CORPORATE

GOVERNANCE
Corporate Governance
Corporate Governance is the application of
best management practices, compliance of
law in true letter and spirit and adherence to
ethical standards for effective management
and distribution of wealth and discharge of
social responsibility for sustainable
development of all stakeholders.
Conduct business in accordance with
of
shareholders (maximising wealth)
while confirming desires
to the basic rules of the
society embodied in the Law and
Local Customs
Corporate Governance
Relationships among various participants in
determining the direction and performance of
a corporation.
Effective management of relationships
among
– Shareholders
– Managers
– Board of directors
– employees
– Customers
– Creditors
– Suppliers
 CORPORATE GOVERNANCE

Corporate Governance may be defined “as a

set of systems, processes and principles which
ensure that a company is governed in the
best interest of all stakeholders”. It is the
system by which companies are directed and
controlled.
It is about promoting corporate fairness,
transparency and accountability.
 CONCEPT
• It involves a set of relationships between a
company’s management, its board, its
shareholders and other stakeholders;
• It deals with prevention or mitigation of the
conflict of interests of stakeholders.Ways of
mitigating or preventing these conflicts of
interests include the
processes, customs, policies, laws, and
institutions which have impact on the way a
company is controlled.
• An important theme of corporate governance is
the nature and extent of accountability of people
in the business, and mechanisms that try to
decrease the principal–agent problem.
 OBJECTIVES
• A properly structured board capable of taking
independent and objective decisions is in place at
the helm of affairs;
• The board is balance as regards the
representation of adequate number of non-
executive and independent directors who will
take care of their interests and well-being of all
the stakeholders;
• The board adopts transparent procedures and
practices and arrives at decisions on the strength
of adequate information;
 OBJECTIVES
• The board has an effective machinery to
subserve the concerns of stakeholders.
• The board keeps the shareholders informed of
relevant developments impacting the
company;
• The board effectively and regularly monitors
the functioning of the management team;
• The board remains in effective control of the
affairs of the company at all times.
 ADVANTAGES OF CORPORATE
GOVERNANCE
• Enhanced Performance- helps a company improve
overall performance.
 Without corporate governance, a company tends to be
weak and sluggish.
• Access to Capital- The better corporate governance a
company has, the more easily it can access outside
capital that the business can use to fund its projects.
 Since corporate governance includes major
shareholders, it connects investors with the business
itself, and these investors use their resources and
contacts to support the company monetarily.
• Better Standards- Corporate governance makes many
decisions about business operations, but one of the most
important decisions involves corporate standards.
 Standards affect the quality of products and the goals that the
business has in technology, customer service, and marketing.
• Better Talent Utilization- With a strong corporate
governance structure, people can find positions that
utilize their talents more effectively, and the board of
directors and top leaders of the business are always
looking to add more talented people to their numbers.
 DISADVANTAGES OF CORPORATE
GOVERNANCE
• Easily Corruptible-Corporate governance needs a certain level of
government oversight to avoid increasing levels of corruption. The lack of
governmental oversight in corporate governance lead to a misallocation of
credit that actually worked against competition.
• Family-Owned Companies- Corporate governance works at its best
when shareholders and board members are able to make objective decisions that
are in the best interest of the company. According to Ibis Associates, a business
planning firm, family-run corporations (founding family members own controlling
share of the company), such as Ford and Wal Mart, lose objectivity in business
making decisions due to the family's financial investment in the business'
performance and the emotional ties associated with building a worldwide
corporation from the ground up.
• Costs of Monitoring- To effectively govern a publicly traded
corporation, shareholders must speak with one voice and have enough
votes to allow that voice to have any real weight. This requires individuals
that have a collective vision for the company to pour more money into
that company to gain a controlling share.
Why Corporate Governance?
Better access to external finance
Lower costs of capital – interest rates
on loans
Improved company performance
– sustainability
Higher firm valuation and share
performance
Reduced risk of corporate crisis
and scandals
Principles of Corporate Governance
Sustainable development of all stake
holders- to ensure growth of all individuals
associated with or effected by the enterprise
on sustainable basis
Effective management and distribution of
wealth – to ensue that enterprise creates
maximum wealth and judiciously uses the
wealth so created for providing maximum
benefits to all stake holders and enhancing its
wealth creation capabilities to maintain
sustainability
 Discharge of social responsibility- to ensure that
enterprise is acceptable to the society in which it is
functioning
 Application of best management practices- to
ensure excellence in functioning of enterprise and
optimum creation of wealth on sustainable basis
 Compliance of law in letter & spirit- to ensure value
enhancement for all stakeholders guaranteed by the
law for maintaining socio-economic balance
 Adherence to ethical standards- to ensure
integrity, transparency, independence and
accountability in dealings with all stakeholders
Four Pillars of Corporate Governance
Accountability
Fairness
Transparency
Independenc
e
Accountability
Ensure that management is accountable to
the Board

Ensure that the Board is accountable

to shareholders
Fairness
Protect Shareholders rights

Treat all shareholders

including minorities, equitably

Provide effective redress for

violations
Transparency

Ensure timely, accurate disclosure on all

material matters, including the financial
situation, performance, ownership and
corporate governance
Independence
Procedures and structures are in place so
as to minimise, or avoid completely conflicts
of interest

Independent Directors and Advisers i.e.

free from the influence of others
Elements of Corporate Governance
Good Board practices

