This document provides an overview of corporate governance. It defines corporate governance as the techniques by which companies are directed and managed, balancing individual, societal, economic, and social goals. Good corporate governance ensures corporate success, economic growth, and maintains investor confidence. The principles of corporate governance include sustainable stakeholder development, effective wealth management, social responsibility, and compliance with law and ethics. The key pillars are accountability, fairness, transparency, and independence. The document also discusses various theories of corporate governance like agency theory and stakeholder theory. It covers topics such as credit ratings, insider trading, whistleblowing, and the role of credit rating agencies in India.
The King Report by Derek Hendrikz includes King report principles, King report practices, sustainable economic growth, social and environmental performance, key elements of the King report, King report 1, King report 2, King report 3, incorporation of global governance trends, executive vs non-executive board members, functions of the board, board oversight, board risk management,
The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company's relationship with its all stakeholders (financiers, customers, management, employees, government, and the community).
The corporate governance framework consists of
(1) explicit and implicit contracts between the company and the stakeholders for distribution of responsibilities, rights, and rewards,
(2) procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with their duties, privileges, and roles, and
(3) procedures for proper supervision, control, and information-flows to serve as a system of checks-and-balances.
The King Report by Derek Hendrikz includes King report principles, King report practices, sustainable economic growth, social and environmental performance, key elements of the King report, King report 1, King report 2, King report 3, incorporation of global governance trends, executive vs non-executive board members, functions of the board, board oversight, board risk management,
The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company's relationship with its all stakeholders (financiers, customers, management, employees, government, and the community).
The corporate governance framework consists of
(1) explicit and implicit contracts between the company and the stakeholders for distribution of responsibilities, rights, and rewards,
(2) procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with their duties, privileges, and roles, and
(3) procedures for proper supervision, control, and information-flows to serve as a system of checks-and-balances.
Corporate Governance is one of the important criteria for foreign institutional investors to decide on which company to invest in. The corporate practices in India emphasize the functions of audit and finances that have legal, moral and ethical implications for the business and its impact on the shareholders
In this presentation i have collected all theories portion for the students as well as teacher
CH- 3 CONCEPTUAL FRAMEWORK OF CORPORATE GOVERNANCE Bibek Prajapati
CH- 3 CONCEPTUAL FRAMEWORK OF CORPORATE GOVERNANCE
FOR CS PROFESSONAL, CA, CMA
Definitions of Corporate Governance
• ICSI Principles of Corporate Governance
• Need for Corporate Governance
• Theories of Corporate Governance
• Evolution and Development of Corporate Governance
• Elements of Good Corporate Governance
The root of the word Governance is from ‘gubernate’, which means to steer. Corporate governance would mean to steer an organization in the desired direction. The responsibility to steer lies with the board of directors/governing board.
• Kautilya’s Arthashastra maintains that for good governance, all administrators, including the king were considered servants of the people. Good governance and stability were completely linked. There is stability if leaders are responsive, accountable and removable. These tenets hold good even today.
• Corporate Governance Basic theories: Agency Theory; Stock Holder Theory; Stake Holder Theory; Stewardship Theory
OECD has defined corporate governance to mean “A system by which business corporations are directed and controlled”. Corporate governance structure specifies the distribution of rights and responsibilities among different participants in the company such as board, management, shareholders and other stakeholders; and spells out the rules and procedures for corporate decision making. By doing this, it provides the structure through which the company’s objectives are set along with the means of attaining these objectives as well as for monitoring performance.
A light explanation of Corporate Governance for those who want to have a quick understanding of the concept. This presentation was designed for a small team of mixed background individuals and enlightened them with the insight on the concept of Governance.
Introduction to Corporate Governance Sep 17 2011Demir Yener
Introductory remarks on good corporate governance practices and implications on board performance and rights and responsibilities for Mongolian directors.
