The New Philosophy Of Business

Governance is that separate process or certain part of management or

leadership processes that make decisions that define expectations, grant power,
or verify performance.
Corporate Governance is the system, set of processes, customs, policies, and
laws by which business corporations are directed and controlled. The corporate
governance structure specifies the distribution of rights and responsibilities
among different participants in the corporation, such as, the board of directors,
management, shareholders and other stakeholders (include employees,
suppliers, customers, banks and other lenders, regulators, the environment and
the community at large) and spells out the rules and procedures for making
decisions on corporate affairs. By doing this, it also provides the structure
through which the company objectives are set and the means of attaining those
objectives and monitoring performance.

DEFINITION :"Corporate governance is a field in economics that investigates how to

secure/motivate efficient management of corporations by the use of incentive
mechanisms, such as contracts, organizational designs and legislation. This is
often limited to the question of improving financial performance, for example, how
the corporate owners can secure/motivate that the corporate managers will
deliver a competitive rate of return", ,
1. "Corporate governance - which can be defined narrowly as the relationship of
a company to its shareholders or, more broadly, as its relationship to society .", from an article in Financial Times

2. "Corporate governance is about promoting corporate fairness, transparency

and accountability" J. Wolfensohn, president of the Word bank, as quoted by
an article in Financial Times,.
.

Requirement

Of

Good

Corporate

Governance
According to the Australian standard on corporate governance (AS8000, 2003),
it requires a structural component requiring identification of requirements,
requirements of laws, codes, best practice, links to risk-requirement, and
reporting, so as to create a functioning series of systems and a maintenance
component requiring education and training, communications monitoring,
assessment, review, liaison and accountability. But, note that corporate
governance has neither a static, nor a prescribed form. The Australian standard
says, "there is no single model of corporate governance" (AS8000, 2003). The
OECD principles of corporate governance (OECD, 2004) says "To remain
competitive in changing world, corporations must innovate and adapt their
corporate governance practices so that they can meet new demands and grasp
new

opportunities.

The Nation Archives of Australia is a leader in developing records management

procedures, particularly in e-records. One that is of particular interest deals with
source records that have been copied converted or migrated. This policy allows
Commonwealth agencies to dispose of source records that have been copied or
converted if proper processes are in place. But the procedure also requires,
importantly, that the policy can be put in place only. If it has been implemented
with the "explicit agreement" of the head of the agency. This means that the
agency head must be satisfied of the integrity of the IT and administrative
systems in place for the copying of the source records before the policy is
adopted and source records are destroyed. Boards and other governing bodies

for records management throughout an organization should also undertake such

high level sign off on records management policies. So requirement of good
corporate governance may be summarized as follows:
due process doing things in an agreed, documented, controlled and
appropriate way.
transparency- doing things in a way which is open to appropriate way.
Accountability- having to answer for the things one does.
compliance- having systems to ensure that things are done properly.
laws- meeting applicable legal obligations.
Security- having systems to ensure protection of information

Purpose Of Corporate Governance

1. Protecting shareholders wealth.
2. Enhancing the wealth through proper utilization of assets.
3. Maintenance of that wealth and not frittering away in unconnected and
non profitable venture.
4. through expropriation, and above all safeguarding he interests of the
shareholders.
The main objective behind corporate governance is to protect long term share
holder value along with the other stakeholders. It is the foundation to build market
confidence and encouraging stable and long term investment flows. Corporate
institutions should have a sound frame work for their operation to achieve their
objective and creating wealth for the welfare of the society as a whole. Corporate
governance is very wide term, which covers a wide range of activities that relate
to the way business organization is directed and governed to the way buoverned.

Objectives of corporate governance are as

follows :
1. Enhancement of shareholder value, keeping in view the interest of other
stakeholder.
2. follow provisions of the companies Act, FEMA factory Act and other statutes .
3. deloy the funds of the company in attaining institutional goal as enshrined in
the memorandum.
4. utilize funds taken from financial institutions and the capital market for the
purposes for which they were intended.
5. develop core competence to effectively manage its diversifications.
6. manage and check the diversification of funds by the way of loans, advances
or investment to subsidiary or investment companies.
7. control over the bad practices .
8. conduct ethical and fair practices towards its share holders, customers,
suppliers, employees and the public at large.
9. provide complete information to the directors on the working of the company.
10.motivate institutional and non executive directors to play active role in the
functioning of the company.
11.make internal control sound and powerful.
12. adopt transparent financial reporting and audit practices and the accounting
practices.

principles of corporate governance

Rights and equitable treatment of shareholders : Organizations

should respect the rights of shareholders and help shareholders to
exercise those rights. They can help shareholders exercise their rights by
effectively communicating information that is understandable and
accessible and encouraging shareholders to participate in general
meetings.

