CORPORATE GOVERNANCE

Corporate governance refers to the top management process that

manages and mediates value creation for, the value transference
among, various corporate claimants including the society at large,
as it simultaneously ensures accountability towards these
claimants. Corporate governance practices and regulations
significantly impact the structure of societies as it covers:-
a) The roles and responsibilities of the Board and the top
Management, Board committee structure and makeup.
b) Management compensation and rewards.
c) The market for corporate control, the relations among firms,
shareholders, and the creditors,
d) Employee and union relationship with firms,
e) The behavior of firms under distress,
f) Types of corporate financing and payouts, including Audit,
g) Social responsibility including compensation etc.

Principles of Corporate Governance

While various organizations have given their areas of focus, the
most accepted principles of corporate governance has been given
by the Organization for Economic Co-operation and Development,
(OECD) which states that the corporate governance framework
should:-
1. Protect Shareholders’ rights.
2. Ensure the equitable treatment of all shareholders, including
minority and foreign shareholders. All shareholders should
have the opportunity to obtain effective redress(remedy) for
violation of their rights.
3. Recognize the rights of stakeholders as established by law &
encourage active cooperation between corporations and
stakeholders in creating health, jobs and sustainability of
financially sound enterprises.
4. Ensure that timely and accurate disclosure is made on all
material matters regarding the corporation, including the
 financial situations, performance, ownership, and governance
of the company.
5. Ensure the strategic guidance of the company, the effective
monitoring of management by the board, & the Board’s
accountability to the company and the shareholders.

Corporate governance in India.

In India, the Companies (Amendment) Act, 2000 contains

provisions which have considerable bearing on the business
operations of the companies.
The salient features of the act are as follows:
1. The board should be of executive & non- executive
directors with not less than 50% of the board comprising of
non-executive directors f the chairman is non-executive, then
at least one third of the board should be of independent
director and if the chairman is also an executive, then atleast
half of the board should be independent directors who are not
having any material pecuniary relationship or transactions
with the company, its promoters, its management or its
subsidiaries, which in judgment of the board may affect
independence of judgment of the director.
2. The board meetings are to be held at least four times a year,
with a maximum time gap of four months between any two
meetings. The minimum information to be made available to
the board of Directors shall be as follows:
A. Annual operating plans & budgets and any updates.
B. Capital budgets and any updates.
C. Quarterly results for the company and its operating divisions
or business segments.
D. Minutes of meetings of Audit committee of the committees
of the board.
E. The information on recruitment and remuneration of senior
Officers including appointment & removal of chief financial
Officer and company secretary.
F. Show cause, demand, prosecution notices and penalty notices
which are materially important.
G. Fatal or serious accidents, dangerous occurrences, any
material effluent and pollution problems.
H. Any material default in financial obligations to and by the
Company or substantial non-payment for goods sold.
I. Any issue, which involves possible public or product
liability, claims of substantial nature, including any
judgments or order which, may have passed strictures on
the conduct of the company or taken an adverse view
regarding another enterprise that can have negative
implications on the company..
J. Details of any joint venture or collaboration agreements.
K. Transactions that involve substantial payment towards
goodwill, brand equity, or intellectual property.
L. Significant Labour Problems and their proposed solutions.
Any significant development in Human Resources/ Industrial
Relations front like signing of wage agreement,
implementation of Voluntary Retirement Scheme etc.
M. Sale of material nature, of investments, subsidiaries, assets,
which is not in normal course of business.
N. Quarterly details of foreign exposures and the steps taken by
Management to limit the risks of adverse exchange rate
movement, if material.
O. Non- compliance of any regulatory, statutory nature or listing
requirements and shareholders services, such as non-payment
of dividend, delays in share transfer etc.