Corporate Governance

CORPORATE GOVERNANCE Sourabh Garg, 117 Sakshi Joshi, 111 Sanjay Pal, 112 Prateek Nahar, 106

INTRODUCTION • Meaning hardly understood. • Much talked about because of :a) Curious happenings in business world. b) Difference in corporate governance systems around the world.

• Mechanism by which procedures of a corporation are indicated. • The concept not new for Indian tradition.

IMPORTANCE & CONCEPT

• Lay foundation for progress of business. • A source of competitive advantage. • Maximize long-term shareholders value. • According to The Institute for Company Secretaries of India it is- application of best management practices, compliance of law, adherence to ethical standards, distribution of wealth & discharge of social responsibility.

ELEMENTS OF GOOD CORPORATE GOVERNANCE • Role and powers of Board • • • • • • • • •

Legislation Board Skills and independence Board appointments and meetings Board induction and training Business and community obligations Financial and operational reporting Code of conduct Management environment Monitoring the Board performance

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CORPORATE GOVERNANCE PRINCIPLES Ensuring the Basis for an Effective Corporate Governance Framework

• Rights of Shareholders and Key Ownership Functions • Equitable Treatment of Shareholders • Role of Stakeholders in Corporate Governance • Disclosure and Transparency

Thoughts on Corporate Governance M. Damodaran :Investment and not as an expenditure  V.R.S. Natarajan, CMD, Bharat Earth Movers Ltd: Ensuring transparency in operations, performance, growth N.R. Narayana Murthy, Infosys Technologies Ltd.: Necessity, and no longer a luxury V.C. Burman, Chairman, Dabur India Ltd.:that good corporate governance and impeccable track record

 Dr. Pratap C. Reddy, Chairman, Apollo Hospitals Enterprise Ltd: Enhance shareholder value , instrument of investor protection.  

Kumar Mangalam Birla committee on Corporate Governance  Several corporate governance structures

 Extends beyond corporate law

 The committee has primarily focused on investors and shareholders.

 Committee believes that its recommendations will go a long way in raising the standards of corporate governance

N.R. NARAYANA MURTHY COMMITTEE ON CORPORATE GOVERNANCE

• Committee primarily related to audit committees, audit reports, independent directors, related parties, risk management, directorships and director compensation, codes of conduct and financial disclosures.

SEBI • There are those who will tell you that business and ethics cannot stand together. In the short run it might appear that companies pay a price for adhering to values while their competitors get ahead in a shorter time frame, but in the long run people would learn to distinguish, stakeholders learn to ask the right questions, and distinguish between the grain and chaff. Those that don't subscribe to values will fall by the way side; those that subscribe to values will last the course and will set benchmarks." M. Damodaran Chairman, Securities and Exchange Board of India

OIL AND NATURAL GAS CORPORATION LTD. (ONGC)   • ONGC has been practicing corporate governance principles much before it became mandatory. • It is an ongoing measure of superior delivery of company’s objectives with a view to translate opportunities into reality. • Aligning its activities to national need, shareholders benefit and employee growth, thereby delighting all its shareholders, while minimizing the risks

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INFOSYS TECHNOLOGIES LTD. ON CORPORATE GOVERNANCE Satisfy the spirit of the law and not just the letter of the law.  Corporate

governance standards should Go beyond the law. Be transparent and maintain a high degree of disclosure levels. When in doubt, disclose. Take a clear distinction between personal conveniences and corporate resources. Communicate externally, in a truthful manner, about how the Company is run internally. Comply with the laws in all the countries in which the Company operates. Have a simple and transparent corporate structure driven solely by business needs.

ICFAI UNIVERSITY PRESS ON CORPORATE GOVERNANCE • Failure of Accounting or Corporate Governance- The exposure of corporate failures in quick succession led to serious public concerns

• Corporate Governance to Sustainability- Sustainability which gives a holistic perspective of the organization's initiatives and depicts its commitment to stakeholders is a concept gaining ground

• Wealth of Companies and Corporate Governance- The emergence of corporate power a great challenge to the industry captains and the government alike in their endeavors to ensure that the corporate sector performance matches the stakeholder requirements

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From Compliance to Competitive Advantage- Corporate governance is a priority for firms because it presents opportunities to manage risks and add value.

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Role of Audit Committee- The independence of Audit Committee is of vital importance in the discharge of the functions of the Board

INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA • Globalization and Competition- Globalization has changed the economies across the world. the competition regime will open a new horizon for the development.

• Using ‘Dharma’ in Corporate Governance- The code of conduct that takes care of ‘public’ money is being increasingly scrutinized and tested on ‘ethical’ standards.

• Looking Beyond Corporate Governance Code- A time has come to redefine the relationship between the shareholders, management and Board of Directors in the context of managing a corporation.

Corporate Social Responsibility •

Corporate social responsibility (CSR)

is a company’s obligation to be accountable to all of its stakeholders in all its operations and activities with the aim of achieving sustainable development not only in the economical dimension but also in the social and environmental dimensions

Corporate Social Responsibility Reason behind CSR • Capital reputation

• Eco-Social Perspective

• Rights to information

Advantages of CSR • • • • • •

Increased sales Customer loyalty Creating new business opportunities Enhanced reputation Brand value Tax benefits

CSR IN INDIA The concept of CSR came into existence in early 1970s but it took some time for the Indian Companies to understand their role towards society. • It was only in late nineties that few companies had came forward with a proper guideline to show their seriousness towards CSR. And now many large companies issues a

CORPORATE SCANDALS

CONCLUSION Every individual has to start culturing the human values in the inner world of himself because they say, “Those who can see the deepest into the past can also see farthest into the future”