Professional Documents
Culture Documents
Stakeholders
It can be seen as one that addresses the problems that result from the separation of ownership and control.
Shareholders
Board
Management
Employees
4.
5.
Corporate context
Aligned Incentives
High disclosure
Insider boards
Reliance on family, bank, public finance Under developed New issue market Limited takeover market
Corporate context
Corporate Misgovernance
Misgovernance in the US Misgovernance in India Scams in India
Winds of change
Prior to reforms in 1991, Indian companies were insulated by closed economy, a sheltered market, limited access to global business, lack of competitive spirit and regulatory framework all these changed on account of: Market-driven performs Economic liberalization Dismantling of control and quota regime Delicensing and deregulation of industries Changes in import/export policies Globalization of the economy within and outside the ambit of the WTO
All these had gone far beyond the original prescription of Milton Friedman that the companies should conduct the business purely in accordance with the desires of the shareholders
Michael Oxley
The Sarbanes Oxley Act was formulated to protect investors by improving the accuracy and reliability of corporate disclosures. The act contained a number of provisions that dramatically change the reporting and corporate directors governance obligations of public companies, the directors, and officers.
1. Appoint and remove CEO 2. Indirectly oversee the conduct of the business 3. Review and approve companys financial objectives, corporate plans and objectives 4. Advice and counsel top management 5. Identify and recommend candidates to shareholders for electing directors 6. Review systems to comply with laws and regulations
The board of directors of a company shall have an optimum combination of executive and non-executive directors with not less than 50 per cent of the board of directors to be non-executive directors. The number of independent directors would depend whether the chairman is executive or non-executive. In case of a non-executive chairman, at least one third of the board should comprise independent directors and in case of executive chairman, at least half of the board should be independent directors.
Board of Directors
Executive Directors
Non-Executive Directors
Independent Directors
Affiliated Directors
(Nominee Directors)
Types of Directors
Executive director an executive of the company and also a member of the board Non-Executive director no employment relationship Independent non-executive directors free from any business or other relationship which may interfere with the exercise of independent judgment Affiliated director who has some kind of independence, yet may have links with suppliers, customers, etc.
Arthur Andersen
Accountancy firm Arthur Andersen was declared guilty of obstructing justice by shredding documents relating to the failed energy giant Enron. The verdict could be the death knell for the 89-year old company, once one of the world's top five accountants.
Andersen has already lost much of its business, and two-thirds of its once 28,000 strong US workforce. Following the conviction, multi-million dollar lawsuits brought by Enron investors and shareholders demanding compensation are likely to follow, and could bankrupt the firm.
Satyam
Price Waterhouse resigned as statutory auditor of Satyam Computer Services Ltd with effect from February 12, 2009, while stating that it would co-operate with the ongoing investigations into the Rs 7,800 crore fraud at the IT major.