Interests of other stakeholders: Organizations should recognize

that they have legal and other obligations to all legitimate stakeholders.

Role and responsibilities of the board: The board needs a range

of skills and understanding to be able to deal with various business issues
and have the ability to review and challenge management performance. It
needs to be of sufficient size and have an appropriate level of commitment
to fulfill its responsibilities and duties. There are issues about the
appropriate mix of executive and non-executive directors.

Integrity and ethical behavior: Ethical and responsible decision

making is not only important for public relations, but it is also a necessary
element in risk management and avoiding lawsuits. Organizations should
develop a code of conduct for their directors and executives that promotes
ethical and responsible decision making. It is important to understand,
though, that reliance by a company on the integrity and ethics of
individuals is bound to eventual failure. Because of this, many
organizations establish compliance and ethics programs to minimize the
risk that the firm steps outside of ethical and legal boundaries.

Disclosure and transparency: Organizations should clarify and

make publicly known the roles and responsibilities of board and
management to provide shareholders with a level of accountability. They
should also implement procedures to independently verify and safeguard
the integrity of the company's financial reporting. Disclosure of material
matters concerning the organization should be timely and balanced to
ensure that all investors have access to clear, factual information.

TRANSPARENCY-: This means accurate, adequate and timely

disclosure of relevant information to the stakeholders. It is not at all
possible to make any progress towards better governance without
transparency. But it is seen that information sharing is hindered under the
excuse of confidentiality. There is need to move towards international
standards in terms of disclosure of information by the corporate sector and
through this the companies develop a high level of public confidence in
business. The scenario at international level makes transparency and
disclosure the key pillars of corporate governance.

Issues involving corporate governance principles include

oversight of the preparation of the entity's financial statements

internal controls and the independence of the entity's auditors

review of the compensation arrangements for the chief executive officer and
other senior executives

the way in which individuals are nominated for positions on the board

Importance Of Corporate Governance

* Corporate governance has succeeded in attracting a good deal of public

interest because of its apparent importance for the economic health of
corporations

and

society

in

general.

* Corporate governance provides the structure through which the objectives of

the company are set, and the means of attaining those objectives and monitoring
performance are determined.
* Corporate governance provides proper incentives for the board and
management to pursue objectives that are in the interests of the company and
shareholders and should facilitate effective monitoring, thereby encouraging firms
to use resources more efficiently
* Corporate governance is used to monitor whether outcomes are in accordance
with plans and to motivate the organization to be more fully informed in order to
maintain or alter organizational activity. Corporate governance is the mechanism
by which individuals are motivated to align their actual behaviors with the overall
participants.

* Corporate governance is a tool for competitive advantage. Normally when we

look at the issue of competitive advantage from a managerial point of view, we
can look at those factors, which are within the control of the enterprise. This
relates to the focus on quality, productivity as well as innovation, which are the
basic requirements, in a highly competitive environment. This is needed for
getting the competitive edge in a market where the customer is king.

* The corporate governance framework should ensure the equitable treatment of

all shareholders, including minority and foreign shareholders. All shareholders
should have the opportunity to obtain effective redress for violation of their rights.

* The corporate governance framework recognizes the rights of stakeholders as

established by law and encourage active co-operation between corporations and
stakeholders in creating wealth, jobs, and the sustainability of financially sound
enterprises.
* The corporate governance framework ensures the timely and accurate
disclosure of all material matters regarding the corporation, including the financial
situation, performance, ownership, and governance of the company. A strong
disclosure regime can help to attract capital and maintain confidence in the
capital markets. Disclosure also helps improve public understanding of the
structure and activities of enterprises, corporate policies and performance with
respect to environmental and ethical standards, and companies' relationships
with

the

communities

in

which

they

operate.

Related Parties To Corporate Governance

Parties involved in corporate governance include the regulatory body (e.g. the
Chief Executive Officer, the board of directors, management and shareholders).
Other stakeholders who take part include suppliers, employees, creditors,
customers and the community at large.
A Board of Directors often plays a key role in corporate governance. It is their
responsibility to endorse the organization's strategy, develop directional policy,

appoint,

supervise

and

remunerate

senior

executives

and

to

ensure

accountability of the organization to its owners and authorities.

All parties to corporate governance have an interest, whether direct or indirect, in
the effective

performance of the organization. Directors, workers and

management receive salaries, benefits and reputation, while shareholders

receive capital return. Customers receive goods and services; suppliers receive
compensation for their goods or services. In return these individuals provide
value in the form of natural, human, social and other forms of capital.

