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decade or two. In India, these issues have come to the force only in the last couple of years. For example,
the corporate governance code proposed by the Confederation of Indian Industry is modelled on the lines
of the Cadbury Committee (Cadbury, 1992) in the United Kingdom. On account of the interest generated
by Cadbury Committee Report, the Confederation of Indian Industry (CII), the Associated Chambers of
Commerce and Industry (ASSOCHAM) and, the Securities and Exchange Board of India (SEBI) constituted
Committees to recommend initiatives in Corporate Governance. The main objective of it was to develop
and promote a code for Corporate Governance to be adopted and followed by Indian companies, be these
in the Private Sector, the Public Sector, Banks or Financial Institution, all of which are corporate entities.
Corporate governance represents the value framework, the ethical framework and the moral framework
under which business decisions are taken. In other words, when investments take place across national
borders, the investors want to be sure that not only is their capital handled effectively and adds to the
creation of wealth, but the business decisions are also taken in a manner which is not illegal or involving
moral hazard.
In the Indian context, the need for corporate governance has been highlighted because of the scams
occurring frequently since the emergence of the concept of liberalization from 1991. We had the Harshad
Mehta Scam, Ketan Parikh Scam, UTI Scam, Vanishing Company Scam, Bhansali Scam and so on. In the
Indian corporate scene, there is a need to induct global standards so that at least while the scope for
scams may still exist, it can be at least reduced to the minimum.
Functions of NFCG
Creating awareness regarding benefits of implementation of good corporate governance practices.
Encouraging research capability in the area of corporate governance.
Providing key inputs for developing laws and regulations.
Laisioning with the various regulatory authorities for proper implementation and
enforcement of
Financial Institutions have also implemented new norms for appointment of nominee directors which have
drastically cut down the total number of such directors on companys board.
The primary purpose of corporate leadership is to create wealth legally and ethically.
This translates to bringing a high level of satisfaction to five constituencies -- customers, employees,
investors, vendors and the society-at-large.
Most important to every corporate body is to ensure predictability, sustainability and profitability of
revenues year after year.
- N R Narayana Murthy
History of Corp Gov in India
Unlike South-East and East Asia, the corporate governance initiative in India was not triggered by any
serious nationwide financial, banking and economic collapse
In December 1995, CII (Confederation of Indian Industry ) set up a task force to design a voluntary code
of corporate governance
In April 1998, the code was released. It was called Desirable Corporate Governance: A Code
Between 1998 and 2000, over 25 leading companies voluntarily followed the code: Bajaj Auto, Hindalco,
Infosys, Dr. Reddys Laboratories, Nicholas Piramal, Bharat Forge, BSES, HDFC, ICICI and many others
Following CIIs initiative, the Securities and Exchange Board of India (SEBI) set up a committee under
Kumar Mangalam Birla to design a mandatory-cum-recommendatory code for listed companies
Became mandatory for listed companies through the listing agreement, and implemented according to a
rollout plan
History of Corp Gov in India
Following CII and SEBI, the Department of Company Affairs (DCA) modified the Companies Act, 1956
to incorporate specific corporate governance provisions regarding independent directors and audit committees
In 2001-02, certain accounting standards were modified to further improve financial disclosures. These
were:
Consolidation of accounts
CORPORATE GOVERNANCE CONCEPT:
Corporate governance is not just corporate management ,it is something much broader to include
fair,efficient and transparent administration to meet certain well define objective.
It is a system by which companies are run. it relates to the set of incentives,safegaurds and the dispute
resolution process that are used to control & coordinate the action of the agents on behalf of the shareholder by
the board of director.
It is related to the code of conduct the management of the company observes while exercising its power.
The Cadbury committee (U.K) has defined corporate governance as
the system by which companies are directed and controlled
NEED AND SIGNIFICANCE OF CORPORATE GOVERNANCE
Social responsibility
Scams
globalization
Fundamental principles of corporate governance.
Transparency
Accountability
Independence
reporting
MAIN ISSUE IN CORPORATE GOVERNANCE.
ROLE OF BOARD OF DIRECTORS: the board of company is expected to perform the following
functions:
Establish achievable and measurable objectives and formulate plans for their achievement
Ensure that the company has adequate finance people,organisation supporting technology.
Appoint a management team and establish the framework of policies and values within which the
management operates.
Approve and review plans, and monitor performance and taking corrective action ,where appropriate.
Safeguard the physical, financial assets of the company and ensure ethical conduct.
Ensure renewal, learning and development of key competencies.
Report performance to various shareholders in the company.
Audit committee:
All public limited companies with a paid up capital of 5 crores and above must establish audit committee
consisting of independent non-executive directors. audit committee can improve the quality of financial reporting
by reviewing the financial statement ,creating a climate of discipline and control and reducing the opportunity of
fraud.