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Governance
Prof. Sarbesh Mishra
Assistant Professor, NICMAR
Necessity
1. Too much of power with few individual
2. Large scale diversion of funds to
associated companies & risky ventures
3. Unfocussed business decisions leading
to losses
4. Preferential allotment of sweat equity at
low prices
5. Spinning off profitable business
operations to subsidiary companies
Recent Happenings
World Com – Improper accounting of
$3.9bn in expenses leading to bankruptcy
Enron – Off balance sheet deals used to
hide the debt
AOL Warner – AOL division accused of
improperly accounted for some advertising
revenues
XEROX – Financial Fraud
UTI – Indiscriminate investment by UTI
Origin
Shareholders’/Investors’ Grievance
Committee
2. As a part of corporate governance,
companies should form a
Shareholders’/Investors’ Grievance
Committee under the Chairmanship of a
non-executive independent director.
Contd….
Remuneration Committee
The company may appoint a Remuneration
Committee to decide the remuneration and
other perks etc. of the CEO and other senior
management officials as the Companies Act
and other relevant provisions.
Management Analysis
Management is required to make full
disclosure of all material information to
investors.
Contd….
Communication
The quarterly, half-yearly and annual financial
results of the Company must be sent to the
Stock Exchanges immediately after they have
been taken on record by the Board.
Auditors’ Certificate on Corporate
Governance
4. The external auditors are required to give a
certificate on the compliance of corporate
governance requirements.