2. CORPORATE GOVERNANCE AND
BOARD OF DIRECTORS
The board of directors of an enterprise has to fulfill a number of
responsibilities.
1. Creating conditions for developing a sound business strategy in
consonance with national/plan objectives.
2. Ensuring that the enterprise has a CEO of the highest caliber, and
the certain senior managers are being groomed to assume the CEOs
positions in future.
3. Creating systems of information, audit and control to oversee
whether the enterprise is meeting objectives.
4. Ensuring that the enterprise complies with legal and ethical
standards.
5. Ensuring that the enterprise is able to manage crisis and that its
3. CORPORATE GOVERNANCE AND CHIEF
EXECUTIVE OFFICER
The premise of effective corporate governance commences with
questioning the effectiveness of the institution of board of directors,
etc. In a recent study of corporate governance in US, therehas been
an evaluation of CEO, whole board, individual directors.
The areas that were investigated in the study ranged from the ability
of developing the annual strategic plan, shaping the organization’s
short-term and long-term objectives, performance of the stock price,
lobbyingefforts, involvement in trade associations, efforts at internal
communication, leadership skills,success in managing labour
relations, and succession, among others.
4. NOMINEE DIRECTORS
Nominee directors include government nominees and representatives
of financial institutions on boards. In essence, these directors are a
conduct between the enterprise and the government.
They must, therefore, bring together with them the Government’s
thinking regarding the various issues for discussion at board
meetings and in the case of financial institutions, the effective
utilization of invested funds. It has been found that government
nominees dominate board meetings and their contribution is not in
proportion to their representation
5. CREDITORS, SUPPLIERS AND
CORPORATE GOVERNANCE
Boards have to play a critical role to fulfill conditions of sound
corporate governance vis-à-viscreditors, as they are very important
stakeholders.
Creditors need financial information on theoperations of the
enterprise on a continuous basis (liquidity, solvency, debt-paying
capacity,debt service coverage ratio, interest coverage ratio, value
added to wages, growth of turnover,growth in market share, etc).
By installing an effective system of financial disclosure, boards can
ensure effective corporate governance.
6. GOVERNMENT, EMPLOYEES AND
CORPORATE GOVERNANCE
Government – central, state or municipal – is the external
stakeholder. The government must,manage and control enterprises,
through laws and regulations.
The Comptroller and Auditor General of India acts as the custodian of
public funds invested in these enterprises.
Questions know as starred and unstarred are constantly asked by
elected representatives on the policies and performance of. More
often than not replies made/tabled and discussions ranging from
half-hour to two days and special debates are unsatisfactory.
7. CONTINUED………….
The organisation should fulfill their responsibilities to employees. No
steps should be initiated
to ensure free flow of information, maximize labour productivity
potential, nurture and
strengthen participatory systems, set-up sound systems of
accountability or establish a proper
relationship between productivity and reward.
8. DIFFERENCE BETWEEN
SHAREHOLDERS AND
STAKEHOLDERS
1. Stakeholders are the ones who affect or get affected by the actions
of the company. Customers,employees, suppliers, government are
all examples of stakeholders of a company.
2. Shareholders are individuals or companies that legally own shares
of stock of a joint stock company. They jointly own the company.
They can be considered as a partial subset of stakeholders. They
have some rights which are exclusive to them and are not available
to any other stakeholder.
9. STAKEHOLDERS: RIGHTS AND
PRIVILEGES
To the Customers
1. To ensure high quality product at affordable and fair prices or free.
2. To ensure good service, ethical conduct and courtesy to the
customers.
To the Society
1. To ensure contribution to the society in most deserving areas.
2. To ensure fairness in all dealings through careful assessment and
scrutiny and professional
service.
3. To ensure maintenance as well as continuous improvement.
10. STAKEHOLDERS: RIGHTS AND
PRIVILEGES
To the Employees
1. To provide all employees opportunity for meaningful work and adequate facilities for
development of their abilities and potential through proper training.
2. To ensure acknowledgement and appreciation for good work.
3. To encourage and facilitate increased association of the employees in decisions related to
their work spheres.
4. To provide best possible conditions of employment through fair wages and working
environment.
To the Governing Body
1. To provide thorough and adequate information regarding the operations of the
organization.
2. To ensure economic viability of the operations through sound financial policies.
3. To ensure continuation and growth of the operations through investing funds in essential
facilities and infrastructure for the operations.
11. RIGHTS OF SHAREHOLDERS
1. Basic shareholder rights include the right to
(a) Secure methods of ownership registration: The Central Depository
Services Ltd. (CDSL),which maintains high standards of safety and efficiency
Registration in depositoryand the unique account number is proof of
ownership for the shareholders.
(b) Convey or transfer shares: There are no restrictions on the transferability
of shares, except in the case where the Board may, subject to the right of
appeal conferred bysection 111 of the Companies Act.
(c) Obtain relevant information on the corporation on a timely and regular
basis: Most of the financial and non-financial information on the companies
is available on their websites or other commercial websites free of cost.
Apart from this regular filings with Stock Exchanges, SEBI and DCA are also
available for shareholders' scrutiny free of cost or at a nominal cost.
(d) Participate and vote in general shareholder meetings: Board of directors
are entrusted with the duty of convening the Annual General Meeting and
12. RIGHTS OF SHAREHOLDERS
e)Elect and remove members of the board: Section 257 of the
Companies Act, 1956, enables shareholders to elect members of the
Board of Directors. Section 284 of the Companies Act enables a
company to remove a director through an ordinary resolution.
f)Share in the profits of the corporation: A company can declare
dividends only out of
current profits after providing for depreciation; or out of
undistributed profits of
previous years after providing for depreciation; or out of monies
provided by the
Central or State Government for the payment of dividend in
pursuance to a guarantee given by that Government.