NCRD Sterling Institute of

Management Studies

CORPORATE
GOVERNANCE
PRESENTED TO
Dr. Seema Laddha
PRESENTED BY:Ashish Mishra (17)
Kaustubh Brid (32)

CORPORATE GOVERNANCE
Corporate Governance may be defined as a set
of systems, processes and principles which
ensure that a company is governed in the best
interest of all stakeholders. It is the system by
which companies are directed and controlled. It is
about promoting corporate fairness, transparency
and accountability.

CONCEPT
It involves a set of relationships between a
companys
management,
its
board,
its
shareholders and other stakeholders;
It deals with prevention or mitigation of the
conflict of interests of stakeholders.Ways of
mitigating or preventing these conflicts of
interests include the processes, customs, policies,
laws, and institutions which have impact on the
way a company is controlled.
An important theme of corporate governance is
the nature and extent of accountability of people
in the business, and mechanisms that try to
decrease the principalagent problem.

OBJECTIVES
A properly structured board capable of taking
independent and objective decisions is in place at
the helm of affairs;
The
board
is
balance
as
regards
the
representation of adequate number of nonexecutive and independent directors who will take
care of their interests and well-being of all the
stakeholders;
The board adopts transparent procedures and
practices and arrives at decisions on the strength
of adequate information;

OBJECTIVES
The board has an effective machinery to subserve
the concerns of stakeholders.
The board keeps the shareholders informed of
relevant developments impacting the company;
The board effectively and regularly monitors the
functioning of the management team;
The board remains in effective control of the
affairs of the company at all times.

ADVANTAGES OF CORPORATE GOVERNANCE

Enhanced Performance- helps a company improve
overall performance.
Without corporate governance, a company tends to
be weak and sluggish.
Access to Capital- The better corporate governance
a company has, the more easily it can access
outside capital that the business can use to fund its
projects.
Since corporate governance includes major
shareholders, it connects investors with the business
itself, and these investors use their resources and
contacts to support the company monetarily.

 Better Standards- Corporate governance makes

many decisions about business operations, but
one of the most important decisions involves
corporate standards.
Standards affect the quality of products and the
goals that the business has in technology,
customer service, and marketing.
Better Talent Utilization- With a strong corporate
governance structure, people can find positions
that utilize their talents more effectively, and the
board of directors and top leaders of the business
are always looking to add more talented people
to their numbers.

DISADVANTAGES OF CORPORATE
GOVERNANCE

Easily Corruptible-Corporate governance needs a certain level of

government oversight to avoid increasing levels of corruption.
The lack of governmental oversight in corporate governance lead
to a misallocation of credit that actually worked against
competition.
Family-Owned Companies- Corporate governance works at its
best when shareholders and board members are able to make
objective decisions that are in the best interest of the company.
According to Ibis Associates, a business planning firm, family-run
corporations (founding family members own controlling share of
the company), such as Ford and Wal Mart, lose objectivity in
business making decisions due to the family's financial
investment in the business' performance and the emotional ties
associated with building a worldwide corporation from the ground
up.
Costs of Monitoring- To effectively govern a publicly traded
corporation, shareholders must speak with one voice and have
enough votes to allow that voice to have any real weight. This

PRINCIPLES OF CORPORATE
GOVERNANCE
Rights and equitable treatment of shareholders-Organizations should respect the rights of
shareholders and help shareholders to exercise
those rights. They can help shareholders exercise
their
rights
by
openly
and
effectively
communicating information and by encouraging
shareholders to participate in general meetings.
Interests of other stakeholders:- Organizations
should
recognize
that
they
have
legal,
contractual, social, and market driven obligations
to
non-shareholder
stakeholders,
including
employees, investors, creditors, suppliers, local
communities, customers, and policy makers.

 Role and responsibilities of the board:-- The board needs

sufficient relevant skills and understanding to review and
challenge management performance. It also needs
adequate size and appropriate levels of independence
and commitment
Integrity and ethical behavior:- Integrity should be a
fundamental requirement in choosing corporate officers
and board members. Organizations should develop a
code of conduct for their directors and executives that
promotes ethical and responsible decision making.
Disclosure and transparency:- Organizations should
clarify and make publicly known the roles and
responsibilities of board and management to provide
stakeholders with a level of accountability. They should
also implement procedures to independently verify and
safeguard the integrity of the company's financial
reporting. Disclosure of material matters concerning the

