This document discusses corporate governance principles and practices in India. It defines corporate governance as relating to laws, procedures and practices that determine a company's ability to make managerial decisions while considering social impacts and accountability to shareholders. The key principles of corporate governance outlined include acknowledging shareholder rights, the role and responsibilities of the board of directors, integrity and ethical behavior, disclosure and transparency, and accountability. Common corporate governance practices in India include requirements under the Companies Act, securities laws, capital market discipline, nominees on company boards, and statutory audits. Globally, strategies focus on corporate objectives, communication/reporting, voting rights, board composition, remuneration policies, and strategic/operating performance.
CH -11 CORPORATE GOVERNANCE AND OTHER STAKEHOLDERSBibek Prajapati
CH -11 CORPORATE GOVERNANCE AND OTHER STAKEHOLDERS
FOR CS PROFESSONAL, CA,CMA, MBA
Stakeholder Concept
• Recognition of Stakeholder Concept In Law
• Stakeholder Engagement
• Stakeholder Analysis
• Types of Stakeholders
• Caux Round Table
• Clarkson Principle of Stakeholder Management
• Governance Paradigm and Stakeholders
• Stakeholders provide resources that are more or less critical to a firm’s long-term success. These resources may be both tangible and intangible. Shareholders, for example, supply capital; suppliers offer material resources or intangible knowledge; employees and managers grant expertise, leadership, and commitment; customers generate revenue and provide infrastructure; and the society builds its positive corporate images.
• A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interest of the company, its employees, the community and the environment.
• Stakeholder engagement leads to increased transparency, responsiveness, compliance, organizational learning, quality management, accountability and sustainability. Stakeholder engagement is a central feature of sustainability performance.
• Primary stakeholders are those whose continued association is absolutely necessary for a firm’s survival; these include employees, customers, investors, and shareholders, as well as the governments and communities that provide necessary infrastructure.
• Secondary stakeholders do not typically engage in transactions with a company and thus are not essential for its survival; these include the media, trade associations, and special interest groups.
• Customers are considered as the king to drive the market and they can sometimes exercise influence by consolidating their bargaining power in order to get lower prices.
• The lenders put a check and balance on the governance practices of an organization to ensure safety of their fund and as a societal responsibility.
• The organization which builds a mutually strong relationship with its vendors improves its overall performance in the marketplace.
• The society provides the desired climate for successful operation of a company business. If society turns against the company, then business lose its faith in the eyes of other stakeholders be it government or customer.
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 -11 CORPORATE GOVERNANCE AND OTHER STAKEHOLDERSBibek Prajapati
CH -11 CORPORATE GOVERNANCE AND OTHER STAKEHOLDERS
FOR CS PROFESSONAL, CA,CMA, MBA
Stakeholder Concept
• Recognition of Stakeholder Concept In Law
• Stakeholder Engagement
• Stakeholder Analysis
• Types of Stakeholders
• Caux Round Table
• Clarkson Principle of Stakeholder Management
• Governance Paradigm and Stakeholders
• Stakeholders provide resources that are more or less critical to a firm’s long-term success. These resources may be both tangible and intangible. Shareholders, for example, supply capital; suppliers offer material resources or intangible knowledge; employees and managers grant expertise, leadership, and commitment; customers generate revenue and provide infrastructure; and the society builds its positive corporate images.
• A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interest of the company, its employees, the community and the environment.
• Stakeholder engagement leads to increased transparency, responsiveness, compliance, organizational learning, quality management, accountability and sustainability. Stakeholder engagement is a central feature of sustainability performance.
• Primary stakeholders are those whose continued association is absolutely necessary for a firm’s survival; these include employees, customers, investors, and shareholders, as well as the governments and communities that provide necessary infrastructure.
• Secondary stakeholders do not typically engage in transactions with a company and thus are not essential for its survival; these include the media, trade associations, and special interest groups.
• Customers are considered as the king to drive the market and they can sometimes exercise influence by consolidating their bargaining power in order to get lower prices.
• The lenders put a check and balance on the governance practices of an organization to ensure safety of their fund and as a societal responsibility.
• The organization which builds a mutually strong relationship with its vendors improves its overall performance in the marketplace.
• The society provides the desired climate for successful operation of a company business. If society turns against the company, then business lose its faith in the eyes of other stakeholders be it government or customer.
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
KUMAR MANGALAM BIRLA COMMITTEE, 1999
The Birla Committee’s recommendations consist of both mandatory recommendations and non-mandatory recommendations.
Mandatory Recommendations
Applicability: These are applicable to all listed companies with paid-up share capital of INR 3 crore and above.
Board of directors: The board of directors of a company must have an optimum combination of executive and non-eutive directors. The number of independent directors should be at least one-third in case the company has a non-executive chairman and at least half of the board in case the company has an executive chairman.
Role of board of directors -Corporate GovernanceRehan Ehsan
This Presentation states the role of board of directors in respect of corporate governance of Pakistan. Reviewing this clear the concept of their legal role in Pakistan.
