CORPORATE

GOVERNANC
E
BY,
KISHNA K.
SHAMSHEER
MIDHUN
MARK J.
MAHENDRA
LOKESH

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 INTRODUCTION
Corporate governance is the system by which
organisations are directed and controlled.
The Corporate governance structure specifies the
distribution of rights & responsibilities among different
participants in the corporation,such as
board,managers,shareholders, & other stakeholders,
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.
FROM-Organisation from Economic Co-operation
and Development (April 1999)

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 DEFINATION
 BY Catherwood, Corporate governance means
that company manages its business in a manner
that is accountable & responsible to the
shareholders.In a wider interpretation,corporate
governance includes company’s accountability
to shareholders and other stakeholders such as
employees,suppliers,customers and local
community.

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 NEED OF
CORPORATE
GOVERNANCE
 The doubt of the effectiveness of company’s
accountability to its shareholders.
 Need for extending corporate accountability to
its employees,creditors,consumers & to society.
 Society’s expectations
 Hostile take-overs
 Complications of relationship of holding
company & its subsidries.

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 PRINCIPLES
 Transparency
 Accountability
 Independence
 Reporting

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CORPORATE
GOVERNANCE IN INDIA
THE MECHANISM
 There are six mechanism to ensure Corporate
governance in our country.
1. The Companies Act 1956
2. The SEBI Act 1992
3. A market for corporate control
4. Participation of block shareholders in the
governance of companies
5. Audit and
6. Code of conduct
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 COMPANIES ACT
1956
 To ensure and protect the rights and interests of
stakeholders
 Confers legal rights on shareholders
1. Vote on every resolution placed before an annual
general meeting
2. Elect directors who are responsible for specifying
objectives & lying down policies
3. Determine remuneration of directors & the CEO
4. Removal of directors
5. Take annual part in the annual general meetings

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 CII CODE ON
CORPORATE
GOVERNANCE
 CONSTITUTION OF THE BOARD
Any listed Co. with a turnover of Rs.100 cr.
& above should have independent, non
executive directors, who should constitute
at least 30% of the board if the chairman is
a non-executive director & at least 50% of
the Board if the chairman & M.D. is the
same person

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 continue
d

 Appointment of Directors
No single person should hold directorship in more
than 10 companies
 AUDIT COMMITTEE

Listed companies with a turnover of over Rs.100 cr

should setup audit committee consisting of at least 3
members all drawn from a companies non-executive
directors, who should have adequate knowledge of
finance of company & basic company law

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 SEBI CODE
 To promote & rise the standards of corporate governance among the
companies listed in NSE the SEBI appointed a committee on
corporate governance under the chairmanship of Kumar Manglam
Birla.
1. Board of directors
2. Audit Committee
3. Remuneration of Directors
4. Board Procedure
5. Management
6. Shareholders
7. Report on corporate governance
8. Compliance

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 PATTERN OF EQUITY
OWNERSHIP
Types of co. Director & Corporate Foreign Financial Public
relatives Bodies institution

Private 8.1% 33.8% 9.2% 4.4% 34.5%

companies
belonging to
business
houses

Private stand 21.6% 18.5% 7.2% 3.1% 46.5%

alone co.

Foreign co 0.8% 18.3% 42.0% 4.3% 22.45

Foreign stand 2.8% 13.8% 43.3% 1.7% 30.0%

alone co.

All 15.7% 23.8% 9.9% 3.5% 41.0%

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 K. BIRLA MANDATORY
COMMITTEE REPORT
The Board of every listed company shall have
an optimum combination of executive & non
executive directors with no less than 50% of
the board comprising of non-executive
directors

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RECOMENDATION
1. Companies must strictly comply with listing norms
2. Boards should meet atleast 4 times a year
3. Setting up of an audit committee having 3 non-executive
directors,majority of them being independent.
It should ensure that financial disclosures are
correct,sufficient and credible
4.Persons of calibre should be inducted as independent
directors & they must be capable of aking quality
contribution to the company.

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 contin
ued

5. A person can become director in a maximum of 10

companies
6.The board should delegate its power of share transfer to
transfer against register
7.Disclosure of quarterly reports by companies should be
mandatory
8.The use of postal ballot system in critical matters like
change of companies name, objectives, corporate
restructuring & further issue of shares through preferential
allotment

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 NON MANDATORY
RECOMENDATION
Financial institutions are not permitted in to the
Board except in the case of default or a
potential default

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SUGGESTIONS AND
REFERENCES
 Dr. Surekha Shenoy
 Corporate Governance

By Devi Singh & Subhash Garg

Corporate Governance
By Colley, Doyle, Logan & Stetinus
Principles & Practice of Management
By T. N. Chhabra

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