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Presented By:-

Shubhamveer Singh
Saurabh Pratap Rao
Jai Prakash

Corporate Governance
Corporate Governance is the application of

best management practices, compliance of law

in true letter and spirit and adherence to
ethical standards for effective management
and distribution of wealth and discharge of
development of all stakeholders.
Conduct of business in accordance with
shareholders desires (maximising wealth) while
confirming to the basic rules of the society
embodied in the Law and Local Customs

Corporate Governance
Relationships among various participants

in determining the direction and

performance of a corporation.
Effective management of relationships
Board of directors

Why Corporate
Better access to external finance
Lower costs of capital interest rates on

Improved company performance
Higher firm valuation and share
Reduced risk of corporate crisis and

Principles of Corporate
Sustainable development of all stake

holders- to ensure growth of all individuals

associated with or effected by the
enterprise on sustainable basis
Effective management and distribution
of wealth to ensue that enterprise
creates maximum wealth and judiciously
uses the wealth so created for providing
maximum benefits to all stake holders and
enhancing its wealth creation capabilities to
maintain sustainability

Discharge of social responsibility- to

ensure that enterprise is acceptable to the

society in which it is functioning
Application of best management
practices- to ensure excellence in functioning
of enterprise and optimum creation of wealth
on sustainable basis
Compliance of law in letter & spirit- to
ensure value enhancement for all stakeholders
guaranteed by the law for maintaining socioeconomic balance
Adherence to ethical standards- to ensure
integrity, transparency, independence and
accountability in dealings with all stakeholders

Four Pillars of Corporate


Ensure that management is accountable to

the Board
Ensure that the Board is accountable to


Protect Shareholders rights
Treat all shareholders including

minorities, equitably
Provide effective redress for violations

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

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

Elements of Corporate
Good Board practices
Control Environment
Transparent disclosure
Well-defined shareholder rights
Board commitment

Good Board Practices

Clearly defined roles and authorities
Duties and responsibilities of Directors

Board is well structured
Appropriate composition and mix of


Good Board procedures

Appropriate Board procedures
Director Remuneration in line with best

Board self-evaluation and training


Control Environment
Internal control procedures
Risk management framework present
Disaster recovery systems in place
Media management techniques in use

Control Environment
Business continuity procedures in place
Independent external auditor conducts

Independent audit committee


Control Environment
Internal Audit Function
Management Information systems

Compliance Function established

Transparent Disclosure
Financial Information disclosed
Non-Financial Information disclosed
Financials prepared according to

International Financial Reporting

Standards (IFRS)

Transparent Disclosure
Companies Registry filings up to date
High-Quality annual report published
Web-based disclosure

Well-Defined Shareholder
Minority shareholder rights formalised
Well-organised shareholder meetings

Policy on related party transactions

Well-Defined Shareholder
Policy on extraordinary transactions
Clearly defined and explicit dividend


Board Commitment
The Board discusses corporate

governance issues and has created a

corporate governance committee
The company has a corporate
governance champion
A corporate governance improvement
plan has been created
Appropriate resources are committed to
corporate governance initiatives

Board Commitment
Policies and procedures have been

formalised and distributed to relevant

A corporate governance code has been
A code of ethics has been developed
The company is recognised as a
corporate governance leader

Other Entities
Corporate Governance applies to all

types of organisations not just

companies in the private sector but also
in the not for profit and public sectors
Examples are NGOs, schools, hospitals,

pension funds, state-owned enterprises

Corporate governance in India

The Indian corporate scenario was more or less

stagnant till the early 90s.

The position and goals of the Indian corporate sector

has changed a lot after the liberalisation of 90s.

Indias economic reform programme made a steady

progress in 1994.
India with its 20 million shareholders, is one of the

largest emerging markets in terms of the market


Corporate governance of India has

undergone a paradigm shift
In 1996, Confederation of Indian Industry (CII), took

a special initiative on Corporate Governance.

The objective 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
Institutions, all of which are corporate entities.
This initiative by CII flowed from public concerns

regarding the protection of investor interest,

especially the small investor, the promotion of
transparency within business and industry

Securities and Exchange Board of India

watchdog, the Securities Board of India,
announced strict corporate governance norms
for publicly listed companies in India.
The Indian Economy was liberalised in 1991.
In order to achieve the full potential of
liberalisation and enable the Indian Stock
Market to attract huge investments from
foreign institutional investors (FIIs), it was
necessary to introduce a series of stock
market reforms.
SEBI, established in 1988 and became a fully

On April 12, 1988, the Securities and Exchange

Board of India (SEBI)was established with a

dual objective of protecting the rights of small
investors and regulating and developing the
stock markets in India.
In 1992, the BSE ,the leading stock exchange
in India, witnessed the first major scam
masterminded by Harshad Mehta.
felt that if more powers had been
given to SEBI,the scam would not have
As a result the GoI brought in a separate
legislation by the name of SEBI Act 1992and
conferred statutory powers to it.

SEBI and Clause 49

SEBI asked Indian firms above a certain size

to implement Clause 49, a regulation that

strengthens the role of independent
directors serving on corporate boards.
On August 26, 2003, SEBI announced an

amended Clause 49 of the listing agreement

which every public company listed on an
Indian stock exchange is required to sign.
The amended clauses come into immediate
effect for companies seeking a new listing.

The major changes to Clause


Directors:- 1/3 to depending

whether the chairman of the board is a nonexecutive or executive position.

Non-Executive Directors:- The total term of office

of non-executive directors is now limited to three

terms of three years each.
Board of Directors:- The board is required to frame

a code of conduct for all board members and

senior management and each of them have to
annually affirm compliance with the code.

Audit Committee:- Financial statements and the draft audit

report of management discussion and analysis of

Financial condition
Result of operations of compliance with laws
Risk management letters
Letters of weaknesses in internal controls issued by statutory
Internal auditors
Removal and terms of remuneration of the chief internal

Whistleblower Policy :- This policy has to be communicated to

all employees and whistleblowers should be protected from

unfair treatment and termination.
Subsidiary Companies:- 50% non-executive directors & 1/3 &

independent directors depending on whether the chairman is

non-executive or executive.

As Indian companies compete globally for access to

capital markets, many are finding that the ability to

benchmark against world-class organizations is
For a long time, India was a managed, protected

economy with the corporate sector operating in an

insular fashion.
But as restrictions have eased, Indian corporations

are emerging on the world stage and discovering that

the old ways of doing business are no longer
sufficient in such a fast-paced global environment.

Thank You