1.

Answer

GOVERNANCE THEORIES

Corporate governance is often analyzed around major theoretical frameworks. The most common are
agency theories, stewardship theories, resource-dependence theories, and stakeholder theories.

Agency Theories

Agency theories arise from the distinction between the owners (shareholders) of a company or an
organization designated as "the principals" and the executives hired to manage the organization called
"the agent." Agency theory argues that the goal of the agent is different from that of the principals, and
they are conflicting (Johnson, Daily, & Ellstrand, 1996). The assumption is that the principals suffer an
agency loss, which is a lesser return on investment because they do not directly manage the company.
Part of the return that they could have had if they were managing the company directly goes to the
agent. Consequently, agency theories suggest financial rewards that can help incentivize executives to
maximize the profit of owners (Eisenhardt, 1989). Further, a board developed from the perspective of
the agency theory tends to exercise strict control, supervision, and monitoring of the performance of
the agent in order to protect the interests of the principals (Hillman & Dalziel, 2003). In other words, the
board is actively involved in most of the managerial decisionmaking processes, and is accountable to the
shareholders. A nonprofit board that operates through the lens of agency theories will show a hands-on
management approach on behalf of the stakeholders.

Stewardship Theories

Stewardship theories argue that the managers or executives of a company are stewards of the owners,
and both groups share common goals (Davis, Schoorman, & Donaldson, 1997). Therefore, the board
should not be too controlling, as agency theories would suggest. The board should play a supportive role
by empowering executives and, in turn, increase the potential for higher performance (Hendry, 2002;
Shen, 2003). Stewardship theories argue for relationships between board and executives that involve
training, mentoring, and shared decision making (Shen, 2003; Sundaramurthy & Lewis, 2003).

Resource-Dependence Theories

Resource-dependence theories argue that a board exists as a provider of resources to executives in

order to help them achieve organizational goals (Hillman, Cannella, & Paetzold, 2000; Hillman & Daziel,
2003). Resource-dependence theories recommend interventions by the board while advocating for
strong financial, human, and intangible supports to the executives. For example, board members who
are professionals can use their expertise to train and mentor executives in a way that improves
organizational performance. Board members can also tap into their networks of support to attract
resources to the organization. Resource-dependence theories recommend that most of the decisions be
made by executives with some approval of the board.

Stakeholder Theories
Stakeholder theories are based on the assumption that shareholders are not the only group with a stake
in a company or a corporation. Stakeholder theories argue that clients or customers, suppliers, and the
surrounding communities also have a stake in a corporation. They can be affected by the success or
failure of a company. Therefore, managers have special obligations to ensure that all stakeholders (not
just the shareholders) receive a fair return from their stake in the company (Donaldson & Preston,
1995). Stakeholder theories advocate for some form of corporate social responsibility, which is a duty to
operate in ethical ways, even if that means a reduction of long-term profit for a company (Jones,
Freeman, & Wicks, 2002). In that context, the board has a responsibility to be the guardian of the
interests of all stakeholders by ensuring that corporate or organizational practices take into account the
principles of sustainability for surrounding communities.

2 Answer

Typically, an Indian company raises funding by issuing equity instruments, debt instruments and through
mezzanine financing. The main types of shares which are issued are equity shares and preference
shares. Both types of shares grant participating rights to their holders.

The key aspects of these instruments are as follows:

 Equity shares grant voting rights to the holder.

 Equity shares do not guarantee a fixed return and, in a liquidation scenario, equity shareholders
are entitled to a return after all statutory and other pay-outs are made.

 Preference shareholders are given a preference with respect to payment of dividend and
repayment in case of liquidation of the company and enjoy limited voting rights.

 Preference shareholders can vote only on such matters which affect their rights, and in
resolutions for winding-up of the company or for repayment or reduction of its equity or
preference share capital.

 Preference shares may be fully or partly convertible into equity shares, or have a right to a
cumulative dividend. The terms of issue of preference shares and rights of the preference
shareholders are generally negotiated before their issue.

Debentures, which are debt instruments, and other securities such as stocks, bonds, warrants, derivative
instruments, and so on, are also issued by a company, however, these do not carry participative rights in
the company.

