corporate governance in usa
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Presented by:
Santosh RajputSweeti NayakMohit RijwaniAmrish Dolas
Deepak Vanjara
Subhdeep Devbaramann
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the process and structure..to direct andmanage the business and affairs of thecorporation with the objective of enhancingshareholder value, which includes ensuringthe financial viability of the business.
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System
Objectives of the company
Good corporate governance structures
Accountability and control systems
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Key objectives
Role of owners in electing the Board
Protection of minorities
Role of other stakeholders in management
Board structure and objectivity of the Board
System of reporting and accountability
Audit and internal control
Effective supervision and enforcement by
regulators To encourage Sustainable Development of
the Company and its stakeholders
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A basic design of existing corporate
governance systems
Corporate
Board ofDirectors
Management
Shareholders Stakeholders Creditors
Supervisory &
enforcementauthorities
Executivedirectors
Ownerdirectors
Independent
Directors
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Separation of ownership and management
Opinion of small shareholders
Large shareholders can effectively voicetheir opinions
The existence of large shareholders can bea built-in corporate governance mechanism
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One way to align the interest ofmanagement and of shareholders is to tiemanagerial compensation to the firmperformance.
Increasing salary with firm performance,and the provision of stock option
compensation
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PROVISIONS OF
SARBANES OXLEY ACT
CEO and CFO to certify appropriateness of financialstatements
Forfeiture of bonuses and profits in certain
circumstances
Prohibition on personal loans to executives
Disclosure of transactions involving management andprincipal stockholders
Annual report
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IMPLICATIONS OF
SARBANES OXLEY ACT
Issuers must comply
Directors and officer must certify annual andperiodic reports (including financial statements)
Employees shielded by whistle-blowerprotections
Attorneys
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Auditors subject to oversight and discipline by a newlycreated independent board
additional restrictions and limitations
Investment banks and research analysts
The Act also created a number of new federal crimes
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NEW YORK STOCK EXCHANGE
REGULATIONS
Majority of Board to comprise of independentdirectors
Non-executive directors to meet at regular intervalswithout the management
Listed companies to compulsorily establish followingcommittees consisting of independent directors only Corporate Governance Committee
Compensation Committee Audit Committee
Listed companies to have an internal audit function
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Listed companies to frame and disclose corporategovernance guidelines Qualification standards Responsibilities Access to management
Compensation Management succession Annual performance evaluation
Listed companies to compulsorily adopt a Code of
Business Conduct and Ethics
CEO to certify annually that no listing agreementviolations
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Current status on corporate
governance
Comparison of Board structure
Indian top 50 Vs U.S. top 50
Key FindingsParameter India (Nifty Fifty companies) US (top 50 out of NYSE 100 index)Ownership pattern 48% of Indian companies have largest shareholder
holding over 50%Largest shareholder holds less than 10%in all cases
Board size Largest board size 17. smallest 5 Largest board size 18. smallest 10
44% of the top 50 companies have more than 12directors
66% of the top 50 companies have morethan 12 directors
Board independence 58% of companies have a board majority ofindependent directors
12% have less than 1/3rd of their directorsindependent
All companies have a board majority ofindependent directors
Executive directors in board In 35 companies 50% of the directors or more areexecutive directors
Boards of 49 companies out of 50 haveless than 25% executive directors
Chairman and CEO 60% have separate Chairman and CEO Only 20% have separate Chairman andCEO
Lead independent director 3 companies have lead independent directors 20 companies have lead independentdirectors
Board committees All companies have audit committees 54% havefully independent Audit Committees
33 companies have remuneration committees ofthese 14 fully independent and 16 have majorityindependent committees
9 companies have nomination committees 6 arefully independent and 3 have majority independentcommittees
All companies have fully independentaudit remuneration and nominationcommittees
Source: Crisil Report on Corporate Governance
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