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GOVERNANCE
Dr Y R Reddy
Corporate
Governance
Oxford English Dictionary defines Governance as the act, manner, fact
or function of governing, sway, control
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.
Corporate
Governance
Corporate governance is the process and
structure used to direct and manage the
business and affairs of the company towards
enhancing business prosperity and corporate
accountability with the ultimate objective of
realizing long-term shareholder value, whilst
taking into account the interest of other
stakeholders.
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Sher Shah Suri (1540-1545) was regarded as best governor of medieval India
In the western world The East India Company introduced a Court of Directors,
separating ownership and control (U.K., the Netherlands) in 1600s
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Why Governance
In the today environment
Managers must be monitored and institutional
arrangements must provide some checks and
balances to make sure they dont abuse their
power
Transaction cost be limited
Enhancement of shareholder value
Rational on Authority/ Delegation
Governance
Governance can be used with reference to all kind of organizational structure
e.g.
1. Corporates like Tata & Reliance
2. Municipal corporation/ Gram panchyat
3. Central/ State Government
4. Partnership firm
5. NGO- not for profit organization
Management
CORPORATE
GOVERNANCE
CORPORATE
MANAGEMENT
External Focus
Internal Focus
Governance
assumes an open
system
Management
assumes a closed
system
Strategy- oriented
Task-oriented
Concerned with
Concerned with
where the company getting the
is going
company there
Fairness
Responsibility
Transparency
Accountabilit
y
Corporate
Governance
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 societys values
Fairness
Ensuring the protection of shareholders
rights and the enforceability of contracts
with service/resource providers
Why to follow CG
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Corporate Governance of an
Organisation
International scenario
Year
1992
1994
Corporate Governance
1995
Greenbury Committee , UK
Directors Remuneration
1998
Hampel Committee, UK
1999
1999
OECD
1999
CACG
2003
2003
Indian scenario
Year
Name of
Areas/Aspects Covered
Committee/Body
1998
Confederation of
Indian Industry (CII)
1999
Kumar Mangalam
Birla Committee
Corporate Governance
2002
Naresh Chandra
Committee
2003
N. R. Narayana
Murthy Committee
Corporate Governance
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2.
3.
4.
5.
6.
7.
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Board of directors
2.
Managers
3.
Workers
4.
Shareholders or owners
5.
Regulators
6.
Customers
7.
Suppliers
8.
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Framework of Corporate
Company Governance
1.
2.
Audit Committee
3.
Internal Audit
4.
Statutory Audit
5.
Disclosure of information
6.
7.
8.
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SEBI, vide its circular dated February 21, 2000, specified principles of
corporate governance and introduced a new clause 49 in the Listing
agreement of the Stock Exchanges.
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