Corporate Governance when used in the context of business organisations is a

system of making directors accountable to share holders for effective management

of the companies, in the best interest of the company and shareholders along with
concern for ethics and values. It is a management of companies by the board of
directors. It hinges on complete transparency, integrity and accountability of
management that includes executive and non-executive directors. Its genesis can be
traced to the internal audit function and its importance was enhanced after the Stock
Market Crash of 1987. With the CG reports of Adrian Cadbury in the United Kingdom,
Mervyn King in South Africa and Kumarmangallam Birla in India the subject was
reduced to controlling shareholder operations and ensure ethical practices in the
financial sector. From thence, it has moved into other areas of the organisation but
unfortunately restricts itself to the management and control of funds. The ambit of
significance of CG lies far beyond this as has been explained at length in Business
Ethics and Corporate Governance: Towards Organisational Excellence (2005).

Is corporate governance just another fashionable word or is it a more important

concept of lasting value? There is no gainsaying the fact that CG is an important
concept and a means to an end that of achieving corporate excellence. Corporate
excellence and corporate governance are positively correlated. In the end, it is
difficult to achieve excellence without good governance. Many experts prefer to
define corporate governance in the narrow sense, i.e. making the management
accountable to the owner (the shareholders) through the board of directors.

Some experts like J J Irani, Narayana Murthy and Naushir Mirza adopt a broader
definition of CG to include the interests of all the stakeholders like employees,
customers and the society at large. Sustaining the balance between different and
often conflicting interest groups is however an extremely difficult task, which is in
fact, the real challenge of good governance.

Essential ingredients of excellence in this author's opinion are: attitude, management

structure and governance. Management structure is the key to the goal of success.
Any corporate worth its name should not bask in past success, as past success is no
guarantee for continued and future success. Past success only increases
expectations and therefore any management has necessarily to strive harder and
harder to meet challenges and to emerge continually successful. Past success is
static success and managements should pursue the path of dynamic success. Ethics
of success is important for dynamic success. Ethics of success is entwined in
corporate governance.

If ethics of success is ignored or sidelined, failure inevitably results. And failure

increases costs considerably and erodes profitability. Dynamic success keeps on
raising the expectations of everyone and managements will face on-going
challenges. As success depends on CG, managements must believe in and practise
good governance principles. He opined that CG is only a means, the end being
corporate excellence.

CG is not just only for the shareholders, but it is as much important for the
corporations themselves. To experience the goodness of CG and to realize its
immense benefits, corporate should have staunch belief in the concept and its
practice.
The illiterates of the 21st century will not be those who cannot read and write, but
those who cannot learn, unlearn and relearn. The dawn of the new millennium has
ushered in an era of liberalization, privatisation, and globalisation, digital technology
and information super highways.

A desirable paradigm on CG must, therefore, in my opinion, address and

accommodate myriad compulsions and convulsions due to discontinuous, non-linear
technological upheavals, fast integrating world economy and a fast shrinking world
characterizing the new millennium.

Corporate governance is a necessary condition and not a sufficient condition for

succeeding in the global market place. Friedman's formulation that the business of
any business is business has outlived its relevance and the social responsibility of
business has become the buzzword in the international corporate arena and has
assumed importance in ensuring long term success of companies.

What constitutes CG in transparency, accountability, investor protection, better

compliance with statutory laws and regulations, social value is good CG practices.
However, mere understanding and appreciation of the principles of corporate
governance just would not do.

The principles must be implemented with religious sincerely and rigidity.

Implementation is the litmus test. This is particularly so because the road ahead is
bumpy and rocky and we are habitually obsessed with complacency. Only when
failure hurts, do people become serious enough.

One can ignore corporate governance only to loose out to competition globally. This
view has been amply argued by the authors in the forthcoming tome Business Ethics
and Corporate Governance: Towards Organisational Excellence (2006) where the
paradigm of the Strategic Triad has been elaborated upon. The need of the hour is to
initiate firm action for implementation of CG practices. Awareness is a prelude to
action. Corporate houses should identify reform processes voluntarily and not just
wait for the laws and regulations to be promulgated.

Corporate governance per se might not lead to corporate excellence as it deals with
the form and not the substance, which is the key to corporate excellence. In order
to create this substance, corporate houses should continually strike alignment
between their business environment and business strategy, between their strategy
and organizational structure and between their structure and corporate culture and
philosophy. Customers should be valued the most. The effort should be to get the
best out of the people by focussing on employee contribution and developing a
culture of continual learning. Knowledge management is another vital ingredient
necessary for corporate excellence.

During the 1990's a large number of companies have failed and the economy has
witnessed a number of rating downgrades, both in the manufacturing sector and the
financial sector. It was discovered that a plethora of companies that collected funds
from the public through public issues during the stock market euphoria have just
vanished from the scene and investors were left in the lurch. Names of individuals
like Harshad Mehta and Ketan Parekh in India are known to all, as are the names of
organisations like the Unit Trust of India and Larsen and Toubro that fell foul of
proper CG practices months after they were anachronistically given the award for
good governance practices. The question arises then whether these people could
have done all the scamming alone or were there accomplices who because of muscle
or money or political power escaped the net.

