1.Corporate Governance

8/8/2019 1.Corporate Governance

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CORPORATE GOVERNANCE

PRESENTED BY

VINOD KUMAR.S

VINEETH B L

VINEETHA V R

VEENA R S

SABNA A

MANOJ MOHAN

MAYA

AKHIL

JOTHY

ANOOP R S


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WHAT IS CORPORATE GOVERNANCE?

Corporate governance is the overall control of

activities in a corporation.

It is concerned with the formulation of long term

objectives and plans and the propermanagements structure to achieve them.

The structure to ensure corporate governance, for

our purpose, includes the board of directors, top

management, shareholders', creditors and others


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GOOD GOVERNANCE

Transparency

y Well governed companies regularly disclose detailed

information on their ownership and the management

structure, latest operating and financial data and

transaction with their affiliates and subsidiaries.


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Shareholder rights

y The golden rule is equal treatment of all

shareholders, regardless of stock class. In other

words one share one votes.


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Board Effectiveness

y To successfully supervise management, board

members must be accountable to all investors, not

just majority, shareholders.

y Boards should act indendently of management and

third parties.

y Compensation, audit and nomination committees

must be comprised of independent directors.


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FACTORS INFLUENCING CORPORATE

GOVERNANCE

1. The ownership structure of a corporation

2. Its financial structure

3. The structure and functioning of the company

boards4. The legal, political and regulatory environment

within which the company operates.


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THE OWNERSHIP STRUCTURE

The ownership structure can be either dispersed

among individual and institutional shareholders

as in the US and UKor can be concentrated in

the hands of a few large shareholders as inGermany and Japan.

Large shareholders tend to be active in corporate

governance either through their representatives

on company boards or through their active

participation in annual general body meetings.


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THE STRUCTURE OF COMPANYBOARDS

The board of directors is responsible for

establishing corporate objectives, developing

broad policies and selecting top level executives

to carry out those objectives and policies.

The board also reviews managements

performance to ensure that the company is run

well and shareholders interests are protected.


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THE FINANCIAL STRUCTURE

Financial structure does matter the quality of

governance.

Lenders exercise significant influence on the way

a company is managed and controlled. Banks as creditors can perform the important

function of screening and monitoring companies

as they are better informed than other investors.


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THE INSTITUTIONAL ENVIRONMENT

The legal, regulatory and political environment

within which a company operates determines in a

large measure the quality of corporate

governance

In fact, corporate governance mechanisms are

economic and legal institutions and often

outcome of political decisions.


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MECHANISMS OF CORPORATE

GOVERNANCE

In our country, there are six mechanisms to ensure

corporate governance.

1. The Companies Act,1956

2. The Securities and Exchange Board ofIndia(SEBI) Act,1992

3. A market for corporate control

4. Participation of block shareholders in the

governance of comapanies5. Statutory audit

6. Code of conduct


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COMPANIESACT

Companies in our country are regulated by the

Companies Act, 1956, as amended upto-date.

The companies act is one of the biggest

legislations with 658 sections and 14 schedules. Through the consolidation of many successive

ammendments,and a large number of statutory

rules and regulations, the act aims at ensuring

the interest of all stakeholders are protected.


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The Act confers legal rights to shareholders to :-

1. Vote on every resolution placed before an

annual general meeting2. To elect directors who are responsible for

specifying objectives and laying down policies

3. Determine remuneration of directors and the

CEO4. Removal of directors and

5. Take active part in the annual general

meetings


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SECURITIES LAW

The primary securities law in our country is

SEBI Act.

One of the aspect of the SEBI regulations is that

in most public issues, the promoters are requiredto take a minimum stake of about 20 per cent in

the capital of the company and to retain these

shares for a minimum lock in period of three

years.

SEBI has laid down guidelines, relates to

prohibiting preferential allotments to dominant

shareholders at a price lower than the average

market price during the preceding six months.


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DISCIPLINE OF THE CAPITAL MARKET

Minority shareholders can refuse to subscribe to

the capital of a company in the primary market

and in the secondary market, they can sell their

shares, thus depressing the share prices.

A depressed share price makes the company

attractive take-over target.


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NOMINEES ON COMPANYBOARDS

Development banks hold large blocks of shares in

companies.

They are equally big debthholders too.

Being equity holders, these investors have theirnominees in the boards of companies

These nominees can effectively block resolution

which may be detrimental to their interests.


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STATUTORYAUDIT

It enhances the credibility of financial reports by

an enterprise.

The auditing process ensures that financial

statements are accurate and complete, therebyenhancing their reliability and usefulness for

making investment decisions.

Credible financial statements are essential for

business enterprises to raise capital and for

society to have trust in limited companies.

Good corporate governance depends, in part, on

good auditing.


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CODES OF CONDUCT

Comprises of 4 sections

Role of board of directors-it was proposed that

the executive directors be balanced by adequate

number of non-executive directors Role of non executive directors-the majority of

the board should be independent that non

executjve directors should be appointed only for a

shor period and there must be a formal process

for the appointment


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Executive directors- the main concern was

remuneration,and the pay should be set by the

remuneration committee,consisting mainly of non

executive directors

Financial reporting and controls- it was

recommended that properly constituted audit

committeesof the board be appointed and that

non executive directors report regularly on the

effectiveness of systems and internal financialcontrol.


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THANKYOU

Documents

1.Corporate Governance