Corporate Governance is one of the important criteria for foreign institutional investors to decide on which company to invest in. The corporate practices in India emphasize the functions of audit and finances that have legal, moral and ethical implications for the business and its impact on the shareholders
In this presentation i have collected all theories portion for the students as well as teacher
CH- 3 CONCEPTUAL FRAMEWORK OF CORPORATE GOVERNANCE Bibek Prajapati
CH- 3 CONCEPTUAL FRAMEWORK OF CORPORATE GOVERNANCE
FOR CS PROFESSONAL, CA, CMA
Definitions of Corporate Governance
• ICSI Principles of Corporate Governance
• Need for Corporate Governance
• Theories of Corporate Governance
• Evolution and Development of Corporate Governance
• Elements of Good Corporate Governance
The root of the word Governance is from ‘gubernate’, which means to steer. Corporate governance would mean to steer an organization in the desired direction. The responsibility to steer lies with the board of directors/governing board.
• Kautilya’s Arthashastra maintains that for good governance, all administrators, including the king were considered servants of the people. Good governance and stability were completely linked. There is stability if leaders are responsive, accountable and removable. These tenets hold good even today.
• Corporate Governance Basic theories: Agency Theory; Stock Holder Theory; Stake Holder Theory; Stewardship Theory
OECD has defined corporate governance to mean “A system by which business corporations are directed and controlled”. Corporate governance structure specifies the distribution of rights and responsibilities among different participants in the company such as board, management, shareholders and other stakeholders; and spells out the rules and procedures for corporate decision making. By doing this, it provides the structure through which the company’s objectives are set along with the means of attaining these objectives as well as for monitoring performance.
A light explanation of Corporate Governance for those who want to have a quick understanding of the concept. This presentation was designed for a small team of mixed background individuals and enlightened them with the insight on the concept of Governance.
Introduction to Corporate Governance Sep 17 2011Demir Yener
Introductory remarks on good corporate governance practices and implications on board performance and rights and responsibilities for Mongolian directors.
DISCUSSING ON VARIOUS RULES AND REGULATIONS MADE BY THE DIFFERENT COMMITTEES WITH RESPECT TO CORPORATE GOVERNANCE SO AS TO MAKE THE COMPANIES IMAGE IN A BETTER WAY FOR THE FUTURE GROWTH AND TO IDENTIFIED BY THE STAKE HOLDERS.
Presentation provides an overview of the theoretical concepts in corporate governance, few definitions, methods to measure it and a brief overview of recent developments in corporate governance in the Caribbean.
“Ensuring Competitive Advantage and Sustainability: an Overview of Obligation...inventionjournals
Corporate Governance is a buzz word in the field of economic administration, regulatory framework and behavioral sciences. The subject of corporate governance has its relevance and significance to varied stakeholders in different ways. In fact, Corporate Governance is a form of obligation, which a corporate body has towards shareholders, employees, customers, Government, Public and towards the Society. Organizations, which are known for good governance by fulfilling all these obligations with a proper blend, are the lead players for the others to follow for securing better and effective competitive advantage. Keeping in mind these varied obligations, Organizations and corporate bodies regularly updating their policies and practices especially for continued competitive advantage but the process of updating is not so easy, they have to find it in a pro-active manner to withstand in the market. The present research paper with this in view aimed at understanding the framework of corporate governance and its role in securing better and effective competitive advantage from the ambit of various stakeholders with a broader consideration from the angle and obligation of Sustainability and Corporate Social Responsibility. Further, the study remarked the changing nature obligations for existence of corporate bodies under dynamic environment. The research paper also differentiated the gap between theory and practice in adoption of sustainability practices. Finally, the research paper ends with some suggestions and ways for better and good governance for organizational sustainability.
This presentation deals with the concept of corporate governance, how it originated, its principles and framework. Then it explains one of the key concept of corporate governance i.e. appointment of independent director and how the apointment of independent director ensures adherence to corporate governance and myths and realities thereto.
Important IPCC chapters by CA classes in Mumbai.seomiamia
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Opportunities for CAs as independent directors to enhance the credibility and...CA. (Dr.) Rajkumar Adukia
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Understanding the concept of Corporate governanceHumsi Singh
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How to implement a good corporate governance?Adam Greene CPA
The concept of corporate governance refers to a set of principles and standards that determine, on one hand, the design, integration, financial planning and operation of the governing bodies of companies .
