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BUSINESS EHICS

UNIT - V
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CORPORATE GOVERNANCE
Corporate governance refers to the set of systems, principles and processes by which a
company is governed. It provides 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 and is also beneficial for all stakeholders in the long term. Milton Friedman
defines corporate governance as the the conduct of business in accordance with
shareholders desires which generally is to make as much money as possible while
confirming to the basic rules of society embodied in law & local customers.

Principles of Corporate Governance
Rights & equitable treatment of shareholders
Interests of other stakeholders
Role & responsibilities of the board
Integrity & ethical behaviour
Disclosure & transparency


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Model of CG
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Anglo Americans German Japanese
Shareholders Shareholders & Employees/unions Shareholders & banks
Elects Elects Elects
Board of Directors Supervisory Board Supervisory Board appoints
President & President
Appoints Appoints Appoints
Officers/Executive Management Board Executive Board
Manage Manage Manage
Company Company Company

Indian Model = Anglo American Model + German Model
Board of Directors/Board &Corporate Board

Board of Directors/ Corporate Board
They are the elected representatives of shareholders. Members in the Board is elected in the
Annual General Meeting. The Board is the supreme authority that is entitled to exercise all the
powers except those powers which are exercised exclusively by the shareholders in their
meetings. The success of the company depends upon on the efficient functioning of its Board
Attributes of the Board of Directors
Board of directors provides guidance & advice to a business or organisation. The directors work
together to define a companys mission, review its financials & promote it to the community.
Board directors who have business insight, good contacts & a strong set values will shape an
organisation for success. The following are the attributes Board of Directors :-
Expertise , Integrity, Enthusiastic, Compatibility, Availability, Diversity, Passion, Networking &
Can Do Attitude

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Role of Board
The role of Board of Directors is as follows :-
Defining Business
Planning Operations
Appointing Officers of the Company
Convening the meetings of the Company
Representing the Company
Performing Checks & Controls
Legal & Regulatory Compliances

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Specific Duties & Responsibilities of Board
Attend monthly board & committee meetings, the annual general body meeting
Reconvene the monthly meeting at a later date if quorum of board is not present
Provide input & participate in the decisions of the board
Read & evaluate monthly financial reports & other board materials before the meeting
Act on all membership applications either directly or through the appointment of
membership officer
Approve the credit policy, financial statement, the annual budget & the business plan
Work with management to develop short range & long range planning based on objectives
Perform an annual written appraisal of the manager based on goals established in the
budget & business plan
Determine the minimum ownership share requirement & the maximum amount of shares that
may be owned by one member provided that no member shall hold more than 10% of the
total share amount.




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Directorial Competences
Directors should understand the role & functions of the board, their legal duties & responsibilities &
the essence & distinctive nature of direction. Awareness & personal qualities such integrity as key
attributes of competent director.
Board Effectiveness
Directorial Competencies lead to Board effectiveness & Board competency. To assess the board
effectiveness the following aspects are studied
Compliance (conformity)
Strategy
Policy Making
Monitoring Performance
Stakeholder Management
Board Relations & Composition
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Rules for Protecting Investors
Right to receive dividend on pro rata basis
To participate in the shareholders meetings
To vote in meetings for directors
To sue directors for suspected wrong doings
To call extra ordinary shareholders meetings

Corporate Disclosure Policy
This code has been framed in pursuance to the regulation contained in clause 12(2) of Chapter
IV of SEBI (Prohibition of Insider Trading) regulation, 1992 inserted by the SEBI (Insider Trading )
(Amendment) Regulation, 2002 & the purpose of this code is to ensure timely & adequate
disclosure of price sensitive information.

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Board Committees or Subcommittees consisting of the members of the Board of Directors are
mandated to carry out specified functions. It is formed with the recommendation of the Board.
Classification of Board Committee
Standing Committees - Standing Committee are developed for ensuring effective board
processes, structures & roles, including committee development, board evaluation
Ad hoc Committees - Ad hoc Committees are formed for a specific task
Task Force Committees A task force is usually organized to deal with a specialized &
specified task, needed to complete within the given time.
Advisory Committees It is composed of specialized resource persons to act as advisors to
the board of directors in strategic decision making process.
Corporate Board Committee
Globalization & Corporate Governance
Globalization refers to all those processes by which the people of the world are incorporated into a
single world society, global society (AL brow 1990). It is the intensification of world wide social
relations which link distant localities.
Influence of Globalization on Corporate Governance
Wide spread agreement on core principles of independence, fairness, transparency &
accountability
Corporate reporting using international standards
Corporate Governance Code best practice governance standard
Organisation for Economic Co Operation & Development
I. Ensuring the Basis for an Effective Corporate Governance Framework
II. The Rights of Shareholders & Key Ownership Functions
III. The Equitable Treatment of Shareholders
IV. The Role of stakeholders in Corporate Governance
V. Disclosure & Transparency
VI. The Responsibilities of the Board

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