Development is US

Water gate Scandal

Foreign & Corrupt Practices Act, 1977
Securities & Exchange Commission 1979
Treadway Commission 1987

Developments in UK
BCCI Scandal
Failure of Baring Bank
COSO


Corporate Governance Committees
Cadbury report
Paul Ruthman Committee
Greenbury Committee 1995
Hampel Committee 1995
Combined Code, 1998
Turnbull Committee, 1999
Cadbury Committee on Corporate
Governance (1992)
The stated objective of this report was
to help raise the standards of corporate governance
and the level of confidence in financial reporting and
auditing by setting out clearly what it sees as the
respective responsibilities of those involved and what it
believes in expected of them-

Code of best practices in December, 1992
Cadbury report of best practices has 19 recommendations
Recommendations are guidelines
Cadbury Committee on Corporate
Governance (1992)
Guidelines are related to the:
BOD
NED
ED
Reporting and control

The Paul Ruthman Committee
It is constituted to deal with the controversial
parts of Cadbury report
The Greenbury Committee, 1995
Set up in Jan, 1995 to
identify good practices by
the CBI, Confederation of
British Industry
Aimed to provide answers
about accountability
Allocation of responsibility
Produced Greenbury Code of
Best Practice which was
divided into four sections:


Greenbury
Code of
Best
Practice
Remuneration
Committee
Disclosures
Remuneration
Policy
Service
contracts and
compensation
The Hampel Committee, 1995
Further development of Cadbury report
Auditors should report privately to directors
Directors should maintain and review all
controls
Companies should add internal audit function
The Combined Code 1998
Derived from Hampel committees final
report, Cadbury report and Greenbury report
Sound systems of internal control
Lesson from the past; effective risk
management
The Turnbull Committee
Set up by the Institute of Chartered
Accountants in England and Wales (ICAEW) in
1999 to provide guidance to assist companies
in implementing the requirements
Corporate governance is not a static concept,
infact it is dynamic and thus needs to be
altered with the changes that occur in the
business environment.
World Bank on Corporate Governance
One of the earliest International organizations to
study the issue of corporate governance
Principles such as transparency, accountability,
fairness and responsibility are universal in their
application
Governance initiatives when driven from the
bottom up rather than top down
The aim is to align as nearly as possible the
interests of individuals, corporations and society
Openness is the basis of public confidence in the
corporate system
OECD Principles
Has strongly promoted good corporate
governance by the implications of following
corporate governance guidelines:
1. Rights of shareholders
2. Equitable treatment of shareholders
3. Role of stakeholders in corporate governance
4. Disclosure and transparency
5. Responsibilities of the board
12
McKinsey Survey on Corporate
Governance
According to McKinsey survey, Good corporate
governance increases market valuation by
following ways:
Increasing financial performance
Transparency of dealing, thereby reducing
the risk that boards will serve their own
self-interest
Increasing investor confidence
McKinsey Survey on Corporate
Governance
McKinsey rated the performance on corporate
governance of each company based on the following
parameters:
Accountability
Transparent ownership, Board size, Board accountability,
Ownership neutrality
Disclosure and Transparency of the Board
Timely and accurate disclosure, Independent Directors
Shareholder equality
One share, One vote

Sarbanes-Oxley Act, 2002
This act calls for protection to those who have the
courage to bring frauds to the attention of those
who have to handle frauds
It ensures that such things are not left to the
individuals who may or may not choose to reveal
them
SOX Act is a sincere attempt to address all the
issues associated with corporate failures to
achieve quality governance and to restore
investors confidence

Sarbanes-Oxley Act, 2002
SOX Act has established following improved provisions:
Establishment of Public company Accounting Oversight
Board
Audit committee
Following critical accounting policies should be directly reported to
audit committee:
Conflict on interest
Audit patron rotation
Improper influence on conduct of audits
Prohibition of non-audit services
CEOs and CFOs are required to affirm financials
Loans to directors
Attorneys
Securities analysts
Penalties