Control Environment

Transparent disclosure

Well-defined shareholder
rights

Board commitment
Good Board Practices
Clearly defined roles and authorities

Duties and responsibilities of

Directors understood

Board is well structured

Appropriate composition and mix of

skills
Good Board procedures
Appropriate Board procedures

Director Remuneration in line with best

practice

Board self-evaluation and training

conducted
Control Environment
Internal control procedures

Risk management framework present

Disaster recovery systems in place

Media management techniques in

use
Control Environment
Business continuity procedures in place

Independent external auditor conducts

audits

Independent audit committee established

Control Environment
Internal Audit Function

Management Information systems

established

Compliance Function established

Transparent Disclosure
Financial Information disclosed

Non-Financial Information disclosed

Financials prepared according to

International Financial Reporting Standards
(IFRS)
Transparent Disclosure
Companies Registry filings up to
date

High-Quality annual report published

Web-based disclosure
Well-Defined Shareholder Rights
Minority shareholder rights
formalised

Well-organised shareholder
meetings conducted

Policy on related party transactions

Well-Defined Shareholder Rights
Policy on extraordinary transactions

Clearly defined and explicit dividend

policy
Board Commitment
The Board discusses corporate
governance issues and has created a
corporate governance committee
The company has a corporate
governance champion
A corporate governance improvement
plan has been created
Appropriate resources are committed
to corporate governance initiatives
Board Commitment
Policies and procedures have been
formalised and distributed to relevant staff
A corporate governance code has
been developed
A code of ethics has been developed
The company is recognised as a
corporate governance leader
Other Entities
Corporate Governance applies to all types of
organisations not just companies in the
private sector but also in the not for profit and
public sectors

Examples are
NGOs, schools, hospitals, pension
funds, state-owned enterprises
CASE STUDY :
Typ Public
e NASDAQ: GOOG
Traded as NASDAQ-100 Component
S&P 500 Component
Industry Internet, Computer software
Menlo Park, California, U.S.
Founded
(September 4, 1998 (1998-09-04))[1][2]
Founder(s) Sergey Brin, Larry Page
Headquarters Mountain View, California, United States
Area served Worldwide
Larry Page
(Co-Founder & CEO)
Key people Eric Schmidt
(Executive Chairman)

Revenue US$ 37.905 billion (2011)

Operating income US$ 11.632 billion (2011)
Profit US$ 09.737 billion (2011)
Total assets US$ 72.574 billion (2011)
Total equity US$ 58.145 billion (2011)
Employees 33,077 (2012)[3]
AdMob, DoubleClick, On2 Technologies,
Subsidiaries
 Corporate Governance Guidelines
 Google’s motto is ‘do not be evil’. They believe these words relate to the way they
serve their users.
 Their code message is that Google strives towards the highest possible standards
of ethical behaviour.
 Following are the seven principles they look at in arriving at their goal:
SERVING THEIR USERS
They have flourished by serving the interests of their users. Their goal is to build
products that organize the world’s information and make it available to their users.

 Usefulness: products and services to be user friendly and useful to their

customers.

 Honesty: they want clear and truthful communication with their customers.

 Responsiveness: they want to be responsive to the user feedback about

their and services.

 Action oriented: they want their product and services to their customers
to
be useful and in case they are not then, they
take appropriate action to make it useful
 RESPECT FOR EACH OTHER AMONG
EMPLOYEES
 They create an ambience in which employee can reach to
his full, potential as follows:
 Employment provides equal opportunity to all employees, without
any discrimination.
 Harassment and discrimination is totally absent from the firm.
 Drugs and alcohol use is not accepted in the firm at all.
 Carrying of weapons and any type of violence by the employees
is strictly not accepted.
AVOIDANCE OF CONFLICT OF
INTEREST
 Avoidance of conflict of interest is achieved by the following methods:
 Openness and transparency is important to work ethics.
 Personnel investment in the firm’s equity is done only after the approval of the
board of directors.
 Gifts and entertainments are allowed to be accepted as long as these are of
low value and do not impact on the firm’s decisions with regard to those
offerings these gifts or entertainment.
PRESERVING
CONFIDENTIALITY
The confidential information could be any of the following:
 Financial information, product information and user information, the
information can be given in select cases on a need to know basis only.
 Trademarks, logos and copyrights. The name of Google products and services
and the logos connected to these are the firm’s intellectual property and
unauthorized use could damage their image.
 Google partners should not give or receive any confidential information
unless they have cleared with the firm’s legal department.
 Google wants to give the same respect to competitive information as
they expect their competitors would give theirs
 Google does not want its employees to even discuss confidential information
on the net or anywhere else, unless the person has been specially authorize
to do
BOOKS AND RECORD-KEEPING
 Google believes in accuracy in reporting the financial analysis of the
firm. Every member of the Google team has the responsibility of seeing
that the books are maintained accurately. No one should ever try to
influence the auditing of Google’s financial accounts.
 The employees are supposed to co operate with accounting and
financial teams; auditors to ensure that the book are accurately
maintained.
 The employees must report any irregularities if they observe them, even the
small problems when they are not as per the firm’s reporting of Financial and
Accounting Concerns Policy.

GOOGLE ASSETS
 It is expected that the employees will take care to conserve the firm’s assets
and equipment. They are provided with all the required tools for the job
they perform.
 The firm’s computers, telephones and other communication equipments are
crucial aspects of the firm’s property and these must be looked after well.
 While buying from third parties the employees are to get the best bargains
of the firm. All contracts must be vetted by the firm’s legal department and
signed by only the authorized signatories.
LAWS

 The firm takes the responsibility of complying with the laws of the land and
when in doubt about the interpretation of any law the employees are to get
in touch with the firm’s legal department.
 The firm wants from its employee’s full compliance with the Foreign Corrupt
Practices Act, export control regulations, antitrust laws and other trade
regulation statutes. In case of accepting gifts, any item of value would be
considered as taking a bribe.
 Any violation of antitrust law by the employees would not be accepted.

CODE OF CONDUCT

 The firm believes that it is not possible to be fully comprehensive with

regard to the code of conduct: they want the employees to refer to the legal
department in case of any doubts in any matter of ethics.
end