Corporate Governence_final

8/7/2019 Corporate Governence_final

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-Presented by-Presented byDeepakDeepak

khandelwalkhandelwal


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q A corporation is an organization created (incorporated)

by a group of shareholders who have ownership of

the corporation.

q The elected board of directors appoint and oversee

management of the corporation .

CORPORATECORPORATE


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q Oxford English dictionary defines governance "as the

act, manner , fact or function of governing sway

control.

q The word has Latin origins that suggest the notion of

steering". it deals with the processes and systems by

which an organization or society operates.

q Governance can be used with reference to all kind of

organizational structure e.g.

q Ngo not for profit organization

q Municipal corporation /gram panchyat

q Central/state government

q Partnership firm

GOVERNANCEGOVERNANCE


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q It is a broad concept and has been defined andunderstood differently by different groups and at

different points of time .

q The Cadbury committee report defines it as the systemby which companies are directed and controlled.

q It is generally understood as the framework of rules,

relationships, systems and processes within and bywhich authority is exercised and controlled in

corporations

CORPORATE GOVERNANCECORPORATE GOVERNANCE


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CORPORATE

GOVERNANCE

CORPORATE

MANAGEMENT

External Focus Internal Focus

Governance assumes anopen system Management assumes aclosed system

Strategy-orientated Task-orientated

Concerned with where thecompany is going

Concerned with getting thecompany there

DIFFERENCE BETWEENDIFFERENCE BETWEEN


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Unlike South-East and East Asia, the corporate governance initiativein India was not triggered by any serious nationwide financial,banking and economic collapse

The initiative in India was initially driven by an industry association,

the Confederation of Indian Industry

In December 1995, CII set up a task force to design avoluntary code of corporate governance.

The final draft of this code was widely circulated in 1997.

In April 1998, the code was released. It was called Desirable

Corporate Governance: A Code.

Between 1998 and 2000, over 25 leading companiesvoluntarily followed the code: Bajaj Auto, Hindalco,Infosys, Dr. Reddys Laboratories, Nicholas Piramal, Bharat

Forge, BSES, HDFC, ICICI and many others

Brief history of corporate governancein India


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Following CIIs initiative, the Securities and Exchange Board of India(SEBI) set up a committee under Kumar Mangalam Birla to designa mandatory-cum-recommendatory code for listed companies

The Birla Committee Report was approved by SEBI in December 2000

Became mandatory for listed companies through the listingagreement, and implemented according to a rollout plan:

2000-01: All Group A companies of the BSE or those in the

S&P CNX Nifty index 80% of market cap.

2001-02: All companies with paid-up capital of Rs.100 millionor more or net worth of Rs.250 million or more.

2002-03: All companies with paid-up capital of Rs.30 million

or more



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Following CII and SEBI, the Department of Company Affairs (DCA)modified the Companies Act, 1956 to incorporate specificcorporate governance provisions regarding independentdirectors and audit committees.

In 2001-02, certain accounting standards were modified to furtherimprove financial disclosures. These were:

Disclosure of related party transactions.

Disclosure of segment income: revenues, profits and capitalemployed.

Deferred tax liabilities or assets.

Consolidation of accounts.

Initiatives are being taken to (i) account for ESOPs, (ii) furtherincrease disclosures, and (iii) put in place systems that canfurther strengthen auditors independence.



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q Supervisory board/committee/team

q Audit committee

q Internal audit

q Statutory audit

q Disclosure of information

q Risk management framework

q Internal control framework

FRAMEWORK OF GOVERNANCEFRAMEWORK OF GOVERNANCE


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qStrengthen management oversight functions andaccountability.

q Balance skills, experience and independence on theboard appropriate to the nature and extent of companyoperations.

q Establish a code to ensure integrity.

q Safeguard the integrity of company reporting.

q Risk management and internal control.

q Disclosure of all relevant and material matters.

q Recognition and preservation of needs of shareholders.

