Corporate governance involves balancing the interests of a company's stakeholders through systems of rules, practices, and processes. It ensures transparency, accountability, and that companies are directed in stakeholders' best interests. Good corporate governance promotes fairness and is simply good business. It has become increasingly important due to concerns over financial reporting, accountability, and international corporate collapses.
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Corporate Governance by Kartik Parashar
1.
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3. WHAT IS CORPORATE GOVERNANCE
Corporate Governance is the system of rules, practices and processes by which a
company is directed and controlled.
• Corporate Governance essentially involves balancing the interests of a
company's many stakeholders, such as shareholders, management, customers,
suppliers, financiers, government and the community.
OR
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'.
4. OBJECTIVES OF CORPORATE GOVERNANCE
Corporate Governance is very essential for any company because it ensures:
• Adequate disclosures and effective decision
making to achieve corporate objectives;
• Transparency in business transactions;
• Statutory and legal compliances;
• Protection of shareholder interests;
• Commitment to values and ethical
conduct of business.
5. NEED FOR CORPORATE GOVERNANCE
• The need for corporate governance
has arisen because of the increasing
concern about the non-compliance of
standards of financial reporting and
accountability by boards of directors
and management of corporate
inflicting heavy losses on investors.
• The collapse of international giants
likes enron, world com of the us and
Xerox of japan are said to be due to
the absence of good corporate
governance and corrupt practices
6. 1. CHANGING OWNERSHIP STRUCTURE
• In recent years, the ownership structure of companies has changed a lot. public
financial institutions, mutual funds, etc. are the single largest shareholder in
most of the large companies. So, they have effective control on
the management of the companies. They force the management to use
corporate governance. That is, they put pressure on the management to
become more efficient, transparent, accountable, etc. They also ask the
management to make consumer-friendly policies, to protect all social groups
and to protect the environment. So, the changing ownership structure has
resulted in corporate governance.
7. 2. IMPORTANCE OF SOCIAL RESPONSIBILITY
• Today, social responsibility is given a lot of importance. the board of directors
have to protect the rights of the customers, employees, shareholders,
suppliers, local communities, etc. This is possible only if they use corporate
governance.
8. 3. GROWING NUMBER OF SCAMS
• In recent years, many scams, frauds and corrupt practices have taken place.
misuse and misappropriation of public money are happening everyday in India
and worldwide. It is happening in the stock market, banks, financial
institutions, companies and government offices. in order to avoid these scams
and financial irregularities, many companies have started corporate
governance.
9. 4. INDIFFERENCE ON THE PART OF SHAREHOLDRS
• In general, shareholders are inactive in the management of their companies.
they only attend the annual general meeting. Postal ballot is still absent in
India. Poxies are not allowed to speak in the meetings. shareholders
associations are not strong. therefore, directors misuse their power for their
own benefits. so, there is a need for corporate governance to protect all the
stakeholders of the company.
10. 5. GLOBLISATION
Today most big companies are selling their goods in the global market. so, they
have to attract foreign investor and foreign customers. They also have to follow
foreign rules and regulations. All this requires corporate governance. without
corporate governance, it is impossible to enter, survive and succeed the global
market.
6. TAKEOVERS AND MERGERS
Today, there are many takeovers and mergers in the business world. Corporate
governance is required to protect the interest of all the parties during takeovers
and mergers.
7. SEBI
SEBI has made corporate governance compulsory for certain companies. this is
done ,to protect the interest of the investors and other stakeholders.
11. MERITS OF CORPORATE GOVERNANCE
• IMPROVED REPUTATION
• A Corporate Governance program can boost a company's reputation. If a
company publicize its corporate governance policies and detail how they
work, more stakeholders will be willing to work with them. This can include
lenders who see them have strong fiscal policies and internal controls, charities
they might partner with to promote their business, government agencies,
employees, the media, vendors and suppliers. The practice of sharing internal
information with key stakeholders is known as transparency, which allows
people to feel more confident and they have little or nothing to hide.
12. • FEWER FINES, PENALTIES, LAWSUITS
Corporate Governance includes instituting policies that require the company to
take specific steps to stay compliant with local, state and federal rules,
regulations and laws. For example, as part of corporate governance, an
executive management team or board of directors might conduct a review of the
company’s hiring practices if it falls under the guidelines of the equal
opportunity employment commission. Company might require that its
accounting department undergo an external audit by an independent auditor
every quarter or year.
13. EXAMPLE OF CORPORATE GOVERNANCE - COCA-COLA
• The Coca-Cola Company is committed to good corporate governance, which promotes
the long-term interests of shareowners, strengthens Board and management
accountability and helps build public trust in the Company.
• The Board is elected by the shareowners to oversee their interest in the long-term
health and the overall success of the business and its financial strength. The Board
serves as the ultimate decision making body of the Company, except for those matters
reserved to or shared with the shareowners. The Board selects and oversees the
members of senior management, who are charged by the Board with conducting the
business of the Company.
14. CNTD…..
• The company’s corporate governance materials, including the corporate
governance guidelines, the company’s certificate of incorporation and bylaws,
the charters for each board committee, the company’s codes of business
conduct, information about how to report concerns about the company and the
company’s public policy engagement and political contributions policy.
15. CONCLUSION
• It is evident from above that it is essential that good governance practices must
be effectively implemented and enforced preferably by self-regulation and
voluntary adoption of ethical code of business conduct and if necessary
through relevant regulatory laws and rules framed by government or its
agencies such as SEBI, RBI.
• The effective implementation of good governance practices would ensure
investors confidence in the corporate companies which will lead to greater
investment in them ensuring their sustained growth. thus good corporate
governance would greatly benefit the companies enabling them to thrive and
prosper.