KUMAR MANGALAM BIRLA COMMITTEE, 1999
The Birla Committee’s recommendations consist of both mandatory recommendations and non-mandatory recommendations.
Mandatory Recommendations
Applicability: These are applicable to all listed companies with paid-up share capital of INR 3 crore and above.
Board of directors: The board of directors of a company must have an optimum combination of executive and non-eutive directors. The number of independent directors should be at least one-third in case the company has a non-executive chairman and at least half of the board in case the company has an executive chairman.
Role of board of directors -Corporate GovernanceRehan Ehsan
This Presentation states the role of board of directors in respect of corporate governance of Pakistan. Reviewing this clear the concept of their legal role in Pakistan.
Notes of Module 5 Corporate Governance
Content
Concept of Corporate Governance
Corporate Governance in India
Objective of Corporate Governance
Features of Corporate Governance
Elements of Corporate Governance
Importance of Corporate Governance
Important Issues in Corporate Governance
Corporate Governance and Agency Theory
Reforming Board of Directors
*Birla Committee
*Naresh Candra Committee
*Narayana Murthy Committee
Bibliography
www.google.com
related materials
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.
Memorandum Of Association Constitution of Company.pptseri bangash
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A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
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Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
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Corporate governance practices in India & around the world
1. CORPORATE GOVERNANCE PRINCIPLES AND
PRACTICES IN INDIA
Meaning
Corporate governance relates to laws, procedures, practices
and implicit rules that determine company’s ability to take improved
managerial decisions from social point of view. It is basically a
system of making directors accountable to shareholders for
effective management of the company along with concern for ethics
and values. It is a process or a set of systems and processes to
ensure that a company is managed to suit the best interests of all.
The systems include structural & organizational / matters. The
stockholders may be internal state holders (promoters, members,
employees and executives) and external state holders (promoters,
members, customers, lenders, vendors, bankers, community,
government and regulators).
Objectives of corporate governance can be listed as
follows.
1) To enhance the long-term value of the company for its
shareholders and all other parties directly a indirectly
associated with it.
2) To provide norms for the relationships between company
management, its board, shareholders, owners, employees,
suppliers, customers and the public.
3) To promote the goodwill and reputation for the company and
the esteem of its management.
4) To attract, employ & retain talented and motivated employees
by encouraging participative Style of Management.
5) To create and adopt code of conduct whole hearted
commitment and improve the moral and ethical standards to
performance of the utmost level.
6) To have a right balance knowledge and competence, to set
strategies and lead the organization.
7) To use the available resources in most economic, efficient &
productive manner for the benefit of shareholders an well as
for the society at large.
8) To set the high standards of business ethnics based on
humanity, honesty & hard work.
9) To improve the standard of living of the society.
10) To generate accurate & reliable information.
11) To make decision making process transparent.
Principles of Corporate Governance.
Commonly accepted principles of corporate governance can
be explained as follows.
2. a. Acknowledging rights of the shareholders and ensuring
equitable treatment to them.
Organizations should respect the rights shareholders and
help shareholders to exercise those rights by ensuring effective
communication of information and encouraging them to participate
in general meetings, Organizations should also accept that they
have legal and other obligations to all legitimate stakeholders.
b. Role and responsibilities of the board:
The board needs certain skills and attitudes to deal with
various business issues and the ability to review and challenge
management performance. It needs to be of sufficient size and
have a commitment to fulfill its responsibilities and duties. The
issues regarding the appropriate mix of executive and non
executive directors should the tackled properly. The key roles of
chairperson and CEO should not be held by the same person.
c. Integrity and Ethical Behavior.
Ethical and responsible decision making is required for
improving public relations, managing risks of business and avoiding
disputes. It can be achieved by developing a code of conduct for
the directors and executives. In order to ensure ethical standards
by individuals, many organizations establish compliance and ethics
programs.
d. Disclosure and Transparency –
Organizations should publicize the roles and responsibilities of
board and management so that they become accountable to
shareholder. They should also lay down procedures for verifying
the integrity of the company’s financial reporting. All investors
should have access to clear and factual information.
e. Accountability –
The Board of Directors should be accountable to the
shareholders and management to the Board of Directors. Both the
Board and the management must be accountable to the
shareholders for the performance of tasks assigned to them. It is
necessary to ensure that there is an effective management of
resources and achievement of results with efficiency coupled with
empowerment.
f. Trusteeship:
Organization should have both social & economic purpose.
The Board must ensure that the company fulfill its obligations &
responsibilities to all its stake holders.
g. Empowerment –
The management should be empowered to adopt dynamic &
progressive approach. Empowerment i.e. delegating decision
making powers at the most appropriate levels in the organizational
hierarchy generates creativity and innovation throughout the
organization.
