CORPORATE

GOVERNANCE
Intro & Definition
 Corporate governance may be defined as a
set of systems, processes and principles which
ensure that a company is governed in the
best interest of all stakeholders
 It is the system by which companies are
directed and controlled
 Good Corporate Governance is Good
Business
 It is about promoting corporate fairness ,
transparency and accountability
Issues in CG(Nov 16)
 Ethical Issues
 Efficiency Issues
 Accountability issues

 EthicalIssues: concerned with the

problem of fraud(Corporations resorting
to fraudulent means, Cartels-pressure on
govt., bribes, gifts to potential customers )
Objectives
 Adequate disclosure and effective
decision making to achieve corporate
objectives.
 Transparency in business transactions.
 Statutory and legal compliances.
 Protection of shareholders.
 Commitment to values and ethical
conduct of business.
 Efficiency
Issues: Concerned with
performance of management.
Management is responsible for ensuring
reasonable returns on investment made
by shareholders.

 Accountabilityissues: concerned with

stakeholders need on transparency .
Management activities influence workers,
customers & society at large.
Seven characteristics of CG
 DISCIPLINE(adhere to behavior that is
universally recognized and accepted to be
correct)
 TRANSPARENCY:(Not only audit data but also
general reports and press releases)
 INDEPENDENCE (avoid potential conflict ,
dominance from large shareholder composition of
board, external-auditors)
 ACCOUNTABILITY
 RESPONSIBILITY(towards all stakeholders)
 FAIRNESS
 SOCIAL RESPONSIBILITY
Principles of CG
 Rights and equitable treatment of
shareholders
 Role and responsibilities of the board
 Integrity and ethical behavior of the
board
 Disclosure and transparency
Needs/ Benefits of CG
 Goodwill of business(strong public image,
loyalty, attracts new investors)
 Prevention from legal action
 Strong team work and high productivity
 Build trust with key shareholders
 High profits
Global trends in CG
 Increase in board’s oversight rule(financial
reporting council-FRC-UK, financial reporting-US)
 The job of the boards and their members
becomes difficult( spend more time on board
work, improve skills, be updated)
 Need of companies for formal board
education programmes
 Role of independent directors and the need
to build board that deliver.
 Board room diversity and women on boards
 Board’s oversight of risk management
(sec 178, Companies Act 2013)
 Say on Pay
 Protection of whistle blowers (sec
177,Companies Act 2013)
 Cyber security is a significant and an
increasing concern for boards
 Social media governance
 Social and environmental policies
Insider Trading