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V It is the regulatory system which directs and controls operations of the

business corporations.
V Corporate governance assigns the responsibilities and rights to the top
level management, middle level managers, shareholders and other

V ñ  

V ñ  


V 2thical issues
V 2fficiency issues
V Accountability issues

V 2thical issues:- 2thical issues are concerned with the problems of fraud
such as bribes, giving gifts to the potential customers and lobbying under
the cover of public relations in order to achieve their goal.
V 2fficiency issue:- 2fficiency issues are concerned with the performance of
management. Management is responsible for ensuring reasonable returns
on the investment made by shareholders.
V Accountability issues:- Accountability issues are concerned with the
transparency of management in the conduct of business. Corporation must
be transparent and answerable to its shareholders and stakeholders in every
step of its business.
ñhere are basically four models of corporate governance. ñhese models are
V Anglo- American Model
V German Model
V Japanese Model
V Indian Model
In this model shareholders elect the board of directors. ñhe board of directors
performs the following functions:
V Representations
V Directions
V Oversight

ñhe board appoints and supervises the managers who take care of daily
activities of the organization. In Anglo-American model stakeholders are
2mployees, Suppliers and Creditors. ñhis model is most suitable for the
production and manufacturing organization.
V In German model shareholders do not directly control the governance
V ñhe board of directors is not elected by shareholders only. Half of the
members are elected by labor unions and half of the members are elected
by shareholders.
V ñhe board of directors appoints and monitors the management board. ñhe
management board has to give report of daily activities to the board of
V In this model employees are not just stakeholders but they are also have a
important role in governance mechanism.
V In Japanese model board of directors is elected by shareholders and
financial institutions.
V In this model president is elected on the consensus of both shareholders
and banks. Sometimes the financial institutions monitor the management
function by nominating the managerial personnel.
V ñhe banks have power to suspend the board in case of emergency.
Indian model is mix of Anglo-American and German models. In India
corporations are divided into three categories:-

x Private Companies
x Public Companies
x Banks and other corporations

x In case of private companies the founder, his family and associates closely
held the private companies. ñhey have maximum control over the
activities of the company. For example: ñata group, Reliance Group
x In case of public enterprises, the central and state governments select the
board of directors. 2ven after the divestment of some public companies,
Government continues to have a considerable hold over the activities of
the company.