Corporategovernance

A presentation on

Presented To:-Prof. Tejal Shah

Presented By:-Prajapati HareshMBA(F.S-2)

Point To be Covered

• Introduction

• Importance • Demand

• Birla committee

Introduction

Definition:-“ Corporate Governance is concerned with holding the

balance between economics and social goals and between individual and communal goals. The corporate Governance framework is there to encourage the efficient use of resources equally, for accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individual, corporation, and the socity ”

• Corporate Governance is also concerned with the ethics, values, and moral of a company and its directors.

• The system by which companies are directed and controlled; boards of directors are responsible for the Governance of companies.

• Corporate Governance is the relationship among corporate managers, directors and providers of equity, people, and institution who save and invest their capital to earns & returns.

Separation of ownership and MGMT.

Shareholders

Employees

Board

Management

Importance

• Many large corporations are multinational and/or transnational in nature. This means corporation have impact on citizens of several countries across the globe.

• If things go wrong, they will affect many countries, albeit some more severely than others.

• Corporate Governance is needed to create a corporate culture of consciousness, transparency and openness.

• It refers to a combination of laws, rules, regulations, producers and voluntary practices to enable companies to maximize shareholder’s long-term value.

• It should lead to increasing customer satisfaction, shareholder value and wealth.

• With increasing government awareness, the focus is shifted from economic to the social sphere and an environment is being created to ensure greater transparency and accountability.

• It is integral to the very existence of a company.

Demand

• Need for corporate governance arises due to separation of management from the ownership.

• For a firm success, it needs to concentrate on both economical and social aspect. It needs to be fair with producers, shareholders, customers etc.

• The “corporate governance concept” dwells in India from the Arthashastra time instead of CEO at that time there were kings and subjects.

• Today, corporate and shareholders replace them but the principles still remain same, unchanged i.e. good governance

• 20th century witnessed the glossy of Indian Economy due to liberalization, globalization, and privatization.

•Indian economy for the 1st time here was together with world economy for product, capital and lab our market and which resulted into world of capitalization, corporate culture, business ethics which was found important for the existence of corporation in the world market place.

Birla Committee

About

• Appointed on May 7, 1999 by SEBI.• Consisted of 17 members under the Chairmanship of

Shri Kumar Mangalam Birla.• Its report is the 1st formal & comprehensive attempt to

evolve a Code of Corporate Governance.• Provides recommendation to distinguish the

responsibilities & obligations of the Board & Mgmt.• Emphasizes the rights of shareholders in demanding

corporate governance.

• A statutory rather than voluntary code would be purposive and meaningful.

• Took into account steps already taken by SEBI.• 3 key constituents of Corporate Governance –

Shareholders, Board of Directors & Mgmt.• It attempted to identify the roles & responsibilities of

the key constituents.• Recognition of 3 key aspects of Corporate Governance

– Accountability, Transparency & Equality of treatment for all stakeholders.

• Draft report was made public by media & was put on SEBI’s website for comments

• Sent to Chambers of Commerce, Stock exchanges, ICAI, ICSI, Association of Merchant Bankers, Association of Mutual Funds, Association of Investors, Financial Institution & Sir Adrian Cadbury

Why was this committee formed?

• Better and more transparent reporting practices

• Adequate attention to the basic procedures for shareholders’ service

• Instrument of investor protection• To prevent insider trading• Markets and investors take notice of

well-managed companies• Concern about the importance of the

subject and of the need to raise the standards of corporate governance

objective

• Enhancement of shareholder value, keeping in view the interests of other stakeholder

• To treat the code not as a mere structure, but as a way of life

• Proactive initiatives taken by the companies themselves and not in the external measures