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Presented by: Anusuya Mehra Harmeet Singh Manish Sharma Rajkumar Ranwa Roopal Jain Vijay Mundel
Definition
Corporate Governance may be defined as a set of systems, processes and principles which ensure that a company is governed in the best interest of all stakeholders. It is the system by which companies are directed and controlled. It is about promoting corporate fairness, transparency and accountability. In other words, 'good corporate governance' is simply 'good business'
Objectives:Predictability Transparency
Accountability
Efficiency & effectiveness Stakeholder satisfaction
Concept
The concept of corporate governance primarily hinges on complete transparency, integrity and accountability of management. The concept of good corporate governance connotes that ethics as important as economics ,fair play as crucial as financial success , morals as vital as market share.
PRINCIPLES :1.
Right and equitable treatment of shareholder Interests of other stakeholder Role and responsibilities of the board Integrity and ethical behavior Disclosure and transparency
2. 3. 4. 5.
Board of Directors
Setting corporate strategy, overall direction, mission or vision
Hiring and firing the CEO and top management Controlling, monitoring, or supervising top management Reviewing and approving the use of resources Caring for shareholder interests
Board of Directors
Board of Directors
Members: Inside directors
Management directors Officers or executives employed by corporation
Outside directors
Non-management directors May be executives of other firms but not employed by boards corporation
Board Responsibilities
Monitor and evaluate corporate performance. Monitor and evaluate corporate strategy. Determine executive compensation. Evaluate senior management performance. Communicate with share holders. Evaluate board performance. Manage Executive Director/CEO succession.
The growing importance of institutional investors and public financial institutions, gradually asserting and transforming themselves in their new role as active shareholders rather than as lenders. The stock exchanges becoming increasingly conscious of their roles as self regulatory organizations and exploring the possibility of using the listing agreement as a tool for raising the standard of corporate governance.
Shapes the growth and future of capital market & economy. Instrument of investors protection. Protecting the interest of Shareholders and all other stakeholder. Contributes to the efficiency of the business enterprise. Creation of wealth. Enables firm to compete internationally in sustained way. Keeps an eye on the issues of insider training.
Pre Requisites
A proper system, consisting of clearly defined an adequate structure of roles, authority and responsibility. Vision, principles and norms which indicate development path, guidelines and norms for performance. A proper system for guiding, monitoring, reporting and controlling.
A committee was set up by SEBI under the Chairmanship of Kumar Mangalam Birla to promote and raise standards of corporate governance. The committee in its report observed that the strong Corporate Governance if indispensable to resilient and vibrant capital markets and is an important instrument of investor protection. It is the blood that fills the veins of transparent corporate disclosure and high quality accounting practices. It is the muscle that moves a viable and accessible financial reporting structure.
Naresh Chand Committee Report, 2002:- The committee was appointed by SEBI
to make recommendation on the representation of independent directors on company boards and the composition of audit committees. The major highlight and recommendations are as follows:
It makes no distinction between a board within executive
chairman and non executive chairman. in every five years.
It is sufficient to have compulsory rotation of audit partners Independent directors should play a larger role to ensure
the corporate governance practices are improve and that the interest of stock holders other than promoters are protected.
Recommendations
Disclosure of accounting treatment Audit qualification Risk management board disclosure Training of board members Use of proceeds of IPO Written code of conduct for executive management Nominee directors-exclusive of nominee directors from the definition of independent director Internal policy on access to audit committees