Submitted by, MAHIMA ANIL

What is corporate Governance?

Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society

Globalization & Corporate Governance

The Cadbury committee report defines it as

the system by which companies are directed and controlled. The primary purpose of corporate governance is to create wealth legally and ethically. rules, relationships, systems and processes within and by which authority is exercised and controlled in corporation.

It is generally understood as the framework of

History of Corporate governance in an International scenario

In the Western world, The East India

Company introduced a Court of Directors, separating ownership and control (U.K., the Netherlands) in 1600s In the 19th century US, state corporation laws enhanced the rights of corporate boards to govern without unanimous consent of the shareholders

International scenario
Year
1992 1994 1995 1998 1999 1999 1999 2003 2003

Name of Committee/Body
Sir Adrian Cadbury Committee, UK Mervyn E . Kings Committee , South Africa Greenbury Committee , UK Hampel Committee, UK Blue Ribbon Committee, US OECD CACG Derek Higgs Committee, UK

Areas/Aspects Covered
Financial Aspects of Corporate Governance Corporate Governance Directors Remuneration Combine Code of Best Practices Improving the Effectiveness of Corporate Audit Committees Principles of Corporate Governance Principles for Corporate Governance in Commonwealth Review of role of effectiveness of Non-executive Directors

ASX Corporate Governance Principles of Good Corporate Governance and Council, Australia Best Practice Recommendations 5 Rajkumar Adukia

Importance of CG
With globalization vastly increasing

the scale of trade and the size & complexity of corporations and the bureaucracies constructed to attempt to control it, the importance of CG and internal regulation has been amplified as it becomes increasingly difficult to regulate externally.

 CG is not a new concept but it has got

popularity in the last few decades due to various crises such as: East Asian Crisis(1990s) & various other fraudulent activities in the corporate world In UK & US, CG emphasize the relationship between shareholder and management In France, Germany & the Netherland, CG take a stakeholders approach to governance

Four issues to understand the importance of CG

The issue of integrity: The boards and

management of companies carrying out their duties in an ethical way The bonus culture: Could better corporate governance in financial institutions and their remuneration policies have prevented the credit crunch and resulting financial crisis?

 The regulatory framework: Better

regulation which ensures businesses recognise the importance of corporate governance as an integral part of management, not a box ticking exercise Directors training: prevention is better than a cure

Parties to corporate governance

1.
2. 3.

Board of directors
Managers Workers

4.
5. 6.

Shareholders or owners
Regulators Customers

7.
8.

Suppliers
Community (people affected by the actions of the
10 organization) Rajkumar Adukia

Corporate Governance
Accountability
Responsibility Transparency Fairness

Fundamental Pillars of Corporate Governance

Investors are Willing to Pay More For a Company With Good Board Governance Practices

83

81

89

Companies are willing to pay 18 % to 28% more for better governance.

CONCLUSION
CG has been a central issue in

developing countries before the recent spate of corporate scandals Due to these recent issues, CG norms and standards have sprouted all around the globe

References
Cadbury, Adrian; 1992; Report of the

Committee on the Financial Aspects of Corporate Governance Davis.A;2006; Best Practice in Corporate Governance, Building Reputation and Sustainable Success