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Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
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2. WHAT IS CORPORATE
GOVERNANCE
Technique by which companies are directed and
managed.
Carrying the business as per the stakeholders’
desires.
Balancing individual and societal goals, as well as,
economic and social goals.
Determining ways to take effective strategic
decisions.
Ultimate authority and complete responsibility to
the Board of Directors.
Includes both social and institutional aspects.
Encourages a trustworthy, moral, as well as ethical
environment.
3. WHY CORPORATE
GOVERNANCE
Better excess to external finance
Lower costs of capital-interest rates on
loans
Improved company performance-
sustainability
Higher firm valuation and share
performance
Reduced risk of corporate crisis and
scandals
4. BENEFITS OF CORPORATE
GOVERNANCE
Good corporate governance ensures corporate
success and economic growth.
Strong corporate governance maintains investors’
confidence, as a result of which, company can raise
capital efficiently and effectively.
It lowers the capital cost.
There is a positive impact on the share price.
Good corporate governance also minimizes
wastages, corruption, risks and mismanagement.
It helps in brand formation and development.
It ensures organization in managed in a manner
that fits the best interests of all.
5. PRINCIPALS OF CORPORATE
GOVERANANCE
Sustainable development of all stake
holder
Effective management and distribution
of wealth
Discharge of social responsibility
Application of best management
practices
Compliance of law in letter and spirit
Adherence of ethical standard
8. FAIRNESS
Protect share holders rights
Treat all share holders including
minorities and equality
Provide effective redress for violations
9. TRANSPARENCY
Ensure timely, accurate disclosure on
all material matters, including the
financial situation, performance,
ownership and corporate governance
10. INDEPENDENCE
Procedures and structures are in place
so as to minimize, or avoid completely
conflicts of interest
Independent directors and advisers i.e
free from the influences of others
11. THEORIES OF CORPORATE
GOVERNANCE
The Theories of Corporate Governance are:
1. Agency Theory
2. Stakeholders and Resource Dependency Theory
3. Stewardship Theory
4. Social Contract Theory
5. Legitimacy Theory
6. Political Theory
7. Trusteeship (Gandhism)
12. THEORIES OF CORPORATE
GOVERNANCE
Agency Theory
An agent is employed by a principal to carry out a task on their
behalf.
Agency refers to the relationship between a principal and their agent.
Agency costs are incurred by principals in monitoring agency
behavior because of a lack of trust in the good faith of agents.
By accepting to undertake a task on their behalf, an agent becomes
accountable to the principal by whom they are employed. The agent
is accountable to that principal.
13. THEORIES OF CORPORATE
GOVERNANCE
Companies that are quoted on a stock market such as the London Stock Exchange
are often extremely complex and require a substantial investment in equity to
fund them, i.e. they often have large numbers of shareholders.
Shareholders delegate control to professional managers (the board of directors)
to run the company on their behalf.
The Directors (agents) have a fiduciary responsibility to the shareholders
(principal) of their organisation (usually described through company law as
'operating in the best interests of the shareholders').
Shareholders normally play a passive role in the day-to-day management of the
company.
Directors own less than 1% of the shares of most of the UK's 100 largest quoted
companies and only four out of ten directors of listed companies own any shares
in their business.
Separation of ownership and control leads to a potential conflict of interests
between directors and shareholders.
The agents' objectives (such as a desire for high salary, large bonus and status for
a director) will differ from the principal's objectives (wealth maximisation for
shareholders).
15. THEORIES OF CORPORATE
GOVERNANCE
Trusteeship
Socio-economic philosophy that was propounded by Mahatma
Gandhi
Provides a means by which the wealthy people would be the trustees
of trusts that looked after the welfare of the people in general
Gandhi believed that the rich people could be persuaded to part with
their wealth to help the poor
He believed that wealth belongs to the community and must be used
for the welfare of the community
16. THEORIES OF CORPORATE
GOVERNANCE
Trusteeship
The Gandhian concept of Trusteeship is not only in perfect sync with,
but goes much farther than, the modern expectations of corporate
stewardship
it stands for caring for other peoples’ money and resources entrusted
to the care of corporate directors and executive management and is
also sensitive to the broader needs of the society
Increasing evidence of migration towards a more inclusive model of
governance based on Trusteeship ; Balasubramanin (2008)
The primary challenge with the Trusteeship Model is that it cannot be
implemented by prescriptions alone but, to succeed, needs to be
accompanied by transformational change of the hearts and minds
17. THEORIES OF CORPORATE
GOVERNANCE
Stakeholder Theory
A stakeholder is defined as any person/group which can affect/be
affected by the actions of a business. It includes employees,
customers, suppliers, creditors and even the wider community and
competitors.