Players In Corporate Governance

Corporate governance systems vary across countries and these differences
directly affect both the process for developing global strategies that can be
adopted. Global strategic decision poses a very tough test for the effectiveness
of corporate governance system. They seek maximize profit and global
competitiveness.
There are five critical stakeholder players that affect the company's decision.
They are
(1)

Employees

(3)

Shareholders

(2)

The management teams

(4) Board of directors (5) Government

Employees: The main variable differentiates employees as a collective group

across countries. The country's labour market will influence the flexibility and
mobility of employees. Country such as the U.S that have employment at will
where by a contract can be terminated at any time are likely to have flexible
labour market and short term labour commitment. In more rigid labour markets
such as Germany and Japan companies invest a great deal in bespoke in house
training that tends to result in more highly skilled labour forces and company

specific skills. These in turns are less transferable from one company to another.
For example in France, the union rights are extended to all employees regardless
of union affiliation. Here unionization will have greater influence on corporate
decision making than in U.S or U.K where only union members benefits from
collective bargaining agreements. Japanese companies tend to have enterprise
unionism, which leads to collective bargaining at company level, and grant a
strong voice to employees. In 2004 for example employee opposition to job
losses prevented the restructuring via. Merger with a foreign partner of France
who is financially troubled Alston, a major producer of ships and trains. In the
same year Volkswagen despite suffering from very high labour cost had to
promise its Western Germany employees job security until 2011 in exchange for
a wage freeze until 2007 and more flexible working hours. The company workers
wield considerable power partly through co-determination rights that require
employees to be consulted on corporate decision.

Top Management Teams: Managers in U.S and U.K tend to have

professional background and strong functional background in finance or
marketing. This is not the case in Germany where managers are more technical
oriented. There is also variation in the international experience and background
of managers. Managerial career mobility tends to be very fluid in U.S and U.K
due to open labour markets. In Japan and France managers tend to remain with
a company for a long period of time. There is also wide acceptance of leaders
from across boarders in the U.K

Shareholders: Countries vary in their mix types of shareholders. At one

extreme the U.S and U.K have mostly arms length, natural shareholders who are
focused on shareholder value maximization. Employee shareholders typically
use their ownership to block the global relocation of jobs. This applies even in the
U.S where united Airlines provide a rare example of a large public company with

majority ownership (55 percent owned by an employee stock ownership plan).

This employee stake and hence control have greatly constrained the ability of the
Airline to relocate job overseas.

Government:intervention is usually in the form of market regulation . A

representative measure for government intervention in the economy is regulation
around takeovers. In countries such as France, Germany, Italy and Japan
government intervention often provide strong takeover barrier such as golden
shares, which bestow on the holder veto power over changes to the company's
charter. The variation hindrance to hostile takeovers in many continental
European countries continues to make it difficult for foreign companies to make
acquisition across border in Europe. In 2001 plans for a European takeover code,
which would guarantee the right of shareholder to be consulted during bids were
shelved following objection from German government. The previous year
Vodafone, the U.K telecoms company made a successful hostile bid for
Mannesmann, a German telecoms company and the German government was
worried that other local companies might fall into foreign land. For example
Volkswagen is protected from takeover by special law. Sweden, which fall in the
continental governance model that use multiple voting rights to help and prevent
its companies from becoming vulnerable to takeover. France is also particularly
active in preserving national ownership of major companies.

LEARNINGS

1.Analyze the movement of market.

2. Designing questionnaire.
3. Taking feedback from existing franchises.
4. Converting other franchises, by negotiating over brokerage and commission.
5.Analyzing portfolio of HNIs.
6. Regular presentation over topics assigned.
7. To find out the grey areas of the organization.
8. How to analyze equity.
9.How to analyze index value :- current market capitalization X base value. Base
market capitalization
10. How to calculate net asset value:Sum of market value of shares
+ Liquid assets
+ Dividends/interest accrued
- amount due on unpaid assets
- Expenses accrued but not paid
No. of shares outstanding
11. CLEARING MECHANISM OF STOCK EXCHANGE.

FACT&FINDINGS
1. According to the survey most of the customers of WIPRO ltd says that it is
pocket friendly.
2. Coming to faith 70% say WIPROLtd is better than others stock brokers due to
customers satisfaction.
3. Lack of promotional activities undertaken by WIPRO securities Ltd. in Pune
Region.
4. Main purposes of investments are returns & liquidity.
5. Investors take risk as well as returns into their mind while making the
investment.
6. Businessmen are more interested in the stock market than the others.
7. Commodity market is less preferred by the investors, might because of less
awareness about commodity market.
8. People want to invest their money in the security market but they have not the
proper knowledge.
9. People pay more emphasis on brokerage than service provided by brokerage
houses.
10. 3 elements affects the economy of any country:1) GOLD, 2) CRUDE OIL, 3) U.S DOLLAR
.

BIBLIOGRAPHY
Books & magazines:
I have read & collected some matter from the books of my syllabus. I have got
some knowledge about the meaning of corporate governance from magazines of
Institute Of Charted Accountance which is provided by my supervisor & guide.

Websites: