12Corporate Governance in India

8/10/2019 12Corporate Governance in India

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Corporate

Governance inInternationalBusiness


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Corporate Governance deals with laws, proceduresand practices that are designed to ensure that a

company is managed in the best interest of all

stakeholders.

Concerned with identifying ways to ensure that

strategic decisions are made effectively to protect

and promote the interest of all stakeholder groups.

Used in corporations to establish order between the

firms owners and its top-level managers

Corporate Governance


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It is about commitment to values, ethical businessconduct and making a distinction betweenpersonal & corporate funds in the management of

a company.


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Features of Corporate Governance

It is concerned with how companies run.

It involves appropriate supervision and controlover the top management

It involves fair, transparent and efficientadministration.

It is to serve the interest of all the stakeholders in

a company It requires in addition to effective legal and

regulatory system, a high level of business ethicsand corporate social responsibility.


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Principles of corporate Governance

Trans

-parency

Account-ability

Indepen--dence

Reporting


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1. Transparency: It means accurate, adequate andtimely disclosure of relevant information to thestakeholders.

2. Accountability: CG has to be a top down approach.

Chairman, board of directors and CEO must fulfill theirresponsibilities to make CG a reality for industry.

3. Independence:A strong Board of directors isnecessary to lead and support merit based

management. The board has to be independent, strongand non partisan body.

4. Reporting: adequate, frequent and accurate report toshareholders and other stakeholders is essential forgood corporate governance.


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Need of Corporate Governance inInternational Business

The right to information requires companies to disclosemore than they ever did.

To make a reliable and less riskier environment forinternational business

To have trust of the investors from the foreign country byproviding more transparency

Foreign investors demand globally sound corporatepractices

In highly complex and dynamic environment goodgovernance can provide some sense of security


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Efficient functioning of financial market requires propergovernance.

Decrease the "likelihood of a domestic financial crisis"and the severity if such a crisis does occur.

Creates more efficient corporate management."

Play a role in reducing corruption, and decreasedcorruption significantly enhances a country's

developmental prospect


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Corporate Governance Failures

Company Country What went wrongSatyam India Earnings overstated hide debt

Enron USA inflated earnings, hid debt inSPEs

Parmalat Italy false transactions recorded

Tyco USA looting by CEO, improper sharedeals, evidence of falsifying

business records

WorldCom USA expenses booked as capitalexpenditure

Xerox USA accelerated revenue recognition


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Ethical issues for TNCs

1. Corruption: it refers to illegal practices to further onesbusiness interest. Some TNCs bribe Govt. officials in hostcountry to get undue favour.

2. Sweatshops:business operations that employ workers atvery low wages for long hours and in poor workingconditions are called sweatshops. TNCs face criticism andare accountable for any sweatshops activities.

3. Child labour: It means employment of children belowthe age of fourteen. TNCs also face criticism and areaccountable for any child labor activities.


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4. Sustainable Development: it meansdevelopment that meets the need of the present

without compromising the ability of futuregeneration to meet their own needs.

5. ISO 14000: It offers a set of certificationstandards for responsible environmental policies.


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Disclosure of Information By TNCs

TNCs should disclose to the public in the countries inwhich they operate, by appropriate means ofcommunication, clear, and complete.

The financial information to be disclosed annuallyshould be provided with suitable explanatory notes.

TNCs shall supply to competent authorities in eachof the countries in which they operate in accordance

with national legislation. TNCs should be responsive to request from Govt. of

countries in which they operate and be prepared toco-operate with international organisation.


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TNCs shall respect the right of each state to regulate& monitor accordingly the activities of their entitiesoperating within its territory.

TNCs should conform to the transfer of technologylaws and regulation of the countries in which theyoperate.

TNCs should perform their activities with due regard

to relevant international standard, so that they dontcause injury to the health or endanger the safety ofconsumers.

Documents

12Corporate Governance in India