This document is on corporate governance

1. Corporate Governance Principles
Since corporate governance canbe highlyinfluential forfirmperformance, firmsmustknow whatthe
corporate governance principlesare andhow itwill improve strategytoapplythese principles.In
practice there are fourprinciplesof goodcorporate governance,whichare:
• Transparency
• Accountability
• Responsibility
• Fairness
All these principlesare relatedwiththe firm’scorporate social responsibility.Corporate governance
principlestherefore are importantforafirm butthe real issue isconcernedwithwhatcorporate
governance actuallyis.
Managementcan be interpretedasmanagingafirmfor the purpose of creatingandmaintainingvalue
for shareholders.Corporate governance proceduresdetermine everyaspectof the role formanagement
of the firmand try to keepinbalance andto developcontrol mechanismsinordertoincrease both
shareholdervalue andthe satisfactionof otherstakeholders.Inotherwordscorporate governance is
concernedwithcreatingabalance betweenthe economicandsocial goalsof a companyincludingsuch
aspectsas the efficientuse of resources,accountabilityinthe use of itspower,andthe behaviorof the
corporationinitssocial environment.
A goodcorporate governance shouldaddressall these mainpoints:
• Creatingsustainable value
• Ways of achievingthe firm’sgoals
• Increasingshareholders’satisfaction
• Efficientandeffective management
• Increasingcredibility
• Ensuringefficientriskmanagement
• Providinganearly warningsystemagainstall risk
• Ensuringa responsiveandaccountable corporation

2. • Describingthe role of a firm’sunits
• Developingcontrol andinternal auditing
• Keepingabalance betweeneconomicandsocial benefit
• Ensuringefficientuse of resources
• Controllingperformance
• Distributingresponsibilityfairly
• Producingall necessaryinformationforstakeholders
• Keepingthe boardindependentfrommanagement
• Facilitatingsustainable performance
As can be seen,all of these issueshave manyramificationsandensuringtheircompliance mustbe
thoughtof as a longtermprocedure.Howeverfirmsnaturallyexpectsome tangible benefitfromgood
governance.Sogoodgovernance offerssome longtermbenefitforfirms,suchas:
• Increasingthe firm’smarketvalue
• Increasingthe firm’srating
• Increasingcompetitive power
• Attractingnewinvestors,shareholdersandmore equity
• More or highercredibility
• Enhancingflexible borrowingcondition/facilitiesfromfinancial institutions
• Decreasingcreditinterestrate andcostof capital
• Newinvestmentopportunities
• Attractingbetterpersonnel /employees
• Reachingnewmarkets

3. Althoughcorporate governance isprimarilyconsideredtobe concernedwithhow afirmconducts itself
inrelationshiptoitsinvestors,increasinglyitisbeingextendedtoa considerationof how itconducts
itself inrelationtoall of itsstakeholders.Thisisapart of the currentconcern forgreateraccountability.
Thus governance isincreasinglybeingconsideredtobe relatedtoCSRand the concerns of the two are
merging.
Importantissuesincorporate governance
There are several importantissuesincorporate governanceandtheyplaya greatrole,all the issuesare
interrelated,interdependenttodeal witheachother.Each issuesconnectedwithcorporate governance
have differentprioritiesineachof the corporate bodies.
The issuesare listedasbelow:
1. Value basedcorporate culture
2. Holisticview
3. Compliance withlaws
4. Disclosure,transparency,&accountability
5. Corporate governance andhumanresource management
6. Innovation
7. Necessityof judicial reforms
8. GlobalizationhelpingIndiancompaniestobecome global giantsbasedongoodcorporate
governance.
9. LessonsfromCorporate failure
1. Value basedcorporate culture:Foranyorganizationtorun ineffectiveway,itneedstohave certain
ethics,values.Longrunbusinessneedstohave basedcorporate culture.Valuebasedcorporate culture
isgood practice for corporate governance.Itisa setof beliefs,ethics,principleswhichare inviolable.It
can be a mottoi.e. A shortphrase whichisunique andhelpsinrunningorganization,there canbe vision
i.e.dreamto be fulfilled,missionandpurpose,objective,goal,target.
2. Holisticview:Thisholisticviewismore orlessgodly,religiousattitude whichhelpsinrunning