FACTORS AFFECTING CORPORATE

GOVERNANCE:1. RISK MANAGEMENT & EFFECTIVE
GOVERNANCE
2. REGULATION & THERE ENFORCEMENT

RISK MANAGEMENT AND EFFECTIVE GOVERNANCE:In todays world, frauds are an undeniable fact of business life.
Affecting all types of businesses. New technologies such as the Internet, and
the development of fully automated accounting systems, have increased the
opportunities for fraud to be committed.
Once suspected or discovered, investigating fraud is a specialist task
requiring experience and technical skill and can be very costly. Thus, there is
no doubt
that fraud is best prevented, rather than dealt with after the fact. The most
effective and appropriate response to the problem of fraud involves a
combination of risk management techniques.
These techniques include:
Setting up inherent control based upon soft controls that occur continuously
and
consistently throughout the organization. Such controls should be embedded
in
normal business practice and be designed in such a way that they are to a
large
extent self sustaining; and
Setting up formal control processes of monitoring, reviewing and reporting

REGULATION AND THERE ENFORCEMENT : Since corporate governance failures have proved to be
harmful not just for the organizations but also for the
economy and the general public at large as well, there
have been public pressures on the government and
regulatory authorities to reform business practices and
increase transparency.
Consequently, it has become a part of the governments
duty to ensure accountability and responsibility in
corporate behavior.
Effective disposal of this responsibility basically revolves
around two things:
First, the designing of regulatory commands i.e. the
regulations and laws to ensure good corporate governance;
and
Second is the enforcement of regulations.

WHY CORPORATE
GOVERNANCE?:AT NATIONAL LEVEL :As barriers to the free flow of capital fall, it becomes imperative to
recognize that the quality of corporate governance is relevant to
capital formation and that sound corporate governance principles is
the foundation upon which the trust of investors is built.
Corporate governance represents the ethical the moral framework
under which business decisions are taken. Thus, any investor, when
making investments across the borders or even otherwise, wants to
be sure that not only are the capital markets or enterprises with
which they are investing are being run competently but they also
have good corporate governance.
Consequently, lack of sound corporate governance practices in any
country
can badly affect the confidence of foreign investors, in turn causing
damage to the
amount of foreign investments flowing in.

At the company and individual level:It is self evident that sound corporate governance is
essential to the well being of an individual company and its
stakeholders, particularly its shareholders and creditors.
We need only remind ourselves of the many companies,
across the world, whose financial difficulties and,
ultimate demise have been substantially attributable to
weak corporate governance.
On the other hand, there are several areas of self-interest
that should drive companies to embrace more effective
governance. These areas are:
1. Effective governance helps to minimize reputational risks
and thus, protecting the
brand;
2. It helps to instill trust in customers and vendors;
3. It also helps to assure effectiveness and integrity of a
companys business
processes.
4. Further, in many cases, the punishment, in terms of
penalties or imprisonment, for
white-collar crimes are now in excess for such criminal acts

CASE STUDY : GLAXO SMITH KLINE

Do more,
feel better,
live longer

GLAXOSMITHKLINE
They believe that it is in the vital financial interest of the firm to
conduct their business with honesty and integrity complying all
legal and regulatory requirements. The code applies to all their
employees worldwide.
Their code of conduct is as follows:
All employees must conduct business with honesty and integrity
in a professional manner for the firms good reputation.
Employees must build relationships on the basis of trust and
treat all with respect and dignity. Their stakeholders like
customers, suppliers, employees must know the legal
requirements of business and company rules, policy and
procedures.
Avoid any activity which could lead to unlawful practice and
harm the firms image.
Avoid conflicts of interest within the firm in all transactions.
Give accurate and reliable information in records submitted while
safeguarding the firms confidential information.
Promptly report to the concerned person any violation of law or

Employees are responsible for the following:

All employees must uphold standards in the conduct of the firms

business. When in doubt the must ask the firms legal department.
Senior Management should be the role model for others.
Failure of the employees regarding compliance to the code would

lead to disciplinary action right up to severance from employment

of the firm.
When in doubt the firm wants the employees to ask questions for

them.
GlaxoSmithKline recognizes that commercial pressures and

complex regulatory environments can present employees with

difficult ethical situations.GSK provide guidance and support for the
backed by rigorous auditing and action if misconduct is identified.
GSK has audit systems to help identify and deal with cases of non-

compliance. Those who violate company standards are subjected

to disciplinary action including dismissal in serious cases. Serious
violations and remedial actions are reported to the audit
committee of the board.

Doing the right thing can, at times appear to sacrifice some

 The companys Code Of Conduct An Introduction to

Corporate Ethics and Compliance promotes honest and ethical

conduct by setting out standards to be followed by GSKs
employees in their everyday work for the company
A separate publication, the Employee Guide to Business

Conduct, helps employees understand what the Code means in

practice and what is acceptable and unacceptable behavior.
The Code is available on the company intranet.
Employees have access to corporate compliance officers and are

encouraged to seek guidance or raise concerns with the officers

directly. Their contact details are in the Code Of Conduct
brochure the Employee Guide and on the company intranet.
A secure off-site PO Box address is available for confidential written

communication, and toll-free telephone GlaxoSmithKline Integrity

Help lines are available in the US and the UK.