CORPORATE GOVERNANCE

MEANING
Corporate governance broadly refers to the mechanisms,
processes and relations by which corporations are controlled and
directed.
Governance structures and principles identify the distribution of
rights and responsibilities among different participants in the
corporation (such as the board of directors, managers,
shareholders, creditors, auditors, regulators, and other
stakeholders) and includes the rules and procedures for making
decisions in corporate affairs

INTRODUCTION
The last few years have seen some major scams and corporate
collapses across the globe.
In India, the major example is Satyam which is one of the largest
IT companies in India.
All these events have caused the pendulum of public faith to shift
away from free market to a more closely regulated one.
So before digging into the subject it is important to define the
concept of Corporate Governance.

THE NEED FOR CORPORATE

GOVERNANCE
Ethical conduct in business and builds confidence.
Improving the economic efficiency of a firm.
The failure to implement it can have a heavy cost beyond
regulatory problems.
Long-term value of the company for its shareholders .all other
partners
Openness, integrity and accountability.

 Actions benefit the greatest number of stakeholders.

Relationships: Companys management, its board, its
shareholders and other stakeholders.
Reputation and long-term performance of corporations.
Impact on the reputation and long-term performance of
corporations.

COMPONENTS
Audit Committees
Audit Reports and Audit Qualifications
Related Party Transactions
Risk Management
Independent Directors
Whistle Blower Policy
Analyst Reports

SEBI & CLAUSE 49

SEBI asked Indian firms above a certain size to implement Clause
49, a regulation that strengthens the role of independent directors
serving on corporate bonds.
On August 26,2003 , SEBI announced an amended Clause 49 of
the listing agreement which every public company listed on an
Indian stock exchange is required to sign. The amended clauses
come into immediate effect for companies seeking a new listing.

MAJOR CHANGES TO CLAUSE 49

I.

Independent Directors: 1/3 to depending whether the

chairman of the board of a non-executive or executive position.

II. Non- Executive Directors: The total term of office of nonexecutive directors is now limited to three terms of three years
each.
III. Board of Directors: The board is required to frame a code of
conduct for all board members and senior management and
each of them have to annually affirm compliance with the code.

IV. Audit Committee:

Meetings of the audit committee.
Powers of the committee.
Role of audit committee.

V. Whistleblower Policy: This policy has to be communicated to

all employees and whistleblowers should be protected from
unfair treatment and termination.
VI. Subsidiary Companies: At least one independent director on
the Board of Directors of the holding company shall be a director
on the Board of Directors of a material non listed Indian
subsidiary company.

VII.Disclosures:

Basis of related party transactions

Disclosure of Accounting Treatment
Remuneration of Directors
Management
Shareholders

VIII. CEO/CFO Certifications:

Reviewed the financial statement and directors report
Established and maintained internal control
Disclosed to the auditors and informed to the auditors and the committee of
any significant changes in internal control and/or of accounting policies
during the year.

CONCLUSION
As Indian companies compete globally for access to capital markets,
many are finding that the ability to benchmark against world class
organizations is essential.
For a long time, India was a managed, protected economy with the
corporate sector operating in an insular fashion.
But as restrictions have eased, Indian corporations are emerging on
the world stage and discovering that the old ways of doing business
are no longer sufficient in such fast paced global environment.

THANK YOU