19. STAKEHOLDER THEORY
The theory states that a company owes a responsibility
to a wider group of stakeholders, other than just
shareholders
Firms should recognize the interests of stakeholders that
have a vested interest in the corporation. RE Freeman
(1984)
Research indicate that the country environment or
political-economic climate affect corporate performance,
Shleifer and Vishny (1997), Doidge et al (2007), Aggarwal
et al (2009).
Balance Scorecard by Kaplan & Norton is an example of
this approach
20. ISSUES OF CORPORATE
GOVERNANCE
Distinguishing the roles of board and management
Composition of the board and related issues
Separation of the roles of CEO and chairperson
Should the board have committees
Appointments to the board and directors'-election
21. ISSUES OF CORPORATE
GOVERNANCE
Directors’ and executives ‘ remuneration:
Disclosure and audit:
Protection of shareholder rights and their expectations:
Dialogue with institutional shareholder:
Should investor have a say in making a company “socially
responsible corporate citizen”?
22. WHISTLEBLOWING
Whistle blowing in its most general form involves calling
(public) attention to wrong doing, typically in order to
avert harm.
It is an attempt by a member or former member of an
organization to disclose wrong doing in or by the
organization.
23. KINDS OF WHISTLE BLOWING
Internal Whistle blowing is made to someone within the
organization
Personal Whistle blowing is blowing the whistle on the
offender, here the charge is not against the organization
or system but against one individual
The impersonal, External Whistle Blowing
24. INSIDER-TRADING
It refers to a situation, where in a person, by virtue of his
position to access unpublished price sensitive
information of the company, gains such access and
subsequently uses the information obtained for his or
her personal benefits.
Insider trading is dealing in securities of a listed
company by any person who has knowledge of material
inside information which is not available to general
public.
It is breach of a fiduciary duty or other relationship of
trust, and confidence.
It is a crime if made to get wrongful gain or avoid losses
25. INSIDER TRADING &
CORPORATE GOVERNANCE
Insider trading has many governance implications,
affecting:
The organization of companies;
The duties of directors of managing boards and
supervisory boards and other corporate insiders;
The permitted flow of information within companies;
The disclosure duties imposed to companies.
The main problem in insider trading is conflict of
interests and the misuse of power –in this case it relates
to the power over privileged information.
26. CREDIT RATING
Estimates the credit worthiness of an individual,
corporation, or even a country.
It is an evaluation made by credit bureaus of a borrower’s
overall credit history.
They are based on financial history and current assets and
liabilities.
a credit rating tells a lender or investor the probability of
the subject being able to pay back a loan.
Commercial credit risk is the largest and most elementary
risk faced by many banks and it is a major risk for many
other kinds of financial institutions and corporations as
well.
Many uncertain elements are involved in determining both
how likely it is that an event of default will happen and
how costly default will turn out to be if it does occur.
27. CREDIT RATING AGENCIES IN
INDIA
CRISIL(Credit Rating Information Services of India Ltd)
ICRA(Information and Credit Rating Services ltd)
CARE (Credit Analysis and Research Ltd)
FITCH India
28. CRISIL
The first rating agency ‘Credit Rating Information
Services of India Ltd. , CRISIL, was promoted jointly in
1987 jointly by the ICICI and the UTI. Other shareholders
included ADB, LIC, HDFC Ltd, General Insurance
Corporation of India and several other foreign and Indian
Banks.
It pioneered the concept of credit rating in the country
and since then has introduced new concepts in credit
rating services and has diversified into related areas of
information and advisory activities.
