CG World Wide

( Unit – I )

1 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 CG- Company & Country
 CG differs from organization to Organization & from Country to
country

 Governance differs in each Org. & shaped as per company’s

Objectives ( its Mission & Vision), & political , economic, legal &
social history of the country.

 Practices adopted Mind set & value system of Org.

2 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Need arises for Universally accepted code due to globalization

 CG plays role in Accounting Practices in any economy

 If greed & mal practices prevailed then country's reputation is on

risk

 E.g Enron & Satyam Computers,

Corporate scandals, like the alleged executive greed and accounting

improprieties at energy giant Enron, have thrust corporate governance
practices into the spotlight, illustrating the fundamental role they play in any
economy.

3 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 CG Models

 Does CG operate same way in all

economies?
 They differ as per capitalism & 2 models
are:
1. Anglo American Model
2. Non Anglo American Model

4 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Anglo American Model

 Globalization argues that C G. practices

across nations follow 2 models of A.A M
1. Anglo American Share Holder centered
Model ( Common in Anglo-American
countries, UK & US)
2. Anglo American Share holder & stake holder
Model. ( Found in East Asian Countries-
Japan, Germany)
5 MBA-II, CG prepared by Neeru R
aghav, Asst Prof, SDCMT
 Anglo American Share Holder centered
Model

 Focus on Share holder’s interest

 Strongly encourage Innovation & cost
competition
 Share holders elect BOD
 Org. runs by BOD
 BOD elects CEO
 CEO manages day today tasks & also seeks
approval from BOD for certain decisions.

6 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Management professor Guillen’s CG
 Under globalization, expansion across nations
require more coordination by govt. & different
system of CG exist.
 Globalization encourages:
Be different firm
Enter in international Market in distinct way
rather then to follow on a best model.

7 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Korean C G

 Korean company tried to be big Co. by

selling low cost cars & they were in standard
quality cars.
 Later Bank has influence over Co. (what is
happening in Co.)
 This relationship influences korean corporate
governance.

8 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 French CG

 French CG also exemplifies the effectiveness

of different strategies
 French design high speed trains & Nuclear
Reactors best in the world.
 They involve public agencies, banks, govt to
produce specific product & that is why they
are producing best product.

9 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 CG Affected

 Imp. Connection between CG & Strategies of

Firms
 CG is affected by many things in an
economy , such as Labour Laws, Tax Laws &
Bankruptcy legislation.

 Globalization is not changing CG system so

that all economies have same rule.
10 MBA-II, CG prepared by Neeru R
aghav, Asst Prof, SDCMT
 CG world Wide by Guillen
Six indicators which explain CG in individual country.

 Stock of foreign investment in their home country

 Presence of institutional investor in each country
 Adoption of long term incentive in CEO’s package
 Balance of dept & equity financing structure by non fin Co’s
 Promotion of listed corporate equity held by diff shareholders
 Hostile take over –( Market control by corporate)

11 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Anglo American Model Follows

 Focus on short term goal

 CEO is main authority
 Profitability is considered into account
 Capital market are quite active to take overs
& control
 There is poor management in company so
threats is also in air

12 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Non-Anglo American Model

 A system of family cross holdings.

 A study by Claessens, in 2000 investigation
to top 15 families dominate listed corporate
asset.
 Japanese’s style of CG is efficient in west.
They believe in Monitoring by shareholder &
Banks.