BJECTIVES OF GOOD CORPORATE GOVERNANCESBJECTIVES OF GOOD CORPORATE GOVERNANCES


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q Board of directors

q Managers

q Workers

q Shareholders or owners

q Regulators

q Customers

qSuppliers

q Community(people affected by the actions of the

organization.)

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ARTIES TO CORPORATE GOVERNANCEARTIES TO CORPORATE GOVERNANCE


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Directors

q Every listed company should be headed by an effectiveboard which should lead and control the company.

q There should be board balance of executive & nonexecutive directors such that no individual candominate the board decision making.

q The board should be supplied with timely information toenable it to discharge its duties.

q There should be formal and transparent procedure for

the appointment of new directors to the board.q All directors should be required to submit themselves for

re-election at regular intervals and at least every threeyears.

PRICIPLES OF CORPORATE GOVERNANCEPRICIPLES OF CORPORATE GOVERNANCE


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q Integrity of the management

q Ability of the board

q Adequacy of the process

q Commitment level of individual board members

q Quality of corporate reporting

q Participation of stakeholders in the management

CTORS INFLUENCING QUALITY OF GOVERNANCCTORS INFLUENCING QUALITY OF GOVERNANC


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q Demand for greater transparency and accountability

qWritten job descriptions detailing roles and responsibilities

of chairman and board members.

q Core competencies for board members are defined and

those without skills or expertise not invited.q Development of performance criteria and annual

evaluations of the board.

q Orientation for new members.

q Ongoing training

q Succession planning

TRENDS IN CORPORATE GOVERNANCETRENDS IN CORPORATE GOVERNANCE


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q Overseeing strategic development & planning

q Management selection, supervision and upgrading.

q Maintenance of good member relations.

q Protecting and optimizing the organizations assets.

q Fulfilling legal requirements.

HE BOARD RESPONSIBILITIESHE BOARD RESPONSIBILITIES


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Fundam ent a l P i l la r s o f C o r po r a teGov er nance

C o r p o r a t eG o v e r n a n c e


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Accountability

Clarifying governance roles & responsibilities, and

supporting voluntary efforts to ensure the alignment of

managerial and shareholder interests and monitoring by

the board of directors capable of objectivity and soundjudgment.

Transparency

Requiring timely disclosure of adequate information

concerning corporate financial performance


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Responsibility

Ensuring that corporations comply with relevant laws

and regulations that reflect the societys values

Fairness

Ensuring the protection of shareholders rights and the

enforceability of contracts with service/resource providers


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Investors are Willing to Pay More For a

Company With Good Board Governance

Practices

83 81 89

% %Companies are willing to pay 18 to 28 more for better.governance



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Best Governed Companies

ICSI NATIONAL AWARD FOR EXCELLENCE INICSI NATIONAL AWARD FOR EXCELLENCE IN



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q Code of CG should be redesigned to reflect international

best practices

q Stringent enforcement of Law

q More effective coordination and cooperation between

SEBI, DCA

qCG mechanism should be flexible and suitable

q Overall ethical values in all segments should be

promoted for effective

q

CONCLUDING OBSERVATIONSCONCLUDING OBSERVATIONS


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q

Board of Directors: information that must be suppliedBoard of Directors: information that must be suppliedq

q Annual, quarter, half year operating plans, budgets andupdates.

q Quarterly results of company and its business segments.q Minutes of the audit committee and other board

committees.

q Recruitment and remuneration of senior officers.

q Materially important legal notices and claims, as well asany accidents, hazards, pollution issues and laborproblems.

q Any actual or expected default in financial obligations.

q

q

MANDATED CG GUIDELINES AND DISCLOSURESMANDATED CG GUIDELINES AND DISCLOSURES


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q Details of joint ventures and collaborations.

q Transactions involving payment towards goodwill, brand

equity and intellectual property.

q Any materially significant sale of business and

investments.

q Foreign currency and other risks and risk management.

q Any regulatory non-compliance.

q

q


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THANK YOU

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