4. organization.Itisnoteasierto adoptit,it needsspecial effortsandonce adopteditleadstodeveloping
qualitiesof nobility,tolerance andempathy.
3. Compliance withlaws:Those companieswhichreallyneedprogress,have highethical valuesand
needtorun longrun businesstheyabide andcomplywithlawsof SecuritiesExchange Boardof India
(SEBI),ForeignExchange RegulationAct,CompetitionAct2002, CyberLaws,and BankingLawsetc.
4. Disclosure,transparency,andaccountability:Disclosure,transparencyandaccountabilityare
importantaspectforgood governance.Timelyandaccurate informationshouldbe disclosedonthe
matterslike the financial position,performance etc.Transparencyisneededinorderthatgovernment
has faithincorporate bodiesandconsequentlyithasreducedcorporate tax ratesfrom 30% today as
against97% duringthe late 1970s. Transparencyisneededtowardscorporate bodiessothatdue to
tremendouscompetitioninthe marketplace the customershavingchoicesdon’tshifttoother
corporate bodies.
5. Corporate Governance andHumanResource Management:Forany corporate body,the employees
and staff are just like family.Fora companyto be perfectthe role of Human Resource Management
becomesveryvital,theybothare directlylinked.Everyindividual shouldbe treatedwithindividual
respect,hisachievementsshouldbe recognized.Eachindividual staff andemployeeshouldbe given
bestopportunitiestoprove theirworthandthese canbe done byHuman Resource Department.Thusin
Corporate Governance,HumanResource hasa great role.
6. Innovation:EveryCorporate bodyneedstotake riskof innovationi.e.innovationinproducts,in
servicesanditplaysa pivotal role incorporate governance.
7. Necessityof Judicial Reform:There isnecessityof judicialreformforagoodeconomyand alsoin
today’schangingtime of globalizationandliberalization.Ourjudicial systemthoughhavingperformed
salutaryrole all these years,certainlyare becomingobsolete andoutdatedoverthe years.The delayin
judiciaryisdue toseveral interestsinvolvedinit.Butthenwithchangingscenarioandfastgrowing
competition,the judiciaryneedstobringreformsaccordingly.Itneedstospeedilyresolve disputesin
cost effectivemanner.
8. GlobalizationhelpingIndianCompaniestobecome global giantsbasedongoodgovernance:In
today’sage of competitionanddue toglobalizationourseveral IndianCorporate bodiesare becoming
global giantswhichare possible onlydue togoodcorporate governance.
9. LessonsfromCorporate Failure: Everystoryhasa moral to learnfrom, everyfailurehassuccessto
learnfrom,inthe same way,corporate bodyhave certainpolicieswhichif goesasa failure theyneedto
learnfromit. Failure canbe bothinternal aswell asexternal whateveritmaybe,ingood governance,
corporate bodiesneedtolearnfromtheirfailuresandneedtomove tothe pathof success.

