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Enrollment No A6018211003 Term Paper Synopsis

Topic Corporate Governance

What is Corporate Governance?

Corporate governance is a collection of principles, processes, customs, laws and procedures that have a strong impact on companys administration, control and progress. Corporate governance also encompasses guidance regarding maintaining beneficial and stable relationship with stakeholders. It consists of strategies for successfully achieving companys common goals. It involves regulatory and market mechanisms, and the roles and relationships between a companys management, its board, its shareholders and other stakeholders, and the goals for which the corporation is governed.

Objectives of Corporate Governance The objective of this term paper on corporate governance is to draw attention of readers towards the role corporate governance play in increasing the capital of a company.

Corporate governance has a great impact on companys share prices and cost that company has to pay for increasing its capital. In order words, corporate governance plays an important role in companys growth and expansion. Corporate governance is really helpful for executives to lead company in right dimension. The principles of corporate governance help executives to figure out fraudulent activities going on in the company and to ensure transparency in companys day to day operations. By implementing corporate governance strategies companys long term strategic goals are efficiently achieved. Corporate governance is a name of a system for maintaining stability and integrity in companys day to day processes. Corporate governance emphasizes for maintaining a top down employee hierarchy so that work can be equally distributed and responsibilities can shared among employees. Corporate governance principles have significantly reduced the burden of executives and administration staff.

Review of Corporate Governance Corporate governance is the internal structure of a corporation from its lowest level workers all the way up to its executives. The term is also used to describe how a corporation makes its decisions

regarding business-related activities from reaching its short-term and long-term goals to communicating with shareholders. Corporate governance has far-reaching effects not only for the business itself but for the financial market as a whole. Here are some of the effects that it has. Shareholder Confidence - Effective corporate governance can have a positive affect on shareholder confidence by reassuring them that the company is making smart business decisions and is well organized internally. Confident shareholders are likely to invest larger amounts of money in an effectively governed company because a positive return on the investment is likely. This can lead to increased market confidence in the company, which can serve to increase its overall stock value. When the stock value of a company rises, so does its overall value. Business Growth and Development - As the value of a corporation increases, so does its ease in generating capital to make purchases aimed at sustaining growth. Corporate governance can have a positive effect on business growth by making it easier for a corporation to raise the necessary capital to acquire new territories or develop new products. Raising capital is easier because investors believe they are extending money to a well-run company with the secure infrastructure necessary to make smart financial decisions. Economic Effects - A corporation with poor corporate governance strategies can have a negative influence on the business market and the larger economy. A lack of effective corporate governance at the executive and management level can lead to bad business

decisions, which can lower the overall value of the company and make it more difficult for the business to meet its financial obligations. This was seen during the economic crisis of 2009 when poor decisions lead to cascading failures in the real estate and automobile markets, which in turn caused large-scale job layoffs and economic slowing. Public perception of business - Corporate governance strategies can have an impact on the public perception of a corporation. A company with strong corporate governance strategies relating to responsible spending, treatment of workers and environmental concerns can generate a large amount of good will among the people.

Case Study (Corporate Governance INFOSYS) Corporate governance is about maximizing shareholder value legally, ethically and on a sustainable basis, while ensuring fairness to every stakeholder, our customers, employees, investors, vendorpartners, the governments of the countries in which it operates, and the community. Thus, corporate governance is a reflection of the culture, policies, relationship with stakeholders and commitment to values. It is believed that sound corporate governance is critical to enhance and retain investor trust.

The Board exercises its fiduciary responsibilities in the widest sense of the term. Infosys continues to be a pioneer in benchmarking the corporate governance policies with the best in the world. The efforts are widely recognized by investors in India and abroad. Infosys has undergone the corporate governance audit by ICRA and CRISIL. ICRA has rated the corporate governance practices at CGR 1. CRISIL has assigned CRISIL GVC Level 1 rating. Below it has been complied with the recommendations of the Narayana Murthy Committee on Corporate Governance constituted by the Securities and Exchange Board of India (SEBI). The Corporate Governance philosophy is based on the following principles

Satisfy the spirit of the law and not just the letter of the law Corporate governance standards should go beyond the law Be transparent and maintain a high degree of disclosure levels When in doubt, disclose Make a clear distinction between personal conveniences and corporate resources Communicate externally, in a truthful manner, about how the Company is run internally Comply with the laws in all the countries in which the Company operates Have a simple and transparent corporate structure driven solely by business needs Management is the trustee of the shareholders' capital and not the owner

Board Composition At the core of the corporate governance practice is the Board, which oversees how the management serves and protects the long-term interests of all our stakeholders. It is believed that an active, wellinformed and independent Board is necessary to ensure the highest standards of corporate governance. The majority of the Board, eight out of 15, are independent members. Conclusion Corporate governance philosophies differ around the world. However, with a few relatively minor exceptions, there exists a broad consensus on the elements of good corporate governance. It is widely understood that the most effective aspects of good corporate governance include: A strong board of directors, independent of management and with sufficient expertise to oversee corporate management on behalf of the companys shareholders; A management compensation oversight, such as a compensation committee comprised of independent directors, to prevent opportunistic behavior by management and help link management compensation to corporate performance; Strong corporation laws and regulations designed to protect the rights of shareholders; Extensive public disclosure requirements, including both financial and non-financial reporting designed to give shareholders and potential investors an accurate, timely and thorough picture of the companys performance and liabilities; and

A robust independent audit function, with sufficiently thorough procedures to confirm the accuracy of a public companys financial disclosure statements and overseen by a board committee comprised of independent directors, or by some other mechanism independent of management. Furthermore, these aspects of good corporate governance must be made credible by strong government and private-sector enforcement mechanisms. Government regulators and law enforcement agencies must have the resources and legal authority to conduct thorough investigations of potential wrongdoing and self-dealing by corporate management. And regulators and law enforcement agencies must aggressively investigate and prosecute managerial and corporate wrongdoing on a constant, ongoing basis, not just when a major scandal arises. Likewise, corporate compliance officers must have the powers they need to ensure that all corporate employees (including senior management) comply with the law and abide by the companys internal corporate governance requirements. Other corporate governance gatekeepers such as lawyers and outside auditors must be bound by a strong code of ethics and abide by the laws and professional requirements which apply to their profession. Without such aggressive overlapping enforcement mechanisms, even the best corporate governance standards can be undermined.