P resented by -

Vikash Mishra
Sakur Ansari
Mohd . Arish
Deepak
khandelwal
Pawan Kumar
 CORPORATE


q
q A corporation is an organization created (incorporated) by a group of
shareholders who have ownership of the corporation.
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q The elected board of directors appoint and oversee management of
the corporation .
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GOVERNANCE
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q Oxford English dictionary defines “governance "as the act, manner , fact or
function of governing sway control.
q The word has Latin origins that suggest the notion of “steering". it deals with
the processes and systems by which an organization or society operates.
q Governance can be used with reference to all kind of organizational
structure e.g.
q Ngo –not for profit organization
q Municipal corporation /gram panchyat
q Central/state government
q Partnership firm
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 CORPORATE GOVERNANCE
q It is a broad concept and has been defined and understood differently by
different groups and at different points of time .
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q The Cadbury committee report defines it as “the system by which
companies are directed and controlled”.
q
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q It is generally understood as the framework of rules, relationships, systems
and processes within and by which authority is exercised and controlled
in corporations”
 DIFFERENCE BETWEEN
CORPORATE GOVERNANCE CORPORATE MANAGEMENT

External Focus Internal Focus

Governance assumes an open system Management assumes a closed system

Strategy-orientated Task-orientated

Concerned with where the company is Concerned with getting the company
going there
 Brief history of corporate governance
in India
• Unlike South-East and East Asia, the corporate governance initiative in India
was not triggered by any serious nationwide financial, banking and
economic collapse


• The initiative in India was initially driven by an industry association, the

Confederation of Indian Industry
•
– In December 1995, CII set up a task force to design a voluntary code
of corporate governance.
–
– The final draft of this code was widely circulated in 1997.
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– In April 1998, the code was released. It was called Desirable
Corporate Governance: A Code.
–
– Between 1998 and 2000, over 25 leading companies voluntarily
followed the code: Bajaj Auto, Hindalco, Infosys, Dr. Reddy’s
Laboratories, Nicholas Piramal, Bharat Forge, BSES, HDFC, ICICI
and many others
 Brief history of corporate governance
in India
• Following CII’s initiative, the Securities and Exchange Board of India (SEBI)
set up a committee under Kumar Mangalam Birla to design a mandatory-
cum-recommendatory code for listed companies


• The Birla Committee Report was approved by SEBI in December 2000



• Became mandatory for listed companies through the listing agreement, and
implemented according to a rollout plan:
•
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– 2000-01: All Group A companies of the BSE or those in the S&P
CNX Nifty index… 80% of market cap.


–
– 2001-02: All companies with paid-up capital of Rs.100 million or
more or net worth of Rs.250 million or more.
–
–
– 2002-03: All companies with paid-up capital of Rs.30 million or more
 Brief history of corporate governance
in India
• Following CII and SEBI, the Department of Company Affairs (DCA) modified
the Companies Act, 1956 to incorporate specific corporate governance
provisions regarding independent directors and audit committees.


• In 2001-02, certain accounting standards were modified to further improve

financial disclosures. These were:
•
– Disclosure of related party transactions.
– Disclosure of segment income: revenues, profits and capital
employed.
– Deferred tax liabilities or assets.
– Consolidation of accounts.


• Initiatives are being taken to (i) account for ESOPs, (ii) further increase
disclosures, and (iii) put in place systems that can further strengthen
auditors’ independence.
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FRAMEWORK OF GOVERNANCE
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q Supervisory board/committee/team
q Audit committee
q Internal audit
q Statutory audit
q Disclosure of information
q Risk management framework
q Internal control framework
OBJECTIVES OF GOOD CORPORATE GOVERNANCES
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q Strengthen management oversight functions and accountability.
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q Balance skills, experience and independence on the board appropriate to
the nature and extent of company operations.
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q Establish a code to ensure integrity.
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q Safeguard the integrity of company reporting.
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q Risk management and internal control.
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q Disclosure of all relevant and material matters.
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q Recognition and preservation of needs of shareholders.
PARTIES TO CORPORATE GOVERNANCE


q Board of directors
q Managers
q Workers
q Shareholders or owners
q Regulators
q Customers
q Suppliers

q Community(people affected by the actions of the organization.)

12
 PRICIPLES OF CORPORATE GOVERNANCE
Directors


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q Every listed company should be headed by an effective board which should
lead and control the company.
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q There should be board balance of executive & non executive directors such
that no individual can dominate the board decision making.
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q The board should be supplied with timely information to enable it to
discharge its duties.
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q There should be formal and transparent procedure for the appointment of
new directors to the board.
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q All directors should be required to submit themselves for re-election at
regular intervals and at least every three years.
ACTORS INFLUENCING QUALITY OF GOVERNANC
q Integrity of the management
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q Ability of the board
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q Adequacy of the process
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q Commitment level of individual board members
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q Quality of corporate reporting
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q Participation of stakeholders in the management
TRENDS IN CORPORATE GOVERNANCE
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q Demand for greater transparency and accountability
q Written job descriptions detailing roles and responsibilities of chairman and
board members.
q Core competencies for board members are defined and those without skills
or expertise not invited.
q Development of performance criteria and annual evaluations of the board.
q Orientation for new members.
q Ongoing training
q Succession planning
THE BOARD RESPONSIBILITIES
q Overseeing strategic development & planning
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q Management selection, supervision and upgrading.
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q Maintenance of good member relations.
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q Protecting and optimizing the organization’s assets.
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q Fulfilling fiduciary and legal requirements.
 Cor porate
Gover nance
Accountabilit

Responsibilit
Tr anspar enc

Fair ness
y

y
Fundamental Pillars of Cor porate
Gover nance


 Accountability
 Clarifying governance roles & responsibilities, and supporting voluntary
efforts to ensure the alignment of managerial and shareholder interests and
monitoring by the board of directors capable of objectivity and sound
judgment.


 Transparency
 Requiring timely disclosure of adequate information concerning
corporate financial performance


 Responsibility
 Ensuring that corporations comply with relevant laws and regulations
that reflect the society’s values

•
•
 Fairness
 Ensuring the protection of shareholders’ rights and the enforceability of
contracts with service/resource providers
 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.
ICSI NATIONAL AWARD FOR EXCELLENCE IN
CORPORATE GOVERNANCE

Best Governed Companies

 CONCLUDING OBSERVATIONS
q Code of CG should be redesigned to reflect international best practices

q Stringent enforcement of Law

q More effective coordination and cooperation between SEBI, DCA

q CG mechanism should be flexible and suitable

q Overall ethical values in all segments should be promoted for effective

q accounting, auditing, disclosure and transparent system.

 MANDATED CG GUIDELINES AND DISCLOSURES
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 Board of Directors: information that must be supplied
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q Annual, quarter, half year operating plans, budgets and updates.
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q Quarterly results of company and its business segments.
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q Minutes of the audit committee and other board committees.
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q Recruitment and remuneration of senior officers.
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q Materially important legal notices and claims, as well as any accidents,
hazards, pollution issues and labor problems.
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q Any actual or expected default in financial obligations.
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q Details of joint ventures and collaborations.
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q Transactions involving payment towards goodwill, brand equity and
intellectual property.
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q Any materially significant sale of business and investments.
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q Foreign currency and other risks and risk management.
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q Any regulatory non-compliance.
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THANK YOU