity, honesty and handwork.
  4. 4. Scope of Corporate Governance: To improve the standard of living and life of the society, industry, commerce and professional services. To generate accurate and reliable information. To make the decision-making process transparent. To prepare a small enterprise for growth and help secure new business opportunities when they arise. To improve the economic efficiency of the firm. To increase the market confidence of the firm.
  5. 5. AgencyTheory
  6. 6. Meani of organizational behavior) wherein the owners of funds (alias ng principals) invest theirmoney in a company that ismanaged by on altogetherdifferent group of people called directors is based on the premise of trust; shareholders lend their money to directors undertrust that the latter shall
  7. 7. Definition ‘Hypothesis that attempts to explainelements of organizational behavior through an understanding of the relationships between principals (shareholders) andagents (directors and managers). A conflictmay exist between the actions undertaken by agents in furtherance of their own self- interest and those required to promote the interest of principals.’
  8. 8. Some Of The InstancesWherein A Conflict Can Exist Between Owners And Managers are interested in short termprofits against long term shareholders value,as Managerspositive As Follows it has a Are impact on theircompensation, incentives, bonus and promotion.The episode of the sub-prime crises in UnitedStates demonstrates this conflict wherein theinvestment bankers and financial institutionstook resource to highly complex derivativeproducts in order to inflate short-termprofits and thereby increase their incentives. Quite often, managers having financial interestin their own company tend to send wrong cues
  9. 9. Assumptionswould alwaysBy SmithGiven be too high. The costs of agency relationships Those costs shall rise with theincrease in size of business. Bigger a business gets, the graterwould be the waste because ofnegligence. Negligence, profusion and conflictof interest would be predicament
  10. 10. As these assumptions have been read onto corporate governance, and informed its reform in recentdecades, they have resulted in what are now an almost universal set oftechniques and practices designed to control the conduct of executives both within the corporation and externally. Inside the company, boards have essentially two meansto exercise control over executives;they can fire them and they can give
  11. 11. Differen Corporate Corporate ce Governance ManagementBetweenCorpora External Focus Internal Focus te Governance Management assumes an open assumes aGoverna system closed system nce And Strategy- Task-orientedCorpora oriented Concerned with Concerned with te where the getting the Manage company is going company there
  12. 12. Role of CEOThe primary role of a CEO is to run the organisation in an efficient manner to produce the desired results. Apartfrom running the business effectively, the CEO is expected to have aconstructive working relationship with the chairman and the directors
  13. 13. Areas to play role for CEO-Power and influence through personal action.Handling the organizational politics.Role as negotiator.Role as communicator.Role of being a role-model.
  14. 14. Personal Action:Ordering the employeesMaking subtle cultural changePersuading the employeesInducing the employees
  15. 15. Politics in firmsIf there are some conflicting demands, he needs to find which demand is genuine and urgent, had fulfill it accordingly. Thus, he needs to take every measure to ensure that politics remain to the minimal in the firms.
  16. 16. CEO as negotiator: Do not negotiate on position. Justice demands that both sides should be given a patient hearing. Use negotiation for making the person agrees to increase productivity, reduce absenteeism of workers. The CEO should negotiate on the problem and not involve personalities of the people who are party to the negotiation.
  17. 17. CEO as Communicator:The CEO wields his personal power through communication with the employees.The role of CEO as communicator exceeds the informative range; it goes on to listening to employee’s complaints, their problems, when it becomes a two-way communication.
  18. 18. CEO as Role-Model:Catalyst for transformation,Reaching out to entire firm’s administration,Planner of strategies, andProblem solver.
  19. 19. ROLE OF BOARD AND SENIOR EXECUTIVES A group of top executives and very senior managers in a company constitutes its board of directors.The board is a bridge which links the persons who are shareholders withthose who manage or create value and for the company.
  20. 20. Duties of Board of Directors Duty of Care – Duty of care implies that the director is obliged to exercise adequate diligence indecision making. Duty of Loyalty: Duty of loyalty means a director must have uncompromising loyalty to the organisation which he must demonstrate through his actions.
  21. 21. Functions of the Boards Reviewing, approving and overseeing fundamental financial and corporate strategies and major corporate actions. Reviewing and approving long-term strategic and business plans, overseeing execution and evaluating results of such plans. Nominating directors, reviewing the structure and operation of the Board and overseeing effective corporate governance. Assessing major risks facing the company and reviewing options for their mitigation.
  22. 22. Functions of the Boards Ensuring that processes are in place for maintaining the integrity of the company, including the integrity and transparency of its financial statements, compliance with laws and ethics, the integrity of relationships with customers and suppliers and relationships with other stakeholders. Selecting the company’s CEO, Chairman of the Board and Lead Independent Director.
  23. 23. Relationship between theBoard and Senior Executives The relationship between senior executives and the Board is a partnership that is crucial to any company’s long term success. Those who have the opportunity to materially influence the integrity, strategy and operation of the company and its financial performance are considered to be a Senior Executive.
  24. 24. Responsibilities of the ChairmanChairman:• Lead the board.• Ensure the efficient organisation and conduct of the Board’s function.• Brief all Directors in relation to issue arising at Board meetings.• Chair shareholder meetings of the Company.• Exercise such specific and express powers as are delegated to the Chairman by the Board from time to time.
  25. 25. Responsibilities of the Managing DirectorManaging Director:• Manage and administer the day-to- day operations of the company.• Supervise senior executives and represent them to the Board.• Exercise such specific and express powers as are delegated to the Managing Director by the Board from time to time.