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introduction

 Corporate governance is "the system by whichcompanies are directed and controlled"

(Cadbury Committee, 1992).

It involves a set of relationships between a

company’s management, its board, itsshareholders and other stakeholders; it deals with prevention or mitigation of the conflictof interests of stakeholders.

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Ways of mitigating or preventing these conflictsof interests include the processes, customs,policies, laws, and institutions which have impacton the way a company is controlled.

Corporate governance also includes the

relationships among the many stakeholders(external & internal) involved and the goals for which the corporation is governed.

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External & Internal Stake holders

External stakeholder groups are shareholders, debtholders, trade creditors, suppliers, customers andcommunities affected by the corporation's activities.

Internal stakeholders are the board of directors, executives, and other employees. Itguarantees that an enterprise is directed andcontrolled in a responsible, professional, and

transparent manner with the purpose of safeguardingits long-term success. It is intended to increase theconfidence of shareholders and capital-marketinvestors

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There has been renewed interest in the corporategovernance practices of modern corporations since2001, particularly due to the high-profile collapses of anumber of large corporations, most of which involvedaccounting fraud.

Corporate scandals of various forms have maintained

public and political interest in the regulation of corporate governance.

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Principles of corporate governance 

Rights and equitable treatment of 

shareholders: Organizations should respect the rightsof shareholders and help shareholders to exercise thoserights. They can help shareholders exercise their rightsby openly and effectively communicating informationand by encouraging shareholders to participate in

general meetings.

Interests of other stake holders: Organizationsshould recognize that they have legal, contractual,

social, and market driven obligations to non-shareholder stakeholders, including employees,investors, creditors, suppliers, local communities,customers, and policy makers.

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 Integrity and ethical behavior:

 Integrity should be a fundamental requirement in choosing

corporate officers and board members. Organizationsshould develop a code of conduct for their directors andexecutives that promotes ethical and responsible decisionmaking.

Disclosure and transparency :

 Organizations should clarify and make publicly known the

roles and responsibilities of board and management toprovide stakeholders with a level of accountability. They should also implement procedures to independently verify and safeguard the integrity of the company's financialreporting. Disclosure of material matters concerning theorganization should be timely and balanced to ensure that

all investors have access to clear, factual information.

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Role and responsibilities of the board: The boardneeds sufficient relevant skills and understanding to

review and challenge management performance. Italso needs adequate size and appropriate levels of independence and commitment

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Corporate Governance In IndiaIndia's SEBI Committee on Corporate Governance

defines corporate governance as the "acceptance by management of the rights of shareholders as the trueowners of the corporation and of their own role as

trustees on behalf of the shareholders. It is aboutcommitment to values, about ethical business conductand about making a distinction between personal &corporate funds in the management of a company."

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Cont…

 It has been suggested that the Indian approach is

drawn from the Gandhian principle of trusteeship andthe Directive Principles of the Indian Constitution, butthis conceptualization of corporate objectives is alsoprevalent in Anglo-American and most other jurisdictions.

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