Date post: | 29-Jan-2015 |
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Corporate GovernanceA draft framework
Conceived–Developed by:
PKS Management ConsultantsBangalore
Service Tax Regd. No. AYMPS8310HSD001
Index
• Corporate Governance Primer• Our framework• Approach
What is Governance
• The word derives from Greek• Means to steer • Was used for the first time by Plato
What is Corporate Governance
• A system by which corporations are directed and controlled
• Focusing on the internal and external corporate structures
• With the intention of monitoring the actions of management and directors
• And thereby mitigating risks
Why Corporate Governance
• Corporate scandals of various forms– Enron Corporation– WorldCom– Satyam
Stakeholders
• Internal stakeholders:– Board of Directors– Executives– Other employees
• External stakeholder groups:– Shareholders, debt holders, trade
creditors, suppliers, customers
– Communities affected by the corporation’s activities.
Genesis of Corporate Governance
• The Cadbury Report • The OECD Principles of Corporate Governance• The Sarbanes-Oxley Act • The Cadbury and OECD reports present general
principals • The Sarbanes-Oxley Act, United States, legislation, based on several of the principles in Cadbury and OECD reports
Principles of Corporate Governance
• Rights and equitable treatment of shareholders• Interests of other stakeholders• Role and responsibilities of the board• Integrity and ethical behaviour• Disclosure and transparency
OECD Principles
• Auditing• Board and management structure and process• Corporate responsibility and compliance• Financial transparency and information
disclosure• Ownership structure and exercise of control
rights
Corporate Governance across world
• Different models of corporate governance • The Anglo-American "model" tends to
emphasize the interests of shareholders. • The Model associated with Continental Europe
and Japan also recognizes the interests of workers, managers, suppliers,
customers, and the community
Corporate Governance in India
• SEBI Committee on Corporate • Drawn from the Gandhian principle of
trusteeship • And the Directive Principles of the Indian
Constitution
Codes and guidelines
• As a rule, compliance with these governance recommendations is not mandated by law
• Although the codes linked to stock exchange listing requirements may have a coercive effect
Internal controls
• Monitoring by the board of directors• Internal control procedures and internal
auditors• Balance of power • Remuneration • Monitoring by large
shareholders/Banks /Creditors
External controls
• Competition• Debt covenants• Demand for and assessment of performance
information (especially financial statements)• Government regulations• Managerial labour market• Media pressure• Takeovers
Benefits of corporate governance
• Corporate success and economic growth• Raises investor's confidence• Helps in attaining operational excellence• Enhances the brand image
• Winning with applause
Our Framework
Holistic
ConscienceBusiness Skills
Levels
Objectives
Processes
Execution
Compliance
Growth
Principles of Corporate GovernanceContinuous improvement from within
Description of our framework
• Three interdependent and interacting components
Foundation
ImplementationResults
Foundation
Conscience
• Character / Honesty / Integrity and above all, conscience is THE Cornerstone of corporate governance
• From Chairman to entry level employee
Business Skills
• Education , Experience, Managerial &
Leadership Skills• At all levels
Corporate Governance Principles
• Existing corporate governance principles to be adopted
• And beyond
Continuous improvement from within
• Assimilate best practices and work on
• But ultimately you are the competitor for yourself
Implementation
Levels
• Internal– Board– Management– Operations
• Stakeholders– Customers– Suppliers– Financial institutions– Govt.– Society at large
• Contextual– Industry specific
Objectives
• Develop suitable objectives corresponding to each level
Processes
• Develop suitable processes and systems corresponding to objective
Execution
• Execute the processes and systems
Compliance
• Put in place compliance structure for each level
Results
• Holistic Growth
Approach
Problem solving approach
• Corporate governance flows from top to down
Define the level
• Work out the levels at which corporate governance need to be implemented in phases
Board
Management
Operations
Phases
• At each level define the processes, SLAs and compliance
Level of automation
• Define the level of automation
Example for department • Each department
interacts with other departments
• And other External stakeholders and agencies
Stakeholders
Agencies
External
Getting the correct picture
• Department has internal view and external view
• Both combined together forms the reality of the department
Internal view
External view
Reality
Internal view
• Department should make a list of all activities and corresponding process flow and gaps
• After internal deliberations, gaps need to be filled
• Here internal view is up-to-date
External view
• Departments / stakeholders interacting with the department should follow the same process and suggest the measures to fill-in the gaps.
• It completes the external view
Mix
• The individual department works on both internal and external views and updates its processes.
General pointers
• Adopt the best practices available at National / International levels
• Culture of the company is interlinked with corporate governance
Corporate governance.. not a milestone
• it is a continuous process
An artefact of
PKS Management Consultants+91 – 97411 94285
# 9, Site No. 14/15 B, 1st Vivekanda LayoutOuter Ring Road, Marathalli
Bangalore -560037
pramod@pksmanagementconsultants.comwww.pksmanagementconsultants.com
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