Corporate Governance: Presented By: Vishal Jivani

CORPORATE GOVERNANCE

PRESENTED BY : VISHAL JIVANI 1

Contents• 1.DEFINITION. • 2.HISTORY. • 3.PRINCIPLES. • 4.INTERNAL AND EXTERNAL CORPORATE GOVERNANCE CONTROLS. • 5.SYSTEMIC PROBLEMS OF CORPORATE GOVERNANCE. • 6.CORPORATE MODELS.

2

DEFINITION• “Corporate governance is the set of processes, customs, • • • •

policies and laws affecting the way in which a corporation is directed, administered or controlled” It also includes the relationship among the stakeholders and the goals for which the corporation is governed. The corporate governance structure specifies the rules and procedure for making decision on corporate affairs. it also provide the structure through which the company objectives are set. It is used to monitor whether outcomes are in accordance with plans or not.

3

HISTORYIn 19 century the need for a better corporate governance was felt

•

th

when• Few giant corporation in u.s. collapsed – e.g. ENRON, WORLD COM, ADELPHIA. – Few companies of U.K. also witnessed several cases of corporate corruption and collapse.  It led to setting of CADBURY(1996), GREEBURY and HAMPEL(1997) committee

 INDIAN- SCENARIO  Initial thrust for better corporate governance came in INDIA

mainly due to Due to 1992 stock market scam .  Onset of international competition resulting from the policy of liberalisation of economy in 1991

4

Cont…… • The confederation of INDIAN industries was the • • • • •

first to appoint a committee under chairmanship of Mr.rahul bajaj in 1998. It was followed by4 national level committee Kumar mangalam birla committee in 1999. N.R. Narayana murty committeein 2003 Gangully committee report in 2002. 4th committee appointed by govt. of INDIA known as report of naresh chandra. 5

PRINCIPLES• Key elements of good corporate governance principles

•

include honesty, trust and integrity, openness, responsibility and accountability,mutual respect to the organisation Commonly accepted principles of corporate governance includes-

• TRANSPARENCY • BOARD- EFFECTIVENESS • SHAREHOLDERS RIGHT

6

• Transparency-disclosure of data. -disclosure of transaction.

 Shareholders right -right and equitable treatment of shareholders. -right to vote.

 Board effectiveness • Role and effectiveness of board.

7

Internal and external corporate governance controls• Internal corporate governance controls-internal corporate governance controls monitor

activities and take corrective action to accomplish organisational goals.examples includes#Monitoring by board of directors#remuneration#disclosure-the annual report should contain the following-name of chairman, deputy chairman, CEO & non executive directors. -the audit and remuneration committee members. -the no. of meeting held by the board &no. of directors attend. -how board and committee performation evaluaton has been conducted

8



• • • •

External corporate governance controls-

Govt. regulations. Media pressure. Takeovers. Competition.

9

SYSTEMIC PROBLEMS OF CORPORATE GOVERNANCE

• SUPPLY OF ACCOUNTING INFORMATION.

• DEMAND FOR INFORMATION. • MONITORING COSTS. 10

CORPORATE MODELS

• Generally only two types of corporate models are discussed-

1.Anglo American model2.Non Anglo American model-e.g. Reliance industries ltd. 1.1 promoters holding 1.2 institutional investors 1.3 Indian public 1.4 others (NRI,OCB,DGDR) e.g. WIPRO 1.1 pr0moters 1.2 institutional investors 1.3 INDIAN public 1.4 others (NRI,OCB,DGDR)

% holding 46.68 28.35 16.56 8.40 83.95 3.77 7.03 5.25 11

12