By:Suruchi Sandhya

Social system influence business Social system affected by business Business factors affected by society:
Type of products to be manufactured & marketed Marketing strategies to be employed Organization of business Value & Norms of business

Ideas behind business in relationship with society:

Values Viability Public Visibility

Economic Objectives
Survival ROI Growth Innovation Market Share
Quantity Quality Objectives which protect consumer interest Objectives which protect interest of workers Objectives which protect interest of society

Social Objectives

Primary & Secondary Objectives

Extension, Development & Improvement of business Payment of dividends Payment of wages Reduction of prices Provide bonus To assist in promoting amenities to locality To assist in developing the industry To promote education, R & D

Short-run & Long-run Objectives

Forces in environment Internal forces Value system of top executive

Business should be manage by

One who formally acquired specially knowledge & skill One who have authority & freedom to take right decision On who have no ideological biasness One whose decisions & actions are guided by certain ethical considerations

Meaning of culture
Knowledge Belief Art Morals Customs Habits

The total life way of people or software of mind

Elements of Culture
Knowledge & Beliefs Ideals Preferences

Organization of culture
Integration of traits, complexes & patterns that make up cultural system

Cultural adaptation Cultural shock Cultural transmission Cultural Conformity Cultural Lag

Cultural Traits
Low-Context & High-Context Cultures Masculine & Feminine Cultures Monochronic & Polychronic Societies Universalism vs. Particularism Individualism vs. Communitarianism Neutral vs. Emotional Specific vs. Diffuse Achievement vs. Ascription

Religion & Business

Ethnodomination

Language & Business

Centralized vs. Decentralized Decision Making Safety vs. Risk Individual vs. Group Reward Informal vs. Formal Procedure High vs. Low Organizational Loyalty Cooperation vs. Competition Short-term vs. Long-term Horizon Stability vs. Innovation

Consumer Preferences Habits Beliefs Nature of use of Commodity Etiquettes Some Social Trends
Age & Gender composition of population Family Size Habitat Attitude toward employment Occupational Pattern

Social change means change in social structure Changes like

Changes in size of society Changes in social institution Changes in occupational pattern Changes in position, status & roles Changes in values, beliefs & attitude Changes in social mobility Changes in social interaction

Social changes brought by technological, cultural, demographic, biological, economic, environmental, psychological, political factors etc Technological developments have a number of adverse effects on society

Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society - Sir Adrian Cadbury

The primary purpose of corporate leadership is to create wealth legally and ethically. This translates to bringing a high level of satisfaction to five constituencies -- customers, employees, investors, vendors and the society-at-large. The raison d'tre of every corporate body is to ensure predictability, sustainability and profitability of revenues year after year.

- Narayana Murthy

Concept of corporate governance is to some extent similar to the quality practices adopted under ISO standards. The main aim is to efficiently manage the organizations. As per Kumar Mangalam Birla Committee, the fundamental objective of corporate governance is the enhancement of long-term shareholder value while, at the same time, protecting the interests of other stakeholders.

Corporate governance is concerned with values, vision & visibility. Corporate management is concerned with the efficiency of the resource use, value addition & wealth creation.

Unlike South-East and East Asia, the corporate governance initiative in India was not triggered by any serious nationwide financial, banking and economic collapse Also, unlike most OECD countries, 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 a voluntary 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 companies voluntarily followed the code: Bajaj Auto, Hindalco, Infosys, Dr. Reddys Laboratories, Nicholas Piramal, Bharat Forge, BSES, HDFC, ICICI and many others

Following CIIs initiative, the Securities and Exchange Board of India (SEBI) set up a committee under Kumar Mangalam Birla to design a 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 listing agreement, and implemented according to a rollout plan

Following CII and SEBI, the Department of Company Affairs (DCA) modified the Companies Act, 1956 to incorporate specific corporate governance provisions regarding independent directors and audit committees In 2001-02, certain accounting standards were modified to further improve financial disclosures. These were:

Disclosure of related party transactions Disclosure of segment income: revenues, profits and capital employed Deferred tax liabilities or assets Consolidation of accounts

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

Enhancement of Shareholder Value, keeping in view the Interests of other Stakeholders

