Corporate governance in india
- 1. Corporate Governance Ram Geer Yadav BBA RK University, Rajkot, India
- 2. Introduction The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company's relationship with its all stakeholders (financiers, customers, management, employees, government, and the community). In other words Corporate Governance is a relationships among various participants in determining the direction and performance of a corporation with the effective management of relationships among (share holders, Employee, Customer, Creditors, suppliers and community)
- 3. Requirement of corporate governance • Better access to external finance • Maintain the relationship of employer and employee in organization • Lower costs of capital -Interest rates on loans/debenture • To protect share holder interest • Protect company from scam
- 4. Pillar of Corporate Governance • Accountability • Transparency • Fairness • Independent
- 5. Elements of Corporate Governance • Good Board practise • Control Environment • Transparency discloser • Well-defined share holder right • Board commitment
- 6. Good Board practise • There should be appropriate board procedure. • There should be clearly defined all the roles and authorities among all the members of organization. • There should be understood the duties and responsibility of director in organization • Board should be well structured. • There should be appropriate composition of mix skill. • The remuneration of director line with best practise. • Director should be self-evaluation and conduct training when there is needed
- 7. Control Environment • There should be internal control Procedure in organization • There should be risk management system in place • There should be disaster recovery management in place • Media management technique should be used • Internal audit function • Independent audit should be established • Independent external auditor conduct audit • There should be management information system established
- 8. Transparency discloser • There should be discloser of all the financial information • There should be discloser all the non-financial information • The accounting system should be prepare on the basis of IFRS (Indian finance standard report) • There should be filling of register up to date. • There should be publish high quality annual report of organization
- 9. Well-Defined share holder right • There should be formalised the minority share holder right. • There should be well organised share holder metting. • There should clearly define the dividend policy among all the members and share holder. • There should be voting right in general meeting • There should be transfer share from one person to another person • The right to sell their stock in market • They have right to get information about the company
- 10. Board Commitment • The board discuss the corporate governance issue and has created the corporate governance commitee • The company has corporate governance champaion which helps to solve the issue in organization. • The corporate governance improvement plan has been created • The policy and procedure have been formalised and distributed to all the staff. • The corporate governance code has been developed • The code of ethics has been developed • The company reconised as a corporate governance leader. • The corporate governance applies in all the organisation either they are private,public or non –profit organisation
- 11. Corporate Governance in India • Corporate governance comes in India in 1956 according to companies act. • India has 20 million of share holder, which is one of the largest emerging market in term of capitalisation. • In 1996 (CII) Confedration of indian industry took special initatve on corporate governance. • It ia formed for the balanced the power and decision making between board of director ,executive and share holder in Indian organisation • According to CII it helps to protect the investor intrest, especially the small investor, the promotion of transparency with the business and industry
- 12. SEBI (Security & Exchange Board of India) • The Government of India’s security , the security board announced a stricked governance rules and regulation for all public listed company in India. • The indian economy liberasied in 1991. In order to enable the investment from foreign investor it was necessary to introduce a series of stock market • On 12th April 1988 SEBI Established • The main objective of SEBI is to protect right of small investor and regulating , developing stock market • In 1992 the BSE the leading stock in India witness the first major scam master minded by Harshad Mehta • When analysis done then they felt that if more power had given to SEBI then scam wouldnot be happen on comming days • In 1992 as per SEBI Act confered the statury report. • Now a days the SEBI introduced in server stock in a market.
- 13. SEBI Clauses 49 • On Auguest 26, 2003 SEBI announced amended clauses 49 of the listing the agreement which every public listed in Indian stock exchange is required to sign • As per SEBI clauses 49 , the agreement between the company and the SEBI Act about the Indian exchange
- 14. The major changes to clause 49 • Independent Director. The independent director are ½ or 1/3 depending whether chairman of board ( Executive or non-executive position) • Non-executive Director. The total term of Non-executive directors is now limited to 3 terms for 3 years. • Board of Director The board of director required code of conduct for all board member and senior management and each of them have to annually affirm compliance with code. • Audit Commitment Financial statement and draft audit report of management discussion and analysis of financial related in organisation
- 15. SEBI • Subsidary companies 50% of non-executive directors and ½ or 1/3 independent director are dependin on whether chair man is executive or non-executive. • Whistle blower policy This is the policy has to communicated to all the employee and whistle blower should be treatment protected from unfair treatment.
- 16. Corporate Governance Issues • Performance evaluation of director. • True independence director • Removal of independent director • Accountability to share holder • Executive compensation • Risk management • Privacy and data protection • Succession planning
- 17. Ram Geer Yadav RK University, Rajkot,Gujrat , India Email: [email protected]