3. h. Ethics –
An organization must set specific standards of ethical
behavior both within the organization & in its external
relationships.
i. Oversight –
It means the existence of a system of checks & balances. It
should prevent misuse of power & facilitate timely management
response to change & risks.
j. Fairness to all Stakeholders –
It involves a fair and equitable treatment of all participants in
the corporate governance structures. There should be no
discrimination between any groups of stakeholders.
Corporate Governance Practices in India.
In India, there are six mechanisms to ensure corporate
governance.
a. The Company’s Act –
Companies in India are regulated by the Indian Companies
Act., 2013, as amended from time to time. To ensure Corporate
governance, the Act confers legal rights to shareholders as under.
1)To vote on every resolution placed in an Annual General Meeting.
2)To elect directors who are responsible for specifying objectives
and laying down policies.
3)To determine remuneration of directors and the CEO.
4) Removal of directors and.
5) Take active part in the annual general meetings.
b. Securities Law :
The primary securities law in our country is the SEBI Act.
Since its setting up in 1992, the board has taken a number of
initiatives towards investor protection. One such initiative is to
mandate information disclosure both in the prospectus and in the
annual accounts. While the Companies Act itself specifies certain
standards of information disclosure, the SEBI Act has added
substantially to these requirements in an attempt to make these
documents more meaningful.
c. Discipline of the Capital Market.
Capital market itself has considerable impact on corporate
governance. The minority shareholders can play an effective role in
this regard. They can refuse to subscribe to the capital of a
company in the primary market and in the secondary market. They
can sell their shares, thus depressing the share prices. A
depressed share price makes the company an attractive takeover
target.
d. Nominees on Company Boards.
Development banks hold large amount of shares in
4. companies which have been given long term loans. Being equity
holders, these investors have their nominees on the Board of
Companies. These nominees can effectively control resolutions,
which may be detrimental to their interests.
e. Statutory Audit –
Statutory Audit is yet another mechanism directed to ensure
good, corporate governance. Auditing enhance the credibility of
financial reports prepared by any enterprise. The auditing processes
ensures that financial statements are accurate and complete,
thereby enhancing their reliability and usefulness for making
investment decisions.
The above-mentioned mechanisms are regulatory in approach.
They are governed by law and violation of any provision can invite
penal action. But legal provisions alone cannot ensure good
corporate governance. What is actually need is self-regulation on
the part of directors.
CORPORATE GOVERANCE PRACTICES AROUND
THE WORLD.
`Corporate governance refers to the relationship among
various participants in determining the directions and performance
of corporations. The primary participants are shareholders, the
management, and Board of Directors. The proper implementation
of corporate governance regulations by the companies is beneficial
both for companies and countries. High quality status of corporate
governance means low capital cost, increase in financial
capabilities, liquidity, ability of overcoming crises more easily and
prevention of execution of soundly managed companies, from
capital markets.
For years, the OECD (Organization for Economic Co-operation
and Development) has been working to promote use of corporate
governance principles. They were first issued in 1999 and revised
in 2004 to support good Corporate Governance policy & practice,
both within OECD countries & beyond.
Global Strategies of corporate governance cover the following
aspects.
1) Corporate Objective - The primary objective of the
corporation should be to enhance the returns of its
shareholders. Corporate objective should be clearly stated
and disclosed.
2) Communication and Reporting - Corporation should disclose
accurate, adequate and timely information especially on the
issues of acquisition, ownership obligation and sale of shares.
3) Voting Rights - Corporations should value shareholders’
rights to vote.
4) Corporate Boards - The Board of Directors are accountable to
5. the shareholders. Each member of the Board should contest
election on a regular basis. The Board should include a
sufficient number of independent Non-Executive Directors with
appropriate competencies. Responsibilities should include
monitoring and contributing effectively to the strategy and
performance of management, and influencing the conduct of
the Board as a whole.
5) Corporate Remuneration Policies - Remuneration of
corporate directors or supervisory board members and key
executives should be in line with the interest of shareholders.
6) Strategic Focus - Major strategic modifications to the core
business of a corporation should not be made without prior
shareholders’ approval of the proposed modification.
Shareholders should be given sufficient information about any
such proposal sufficiently early to allow them to make an
important judgment and exercise their voting rights.
7) Operating Performance - Corporate Governance practices
should make clear the intention of the company to enhance
company operating performance in comparison with its
competitors.
8) Shareholders’ Returns - Corporate Governance practices
should also focus Board’s attention on optimizing profits to pay
good returns to their shareholders.
9) Corporate Citizenship - The Company should adhere to all
applicable laws of the jurisdiction in which they operate.
10) Corporate Governance Implementation - Codes of best
practices should be applied pragmatically. Where they do not
yet exist, investors and others should try to develop them.
Many MNCs and TNCs operate in several countries of the
world. Their activities must focus on ethically and responsibly
inspired vision and core values. They must adopt ethical standards,
norms and practices. They must be the leaders in the industry not
only in the technology, organizational practices, product features, R
& D, marketing organization and performance, but they must also
lead in ethics and social responsibility in their home countries & all
other countries.