13 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Japanese Style of CG

 Long term goal

 Initiate capital market
 Less mergers& Acquit ion
 Monitoring system

14 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Codes & Guidelines

 C G principal & codes have been developed

by Stock Exchange.
 If countries deviate they need to explain the
concern of divergent practices

15 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 OECD Principles
 OECD principles have become influential in
1999.
 30 countries' govt. have approved revised
version of principles where recommendations
are:
1. Corporate Good Behavior to rebuild &
maintain trust in companies & stock Market
2. Strengthen transparency & disclosures to
counter conflicts of interest.
16 MBA-II, CG prepared by Neeru R
aghav, Asst Prof, SDCMT
 CG in India
 With a view to provide good governance to corporate
sector, some of the laws under legal regulatory
framework are:
 Company act 1965 deals with issues like,
Composition, appointment, removal of directors from
Board, Corporate Mergers, Acquisitions, etc.
 Securities Contract Act 1956 deals with issues
related to listing agreement of Stack exchange
 Companies Act deals with issues related to
promoting competition and controlling monopolistic
trade activities.

17 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 CG in India

 Foreign Exchange Mgmt act controls

activities related to foreign flow of funds.
 Board of Industrial & Financial reconstruction
that looks into revival of industries that have
falled sick
 SEBI deals with issues related to unfair trade
practices, insider trading, regulation of Stock
Market, etc.
18 MBA-II, CG prepared by Neeru R
aghav, Asst Prof, SDCMT
 CG in India

Initiatives take by Ministry of Corporate Affairs are:

 Setting up of investor Education & protection Fund;
 Empowering investors by education & information
with help of investors associations, webcites are:
www.investorhelpline.in, www.watchoutinvestor.com
 All listed companies has to follow SEBI rules & need
to produce reports time to time as required by SEBI.

19 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 WORLD COUNCIL
FOR CORPORATE
GOVERNANCE

The World Council for Corporate Governance was established
as an independent, not for profit international network aimed to
galvanize good governance practices worldwide.

 It was established at the first International Conference on

Corporate Governance held in January 200 1in New Delhi.

World Council for Corporate Governance was registered with

Companies House on 23 October 2002 as a company limited
by guarantee under registration no. 4570299

20 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Mission:

 Making a difference to national economies by improving quality

of their corporate governance

 "The foundation of any structure of corporate governance is

disclosure. Openness is the basis of public confidence in
the corporate system and funds will flow to the centers of
economic activity that inspire trust.

The mission of the World Council is to establish that trust and

with it the widest possible encouragement of enterprise."

Sir Adrian Cadbury 

21 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Vision
  
Vision of WCFCG is become a leading provider of knowledge
about best practices in corporate governance to company
boards, policy makers, investors, fund managers, financial
advisors, researchers, academics and other interested parties
by creating active partnerships and foster cooperative
relationships between organizations committed to improving
quality of corporate governance worldwide.

  

22 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 WORLD COUNCIL

 Objectives 
 The Council has been established to help improve
the quality of corporate governance practices
worldwide by promoting greater transparency,
integrity, probity, accountability and responsibility. It
aims to achieve its vision through a four-pronged
action plan called IDEA
Interaction
Broaden the interaction among all stakeholders
involved in corporate governance process;

23 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 WORLD COUNCIL
 Dialogue 
Identify specific needs of developing and transition economies and use
the power of dialogue to build a consensus and create partnerships
among all stakeholders especially public and private sectors and
capital providers with a view to adopting best corporate governance
practices;
 Exchange 
Exchange information, experience and knowledge about best practices
in corporate governance worldwide through conferences, seminars,
workshops and roundtables;
 Action 
Provide hands-on technical support to help developing and transition
economies to bridge the gap between them and developed countries

24 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Index of codes, India

 -Corporate Governance Voluntary Guidelines

2009 24 December 2009-
 Report of the Kumar Mangalam Birla Committee on
Corporate Governance February 2000-
 Draft Report of the Kumar Mangalam Committee on
Corporate Governance September 1999-
 Desirable Corporate Governance in India - A
Code April 1998

25 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Mexico


Código de Mejores Prácticas Corporativas
2010 2010-Código de Mejores Prácticas
Corporativas July 1999

26 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT
 Ghana


Corporate Governance Guideleines on Best
Practices 2010

27 MBA-II, CG prepared by Neeru R

aghav, Asst Prof, SDCMT