Convertible instruments like convertible debentures and convertible preference shares are also issued
by Indian companies. These instruments are converted into equity shares of the company at a pre-
agreed duration
3 Answer

4. Answer

The Principal-Agent Relationship

A principal-agent relationship is an arrangement between two or more individuals. Specifically, the

agent of the relationship performs a task on behalf of the principal. This is often due to different degrees
of knowledge and skills. For example, if you hire out a contractor to fix your roof, you are the principal
while the roofer is the agent. You do not have the skills to carry out roof repair, so you hire someone
who has. Other examples may include hiring a lawyer, consulting a doctor or following the advice of a
bank manager. Central to the principal-agent relationship is the concept of trust. By hiring a contractor
to fix your roof, you trust that he will provide the best service in his capacity. The roofer, on the other
hand, is confident that you will pay him once the job is complete.

Introducing Utility

In economics, utility is the satisfaction individuals receive from consuming goods and services. Everyone
experiences some level of utility from consuming a certain good, and the difference between people's
utility is a result of different preferences. While economists measure utility, it is difficult assigning a
value as preferences are qualitative, not quantitative. In other words, there is no "ruler" for measuring
utility. With regard to the principal-agent relationship, utilities come in the form of incentives. The
roofer has an incentive to fix your roof because he knows that you will pay him. On the flip side, you
have an incentive to pay the roofer because you are confident that he will fix your roof.

The Principal-Agent Problem

The principal-agent problem arises when the incentives of the principal and agent conflict. Both the
principal and agent strive to maximize their utility, but by doing so, either the principal or the agent
becomes worse off as a result. Let's say that you pay your roofer by the hour. By doing so, the roofer
realizes that, by taking as much time as possible, he could reap a higher reward in the form of money.
You are powerless to prevent this, as you know little about repairing a roof. Hence the problem.
Although the roofer has fixed your roof, you end up paying more than necessary.

Eliminating the Problem

Turning back to the example of the roofer, let's say that you change an element to the roofing contract.
Instead of paying the roofer by the hour, you pay him by the project, a set fee. This way, you have
eliminated the roofers incentive to extend the project as long as possible. Eliminating the principal-
agent problem comes down to finding the conflict of incentives. If you eliminate the conflict, you
eliminate the problem.
5 Answer

When an employer hires a new employee, he is not just bringing a new member of the workforce
aboard, he is also starting a new relationship. Because employers and employees often work in close
quarters, they necessarily develop relationships. Managing these relationships is vital to business
success, as strong relationships can lead to greater employee happiness and even increased
productivity. To reap these benefits, keep the dynamics of your employer-employee relationship in
mind.

Relationship Basics

Generally, employer and employee relationships should be mutually respectful. The degree of closeness
in these relationships will depend on both the employer and the employee. Some employers opt to keep
their employees at a distance and, in doing so, ensure that there is no confusion as to the hierarchy that
exists between them. Others elect to become friendlier with their employees, seeing this as a way to
amp up employee happiness. While neither option is entirely right or wrong, it is wise to avoid getting
too close to employees, as doing so can cause the line between employer and employee to become
blurred.

Mutual Reliance

The employer-employee relationship should be one of mutual reliance. The employer is relying upon the
employee to perform her job and, in doing so, keep the business running smoothly. Conversely, the
employee is relying upon the employer to pay her and enable her to support herself, and potentially her
family, financially.

Relationship Building

Just as with all relationships, the employer and employee relationship is one that must develop over
time. Employers can promote the building of relationships by speaking candidly with their employees
about their lives, asking them about their families and learning about their interests. Similarly,
employees can promote the building of this relationship by being open with their employer and sharing
information about themselves and their lives.

Boundaries

Though the type of employee and employer relationship that is considered appropriate varies from
company to company, boundaries exist at almost all companies. Generally, it is unwise for employers to
develop romantic relationships with their employees. Similarly, employers should exercise care to
ensure that the relationship they develop with one employee isn't notably closer than the relationships
they develop with others, as this can lead to concerns regarding favoritism or similar issues of unfairness
within the workplace.
6 Answer

A performance measurement process involves the design and implementation of an information

feedback system by which management identifies and then monitors its key performance indicators
(KPIs). These KPIs give a business owner the ability to measure and, as a result, better manage those
activities, behaviors and processes that drive organizational success, sustainability and profit. In a typical
performance measurement application, the selected KPIs are incorporated into a balance scorecard
framework that allows for the evaluation of business performance in light of strategic goals and
objectives across several performance areas such as finances, customer services, internal operations and
learning and growth.