This has raised an important question – why were the board of directors, auditors
and the regulating authorities not able to detect and pre-empt these irregular
practices. The role of the State Bank of India, the Vijaya Bank and the Madhavpura
bank readily come to mind for their failure to contain the siphoning of public funds
for private benefit.

On corporate governance, the role of financial institutions and the role of board of
directors has been a major focus. While these two bodies no doubt have a major
role to play in ensuring good cg the concept has to include the very fundamentals on
how the company function in its day-to-day dealings with customers, with the trade,
with suppliers, with the suppliers, with the shareholders, with the government and
with the public. By its very definition, CG requires more internal discipline over
external accountability. This internal discipline implies that the quality of its
management has to be of a high order to be able to exercise that discipline in the
organisation. By this one would expect that a good management would lead a
company to being a good corporate citizen. It may be soon be that in the open
market economy survival itself may be stake in the even issues of corporate
governance are not given due importance.

Corporate governance 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 that can ensure
this may include structural and organisational matters. The stake holders may be
internal stake holders (promoters, members, workmen and executives) and external
stake-holders (promoters, members, customers, lenders, vendors, bankers,
community, government and regulators).

Corporate governance is concerned with the establishing of a system whereby the

directors are entrusted with responsibilities and duties in relation to the direction of
corporate affairs. It is concerned with accountability of persons who are managing it
towards stakeholders. It is concerned with the morals, ethics, values, parameters of
conduct and behaviour of the company and its management. Corporate governance
is nothing but a voluntary ethical code of business of companies. This is based on the
core values of the top management and the guiding principles that emanate from it.

According to the Cadbury committee on financial aspects of CG, corporate

governance is the system by which companies are directed and controlled. The
board of directors is responsible for the governance of the company. The directors
and the auditors are to satisfy themselves that an appropriate governance structure
is in place.

The concept of corporate governance hinges on total transparency, integrity and

accountability of the management. This includes non-executive directors. it is a
system of making management accountable to the shareholders for effective
management of the companies, with adequate concern for ethics and values.
Corporate governance recognizes issues like maintaining continuity by succession
planning, identifying opportunities, facing challenges and managing changes within
the business and allocation of resources towards the right priority.
Corporate governance mainly consists of two elements:

* A long-term relationship, which has to deal with checks and balances, incentive of
managers and communications between managers and investors.
* A transactional relationship involving matters relating to disclosure and authority.

Corporate governance is basically a system of making directors accountable to share

holders for effective management of the companies, in the best interest of the
company and shareholders along with concern for ethics and values. It is a
management of companies by the board of directors. It hinges on complete
transparency, integrity and accountability of management, which includes executive
and non-executive directors.

Corporate governance is a way of life and not a set of rules. It is more of a way of
life that necessitates taking interests in every business decision. a key element of
good corporate governance is transparency projects through a code of good
governance which incorporates a system of checks and balances between key
players- board of management, auditors and shareholders.

Corporate governance is in essence determination of how companies are governed,

how executive actions are supervised and how a company is accountable to
regulations imposed on it by law or other commitments to shareholders.

It has been defined by the Cadbury committee report as:

The system by which companies are directed and controlled

EXCELLENCE THROUGH CORPORATE GOVERNANCE

Adherence to good governance practices enhances the efficiency of corporate sector

in the following manner.

1. Good governance provides stability and growth to the companies.

2. Good governance system, demonstrated by adoption of good corporate practices,
builds confidence.
3. Effective governance reduces perceived risks, consequently reducing cost of
capital.
4. In the knowledge driven economy, excellence ion skills like management will be
the ultimate tool for corporate houses to leverage competitive advantage in the
financial market.
5. Adoption of good corporate practices promotes stability and long-term sustenance
of stakeholders' relationship.
6. A good corporate citizen becomes an icon and enjoys a position of pride.
7. Potential stakeholders aspire to enter into a relationship with enterprises whose
governance credentials are exemplary.

Corporate governance 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 the management of companies by the board of directors. it hinges
on complete transparency, integrity and accountability of management that includes
executive and non-executive directors.
Corporate governance is in essence determination of how companies are governed,
how executive actions are supervised and how a company is accountable to
regulations imposed on it by law or other commitments to shareholders. It has been
defined by the Cadbury committee report as:

The system by which companies are directed and controlled

The role of corporate governance is to ensure that the directors of a company are
subject to their duties, obligations and responsibilities, to act in the best interest of
their company, to give direction and to remain accountable to their shareholders and
other beneficiaries for their actions.

Corporate governance is concerned with establishing a system whereby directors are

entrusted with responsibilities and duties in relation to the direction of a company's
affairs. An effective corporate governance system should provide mechanisms for
regulating directors' duties in order to restrain them from abusing their powers and
to ensure that they act in the best interests of the company in its broad sense.
Corporate governance is also concerned with the ethics, values and morals of a
company and its directors.