Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Corporate governance

Corporate governance is "the system by which companies 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 the corporation is
governed. In contemporary business corporations, the main
external stakeholder groups are shareholders, debt holders,
trade creditors, suppliers, customers and communities affected
by the corporation's activities. Internal stakeholders are the
board of directors, executives, and other employees.

  • Login to see the comments

Corporate governance

  1. 1. INTRODUCTION Corporate governance is "the system by which companies 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 the corporation is governed. In contemporary business corporations, the main external stakeholder groups are shareholders, debt holders, trade creditors, suppliers, customers and communities affected by the corporation's activities. Internal stakeholders are the board of directors, executives, and other employees.
  2. 2. Historical Background In India, SEBI and CII have been in the forefront to introduce better governance in the corporate sector specially for listed companies. In 1988’s, a CII Committee under the Chairmanship of Shri Rahul Bajaj published a report on Corporate Governance. Later SEBI constituted a committee to formulate the Code of Corporate Governance under the Chairmanship of Shri Kumarmangalam Birla (Member of SEBI Board) to promote and raise the standards of Corporate Governance in respect of listed companies. The recommendations of SEBI Committee on Code of Corporate Governance infact were given a legal shape by inclusion of Clause 49 of the Listing Agreement, with stock exchanges and issuing guidelines for investors’ protection etc. Thus enforcement of Corporate Governance has been through introducing new provisions in various laws.
  3. 3. What is Corporate Governance? According to Cadbury, the “corporate governance is a system by which companies are directed and controlled .” It goes on to say that: “Board of Directors are responsible for the governance of their companies. The shareholders role is to appoint the directors and the auditors and to satisfy themselves that appropriate governance is in place”.
  4. 4. Some Definitions 1. “Good corporate governance practices instill in companies the essential vision, processes, and structures to make decisions that ensure longer-term sustainability. More than ever, we need companies that can be profitable as well as achieving environmental, social, and economic value for society.” -Rachel Kyte | Vice President, Business Advisory Services, IFC
  5. 5. 2. “Good corporate governance is the glue that holds together responsible business practices, which ensures positive workplace management, marketplace responsibility, environmental stewardship, community engagement, and sustained financial performance. This is even more true now as we work worldwide to restore confidence and promote economic growth.” -Thierry Buchs (head, private sector development division of Switzerland’s state secretariat For economic affairs (seco)
  6. 6. A balancing act
  7. 7. Principles of corporate governance • Principles of corporate governance • Interests of other stakeholders • Role and responsibilities of the board • Integrity and ethical behavior • Disclosure and transparency
  8. 8. Main Objective of Corporate Governance • To make the markets safe and investors friendly • To provide investor protection • To empower the shareholders • To provide greater value to their holdings The primary objective is entity’s growth and shareholders prosperity.
  9. 9. Mechanisms and controls Internal corporate governance controls • Monitoring by the board of directors • Internal control procedures and internal auditors • Balance of power • Remuneration Performance • Monitoring by large shareholders • Banks and other large creditors External corporate governance controls • Competition • Debt covenants • Demand for and assessment of performance information • Government regulations • Managerial labour market • Media pressure • Takeovers
  10. 10. CONCLUSION The quality of corporate governance is often reflected in the quality of decision making. Public sector bodies must combine reliable information produced by ‘hard’ systems and processes with the ‘softer’ issues of openness and integrity to inform their judgment on key decisions. The more open and honest organisations are with themselves about their performance, the more open and honest they can be with service users and the public. This honesty is the foundation for deciding appropriate action to remedy poor performance. Better quality services are then more likely; improved performance and being more open will increase public trust.

×