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ROLE OF GOVERNMENT IN
ENSURING CORPORATE
GOVERNANCE
D. RAMAKRISHNA, ASST.PROFESSOR, RIMS, KKD rkrims@gmail.com, (+91) 9030233744

Lesson Objectives
 ROLE OF GOVERNMENT IN ENSURING
CORPORATE GOVERNANCE
 BOARD OF DIRECTORS
 FRAMEWORK FOR CG
 ROLE OF CEO
 EXECUTIVE Vs NE DIRECTORS
D. RAMAKRISHNA, ASST.PROFESSOR, RIMS, KKD rkrims@gmail.com, (+91)
9030233744

 Government plays both administrative
and coordinative roles through its
organs at various ministerial levels.
 It is responsible for the maintenance
of basic security, public law and
order, and protection of property.
 It has an obligation to protect the
vulnerable members of society.
Overarching role of government in
corporate governance
D. RAMAKRISHNA, ASST.PROFESSOR,
RIMS, KKD rkrims@gmail.com, (+91)
9030233744

Participatory role of government in
corporate governance
 Government plays a participatory role on economic
development through parastatals and state owned
enterprises.
 Government plays a facilitative role in the economy
by creating a sound infrastructure
 Government provides relevant infrastructure and
basic service enablers such as electricity, water,
communication, infrastructure etc.
 This enables companies, individuals and
government itself to function or perform efficiently
towards wealth creation and economic development
of the country. D. RAMAKRISHNA, ASST.PROFESSOR,
RIMS, KKD rkrims@gmail.com, (+91)

Monitoring Role
• Government oversees and monitors
organizations such as the Securities
Exchange Commission, the Stock
Exchange etc.
D. RAMAKRISHNA, ASST.PROFESSOR, RIMS,
KKD rkrims@gmail.com, (+91) 9030233744

 operate under through making regulatory
and statutory frameworks
 the interpretation and enforcement of
legislation is done through the courts or
judiciary and other national enforcement
agencies.
D. RAMAKRISHNA,ASST.PROFESSOR, RIMS, KKD rkrims@gmail.com, (+91)
9030233744

Corruption ultimately robs the wealth of a
nation making the poor people poorer
while increasing the wealth of the rich.
Leaders should lead by example, should
walk the talk
D. RAMAKRISHNA, ASST.PROFESSOR, RIMS, KKD
rkrims@gmail.com, (+91) 9030233744

Enforcement Mechanism of Corporate
Governance
 Enforcement could be on a statutory basis (that is
legislated) or as a Code of Principles and practices
(on a voluntary or self-regulatory basis) or a
combination of both legislation and voluntary.
 Some governments apply the statutory basis and this
implies that companies should “comply or else”. In
this sense there would be legal consequences in the
event of non compliance.

Government should play a role in
instilling values and ethics
 With a society or citizens with good
moral values, it is easy for the
government to use the comply or
explain, apply or explain, and adopt or
explain bases in corporate
governance and thus obviate the need
of legislation.
 The voluntary basis works well where
the moral fibre of society is strong.D. RAMAKRISHNA,
ASST.PROFESSOR, RIMS, KKD

 http://www.nccg.co.zw/index.php?option=com_content&view=articl
e&id=82:governments-role-a-corporate-
governance&catid=42:highlights-of-the-code&Itemid=204
D. RAMAKRISHNA, ASST.PROFESSOR, RIMS, KKD

Introduction
 A board of directors is a body of elected
or appointed members who jointly oversee
the activities of a company or organization.
 Other names include board of governors,
board of managers, board of regents,
board of trustees, and board of visitors.
It may also be called "the executive board"
and is often simply referred to as "the
board".
D. RAMAKRISHNA, ASST.PROFESSOR, RIMS, KKD rkrims@gmail.com, (+91)
9030233744

TYPICAL DUTIES OF BOARDS OF DIRECTORS
• Governing the organization by establishing broad
policies and objectives;
• Selecting, appointing, supporting and reviewing
the performance of the chief executive;
• Ensuring the availability of adequate financial
resources;
• Approving annual budgets;
• Accounting to the stakeholders for the
organization's performance;
• Setting the salaries and compensation of
company management;

TERMINOLOGY
• Director - a person appointed to serve on the
board of an organization, such as an
institution or business.
• Inside director - a director who, in addition to
serving on the board, has a meaningful
connection to the organization
• Outside director - a director who, other than
serving on the board, has no meaningful
connections to the organization

• Executive director - an inside director who is also an
executive with the organization. The term is also used,
in a completely different sense, to refer to a CEO
• Non-executive director - a director who is not an
executive with the organization
• Shadow or de facto director - an individual who is not
a named director but who nevertheless directs or
controls the organization
• Nominee director - an individual who is appointed by a
shareholder, creditor or interest group (whether
contractually or by resolution at a company meeting)
and who has a continuing loyalty to the appointor/s or
other interest in the appointing company
TERMINOLOGY

INSIDE DIRECTOR
• A Chief Executive Officer (CEO) who may also be
chairman of the board
• Other executives of the organization, such as its
Chief Financial Officer (CFO) or executive vice
president
• Large shareholders (who may or may not
also be employees or officers)
• Representatives of other stakeholders such as
labor unions, major lenders, or members of the
community in which the organization is located.

OUTSIDE DIRECTOR
• An outside director is a member of the
board who is not otherwise employed by
or engaged with the organization, and
does not represent any of its stakeholders.
• A typical example is a director who is
president of a firm in a different industry.
• Outside directors are not employees of
the company or affiliated with it in any
other way.

Mr. Seshasayee has been an Independent Director on the
Company’s Board since January 2011 and is the chairperson
of the Audit Committee. Mr. Seshasayee’s other board
positions include Non-Executive Vice Chairman of Ashok
Leyland Ltd. and Chairman of IndusInd Bank Ltd.

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