1. What do you mean by Corporate Governance?

Highlight its Role in

Corporate Image Building?

Corporate governance is a set of mechanisms through which outside investors protect

themselves against expropriation by the insiders. They define “the insiders” as both
managers and controlling shareholders.
Or
Corporate governance refers to the manner in which the affairs of a corporate body
should be conducted in order to serve and protect the individual and collective interests
of all stakeholders.

Corporate image is mostly focused on marketing and includes factors such as brand and
the feeling associated with your customer experience. It is less about ideas and more
about visual and emotional appeal. In some cases, customers may be less influenced by
reputation factors such as financial stability than image factors such as a stylish design.
From certain studies the high level of awareness and responsibility in recognizing the role
of corporate governance and the significance of integration of corporate governance into
corporate strategy Companies do fully understand that better corporate governance is a
condition for corporate reputation development. Companies do completely understand
the nature and significance of corporate reputation and its key role in the achieving
sustainable competitive advantage. The role of corporate reputation should be of the
utmost importance in increasing the numbers of investors.
Though the majority of companies and consumers share the opinion that companies are
liable to disclose their internal corporate information to public, the discipline, Fairness &
transparency has strong governance control are recognized as significant factors in
corporate reputation.

There is a strong positive correlation between how people perceive the organization and
the pro-corporate supportive behavior. Corporate image is perceived as the mental
picture of the organization. It is the sum total of the perceived characteristics of the
organization. Every organization has its corporate image whether the organization does
anything about it or not. Corporate image is formed based on the stakeholders’
perceptions of specific actions of the organization as well as associated industry and
national issues. The corporate image of the organization to a large extent influences the
reactions of the stakeholders to the specific actions, services, and products of the
organization.
Corporate image is the net result of the interaction of all the experiences, beliefs, feelings,
knowledge and impressions that people have about the organization. It literally means
the level of reputation and an overall picture the organization has been able to create in
the eyes of public, competition, end customers and other subjects involved. It is the sum
of activities linked with the organizational culture, corporate identity and design,
delivered by the communications from the organization.
The image building and managing are linked to several main areas of image usage:
• Strategic positioning;
• Successful market penetration;
• Availability of different resources and cost reduction;
• focus on the behavior that increases motivation and productivity;
• Easier recruitment of employees;
• attracting creative employees;
• increasing the company value;
• Higher profits.
 2. Define the term Company. Discuss its various types and their salient
features?

A company, abbreviated co., is a legal entity made up of an association of people, be

they natural, legal, or a mixture of both, for carrying on a commercial or industrial
enterprise.

A company is a "corporation" - an artificial person created by law.

A human being is a "natural" person.
A company is a "legal" person.
A company thus has legal rights and obligations in the same way that a natural person
Does.

Characteristics of a Company
 Ownership in shares
 Freely transferable shares
 Separate entity apart from shareholders
 Liability of shareholders
 Indefinite life
 Board of directors
Types of companies
On the basis of incorporation:

