Corporate Governance

Introduction
Corporate Governance is the conduct of business in accordance with shareholders desires, which generally is to make as much money as possible, while conforming to the basic rules of the society embodied in law and local customs. - Milton Friedman

Objectives
1. 2. 3. 4. 5. 6. A capable board of directors. Balanced representation on the board. Transparent procedures and practices. Look after the concerns of shareholders. Information to shareholders. Monitoring the functioning of the management team. 7. Effective control of the company affairs all the time.

Basic principles
1. 2. 3. 4. Transparency and disclosure. Integrity and fairness. Accountability and responsibility. Value creation.

******** Governance and Management. Governance and Ethics.

1. 2. 3. 4. 5. 6. 7. 8.

Elements of good corporate governance Role and powers of Board. Legislation. Management Environment. Board Skills. Board Appointments. Board Induction and Training. Board Independence Board Meetings.

Contd..
9. 10. 11. 12. 13. 14. 15. Code of Conduct. Strategy setting. Business and community obligations. Financial and operational reporting. Monitoring the Board Performance. Audit Committees. Risk Management.

Factors influencing quality of corporate governance 1. 2. 3. 4. Integrity of the management. Ability of the board. Adequacy of the Processes. Commitment level of individual board members. 5. Quality of Corporate reporting. 6. Participation of stakeholders in the management.

Corporate governance in india

1. CII code of desirable corporate governance 1998. 2. Kumar Mangalam Birla Committee 2000. 3. RBI report on Corporate Governance 2001. 4. Naresh Chandra Committee 2002. 5. N.R. Narayana Murthy Committee 2003. 6. Revised clause 49 in 2003 and in 2004.

Revised clause 49 of Listing agreement

Effective from 1st April, 2005. Companies with paid up share capital of Rs. 3 crore or Net worth of Rs. 25 crore. Applicable to all listed companies including banks, insurance companies, financial institutions, etc. but not mutual funds. Companies have to submit compliance report every quarter.

Mandatory requirements
I. Board of Directors. A. Composition of Board. B. Non-Executive Directors Compensation and Disclosure. C. Other provisions as to Board and Committees. D. Code of Conduct.

II. Audit Committee. A. Qualified and Independent Audit Committee. B. Meeting of Audit Committee. C. Powers of Audit Committee. D. Role of Audit Committee E. Review of Information by Audit Committee.

III. Subsidiary Companies. IV. Disclosures. A. Basis of related party transactions. B. Disclosure of accounting treatment. C. Board Disclosures Risk Management. D. Proceeds from Public issue, rights issue, etc. E. Remuneration of Directors. F. Management. G. Shareholders.

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Information to be placed before Board of Directors.

Format of Quarterly compliance report on Corporate Governance. Suggested list of items to be included in the report on Corporate Governance in the Annual Report of Companies Non-mandatory Requirements.

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