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CORPORATE Presented By:Shafin P (50) GOVERNANCE

What is Corporate Governance?

Corporate governance refers to the set of systems, principles and processes by which a company is governed They provide the guidelines as to how the company can be directed or controlled such that, it can fulfill its goals and objectives in a manner that adds to the value of the company & is also beneficial for all stakeholders in the long term Stakeholders in this case include everyone ranging from the board of directors, management, shareholders to customers, employees & society

Principles of Corporate Governance

Corporate governance is based on principles such as conducting the business with all integrity & fairness being transparent with regard to all transactions making all the necessary disclosures & decisions complying with all the laws of the land accountability and responsibility towards the stakeholders commitment to conducting business in an ethical manner

Need for Corporate Governance

Corporates are required to protect & enhance the wealth of the shareholders Companies are to be transformed as a responsible corporate citizen for this purpose Corporates should exhibit fairness & justice to employees, consumers & public in general Corporate should show accountability for performance in an ethical manner Companies should recognize the rights of shareholders & society

Role of Management for good CG

Board of Directors should recognize the significance of their role as developers & monitors of corporate behavior They should perform their duty to act as guardian of the corporate & its shareholders Managers must be accountable for their performance to the board & shareholders They must ensure that policies laid down by the board are implemented in the overall interest of the shareholders They should protect long term interest of the share holders by enhancing the value of the corporation

Importance of Corporate Governance

1. Changing Ownership Structure

In recent years, the ownership structure of companies has changed a lot Public financial institutions, mutual funds, etc are the single largest shareholder in most of the large companies They force the management to use corporate governance i.e. they put pressure on the management to become more efficient, transparent, accountable, etc They also ask the management to make consumer-friendly policies, to protect all social groups & to protect the environment So, the changing ownership structure has resulted in corporate governance

2. Importance of Social Responsibility

Nowadays social responsibility is given a lot of importance Board of Directors have to protect the rights of the customers, employees, shareholders, suppliers, local communities, etc This is possible only if they use corporate governance

3. Growing Number of Scams

In recent years, many scams, frauds & corrupt practices have taken place Misuse & misappropriation of public money are happening everyday in India & worldwide It is happening in the stock market, banks, financial institutions, companies & government offices In order to avoid these scams & financial irregularities, many companies have started corporate governance

4. Indifference on the part of Shareholders

Shareholders are inactive in the management of their companies in general Shareholders associations are not strong & therefore, directors misuse their power for their own benefits So, there is a need for corporate governance to protect all the stakeholders of the company

5. Globalization
Today big companies have to attract foreign investor & foreign customers for selling their goods in the global market They also have to follow foreign rules & regulations All this requires corporate governance Without corporate governance, it is impossible to enter, survive & succeed the global market

6. Takeovers and Mergers

There are many takeovers & mergers in the business world Corporate governance is required to protect the interest of all the parties during takeovers & mergers

7. SEBI
SEBI has made corporate governance compulsory for certain companies This is done to protect the interest of the investors & other stakeholders

Factors governing Corporate Governance

Important factors which influence corporate governance:1. Ownership structure of an organization 2. Financial Structure 3. Structure of the company boards 4. Environmental factors

1. Ownership structure of the organization

Management & control of an organization is mainly determined by its ownership structure Corporate governance of an organization varies with its ownership structure In India, corporate sector comprises 3 types: state enterprises private enterprises multinational organizations

2. Financial Structure
Financial structure of a company influences its corporate governance Financial structure is the proportion of debt to equity Lenders can make significant influence on the way through which an organization is managed & controlled

3. Structure of company boards

Structure of the company boards also influences its governance Board of directors (BoD) has the power to: decide the objectives of the company take decisions on policies of the organization selection of top executives to implement the policy decisions BoD also reviews the management performance always, to ensure that the company is performing well to protect the interest of the investors So the board has important place in the corporate governance

4. Environment
Environmental conditions like political & legal regulations have influence in the corporate governance Organizations perform within these environmental setup

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