 Chartered company
A chartered company is an association formed by investors or shareholders for the
purpose of trade, exploration, and foundation. A chartered company is a trading
corporation enjoying certain rights and privileges, and bound by certain obligations under
a special charter granted to it by the sovereign authority of the state, such charter
defining and limiting those rights, privileges and obligations, and the localities in which
they are to be exercised. Such companies existed in early times, but have undergone
changes and modifications in accordance with the developments which have taken place
in the economic history of the states where they have existed.
 Statutory company
A company created by the special act of the parliament is called statutory company. Its
objectives, powers and activities are defined by the act. Habib Bank, Agriculture
Development Bank, Industrial Development Corporation are some examples.
 Registered company
It is formed under company act of the country. The working of registered company is
governed by the provision of the company act. Cherat Cement Company, Nan Khatai
Biscuits Pvt Ltd is some of the examples.
ON THE BASIS OF LIABILITY:
 Unlimited company
It is a company in which the liability of the members is unlimited like that of partnership firm. If
the assets of the company are not sufficient for satisfying the claims of the creditors, the
shareholders are liable to pay more than the face or nominal value of shares held by them even
form their personal property.
Company limited by shares.
A company limited by shares is registered under the provisions of the Company act with a specific
amount of share capital divided into a definite number of shares. The liability of shareholders is
limited to the extent of face value of the shares they have paid for. This type of company is quite
common these days.
Company limited by guarantee:
The company, under which each shareholder promises to pay a specific sum as guarantee at the
time of winding up of company, is called company limited by guarantee. Such guarantee is
specified in the Memorandum of Association of the company. The amount of such guarantee
may differ from member to member.
ON THE BASIS OF OWNERSHIP
Government companies
A government company is a company in which no less than 51 % of the paid up share capital is
held by the government
Non-government companies:
A company which is not a government undertaking is called Non-government Company.
Generally, company owned, managed and controlled by the private sector come under this
category.
ON THE BASIS OF NUMBER OF MEMBERS
Private company
A private company is a company which, by its Memorandum of Association, limits the number of
its members not exceeding 50 and prohibits the sales of its shares to the general public. A private
company must use the words ‘private limited (Pvt. Ltd.) in its name.
Privileges of private company
 Established by single person
 Does not need to publish prospectus at the time of issue of its shares
 It can refuse transfer of shares form one member to another.
 It is not necessary for such a company to obtain the certificate of commencement of business
before starting its business activities
 It is not necessary to held statutory meeting.
Public company
A public company is a company which, by its Memorandum of Association, limits the number of
its members not to be at least 7 and to open the boundary of having the maximum number of
shareholders to the fullest. It doesn’t prohibit the sales of its shares to the general public but
rather it allows collecting major capital by offering shares to the public. The public company is
governed by the authorized capital with which is registered. The shares are transferable. A public
company must use the word ‘limited (Ltd.) in its name.
Privileges of public company
 Established by at least 7 promoters
 Needs to publish prospectus at the time of issue of its shares
 It cannot refuse transfer of shares form one member to another.
 It is necessary for such a company to obtain the certificate of commencement of business
before starting its business activities
 It is necessary to held statutory meeting.
 3. Discuss the Board of Directors as the Governing Body of Corporations
A board of directors is a team of people elected by a corporation's shareholders to represent the
shareholders' interests and ensure that the company's management acts on their behalf. The
head of the board of directors is the chairman or chairperson of the board. The board of directors
for a corporation is responsible for steering the corporation through the rough waters of its
mission to the shareholders. A corporate board also has legal duties and other duties.
A board of directors is a group of individuals that are elected as, or elected to act as,
representatives of the stockholders to establish corporate management related policies
and to make decisions on major company issues.

Key Roles of BODs

The role of the Board in creating an environment where a corporation can succeed is the
key to future success of the business. The board should work to ensure that it builds a
united, cohesive and coordinated team working towards the main goal of attaining
desired corporate performance. Directors have a duty to look after the company and its
business in a proper manner. There is need for greater control over corporate entities due
to the increasing concern about corporate failures and the need for better monitoring.
The key roles of BODs in corporate governance are as follows:
a) Establish vision, mission and values
 Determine the company's vision and mission to guide and set the pace for its current
operations and future development.
 Determine the values to be promoted throughout the company.
 Determine and review company goals.
 Determine company policies
b) Set strategy and structure
 Review and evaluate present and future opportunities, threats and risks in the
external environment and current and future strengths, weaknesses and risks relating
to the company.
 Determine strategic options, select those to be pursued, and decide the means to
implement and support them.
 Determine the business strategies and plans that underpin the corporate strategy.
 Ensure that the company's organizational structure and capability are appropriate for
implementing the chosen strategies.
c) Delegate to management

Delegate authority to management, and monitor and evaluate the implementation of

policies, strategies and business plans.
 Determine monitoring criteria to be used by the board.
 Ensure that internal controls are effective.
 Communicate with senior management.
d) Exercise accountability to shareholders and be responsible to relevant stakeholders
 Ensure that communications both to and from shareholders and relevant
stakeholders are effective.
 Understand and take into account the interests of shareholders and relevant
stakeholders.
 Monitor relations with shareholders and relevant stakeholders by gathering and
evaluation of appropriate information.
 Promote the goodwill and support of shareholders and relevant stakeholders.
e) Other roles
 Selecting, compensating, monitoring and, when necessary, replacing key executives
and overseeing succession planning.
 Aligning key executive and board remuneration with the longer term interests of the
company and its shareholders.
 Ensuring a formal and transparent board nomination and election process.
 Monitoring and managing potential conflicts of interest of management, board
Members and shareholders, including misuse of corporate assets and abuse in
related party transactions.
 Overseeing the process of disclosure and communications.
 Monitoring the effectiveness of the company’s governance practices and making
changes as needed.
 4. Keeping in view Governance of Corporation. Highlight Corporate
Social Responsibilities?
Corporate governance has gained a much higher profile in the last two decades in the
wake of various corporate scandals and collapses. Corporate social responsibility (CSR) is
now becoming much more a part of mainstream corporate governance as there is a
recognition that a company cannot – in the long-term – operate in isolation from the
wider society in which it operates. This view is encapsulated by Sir Adrian Cadbury: ‘The
broadest way of defining social responsibility is to say that the continued existence of
companies is based on an implied agreement between business and society’ and that ‘the
essence of the contract between society and business is that companies shall not pursue
their immediate profit objectives at the expense of the longer-term interests of the
community’

