corporate governance - corporate management - strategic management - manu melwin joy
TRANSCRIPT
Corporate GovernanceCorporate Management
Prepared By
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Manu Melwin JoyAssistant Professor
Ilahia School of Management Studies
Kerala, India.Phone – 9744551114
Mail – [email protected]
Corporate Governance• The Cadbury Committee
report (1991) defines corporate governance as a system by which corporate are directed and controlled.
• According to Salins Sheikh and Williams Ress, corporate governance is concerned with ethics, values and morals of a company and its directors.
Corporate governance in India
• In India, the concept of
corporate governance is
gaining importance mainly
because of two reasons.
– Economic Liberalization
– Deregulation of industry
and business
Corporate governance in India
• Economic Liberalization –
After liberalization, there has
been institutionalization of
financial markets and the
market began to
discriminate between
wealth creators and wealth
destroyers.
Corporate governance in India• Deregulation of industry
and business – The role of private sector has increased and the companies are realizing that shareholders love to stay with those corporate that create value for their shareholders which is possible only by adopting fair, honest and transparent corporate practices.
Mandatory requirements of corporate governance code
• Composition of Board of Directors – The board of directors of the company shall have an optimum combination of executive and non executive directors with not less than 50% of the total number of directors comprising of non executive directors
Mandatory requirements of corporate governance code
• Director’s pecuniary relationship – All pecuniary relationship or transactions of the non executive director’s vis-à-vis the company should be disclosed in the Annual Report.
Mandatory requirements of corporate governance code
• Audit Committee – Every company is required to set up a Audit Committee consisting of minimum three members, all being non executive directors, majority of them being independent and at least one member having financial and accounting knowledge. They should meet at least 3 times in an year, once in every six months.
Mandatory requirements of corporate governance code
• Director’s remuneration – The remuneration of non executive directors shall be determined by the board of directors and the following disclosure shall be in the annual report : (a) all elements of remuneration package of all the directors (b) details of fixed and performance related components of remuneration and (c) service contracts, notice period etc.
Mandatory requirements of corporate governance code
• Board meetings – Minimum four board meetings should be conducted in a year. There should not be a time gap of more than four months between any two board meetings.
Mandatory requirements of corporate governance code
• Management – The management of the company must disclose to its Board details relating to all material, financial and commercial transactions.
Mandatory requirements of corporate governance code
• Shareholders – In case of appointment of a director, shareholders should be provided with a brief resume of the person. The company should publish in their website details regarding information on stock exchanges.
Mandatory requirements of corporate governance code
• Report on corporate governance – Every listed company shall have a separate section on corporate governance in the annual report of the company with a detailed compliance report on corporate governance.
Mandatory requirements of corporate governance code
• Certificate of compliance – The company is required to obtain a certificate from the auditors of the company regarding compliance of conditions of corporate governance as stipulated in clause 49 of the listing agreement.
Factors influencing corporate governance
• Promoters – In the Indian scenario, the promoters dominate governance in every possible way.
• Management culture – Corporate governance stems from the culture and mindset of the management.
Factors influencing corporate governance
• Board’s value and dedication – If board wants to live up to an ideal Corporate governance, the it must be prepared to face ordeals, difficulties and tribulations.
• Role of professionals – Professionals like company secretaries, accountants and auditors should work together more closely.
Factors influencing corporate governance
• Corporate objectives – The overriding objective of any corporate should be to optimize overtime, the returns of its shareholders.
• Communication and reporting – Corporate should disclose adequate, accurate and timely information and assist investor to make informed decision regarding ownership, acquisition and sales of shares.
Committees on corporate governance
• Hampel Committee – The committee was chaired by Sir Ronnie Hampel, the chairman of ICI and the committee published its reports in August 1997. The basic aim of the committee was to promote high standards of corporate governance in the interests of investors protection and to preserve and enhance the standing of companies listed on the London Stock Exchange.
Committees on corporate governance
• Cadbury Committee – The committee was set up in May 1991 by the Financial Reporting Council, the London Stock Exchange and the accountancy profession to address the financial aspects of corporate governance.
Committees on corporate governance
• Greenbury committee –
This committee was set
up to determine and to
account for Director’s
remuneration.
Committees on corporate governance
• Blue Ribbon committee – The committee was specifically formulated for NewYork Stock Exchange (NYSE), National Association of Securities dealers (NASP) and Securities and Exchange Commission (SEC). The main objectives were to strengthen the independence of audit committee and making it more effective.
Committees on corporate governance
• Kumar Manglam Birla Committee – The committee was chaired by Mr. Manglam which submitted its final report in early 2000. The main purpose of the committee is to promote and raise the standards of corporate governance.
Committees on corporate governance
• Naresh Chandra Committee – This committee was appointed on 21st August 2002 by the Department of Company Affairs(DCA). The committee submitted two reports and is based on almost the same grounds as Kumar Manglam Birla committee reports.
Committees on corporate governance
• Narayana Murthy Committee – SEBI appointed this committee comprising of 23 persons. The committee recommended that the corporate organization should function in a more organized manner and should strive for enhancing long term value to the shareholders.
