CORPORATE GOVERNANCE

• PRACTICES BY INDIAN COMPANY

60 TH EXECUTIVE DEVELOPMENT
PROGRAMME ICSI

BY ABHINAY AGARWAL 120543355/08/2011

PRIYA AGARWAL 140055045/08/2013
KANCHAN MUNDHRA 120469201/02/2011
NEHA BAID 140073127/02/2014
PRIYANCA DESAI 140067668/02/2014
LAXMI SARAF 120440382/08/2010
 INTRODUCTION
• Inadequacies and failure of an existing system often bring to the
force the need for norms and codes to remedy them. This is true of
corporate governance too.
• Deficiencies in the Accounting Standards became more evident
after many companies, in their eagerness to increase earnings and
accelearte growth, exploited the weaknesses in the accounting
standards to show inflated profits and understate liabilities.
• Followings CII s initiative, the Securities and Exchange board of
India (SEBI) set up a committee under kumar Mangalam Birla to
design a mandatory- cum-recommendatory code for listed
companies.
• Following CIIs and SEBI, the Department of Company Affairs (DCA)
modified the Companies Act 1956 to incorporate specific corporate
governance provisions regarding independent directors and audit
committees
In 2001-2002 certain accounting standards were modified to futher improve financial
disclosures.

1. Disclosure of related party transactions.

2. Disclosure of segment income: revenues, profit and capital employed
3. Deferd tax liabilities or assets
4. Consolidation of accounts.
SIGNIFICANCE
OBJECTIVE OF STUDY
SCOPE OF STUDY
METHODOLOGY
 LIMITATION
SATYAM VADA
MAJOR POINTS DHARNAM CHARA
1. NO PROPER STRUCTURE
2. NO GOVERNMENT SUPPORT
3. INSIDER TRADING
4. BASIC OF INDIAN MODEL
5. FAMILY OWNED BUSINESS
6. NON COMLIANCE WITH
DISCLOSURE
 1. No Proper Structure

There is still lack of awareness about its various issues, like, quality and frequency
of financial and managerial disclosure, compliance with the code of best practice,
roles and responsibilities of Board of Directories, shareholders rights, etc. There
have been many instances of failure and scams in the corporate sector, like
collusion between companies and their accounting firms, presence of weak or
ineffective internal audits, lack of required skills by managers, lack of proper
disclosures, non-compliance with standards, etc. As a result, both management
and auditors have come under greater scrutiny.

2. No Government Support

The public over the recent scandals has made it clear that the status quo is no
longer acceptable: the public is demanding accountability and responsibility in
corporate behavior. It is widely believed that it will take more than just
leadership by the corporate sector to restore public confidence in our capital
markets and ensure their ongoing vitality.
3. Insider Trading

Corporate insiders like officers, directors and employees by the virtue of their
position have access to confidential information about the corporation and may
misappropriate that information to reap profits.
However, the term is frequently used to refer to a practice in which an insider or a
related party trades based on material non-public information obtained during the
performance of the insider’s duties at the corporation, or otherwise in breach of
a fiduciary or other relationship of trust and confidence or where the non-public
information was misappropriated from the company.

4. Basis of Indian Model

The problem in the Indian corporate sector is that of disciplining the dominant
shareholder and protecting the minority shareholders. Clearly, the problem of
corporate governance abuses by the dominant shareholder can be solved only by
forces outside the company itself. In an environment in which ownership and
management have become widely separated, the owners are unable to exercise
effective control over the management or the Board.
 4. FAMILY OWNED BUSINESS

Family-owned business- Family-owned companies are characterized as

organizations in which the shareholders belong to the same family and
participate substantially in the management, direction, and operation of the
company. A family business refers to a company where the voting majority is
in the hands of the controlling family; including the founder(s) who intend to
pass the business on to their descendants.[xiii] Many Indian businesses are
old family establishments and while controlling shareholders may welcome
cash infusions by outside investors, but they may hesitate to relinquish
control.

6. NON COMLIANCE WITH DISCLOSURE

1. Noncompliance with disclosure norms and even the failure of auditor’s reports to conform to
the law attract nominal fines with hardly any punitive action.
2. One of the big problems with Indian corporate governance is that too many listed companies
and directors follow the letter of the law, rather than the spirit. Clause 49 of the country’s listing
rules sets out a series of corporate governance regulations. For example, a listed company must
have a non-executive and one-third of its board should be non-executive directors. The
nonexecutives should be on the board to challenge management, but in reality they tend not to.
IF MANAGEMENT IS ABOUT RUNNING
THE BUSINESS , CORPORATE
GOVERANCE IS ABOUT SEEING THAT IT
IS RUN PROPERLY

ALL COMPANIES NEED MANAGING AND

GOVERNING
CORPORATE GOVERNANCE REFER TO SET OF SYSTEMS, PRINCIPLES AND PROCESSES BY
WHICH A COMPANY IS GOVERNED.

THEY PROVIDE THE GUIDELINES AS TO HOW THE COMPANY CAN BE DIRECTED OR

CONTROLLED SUCH THAT IT CAN FULFIL ITS GOALS AND OJECTIVE IN A MANNER THAT
ADDS TO THE VALUE OF THE COMPANY AND IS ALSO BENEFICIAL FOR ALL ITS STAKE
HOLDERS IN THE LONG TERM.

STAKEHOLDERS IN THIS CASE WOULD INCLUDE EVERYONE RANGING FROM THE

BOARD OF DIRECTOR, MANAGEMENT, SHAREHOLDER TO CUSTOMER, EMPLOYES AND
SOCIETY.

THE MANAGEMENT OF THE COMPANY HENCE ASSUMES THE ROLE OF THE TRUSTEE
FOR ALL THE OTHER.

YOU CAN FOOL THE PEOPLE SOME OF THE TIME, AND SOME OF THE PEOPLE ALL THE
TIME, BUT YOU CANNOT FOOL ALL THE PEOPLE ALL THE TIME.