BEth 7 a Corp Govenance

8/3/2019 BEth 7 a Corp Govenance

1/22


2/22

Governance - Key issue today

Essential requirement for socio- economic

development

Matter of paramount importance for Govt.

corporate and civil society at large


3/22

Corporate Governance rests on 4

FundamentalC

orner stones

Corporate Governance

F

A

I

R

N

ES

S

T

R

A

N

P

A

RC

Y

A

CC

O

U

N

T

ABI

LI

TY

R

ES

P

O

N

SI

BI

LI

T

Y


4/22

F

airness: right judgment , right decision, fairaccounting principles, honesty and integrity, and

safeguarding the interest of all stakeholders

Transparency: Open and clear policies, opencommunication, transparency in decision making and

no hidden agenda or ambiguity

Accountability: Responsibilities can be fixed easilyfor action taken and not taken and protecting the

interest of the shareholders and investors


5/22

No market has divine right to investors capital

Responsibilities of corporates

Shareholders wealth maximizationAdherence to Law

Ethical practices

Employee-employer relationship

Customer satisfactionCorporate Social Responsibility


6/22

Companies having good corporate Governanceare seen as highly regarded companies by its

shareholders and competitors

There is no one single model ofCorporate

Governance

Different countries are adapting differentmodels CG and rightly so cultures, traditions,

legal structures vary from country to country


7/22

The best practices on corporate governance

would universally ensure

Enlightened customers

Satisfied suppliers Willing investors

Trusted employees

Happy creditors

Assured Government Unified community

Protected environment


8/22

Came into limelight in 1991 when a committeeknown as Cadbury committee founded by financial

reporting council, London stock exchange and

accountancy profession

To overcome the huge problem of scam and

failure occurring in corporate sector worldwide

To boost confidence of investors both infinancial reporting and the ability of auditors to

provide the safeguards


9/22

To review structure, rights and roles ofboard ofdirectors, shareholders and auditors making

them more effective and accountable

Board of Directors meet regularly, retain full andeffective control over the company & monitor the

executive management

Non Executive Directors bring in independentjudgment on issues of strategy, performance and

resources


10/22

Financial reporting and control:

Project true and fair picture of the financial position

Dealing with the right and responsibilities of

Shareholders

Elect directors

Appoint auditors to provide external check, fair and

Accurate reporting


11/22

CG came with the introduction of economic reformsand liberalization in 1991 and the need for capital

market regulation

This liberty instead of being used for good purposewas exploited by unscrupulous players which gave

birth to series of scandals

Formation of a code ofCG commencedinstitutionally in 1999 when SEBI appointed a

committee under the chairmanship of Kumar

Mangalam Birla


12/22

Kumar Mangalam Birla committee(by SEBI in 1996)

Objectives:

View corporate Governance from the perspective of

the investors and shareholders and prepare aCode to suit the Indian corporate environment

Identified 3 key constituents ofC. Governance

Shareholders Board of directors Management


13/22

PSEs play a significant role in acceleration ofeconomic growth

PSEs - guardian or trustee of precious public money

They deal with Tax payers money and are therefore

accountable to parliament

Also accountable for other authorities likecomptroller and auditor general of India and control

vigilance committee


14/22

Corporate Social Responsibility

Human Welfare and improving the Quality

of Life in Society


15/22

Business is dependent on society. Is existence isdue to the people living within a social structure

To survive and thrive Business should earn the

goodwill of people

Companies relate to society through more than just

market place transaction

They serve a wide range of values than the

traditional economic ones (Companies are more

than economic institutions)


16/22


17/22

Growth responsibility:Best way to survive and grow in the long run is to

operate profitably by serving customer responsibly

Long term orientation:Require loyal brand of customers, repeat customers

Goodwill cannot be bought, begged or borrowed

Reputation of company (through care and concern)

Give and take relationship: Business takes much

from society also owes something to society


18/22

External Society Internal

Government Shareholders

Law Business Employees

Suppliers

Specl interest groups Financial Institutions

Customers


19/22

FFirm

PoliticalGroups

Owners Financialcommunity

Activist

Group

Customers

Customer

Advocategroups

Unions

Suppliers

Competitors

Trade

AssoEmployees

Government


20/22

Optimum use of scarce national resourcesNot to waste, misuse, damage or cause to deteriorate

Alternate use, crucial option ( opportunity cost)

Responsibility not to make losses( KF airlines)

Improved Quality of Life

Responsibility of employment and income

Offering quality product and fair price


21/22

Environmental protection (cement /chemical companies)

Fair Trade practice ( as per MRTP act)

Charging fair and reasonable price

Offering quality products as per claim and promiseMaking goods available to Mkt ( no artificial scarcity)

Not indulging in black marketing

Not making misleading claims in advertisement

Making prompt payment of loans and borrowingPaying corporate tax, duties and dues

Not bribing public servant, or political favours


22/22

Safeguarding heath and wellbeing of consumersPoor QC, substandard products, date exp. goods,

poor storage, chemical causing skin damage

CSR ( TATA, ITC, ACC, P& G, Infosys, Microsoft)

Business creates wealth for the community hence it

needs to make profits. It is ethical to make profits &

generate revenue for s.holders, employees, creditors

BEth 7 a Corp Govenance

Documents

Transcript of BEth 7 a Corp Govenance