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    BGS 2

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    This document provides an overview of corporate governance including definitions, models of corporate governance, principles and guidelines from the OECD, issues in corporate governance, and the relevance and benefits of good corporate governance practices. It discusses the theoretical basis for corporate governance and the obligations of corporations to key stakeholders like society, investors, employees, and customers. It also outlines managerial obligations and the roles and responsibilities of corporate boards and directors.

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    BGS 2

    Uploaded by

    vasuki
    20 views21 pages
    This document provides an overview of corporate governance including definitions, models of corporate governance, principles and guidelines from the OECD, issues in corporate governance, and the relevance and benefits of good corporate governance practices. It discusses the theoretical basis for corporate governance and the obligations of corporations to key stakeholders like society, investors, employees, and customers. It also outlines managerial obligations and the roles and responsibilities of corporate boards and directors.

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    BGS-2

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    This document provides an overview of corporate governance including definitions, models of corporate governance, principles and guidelines from the OECD, issues in corporate governance, and the relevance and benefits of good corporate governance practices. It discusses the theoretical basis for corporate governance and the obligations of corporations to key stakeholders like society, investors, employees, and customers. It also outlines managerial obligations and the roles and responsibilities of corporate boards and directors.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    20 views21 pages

    BGS 2

    Uploaded by

    vasuki
    This document provides an overview of corporate governance including definitions, models of corporate governance, principles and guidelines from the OECD, issues in corporate governance, and the relevance and benefits of good corporate governance practices. It discusses the theoretical basis for corporate governance and the obligations of corporations to key stakeholders like society, investors, employees, and customers. It also outlines managerial obligations and the roles and responsibilities of corporate boards and directors.

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    of 21

    Module-2

    Corporate Governance
    Definition
    • Corporate Governance refers to the structure, systems, and process
    in a corporation that are considered most appropriate to enhance its
    wealth generating capacity.
    - Y.C. Deveshwar, Chairman of ITC
    Market Model and Control Model

    i) The Anglo-American Model (Market Model)


    ii) The German Model (control Model)
    iii) The Japanese Model (control Model)
    The Anglo-American Model (Market
    Model)
    German Model
    The Japanese Model
    OECD on corporate governance

    • Principles of OECD

    • The rights of shareholders


    • Equitable treatment of shareholders
    • The role of stakeholders in corporate governance
    • Disclosure and transparency
    • The responsibilities of the board
    Guidelines of OECD
    • Countries should be required to establish independent shares registries.
    • Standards for transparency and reporting of the sales of underlying assets need to
    be spelled out along with enforcement mechanisms and procedures by which
    investors can seek to recover damages.
    • The discussion of stakeholder participation in the OECD guidelines needs to be
    balanced by discussion of conflict of interest and insider trading issues. Standards
    or guidelines are needed in both areas.
    • Property rights and their protection.
    • Internationally accepted accounting standards should be explicitly required and
    national standards should be brought into alignment with international standards.
    • Internal company audit functions and the inclusion of outside directors on audit
    committees need to be made explicit. The best practice would be to require that
    only outside, independent directors be allowed to serve on audit committees.
    A historical perspective of corporate
    governance
    • From a Narrow to a Broader Vision
    • The Growth of Modern Ideas of Corporate Governance from the
    USA
    • England Catches Up
    • The Cadbury Committee
    • Corporate Governance in the Banking Sector
    Issues in corporate governance

    • Distinguishing the roles of board and Management


    • Composition of the board and related issues
    • Separation of the roles of the CEO and chairperson
    • Should the board have committees?
    • Appointments to the board and director’s re-election
    • Directors’ and executives’ remuneration
    • Disclosure and audit
    • Protection of shareholder rights and their expectations
    • Dialogue with institutional shareholders
    • Should investors have a say in making a company socially responsible
    corporate citizen?
    Relevance of corporate governance
    • Internationally, over the past few years, much emphasis has been
    placed on the importance of corporate governance.
    • Corporate governance is all about governing corporations
    • The management has to be trusted to run the company in the interest
    of the shareholders and other stakeholders.
    • Looking at conventional firms, management will usually have an
    information advantage over other stakeholders and hence the need for
    corporate governance
    • In recent years, some high profile business frauds and questionable
    business practices in the United Kingdom, the United States and other
    countries including India have led to doubts being cast on the integrity
    of business managers.
    Need and importance of corporate
    governance
    • Corporate governance is needed to create a corporate culture of
    consciousness, transparency and openness.
    • It refers to a combination of laws, rules, regulations, procedures and
    voluntary practices to enable companies to maximize shareholders’
    long-term value.
    • It should lead to increasing customer satisfaction, shareholder value
    and wealth.
    • With increasing government awareness, the focus is shifted from
    economic to social sphere and an environment is being created to
    ensure greater transparency and accountability.
    • It is integral to the very existence of a company.
    Benefits of good corporate governance

    • Creation and enhancement of a corporation’s competitive advantage


    • Enabling a corporation perform efficiently by preventing fraud and
    malpractices
    • Providing protection to shareholders’ interest
    • Enhancing the valuation of an enterprise
    • Ensuring compliance of laws and regulations
    The concept of corporate

    • “Corporation” is the nucleus of all business activities in modern


    economies. Lawyers and economists describe the corporation as “a
    nexus of contracts”, arguing that the corporation is nothing more
    than the sum of all of the agreements leading to its creation.
    The concept of governance
    • “Governance” is as old as human civilization. Simply stated, it means
    the process of decision-making and the process by which decisions
    are implemented (or not implemented). An analysis of governance
    focusses on the formal and informal players involved in
    decision0making and implementing the decisions made.
    Theoretical basis for corporate governance

    • Agency Theory
    • Stewardship Theory
    • Stakeholder Theory
    • Sociological Theory
    Obligation to society
    Obligation to investors

    • Towards shareholders
    • Measures promoting transparency and informed shareholder
    participation
    • Transparency
    • Financial reporting and records
    Obligation to employees

    • Fair Employment practices


    • Equal opportunities employer
    • Encouraging whistle blowing
    • Humane treatment
    • Participation
    • Empowerment
    • Equity and inclusiveness
    • Participative and collaborative environment
    Obligation to customers

    • Quality of products and services


    • Products at affordable prices
    • Unwavering commitment to customer satisfaction
    Managerial obligation
    • Protecting company’s assets
    • Behavior towards government agencies
    • Control
    • Consensus-oriented
    • Gifts and donations
    • Role and responsibilities of corporate board and directors
    • Direction and management must be distinguished
    • Managing the whole-time directors

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