Corporate Governance

Definition How it came into being Models of Corporate Governance Corporate objectives and Goals Ownership Patterns

Anuran Mukherjee 10BSP0569

What is Corporate Governance?

Corporate governance is the system by which business corporations are directed and controlled. It specifies the distribution of rights and responsibilities among different participants in the corporation and spells out the rules and procedures for making decisions on corporate affairs. OECD Corporate governance ensures that long term strategic objectives and plans are established and that the proper management structure is in place to achieve those objectives, while at the same time ensuring that the corporation s integrity, reputation and responsibility to its various constituencies are maintained. NACD, New York.

How Corporate Governance came into Being

America s Hall of Shame France Corporate Misgovernance in India
 Cornering of industrial licenses mainly with a view to preempting competitors to enter into their well entrenched industry.  Using import licenses to make a quick profit in the market  Illegally holding money abroad to meet business expenses and investments for which government would not allow enough funds  Trying to gain special advantages for the business through bribery of concerned officials. Giving political donations.

Anglo American Model

BOARD OF DIRECTORS
SUPERVISORS ELECT

SHAREHOLDERS
OWNERS

APPOINTS AND SUPERVISES

OWN

CREDITORS

OFFICERS
LIEN MANAGERS

STAKEHOLDERS
MANAGE HOLD STAKE

COMPANY
STRUCTURAL FRAMEWORK

LEGAL SYSTEM

CORPORATE STRUCTURE

German Model
SUPERVISORY BOARD
BOAED APPOINT 1/2

APPOINTS AND SUPERVISE

REPORTS TO

MANAGEMENT BOARD
(INCLUDING LABOUR RELATIONS OFFICER) EMPLOYEES AND LABOUR UNIONS

INDEPENTLY RUNS (DAY BY DAY)

APPOINT 1/2 APPOINT 1/2 APPOINT 1/2

COMPANY
OWN

SHAREHOLDERS OWN

CORPORATE STRUCTURE

Japanese Model
SUPERVISORY BOARD
BOAED APPOINT

INCLUDING PRESIDENT

SHAREHOLDER
RATIFIES PRESIDENT S DECISION
CONSULTS

OWN

PRESIDENT

MONITORS AND ACT IN EMERGENCIES. PROVIDE MANAGERS CONSULTS

EXECUTIVE MANAGEMENT
(PRIMARY BOARD OF DIRECTORS)

BANKS

LOANS MANAGES

COMPANY

CORPORATE STRUCTURE

Indian Model
It is a mix of the Anglo American and German models. Corporations in India can be grouped into three categories: private companies, public companies, banks & other corporations. The founder, his family, and associates closely hold the private companies and they exercise maximum control over the activities of the company. In case of public enterprises, the central and state govt. choose the members of the board.

Corporate Objectives & Goals

Rights of shareholders Equitable treatment of Shareholders Role of stakeholders in Corporate Governance Roles and responsibilities of the board Integrity and ethical behaviour Disclosure and transparency

Corporate Ownership Patterns

The four basic patterns of ownership are sole proprietorship, partnership, corporation Private and Public. German "concerns" (Konzern) Japanese keiretsu and South Korean chaebol

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