Corporate governance is a function of leadership, internal operations, organizational

principles, and relationships with employees and other stakeholders, all of which must
evolve in response to external forces that include shifting macroeconomic conditions. Like
most aspects of business, effective governance can only be achieved through a
continuous process of innovation, realignment, and refinement. Cisco has always aimed
to align our operations and resources so we can respond quickly to changing market
conditions, drive customer success, and seize emerging opportunities. Most recently, that
has involved taking a leadership role in the industry by moving from a centralized
command-and-control governance model to a more collaborative model based on a
culture of shared goals, a structured planning process, and cross-functional councils,
boards, and workgroups.
Corporate Governance is ensuring that an organization is run in a responsible manner by
ensuring accountability, transparency and compliance with due regard to its key
stakeholders. It is the whole set of legal, cultural, and institutional arrangements that
determine what publicly traded corporations can do, who controls them, how that control
is exercised, and how the risks and returns from the activities they undertake are
allocated (Margaret Blair, 1995)
Corporate Social Responsibility (CSR) is corporate form of self-regulation integrated into
the business model to create a positive impact on the stakeholders and the environment.
CSR is a concept whereby companies integrate social and environmental concerns in their
business operations and in their interactions with their stakeholders on a voluntary basis
(European Commission, 2001).
A traditional view suggested a contradiction between CSR and Corporate Governance.
Corporate Governance was related to profit maximization and provided protection to
shareholders who have provided capital to firm, while CSR apparently was against profit
maximization because it suggested a set of actions beneficial for external stakeholders
that may not be good for a shareholder. But not anymore. Corporate Governance is an
umbrella term and CSR is gradually getting fused into the company’s corporate
governance practices. Their relationship can be interpreted by abandoning the standard
view of the firm as a shareholder value maximizer and embracing the view of a firm as a
stakeholder value maximizer. This convergence paves the way for Corporate Governance
to be driven by ethical norms and the need for accountability, and it enables CSR to adapt
prevailing business practices. Today both Corporate Governance and CSR focus on ethical
practices in business and the responsiveness of an organization to its stakeholders and
the environment in which it operates.
 5. Comprehensively discuss external influences on Corporate
Governance?

External Forces:

Political: External political forces are the primary factor in determining the corporate
governess model used by a firm. Corporate governance defines the ways in which a
company safeguards the interests of its financiers (investors, lenders, and creditors)
which has a big impact on reputation.
The problem with this argument relates to the nature of business in question: the public
sector should see the political aspect as a major factor as decisions will have a direct
impact to that area. Small privately owned firms may have no political forces that directly
impact on their reputation, although political policies may play a big part in their
profitability. These small privately owned companies should still see the political arena as
an important factor: policy changes can quickly alter a business reputation, particularly
when related to the environment. The stability of the political system is also an important
factor.
Economic: There are now many messages around the issues of corporate social
responsibility and the effect of the economy on social values. In a period when many
manufacturing jobs have moved to the Far East the ability to secure employment for a
local community will have a major impact on CR.?
These external economic drivers can also shape the perception of a whole industry. Two
examples are the financial sector and university education. Regardless of which institution
is reviewed, the general public will already have a fixed perception of that market.
Pharmaceutical companies will need to take into consideration the current economic
down turn and the pressure on the health sector when reporting profits.
Social: at the most basic level, public interests are linked to a working democracy. There
is a growth in interest groups that have generated a ground swell of public pressure that
influence a number of topics. There is a need for the media to promote diversity; this is
where Corporations can begin to endorse their own messages.
Technology: there are two drivers related to technology, the first is that which relates to
a company’s product and/or service technologies, the second is the new mode of
information carriers. A review of the global rankings for corporate reputation has
highlighted that the technology companies have the highest positive ranking. The
perception of “coolness” of their products and services is the main driver for these
rankings.
The impact of social media is the other aspect of technology which is driving the increasing
transparency of corporations. Dell, to their detriment, have experienced the full force of
such technologies.
Legal: Companies that ignore the changes in legislation relating to the environment risk
damaging their reputation and losing business. There are many other legislative drivers
that could potentially tarnish the image of a company: pharmaceutical companies must
continue to focus on those related to the health sector.
Environmental: As with technology, there are two drivers within the environmental field.
The first is the physical environment a company operates in and the second is the
environmental issues that are now widely discussed. The physical location and fabric of
the offices will play an important part to the perception of a company’s reputation. As an
example, fashion companies need to have a presence in London, New York, Paris and
Milan. In terms of the fabric, it is well documented about Google’s offices.
Monetary Policies: The political environment, by influencing fiscal and monetary policies
has a substantial impact on corporate governance practices.
Government influence: The government interferes with the work of regulatory and
supervisory bodies with regard to appointments or incentives for company executive
within firms
Politician influences
Politician exert undue influence over the ministries and agencies responsible for
monitoring and enforcement of corporate governance guidelines and regulation within
firms
Total ownership structure: This is proxy as the variable for ownership structure effects
upon corporate governance; it is the addition of all the statement
Regulatory authorities: Level of corruption influence the ability of the regulatory
authorities to enforce compliance within corporate governance principles an d accountability
within firms
8. Write Short Notes on the Following

