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CORPORATE GOVERNANCE

Prof . A. Mandal

Introducing Myself

Atanu Mandal
atanu.mail4phone@gmail.com atanu.mandal@indiraisbs.ac.in

+91 9028911588

Introduction & Interaction

Your Name

Your Company & Nature of job (if any)

Briefly say a few words that describes you

Your expectations from the course

Your concerns about the course

Your expectations from the teacher

Your concerns about the teacher

Let us Agree on Norms


Cell Phone Late Coming Someone Dominating the discussion Discussion that digress from the topic

Objective / Goal of the course The main objective of this course is to inculcate a visionary
and strategic thinking in the mindset of the MBA student. More specific objectives are as follows: To develop a cross-functional and holistic view of the business organization that is fully exposed to the vulnerabilities of the rapidly changing, hyper-competitive and increasingly unpredictable external environment. To understand the challenges of internal integration and external adoption. To develop the ability of analyzing varying business situations and finding the possible ways aimed at achieving the desired organizational goals.

Books

To be referred later

Grading Plan

As shared by the Institute

What is Corporate Governance?

Prof. A. Mandal

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 and is also beneficial for all stakeholders in the long term. Stakeholders in this case would include everyone ranging from the board of directors, management, shareholders to customers, employees and society. The management of the company hence assumes the role of a trustee for all the others.

What is a Company?
Company is a voluntary association of persons formed for the purpose of doing business, having a distinct name and limited liability. It is a juristic person having a separate legal entity distinct from the members who constitute it, capable of rights and duties of its own and endowed with the potential of perpetual succession. The Companies Act, 1956, states that 'company' includes company formed and registered under the Act or an existing company i.e. a company formed or registered under any of the previous company laws.

What is a Company?
However, company is not a citizen so as to claim fundamental rights granted to citizens.Company is a 'juristic person' and it can file a suit as an 'indigent person' An Expression 'person' includes not merely a natural person but also other juridical persons. A company being a juristic person would be represented before a Court of law or any other place by a person competent to represent it

What is a Company?
. It is enough that the person competent to represent a company presents the application on behalf of the company. Minors, lunatics or person under any disability are also entitled to file a suit either through guardian or the next friend. In such a case it is the guardian or next friend who is competent to represent the petitioner.Company is a separate legal entity. Company is separate legal entity distinct from its shareholders.

What is a Company?
The major constituents of a company are its members, who are the ultimate owners and its directors. It is an important feature of the company form of business, that there is a gap between the ownership and control over the affairs of the company. In real sense the members are the owners of a company, but it is being managed by the directors who are elected representatives of its members, because it is absolutely necessary for it to have a human agency called as the Company's board of directors. The Board of Directors comprises the directors.

Principles of Corporate Governance?


Corporate governance is based on principles such as conducting the business with all integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions, complying with all the laws of the land, accountability and responsibility towards the stakeholders and commitment to conducting business in an ethical manner. Another point which is highlighted in the SEBI report on corporate governance is the need for those in control to be able to distinguish between what are personal and corporate funds while managing a company.

Importance of Corporate Governance


Fundamentally, there is a level of confidence that is associated with a company that is known to have good corporate governance. The presence of an active group of independent directors on the board contributes a great deal towards ensuring confidence in the market. Corporate governance is known to be one of the criteria that foreign Unfortunately, corporate governance often institutional investors are increasingly depending on when deciding on which companies to invest in. becomes the centre of discussion only after the influence on the share price of the company. Having a clean image on the corporate governance front could also make it easier for companies to source capital at more reasonable costs. It is also known to large have a scam. positive exposure of a

Recently in the news for?

Satyam Scam

Corporate Governance
Contemporary corporate governance started in 1992 with the Cadbury report in the UK Cadbury was the result of several high profile company collapses is concerned primarily with protecting weak and widely dispersed shareholders against self-interested Directors and managers

Corporate Governance Parties


Shareholders those that own the company Directors Guardians of the Companys assets for the Shareholders Managers who use the Companys assets

Corporate Governance
Primarily concerned with public listed companies i.e. those listed on a Stock Exchange Focused on preventing corporate collapses such as Enron, Polly Peck and the Maxwell companies

Corporate Governance
What relevance does it have to India where along with public listed companies we have millions of privately owned companies? Most companies are non-listed, private family owned businesses where the shareholders and the managers are often the same people

ACCOUNTABILITY

FAIRNESS

COMPANY

TRANSPERANCY

PILLARS OF CORPORATE GOVERNANCE

INDEPENDENCE

Four Pillars of Corporate Governance


Accountability Fairness Transparency Independence

Accountability
Ensure that management is accountable to the Board Ensure that the Board is accountable to shareholders

Fairness
Protect Shareholders rights Treat all shareholders including minorities, equitably Provide effective redress for violations

Transparency
Ensure timely, accurate disclosure on all material matters, including the financial situation, performance, ownership and corporate governance

Independence
Procedures and structures are in place so as to minimise, or avoid completely conflicts of interest Independent Directors and Advisers i.e. free from the influence of others