2. To provide “the maximum happiness for
the maximum number of people for the
maximum period, based on the
principles of Dharma – righteousness
and moral values.”
-Ayodhya Kand
Governance Concept in „Ramayana‟
3. CORPORATE
A corporation is a separate legal entity that has been
incorporated through a legislative or registration
process established through legislation.
- according to Wikipedia
The word "corporation" derives from corpus, the
Latin word for body, or a "body of people."
A corporation is an organization created
(incorporated) by a group of shareholders who
have ownership of the corporation.
4. GOVERNENCE
Oxford English dictionary defines “governance "as
the activity of governing a country or controlling a
company or an organization .
The word has Latin origins that suggest the notion
of “steering". it deals with the processes and
systems by which an organization or society
operates
5. CORPORATE GOVERNENCE
“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 social responsibility for
sustainable development of all
stakeholders”.
-The Institute of Company Secretaries of India
6. CORPORATE GOVERNANCE CORPORATE MANAGEMENT
External Focus Internal Focus
Governance assumes an open system Management assumes a closed
system
Strategy-orientated Task-orientated
Concerned with where the company is
going
Concerned with getting the company
there
7. Corporate governance is….
•A means whereby society can be sure that large
corporations are well-run institutions to which
investors and lenders can confidently commit their
funds.
•Is a term that refers broadly to the rules, processes, or
laws by which businesses are operated, regulated, and
controlled. The term can refer to internal factors
defined by the officers, stockholders or constitution of
a corporation, as well as to external forces such as
customer groups, clients and government regulations.
•(Creates)..safeguards against corruption and
mismanagement, while promoting fundamental values
of a market economy in democratic society.
8. A basic design of existing corporate governance
systems
Corporate
Management
Stakeholders Creditors
Supervisory &
enforcement
authorities
Executive
directors
Independent
Directors
Shareholders
10. Accountability
Clarifying governance roles & responsibilities, and supporting voluntary
efforts to ensure the alignment of managerial and shareholder interests and
monitoring by the board of directors capable of objectivity and sound
judgment.
Transparency
Requiring timely disclosure of adequate information concerning corporate
financial performance
11. Responsibility
Ensuring that corporations comply with relevant laws and regulations that
reflect the society’s values
Fairness
Ensuring the protection of shareholders’ rights and the enforceability of
contracts with service/resource providers
12. Driving Forces of Corporate
Governance in India
1) Unethical Business Practices
– Security Scams ---Harshad Mehta Security Scam
• Equity allotments at discount rates to the controlling
groups
• Disappearance of Companies (1993-94) - around 4,000
2) Impact of Globalization
– Integration with Foreign Market
– Foreign Investors expectations
– New Business Opportunities --- IT & ITES, BPO etc.,
– New Capital formation – FII, FDI
3) Impact of Privatisation
– New structure of ownership
– Multinational Companies
13. Brief history of corporate governance
in India
Companies Act, 1956 provides for basic framework for regulation
of all the companies. Certain provisions were incorporated in the
Act itself to provide for checks and balances over the powers of
Board viz.:
Loan to directors or relatives or associated entities (Sec 295)
Interested contract needs Board resolution and to be entered
in register (Sec 297)
Interested directors not to participate or vote (Sec 300)
Appointment of director or relatives for office or place of
profit needs approval by shareholders. If the remuneration
exceeds prescribed limit , CG approval required (Sec 314)
Shareholders holding 10% can appeal to Court in case of
oppression or mismanagement (397/398).
14. Brief history of corporate governance
in India
The initiative in India was initially driven by an industry
association, the Confederation of Indian Industry
In December 1995, CII set up a task force to design a
voluntary code of corporate governance.
The final draft of this code was widely circulated in
1997.
In April 1998, the code was released. It was called
Desirable Corporate Governance: A Code.
Between 1998 and 2000, over 25 leading companies
voluntarily followed the code: Bajaj Auto, Hindalco,
Infosys, Dr. Reddy’s Laboratories, Bharat Forge, BSES,
HDFC, ICICI and many others
15. Brief history of corporate governance
in India
Following CII’s initiative, the Securities and Exchange Board of
India (SEBI) set up a committee under Kumar Mangalam Birla to
design a mandatory-cum-recommendatory code for listed
companies
The Birla Committee Report was approved by SEBI in December
2000.Became mandatory for listed companies through the
clause 49 of the listing agreement, and implemented according
to a rollout plan:
2000-01: All Group A companies of the BSE or those in the
S&P CNX Nifty index… 80% of market cap.
2001-02: All companies with paid-up capital of Rs.100
million or more or net worth of Rs.250 million or more.
2002-03: All companies with paid-up capital of Rs.30
million or more
16. Brief history of corporate governance
in India
The Naresh Chandra committee was appointed in August 2002 by
the department of Company Affairs(DCA) under the Ministry of
Finance and corporate Affairs, to examine various corporate
governance issues. The Committee submitted its report in
December 2002.
It made recommendation in terms of two key aspects of corporate
governance: financial and non- financial disclosures, and
independent auditing and board oversight of management
17. Murthy Committee
Committee was set up by SEBI under the chairmanship of Mr N.R.
Narayana murthy, in order to review clause 49, and to suggest
measure to improve corporate governance standard
Some of the major recommendation of the committee were
primarily related to
Audit committees
Audit reports
Independent directors
Related party transactions
Risk management
Directorship and director compensation
Code of conduct
Financial disclosures
18. COMPANY BILL 2012
After the murthy committee report provisions were maid for
amendments in the companies act 1956.
The bill was presented in parliament in December2011 , Standing
committee submitted its report in June 2012. based on report some
amendments were made and the bill was passed in Lok Sabha on
18th December 2012.This bill will replace Companies Act,1956.
The bill has470 clauses as against 658 Sections in the existing
Companies Act, 1956. the entire bill has been divided into 29
chapters.
19. Brief overview-COMPANY BILL 2012
Key points of COMPANY BILL 2012 are as under
Preliminary
Compromise, Arrangement and Amalgamations
Audit and Auditors
Accounts of companies
Appointment and Qualifications of Directors
Declaration and Payment of Dividend
Annual Return
Meeting of Board and its Power, etc
20. CONCLUSION
What began as a voluntary effort soon acquired mandatory
status through the adaptation of Clause 49, as all companies(
of a certain size) listed on stock exchange were required to
comply with these norms, a trend which was further
reinforced by the introduction of stringent penalties for
violation of prescribed norms. While the Voluntary Corporate
guidelines of 2009 represented a move back to a Voluntary
framework for corporate governance. Recent COMPANY BILL
2012 marks a reversal.
21. “Satyam Vada Dharmam Chara”
“Forever speak the truth and follow the dharma”
Thank You