5. Corporate governance inIndiapast,present&future
Good corporate governance inthe changingbusinessenvironmenthasemergedaspowerful tool of
competitivenessandsustainability.Itisveryimportantat thispointandit needscorporationforone and
all i.e.fromCEO of companyto the ordinarystaff forthe maximizationof the stakeholders’valueand
alsofor maximizationof pleasureandminimizationof painforthe long termbusiness.
Global competitionsinthe marketneedbestplanning,management,innovative ideas,compliance with
laws,goodrelationbetweendirectors,shareholders,employeesandcustomersof companies,value
basedcorporate governance inorderto grow,prosperandcompete ininternational marketsby
strengthentheirstrengthovercomingtheirweaknessesandrunningthemeffectivelyandefficientlyin
an efficientandtransparentmannerbyadoptingthe bestpractices.
Corporate Indiamustcommititself asreliable,innovative andpromptservice providertotheir
customersandshouldalsobecome reliable businesspartnersinordertoprosperandto have all round
growth.
Corporate Governance isnothingmore thana setof ideas,innovation,creativity,thinkinghavingcertain
ethics,values,principlesetc.whichgivesdirectionandshape toitspeople,employeesandownersof
companiesandhelpthemtoflourishinglobal market.
Corporate governance hasexistedsince pastbutitwas indifferentform.DuringVedictimeskingsused
to have theirministersandusedtohave ethics,values,principlesandlawstorun theirstate buttoday it
isin the formcorporate governance havingsame rules,laws,ethics,values,andmoralsetc.whichhelps
inrunningcorporate bodiesinthe more effectivewayssothattheyinthe age of globalizationbecome
global giants.
Several IndianCompanieslike PepsiCo,Infuses,Tata,Wipro,TCS,and Reliance are some of the global
giantswhichhave theirflagof successflyinghighinthe skydue to goodcorporate governance.
Today,evenlawhas a greatrole to playin successful andgrowingeconomy.Governmentandjudiciary
have enactedseveral lawsandregulationslikeSEBI,FEMA,Cyberlaws,Competitionlawsetc.andhave
broughtseveral amendmentsandrepeal the lawsinorderthattheydon’tact as barrierfor these
corporate bodiesanddevelopingIndia.Judiciaryhasalsohelpedingreatwaybysolvingthe corporate
disputesinspeedyway.
Corporate bodieshave theiraim,values,motto,ethicsandprinciplesetc.whichguide themtothe
ladderof success.Bigand small organizationshave theirmagazinesannual reportswhichreflecttheir
achievements,failure,theirprofitandloss,theircurrentpositioninthe market.A few companieshave
alsoshownawarenessof environmentprotection,social responsibilitiesandthe cause of upliftmentand
social developmentandtheyhave deeplycommittedthemselvestoit.The bigexample of sucha
companycan be of DeepakFertilizersandPetrochemicalsCorporationLimitedwhichalsobagged2nd
runnerup awardfor the corporate social responsibilitybybusinessworldin 2005.

6. Under the presentscenario,stakeholdersare givenmore importance astoshareholders,they evenget
chance to attend,vote at general meetings,make observationsandcommentsonthe performance of
the company.
Withincrease ininterdependence andfree trade amongcountriesandcitizensacrossthe globe,
internationallyacceptedcorporate governancestandardsare of paramountimportance forIndian
Companiesseekingtodistinguishthemselvesinglobal footprint.The companiesshouldalwayskeep
improving,enhancingandupgradingthemselvesbybringingmore reliableintegratedproductand
service quality.Theyshouldbe more transparentintheirconduct.
Corporate governance shouldalsohave approachof holisticview,valuebasedgovernance,shouldbe
committedtowardscorporate social upliftmentandsocial responsibilityandenvironmentprotection.It
alsoinvolvescreative,generative andpositive thingsthataddvalue tothe variousstakeholdersthatare
servedascustomers.Be it finance,taxation,bankingorlegal frameworkeachandeveryplace requires
goodcorporate governance.
Perspectives of corporate governance
Mainlywe will deal withthe perspectivesof corporate governance fromthree pointsof view:
1. Shareholders(Capital Market) –Providersof arisk capital have final control onresource
allocationdecisions
2. Organization(Management) –Main purpose istocontrol i.e.throughskills,intelligence,
innovation,ideas,professionalismetc.Therefore,here inthisperspective,resource allocationdecision
shouldrestwiththem
3. Stakeholders –for longtermbusiness,onlyshareholdersvaluemaximizationshouldnotbe seen
as sole goal but itshouldbe forwellbeingof all groupswithstake of longrunof businessanditshould
be goal of corporate governance.