It became public in 1993.
In 1996, it formed a strategic alliance with S&P rating
group.
29. SERVICES OFFERED BY CRISIL
Credit Rating Services
Advisory Services
Credibility first rating and evaluation Services
Training Services
30. ICRA LTD
Information and Credit Rating Services (ICRA) has been
promoted by IFCI Ltd as the main promoter and started
operations in 1991.
Other shareholders are UTI, Banks, LIC, GIC, Exim Bank,
HDFC and ILFS.
It provides Rating, Information and Advisory services
ranging from strategic consulting to risk management and
regulatory practice.
The main objectives of ICRA are to assist investors both
individual and institutional in making well informed
decisions
To assist issuers in raising funds from a wider investor
base.
To enable banks, investment bankers, Brokers in placing
debt with investors.
To provide regulators with market driven systems to
encourage the healthy growth of capital markets.
31. CARE LTD.
Credit Analysis and Research Ltd or CARE is
promoted by IDBI jointly with Financial
Institutions, Public/Private Sector Banks and
Private Finance Companies.
It commenced its credit rating operations in
October, 1993 and offers a wide range of
products and Services in the field of Credit
Information and Equity Research.
It also provides advisory services in the areas
of securitization of transactions and structuring
Financial Instruments.
It offers services like 1. Credit rating of debt
instruments 2. Advisory services like
securitization transactions, structuring
financial instruments, financing infrastructure
projects and municipal finances 3. Information
services like providing information to
companies, industry and businesses. 4. Equity
research
32. FITCH RATINGS INDIA LTD.
It is the latest entrant in the credit
rating Business in the country as a joint
venture between the international credit
Rating agency Duff and Phelps and JM
Financial and Alliance Group.
In addition to debt instruments, it also
rates companies and countries on
request.
33. RATING PROCESS
The process begins with issue of rating
request letter by the issuer of the
instrument and signing of the rating
agreement.
CRA assigns an analytical team
consisting of two or more analysts one
of whom would be the lead analyst and
serve as the primary contact.
Meeting with Management- The
analytical team obtains and analyses
information relating to its financial
statements, cash flow projections and
other relevant information.
Discussion with management on
management philosophy, competitive
position, financial policies and future
plans.
34. RATING PROCESS CONT-
Discussions on financial projections based
on objectives and growth plan , risks and
opportunities.
Rating committee- after meeting with the
management the analysts present their
report to a rating committee which then
decides on the rating.
After the committee has assigned the
rating, the rating decision is communicated
to the issuer, with reasons or rationale
supporting the rating.
Dissemination to the Public: Once the
issuer accepts the rating, the CRAs
disseminate it, along with the rationale, to
35. BIBLIOGRAPHY
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Maheshwari, D. (2013, December 7). Issues of corporate governance.
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Editor's Notes
1.Distinguishing the roles of board and management:
Distinguishing the roles of board and management –
The board occupies a key position between shareholder (owner) and the company’s management (day to day managers of the company’s resource).
As per this arrangement , the board of a listed company has following functions:
select, decide the remuneration and evaluate on a regular basis, and when necessary , change the CEO.
Oversee (not directly , but indirectly )the conduct of the company’s business to evaluate whether or not it is being correctly managed.
Review and , where necessary , approve the company’s financial objectives and major corporate plans and objective.
All other functions required by law to be performed.
2.Composition of the board and related issues:
A board of directors is a “committee elected by the shareholders of a limited company to be responsible for the policy of the company .
Sometimes ,full time functional directors are appointed , each being responsible for some particular branch of fir ‘s work.
The composition of board of directors refers to number of directors of different kind that participate in work of the board.
3.Separation of the roles of CEO and chairperson:
It is now increasingly being realized that the practice of combining the role of chair person with that of the CEO as is done in countries like the US and INDIA leads to conflicts in decision making and too much concentration of power in one person resulting in unsavory consequences.
4.Should the board have committees:
Many committees on corporate governance have recommended in one voice the appointment of special committees for
Nomination
Remuneration and for
Auditing.
These committees would lessen the burden of the board and enhance its effectiveness.