Corporate governance
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This document provides an overview of corporate governance. It defines corporate governance as the set of arrangements that define the relationship between corporate owners and managers. It discusses two models of corporate governance: the market/shareholder model and control/stakeholder model. The document also outlines the OECD principles of corporate governance, historical perspectives, issues in corporate governance, and the benefits of good corporate governance practices. Finally, it discusses concepts of corporations and governance as well as obligations to stakeholders like employees, customers, and managers.
Corporate governance
- 1. Visvesvaraya Technological University Belgavi, P.G. Centre Kalaburagi - 585105 Presented By :SOURABH & ISRAR
- 2. Module:2 CORPORATE GOVERNANCE • Introduction to CG • Definition of CG • Market model and Control model • OECD on corporate governance • Historical perspective of CG • Issues in CG • Relevance of CG • Benefits of good CG • Concept of corporate • Concept of governance • Theoretical basis for CG • Obligation to society • Obligation to investors • Obligation to employee • Obligation to customers • managerial obligation • Indian cases • Needs and importance of CG
- 3. Introduction of corporate governance corporate governance is a dynamic aspect of business. The term governance derived from latin word Gubernate meaning to ‘steer’ usually applying to steering of a ship. There were several frauds and scams in the corporate history. it was felt that system for regulation is not satisfactory. These regulation should penalize the wrong doers, while those who adhere the rules and regulation, should be motivated market forces.
- 4. defnition Definition of corporate governance “corporate governance can be viewed as set of arrangement internal to the corporation that define the relationship between the owners and managers of the corporation” According to shleifer and vishny Corporate governance deals with the ways in which suppliers of finance to corporation assure themselves of getting a return on their investment
- 5. Two models of Corporate Governance • Market model (shareholders) model • Control model(stakeholders) model
- 6. The outsider model • A priority to market regulation • the owners of firms tend to have a transitory interest in the firm • The absence of close relationships between shareholders and management • the existence of an active `market for corporate control´ - takeovers, particularly hostile ones • the primacy of shareholder rights over those of other organisational groups
- 7. The insider model • The priority to stakeholders control • The owners of firms tend to have an enduring interest in the company • They often hold positions on the board of directors or other senior managerial positions • The relationships between management and shareholders are close and stable • There is little by way of a market for corporate control • the existence of formal rights for employees to influence key managerial decisions
- 8. OECD on corporate governance • Rights and equitable treatment of a shareholders • Interest of other stakeholders • Role and responsibility of the board • Integrity and ethical behavior • Disclosure and transparency
- 9. Historical perspective • The concept of governance is as old as human civilization • Manu Dharma Shastra • Kautilya’s Arthashastra – 3rd Century BC • Government of India – Satyameva Jayate • M K Gandhi – My experiments with truth
- 10. Issue of corporate governance • Duties of directors. • Composition and balance of the board. • Remuneration and reward of directors. • Reliability of financial reporting and external auditors. • Board’s responsibility for Risk management and internal control. • Shareholders rights and responsibilities • Corporate social responsibility and business ethics.
- 11. Needs and importance of CG • Changing ownership structure • Importance of social responsibility • Growing number of scams • Indifference on the part of shareholders • Globalization • Takeovers and mergers • SEBI
- 12. Benefits of corporate governance • Good corporate governance ensures corporate success and economic growth. • Strong corporate governance maintains investors confidence, as a result of which, company can rise capital efficiently and effectively. • It lower the capital cost • There is a positive impact on the share price. • It provides proper inducement to the owners as well as managers to achieve objectives that are in interests of the shareholders and the organization. • Good corporate governance also minimizes wastages, corruption, risk and mismanagement. • It helps in brand formation and its development. • It ensures an organization to manage in a manner that fits the best interests of all.
- 13. Concept of corporate and Governance corporations are the most common forms of business organization, and one which is chartered by state and given many legal rights as a entity separate from its owners. This form of business is characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and existence as a going concern. Governance is a act of governing. It relates to decisions that define expectations, grant power, or verify performance. It consist of either a separate process or part of decision making or leadership processes. It modern nation-states, these processes and systems are typically administrated by a government.
- 14. Obligation to employees, customers and managerial obligation • Code of conduct • Compliance with law • Disclosure of information • Prohibited payment • Fair dealing • Conflicts of interest • Corporate opportunities • Use of company property • Safety and environmental protection • Fundamental rights • Responsibility • Where to seek clarification Accounting records and practices • Reporting breaches of this code • Waivers from code