a. Audit Committee
An audit committee is the section of an organization’s board of directors that is in charge
of monitoring an organization’s financial reporting and authenticating its accuracy. An
audit committee is a selected number of members of a company’s board of directors
whose responsibilities include helping auditors remain independent of management.
 Most audit committees are made up of three to five or sometimes as many as seven
directors who are not a part of company management. The committee is not involved
in the nonprofit’s daily accounting functions, but instead oversees the independent
audit process which often entails hiring and evaluating the independent auditor(s).
Where applicable, the audit committee may also be the body that is accountable to
make sure that revisions or recommendations made by the auditor, such as about the
organization’s internal controls, are indeed implemented. -
 Typically major responsibilities of audit committee are

 Overseeing the financial reporting and disclosure process
 Monitoring choice of accounting policies and principles,
 Oversight of regulatory compliance,
 Ethics, and whistleblower hotlines, and practices with management.
 Monitoring financial reporting
 Monitoring internal control, internal audit, and risk management system effectiveness
 Overseeing the statutory audit
 Reviewing and monitoring auditor independence and the provision of additional
services to the audited entity
 Auditor appointment
 Taking action, where appropriate, on significant control weaknesses reported by
internal audit, the external auditors, and others.
 Approving an annual plan and budget submitted by the external auditor.
 Approving annual audit plans to be submitted by the outside auditor as well as by
internal audit.
b. Corporate Stakeholders

A person, group or organization that has interest or concern in an organization.

Stakeholders can affect or be affected by the organization's actions, objectives and
policies. Some examples of key stakeholders are creditors, directors, employees,
government (and its agencies), owners (shareholders), suppliers, unions, and the
community from which the business draws its resources. Not all stakeholders are equal.
A company's customers are entitled to fair trading practices but they are not entitled to
the same consideration as the company's employees. The stakeholders in a corporation
are the individuals and constituencies that contribute, either voluntarily or involuntarily,
to its wealth-creating capacity and activities, and that are therefore its potential
beneficiaries and/or risk bearers.

A stakeholder is any person, organization, social group, or society at large that has a stake
in the business. Thus, stakeholders can be internal or external to the business. A stake is
a vital interest in the business or its activities. It can include ownership and property
interests, legal interests and obligations, and moral rights. A legal obligation may be the
duty to pay wages or to honor contacts. A moral right may include the right of a consumer
not to be intentionally harmed by business activities. Stakeholders can:

 Affect a business
 Be affected by a business
 Be both affected by a business and affect a business
 A corporate stakeholder is a person or group who can affect or be affected by the
actions of a business.
 Internal stakeholders are entities within a business (e.g., employees, managers,
the board of directors, investors).
 External stakeholders are entities not within a business itself but who care about
or are affected by its performance (e.g., consumers, regulators, investors,
suppliers).
Internal stakeholders are entities within a business (e.g., employees, managers, the board
of directors, investors). Employees want to earn money and stay employed. Owners are
interested in maximizing the profit the business makes. Investors are concerned
about earning income from their investment.

External stakeholders are entities not within a business itself but who care about or are
affected by its performance (e.g., consumers, regulators, investors, suppliers). The
government wants the business to pay taxes, employ more people, follow laws, and
truthfully report its financial conditions. Customers want the business to provide high-
quality goods or services at low cost. Suppliers want the business to continue to purchase
from them. Creditors want to be repaid on time and in full. The community wants the
business to contribute positively to its local environment and population.