Corporate governance is the system by which companies are directed and controlled. It establishes the framework for accountability, transparency, and fairness through policies, processes, laws and institutions. The key principles of corporate governance according to OECD are the rights of shareholders, equitable treatment of shareholders, role of stakeholders, disclosure and transparency, and board responsibility. Stakeholders in corporate governance include employees, suppliers, government, customers, shareholders and investors. Factors for evaluating corporate governance are regulations on non-executive directors, constraints on management power, disclosure requirements, and board accountability.

1. Corporate
Governance .
Dr R Soundararajan
Ref CSV Murthy , Business Ethics Himalaya Publications

2. What is corporate Governance?
A System which
administrates
Good
relationship
among multiple
Stake holders
involved
In the
furtherance
of
corporation’s
Goals
By means of
adopting
Policies
Processes
Setting up
rules and
regulations
Framing Laws
Establishi
ng
Institution
s
In order
to
Make
administr
ation
Fair
Transpar
ent
Respons
ible and
Account
able
Infosys defines corporate governance as an ethically driven business process
committed to values aimed at enhancing an organization’s wealth generating
capacity

3. Why corporate Governance?
In to-days globalized
world the following
factors make the
corporation to embrace
ethical Codes
1. A huge demand for
access to Capital
2. Large partnership
3. Need for Association
between multiple
companies
4. Increasing
Dependence of one
over other
Why
corporate
Governance?
Changing ownership
structure
Fiduciary Nature of
Relationship
Increasing complexities
Passivity of
shareholdersRisk mitigation
Public acceptance
and Image

4. What are the basic principles of
Corporate Governance

5. Basic Principles
• There are three Principles
• Board as a representative
of the organization
Owner’s , Protect
resources and allocate
them for planned
progress
• Corporate Governance
ensures accountability
• Enable stakeholders to
take board to task
Basic
Principles of
Corporate
Governance?
Minority Recognition
Stakeholder Recognition-
establish strong relations
Board Functions-
clearly defined
Transparency- Financial
statements and Transactions
Accountability
Fairness
Sustainability

6. Organisation for Economic Co-
operation and Development (OECD)
Cover 5 key areas
is the basis of
Corporate
Governance
1. Rights of shareholders
2. Equitable treatment of
shareholders
3. Role of stake holders in
Governance
4. Disclosure and
transparency
5. Responsibility of Board

7. Who are the stakeholders in
Corporate Governance
• Employees
• Trade Unions
• Suppliers
• Government
• Competitors
• Customers
• Shareholders and
Investors
• Local Government

8. What are the major factors to be
considered while evaluating
Corporate Governance?
Discussion
S292-A of
companies Act
and Clause 49
Appointing non-
executive Directors
Place constraints on
management power
and ownership
Concentration
Ensuring proper
disclosure of financial
Information and
executive
compensation

9. Accountability of Board of
Directors
• BOD link between managers and
Shareholders
• BOD is the effective instrument of
good governance
• Elected by shareholders for
establishing corporate
management policies and make
decisions on major issues
• Independent directors ensure
that BOD take correct decision

10. Financial Disclosure and Controls
• Audit committee comprising of
Independent Directors
• Sole power to hire, fire company
auditors and approve non audit
services by audit committee
• Compensation of top management
determined by performance
• Compensation rate set by
independent compensation
committee and should be fully
disclosed to shareholders

11. Stock options
• Sometime BOD, grant
generous stock options to
top managers
• Stock option for better
Performance
• Too much Stock option
may also dilute the share
valuation

12. List of Regulators
1. Ministry of
Corporate
Affairs
2. Serious Fraud
Investigation
Office
3. Company Law
Board
4. Registrar of
companies
5. Security Exchange Board of
India[ SEBI]
6. Institute Of chartered
Accountant Of India
7. Stock Exchange
8. Enforcement Directorate-
Foreign Exchange and
Management Act[FEMA],
Prevention of Money Laundering
Act[ PMLA]

13. What do you mean by CSR?

14. What is iron law of responsibility?
Iron Law of
Responsibility
Society gives
business its
charter to exist
and charter can
be amended or
revoked at any
time if it fails to
live up to the
Expectations of
the society
In order to retain
its existing social
role and social
power business
must respond to
societies needs
constructively

15. Iron Law of
Responsibility
Better Society – creates better
environment in which business
can be profitable
Better Public Image
Regulations are costly to
business and restricts business
decision. CSR and socially
responsible business prevent
government intervention
Effective use of resources
offered by society and
business should honor this
principle
Minimize
Environmental
Damage
Business has the
innovative ability to
turn social problems
into economic
opportunity and
functional capacities
can be increased
many times
Need for
Social
Responsibility

16. What are the developments taken
place over the last decade to
increase focus on social
responsibilities?
Discussion

17. Developments on Social
Responsibility
Increased
Shareholder
activism
Engagement of
shareholder in
board and
decision making
New CSR
Guidelines
Transparency
and reporting
CSR and
Corporate
Governance
Growing
pressure from
Investors and
markets
Corporate
accountability in
all value chain
Information
Technology
Pressure to
quantify CSR
“ROI”