Not-for-profit organizations labor under similar kinds of competitive pressures as for-profit businesses,
as well as having to deal with a host of other economic, societal, and regulatory conditions and
restrictions which are unique to the not-for-profit sector and are the context in which they must
evaluate their services and operations. For most organizations, their mission statement generally
defines their primary goals and objectives. Consequently, many of the key success factors and the more
specific performance indicators that they will need to monitor will be determined, in large part, by the
specific goals and objectives, which are contained in, or are implicit in, that mission statement and by
the various program activities by which the organization hopes to realize those goals and objectives.

The performance areas of finance and internal operations may still be key, and management will need
to track appropriate measures in order to evaluate how well the organization is using its financial
resources, delivering its services and managing its relationships with employees, volunteers and other
stakeholders. However, if the organization is to evaluate how well it is doing in achieving its mission-
driven goals, it will also need to devise ways to measure the overall effectiveness of its programs and
services. A good performance measure system would need to address whether these programs and
services are having the impact that its mission statement promises.

Performance indicators that not-for-profits will use to measure service effectiveness and
accomplishments will typically fall into one of four categories: 1) Input measures which quantify the
efforts or resources expended in an activity or program, 2) output measures which quantify the volume
or level of services provided or delivered, 3) outcome measures which quantify the actual effect an
organization’s efforts have on its objectives and 4) efficiency measures which compare the amount of
inputs with output or outcome quantifiers.

Management of not-for profit organizations are generally most familiar with the first two types of
measures. They may already keep track, using their accounting and information systems of the financial
and nonfinancial resources used in operating a program or providing a specific service. If volunteerism is
an important element in their program activities, their records may also capture the statistics on
donated hours and efforts. Many organizations are in the habit of tracking output measures, as well,
that is, the number of meals provided, people housed, patients served, etc.

Outcome measures present special problems. These measures should gauge how effective an
organization is in accomplishing its mission-based goals. For instance, an adult reading program would
want to gauge its impact on adult literacy rates in its local area; a program dedicated to providing health
services to children might track statistics on childhood disease. Whereas input and output measures can
be based on objective data that can be extracted from an organization’s existing accounting and
information system with relative ease, outcome measures may involve a high degree of subjective
evaluation, may require working with data that is not that readily quantifiable, may need to be obtained
from an outside source or may require a special system for tracking.

Efficiency measures which relate inputs to output or outcome measures are particularly useful in
enabling management to evaluate how efficient and cost-effective it has been in managing its assets and
resources, as well as giving them a common standard of measurement by which they can compare their
organizations to others with similar programs. Determining what the average cost, in terms of dollars
and time required, to assist an adult in achieving a pre-determined level of reading proficiency, for
instance, might be a useful efficiency measurement for our hypothetical adult reading program. In the
same manner, determining the cost of fundraising activities for every $100 raised is an easily obtainable
measure that gives organization management a sense of whether its fundraising efforts and activities
are effectively managed. Fundraising cost per $100 is also a commonly recognized ratio that many not –
for-profit watchdog agencies like the American Institute of Philanthropy use as a comparative
benchmark in evaluating and grading charities and other not-for-profits.

Performance measures therefore may be as various as the types of organizations that employ them.
However, good performance measures should share the following common characteristics. They should
be:

 Meaningful in relation to the organization’s goals

 Responsibility linked

 Organizationally acceptable

 Balanced

 Timely

 Credible

 Cost effective to compile and track

 Comparable (i.e., making the organization’s performance comparable with other organizations
or with recognized industry benchmarks)

 Simple (the simpler and the more immediately understood, the better)

Moreover, the identified measures or indicators should be incorporated into an overall performance
measurement system, one that covers all the key performance areas of the organizations and one that
allows for periodic monitoring, reporting and reevaluation.
7. answer

8. Answer

Corporate social responsibility (CSR, also called corporate conscience, corporate

citizenship or responsible business)[1] is a form of corporate self-regulation integrated into a business
model. CSR policy functions as a self-regulatory mechanism whereby a business monitors and ensures its
active compliance with the spirit of the law, ethical standards and national or international norms.[2]

