CORPORATE GOVERNANCE VS VIDURA NEEDI

WHAT IS CORPORATE GOVERNANCE?

The Manner in which a Corporation is Run

Achieving its Objectives Transparency of its Operations Accountability & Reporting Good Corporate Citizenship

The Processes & Operating Relationships that Best Achieve Organisational Goals

CORPORATE GOVERNANCE
Corporate

governance is

a relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations concerned with identifying ways to ensure that strategic decisions are made effectively used in corporations to establish order between the firms owners and its top-level managers

GOVERNANCE MECHANISM
Insiders

The firms CEO and other top-level managers Affiliated Outsiders Individuals not involved with day-to-day operations, but who have a relationship with the company Independent Outsiders Individuals who are independent of the firms dayto-day operations and other relationships

THE CORPORATE GOVERNANCE SYSTEM

Shareholders (the General Meeting of Shareholders) Elect and Dismiss Represent and Report to Directors (the Supervisory Board) Guide and Oversee Report and Answer to

Managers (the Executive Bodies) Provide Capital Report Transparently

Source: IFC, March 2004

ROLE OF THE BOARD OF DIRECTORS

Monitor Are managers acting in shareholders best interests Evaluate & Influence examine proposals, decisions actions, provide feedback and offer direction Initiate & Determine delineate corporate mission, specify strategic options, make decisions

GOVERNANCE MECHANISMS

Firms face the risk of takeover when they are operated inefficiently Many firms begin to operate more efficiently as a result of the threat of takeover, even though the actual incidence of hostile takeovers is relatively small Changes in regulations have made hostile takeovers difficult Acts as an important source of discipline over managerial incompetence and waste

VIDURA NITI

Viduras teachings on right conduct extracted from Mahabharata Self-awareness and Self-control Lofty ideals Clarity of goals Industriousness Ethical conduct

Essential Qualities for Wise rulers

CHOOSING RIGHT PROJECTS AND JOBS-VIDURA NITI A WISE MAN SHOULD IDENTIFY TASKS WHICH
REQUIRE MINIMUM RESOURCES AND EFFORT AND WILL GIVE MAXIMUM BENEFITS AND SWIFTLY IMPLEMENT THEM.

PRINCIPLES OF OECD CODE ON CORPORATE GOVERNANCE -WISE MANS POSITIVE BEHAVIOR The corporate governance system should promote transparent and efficient markets; should be consistent with rule of law and should lay down clear roles of various regulatory and enforcement authorities. A wise man never wastes resources in futile nonvalue added activities Silence is preferred to indiscrete talking; Onlywhen absolutely necessary o a wise man talks and that too always truth.

PRINCIPLES OF OECD CODE ON CORPORATE GOVERNANCE -WISE MANS POSITIVE BEHAVIOR

The system should facilitate equitable treatment to all shareholders, including minority and foreign shareholder. Corporate governance should recognise the rights of stakeholders established by law or mutual contract; should encourage cooperation between the corporate and the stakeholders to create value Disclosure and transparency: System should ensure timely and accurate information about financial situation, performance, ownership and governance Board management structure

..will not long for opportunities beyond his means. Will be well-balanced in success and failures,

LEADERSHIP QUALITIES AND VIDURA NIDI

Corporate governance is essentially about leadership:

leadership for efficiency; leadership for probity; leadership with responsibility; and leadership which is transparent and which is accountable.
- PRINCIPLES FOR CORPORATE GOVERNANCE IN THE COMMONWEALTH

THE CORPORATE BOARD VS IMPORTANT DUTIES OF A KING

Central to Corporate Governance

Juxtaposed between Shareholders on the one hand, and on the other, Managers of the Entity (Cadbury)
Follows Distancing between Ownership and Control (Berle and Means) Trustee for All Shareholders

Loyalty & Commitment Always to Company

BOARD ROLE & RESPONSIBILITY-CORPORATE

GOVERENCE CONDUCT OF A WISE RULER HAPPINESS VIDURA NITI

(LEADER) FOR

Provide/

Exercise

Leadership and Strategic Guidance Objective Judgment Independent of Management Control over the Company Direct and Control the Management of the Company Be Accountable at all times to All Shareholders

SOME CLOSING THOUGHTS

Minimize Conflict of Interest Potential Respect Minority / External Shareholders Rights (Listed Public Sector Banks) Bank Boards to Go That Extra Mile: Go Beyond What is Prescribed to What is Appropriate That Way lies Greater Valuations & Better Reputations