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Corporate governance
By:Rahul Singh

3/17/13

What is corporate governanace??

Corporate governance is "the system by which companies are directed and controlled. Corporate Governance refers to the structures & processes for the efficient & proper direction & control of companies (both private and public) in the interest of all stakeholders. It involves regulatory and market mechanisms, and the roles and relationships between a companys management, its board, its shareholders and other stakeholders, and the goals for which the corporation is governed.

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Why corporate governance???

Much of the contemporary interest in corporate governance is concerned with mitigation of the conflicts of interests between stakeholders. Ways of mitigating or preventing these conflicts of interests include the processes, customs, policies, laws, and institutions which have impact on the way a company is controlled.

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Parties in corporate governance

Corporate Governance is the interaction between various participants Shareholders board of director companys management The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the two.

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Principles of corporate governance.

Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights. They can help shareholders exercise their rights by openly and effectively communicating information and by encouraging shareholders to participate in general meetings. Interests of other stakeholders: Organizations should recognize that they have legal, contractual, social, and market driven obligations to non-shareholder stakeholders, including employees, investors, creditors, suppliers, local communities, customers, and policy makers.

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Integrity and ethical behavior: integrity should be a fundamental requirement in choosing corporate officers and board members. Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making. Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide stakeholders with a level of accountability. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual information. Role and responsibilities of the board: The board needs to have
sufficient relevant skills and understanding to review

performance.
adequate size and appropriate levels of independence and

commitment

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Corporate governance in India

India's SEBI Committee on Corporate Governance defines corporate governance as the "acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal & corporate funds in the management of a company. It has been suggested that the Indian approach is drawn from the Gandhian principle of trusteeship and the Directive Principles of the Indian Constitution, but this conceptualization of corporate objectives is also prevalent in Anglo-American and most other jurisdictions.

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Benefits of corporate governance

Good corporate governance ensures corporate success and economic growth. Strong corporate governance maintains investors confidence, as a result of which, company can raise capital efficiently and effectively. It lowers the capital cost. There is a positive impact on the share price. It provides proper inducement to the owners as well as managers to achieve objectives that are in interests of the shareholders and the organization. Good corporate governance also minimizes wastages, corruption, risks and mismanagement.

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It helps in brand formation and development. It ensures organization in managed in a manner that fits the best interests of all.

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Example:

Toyota has implemented methods that empower employees to participate in the decisions that affect them and their relationship with the organization. At Toyota, the company has employed these proven techniques of co-determination to encourage employee, and supplier involvement in their decision making process, since these practices help improve both the ability and attitude of stakeholders.

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Thank You

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