With some models, a firm's implementation of CSR goes beyond compliance and statutory
requirements, which engages in "actions that appear to further some social good, beyond the interests
of the firm and that which is required by law".[3][4] The binary choice between 'complying' with the law
and 'going beyond' the law must be qualified with some nuance. In many areas such as environmental
or labor regulations, employers can choose to comply with the law, to go beyond the law, but they can
also choose to not comply with the law, such as when they deliberately ignore gender equality or the
mandate to hire disabled workers. There must be a recognition that many so-called 'hard' laws are also
'weak' laws, weak in the sense that they are poorly enforced, with no or little control or no or few
sanctions in case of non-compliance. 'Weak' law must not be confused with soft law.[5] The aim is to
increase long-term profits and shareholder trust through positive public relations and high ethical
standards to reduce business and legal risk by taking responsibility for corporate actions. CSR strategies
encourage the company to make a positive impact on the environment and stakeholders including
consumers, employees, investors, communities, and others.[6]

Proponents argue that corporations increase long-term profits by operating with a CSR perspective,
while critics argue that CSR distracts from businesses' economic role. A 2000 study compared
existing econometric studies of the relationship between social and financial performance, concluding
that the contradictory results of previous studies reporting positive, negative, and neutral financial
impact, were due to flawed empirical analysis and claimed when the study is properly specified, CSR has
a neutral impact on financial outcomes.[7]

Critics[8][9] questioned the "lofty" and sometimes "unrealistic expectations" in CSR.[10] or that CSR is
merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over
powerful multinational corporations.

Political sociologists became interested in CSR in the context of theories

of globalization, neoliberalism and late capitalism. Some sociologists viewed CSR as a form of capitalist
legitimacy and in particular point out that what began as a social movement against
uninhibited corporate power was transformed by corporations into a 'business model' and a 'risk
management' device, often with questionable results.

CSR is titled to aid an organization's mission as well as serve as a guide to what the company represents
for its consumers. Business ethics is the part of applied ethics that examines ethical principles and moral
or ethical problems that can arise in a business environment. ISO 26000 is the recognized international
standard for CSR. Public sector organizations (the United Nations for example) adhere to the triple
bottom line (TBL). It is widely accepted that CSR adheres to similar principles, but with no formal act of
legislation

9. Answer

The Global Code of Business Conduct and Ethics (Code) is designed to guide the conduct of all Principal
employees, regardless of location, function or position, on ethical issues that are faced during the
normal course of business. Acting with integrity requires making decisions based on what is right. The
Code, along with our core values and mission, assists us in putting our values into action. When faced
with a decision for which there is no clear course of action, we must ask ourselves: Will my decision
reflect our core value of Integrity? How would the decision make customers, co-workers, family, and
friends feel about the Company and me? Considering these questions can help us make sure we
continue to operate in an ethical and legal manner. Every Director and employee of the Company is
accountable for adhering to the Code. All employees are responsible for certifying annually that they
have read this Code and agree to act in accordance with the principles of integrity and ethical
expectations.

10. Answer

The below mentioned article provides highlights on the Consumer Protection Act, 1986.

Introduction:

The Consumer Protection Act 1986 was passed by the Indian Parliament to protect consumer rights and
to redress consumer complaints and resolve consumer disputes.

Every individual is a consumer of goods and services and expects a fair deal against unfair exploitation.

This Consumer Protection Act applies to the whole of India except the State of Jammu and Kashmir and
covers all goods and services purchased by the consumers and to all sectors — private, public and
cooperative. The objective of the Act is “to provide for better protection of the interests of consumers
and for that purpose to make provisions for the establishment of Consumer Councils and other
authorities for the settlement of consumer disputes and for matters connected therewith”. It protects
the consumers from unfair trading or unfair trade practices.

It is important to note that the Indian Consumer Protection Act is a social welfare legislation and has
been designed to avoid technicalities, procedural delays, procedural requirement, court fees and costs.

The Consumer Protection Act, 1986 provides for the following rights to the consumers:

(a) Right to be heard and to be assured that consumers’ interests will receive due consideration at
appropriate forum;

(b) Right to seek redressal against unfair trade practices or unscrupulous exploitation of consumers; and

(c) Right to consumer education