CG a Way of Life rather than a Code

The Board of Directors

Pivotal role Accountable to stakeholders Directs management

The Shareholders & Stakeholders

To participate in appointment of directors To hold the BoD accountable for governance through proper disclosures

The Management
To act on the direction of the BoD To provide requisite information to the BoD for decision making To implement and monitor control systems

 An effective disclosure based regulation (DBR) implies greater responsibilities on the company directors, its management and advisers An effective DBR promotes investor activism Markets believe that perceived benefits outweigh perceived costs

Disclosures by whom
Public Listed Cos. Intermediaries Stock Exchanges Mutual Funds Analysts & advisors

Disclosures for whom

Shareholders Investors Intermediaries Regulator Government Other stake holders

MARKET

 Components & types of disclosures

Public Offers Private Placement

Initial Disclosures Disclosures for raising capital by companies, mutual funds in offer documents
Continuous disclosures financial / nonfinancial Frequency of disclosure Dissemination process electronic, physical, centralized, dispersed Accessibility of information

Initial Disclosures Continuous disclosures Corporate Governance Financial disclosures Risk based disclosures for intermediaries Disclosures for stock exchanges

Board of Directors: information that must be supplied

Annual, quarter, half year operating plans, budgets and updates Quarterly results of company and its business segments Minutes of the audit committee and other board committees Recruitment and remuneration of senior officers Materially important legal notices and claims, as well as any accidents, hazards, pollution issues and labor problems Any actual or expected default in financial obligations Details of joint ventures and collaborations Transactions involving payment towards goodwill, brand equity and intellectual property Any materially significant sale of business and investments Foreign currency and other risks and risk management Any regulatory non-compliance

Disclosures to shareholders in addition to balance sheet, P&L and cash flow statement
Board composition (executive, non-exec, independent) Qualifications and experience of directors Number of outside directorships held by each director (capped at director not being a member of more than 10 board-level committees, and Chairman of not more than 5) Attendance record of directors Remuneration of directors Relationship (familial or pecuniary) with other directors Warning against insider trading, with procedures to prevent such acts Details of grievances of shareholders, and how quickly these were addressed Date, time and venue of annual general meeting of shareholders

Dates of book closure and dividend payment Details of shareholding pattern Name, address and contact details of registrars and/or share transfer agents Details about the share transfer system Stock price data over the reporting year, and how the companys stock measured up to the index Financial effects of stock options Financial effects of any share buyback Financial effects of any warrants that are to be exercised Chapter reporting corporate governance practices Detailed chapter on Management Discussion and Analysis focusing on markets, operations, finances, accounts, risks, opportunities and threats, internal control systems

Consolidated financial statement, incorporating accounts of all subsidiaries (over 50% shares held by reporting company) Details of all significant related party transactions Detailed segment reporting (revenues, costs, operating profits and capital employed) Deferred tax liabilities and assets and debit/credit in the P&L for the reporting year

(A) Basis of related party transactions

I. A statement in summary form of transactions with related parties in the ordinary course of business shall be placed periodically before the audit committee. II. Details of material individual transactions with related parties which are not in the normal course of business shall be placed before the audit committee. III. Details of material individual transactions with related parties or others, which are not on an arms length basis should be placed before the audit committee, together with Managements justification for the same

(B) Disclosure of Accounting Treatment To disclose in the financial statements, if an accounting treatment other than prescribed in Accounting Standard has been followed alongwith explanation. (C) Board Disclosures Risk management
Internal and external business risks Procedures to inform Board members about the risk assessment and minimization. Periodically reviewed

(D) Proceeds from public issues, rights issues, preferential issues etc. To disclose to the Audit Committee, on use/application of funds as and when any issue is made (E) Additional disclosures: In the Annual Report the criteria of making payments to NEDs to be disclosed or a reference to be made that the same is available on the companys website number of shares and convertible instruments held by NEDs. NEDs shall disclose their shareholding (both own or held by / for other persons on a beneficial basis) in the company in which they are proposed to be appointed as directors, prior to their appointment.

F) Management A Management Discussion and Analysis report to form part of the Annual Report. G) Shareholders Disclosures to shareholders in case of appointment /reappointment of directors, quarterly results and presentations made, shareholders grievance committee and share transfer committee, shareholding pattern-change