1.corporate Governance

CORPORATE GOVERNANCE
PRESENTED BY
VINOD KUMAR.S
VINEETH B L
VINEETHA V R
VEENA R S
SABNA A
MANOJ MOHAN
MAYA
AKHIL
JOTHY
ANOOP R S
WHAT IS CORPORATE GOVERNANCE?
 Corporate governance is the overall control of activities
in a corporation.
 It is concerned with the formulation of long term
objectives and plans and the proper managements
structure to achieve them.
 The structure to ensure corporate governance, for our
purpose, includes the board of directors, top
management, shareholders', creditors and others
GOOD GOVERNANCE
 Transparency
 Well governed companies regularly disclose detailed
information on their ownership and the management
structure, latest operating and financial data and transaction
with their affiliates and subsidiaries.
 Shareholder rights
 The golden rule is equal treatment of all shareholders,
regardless of stock class. In other words one share one votes.
 Board Effectiveness
 To successfully supervise management, board members must
be accountable to all investors, not just majority,
shareholders.
 Boards should act indendently of management and third
parties.
 Compensation, audit and nomination committees must be
comprised of independent directors.
FACTORS INFLUENCING CORPORATE
GOVERNANCE
1. The ownership structure of a corporation
2. Its financial structure
3. The structure and functioning of the company boards
4. The legal, political and regulatory environment within
which the company operates.
THE OWNERSHIP STRUCTURE
 The ownership structure can be either dispersed among

individual and institutional shareholders as in the US and
UK or can be concentrated in the hands of a few large
shareholders as in Germany and Japan.
 Large shareholders tend to be active in corporate
governance either through their representatives on
company boards or through their active participation in
annual general body meetings.
THE STRUCTURE OF COMPANY BOARDS
 The board of directors is responsible for establishing
corporate objectives, developing broad policies and
selecting top level executives to carry out those
objectives and policies.
 The board also reviews management’s performance to
ensure that the company is run well and shareholders’
interests are protected.
THE FINANCIAL STRUCTURE
 Financial structure does matter the quality of
governance.
 Lenders exercise significant influence on the way a
company is managed and controlled.
 Banks as creditors can perform the important function of
screening and monitoring companies as they are better
informed than other investors.
THE INSTITUTIONAL ENVIRONMENT
 The legal, regulatory and political environment within

which a company operates determines in a large measure
the quality of corporate governance
 In fact, corporate governance mechanisms are economic
and legal institutions and often outcome of political
decisions.
MECHANISMS OF CORPORATE
GOVERNANCE
In our country, there are six mechanisms to ensure
corporate governance.
1. The Companies Act,1956
2. The Securities and Exchange Board of India(SEBI)
Act,1992
3. A market for corporate control
4. Participation of block shareholders in the governance
of comapanies
5. Statutory audit
6. Code of conduct
COMPANIES ACT
 Companies in our country are regulated by the
Companies Act, 1956, as amended upto-date.
 The companies act is one of the biggest legislations with
658 sections and 14 schedules.
 Through the consolidation of many successive
ammendments,and a large number of statutory rules and
regulations, the act aims at ensuring the interest of all
stakeholders are protected.
The Act confers legal rights to shareholders to :-
1. Vote on every resolution placed before an annual

general meeting
2. To elect directors who are responsible for specifying
objectives and laying down policies
3. Determine remuneration of directors and the CEO
4. Removal of directors and
5. Take active part in the annual general meetings
SECURITIES LAW
 The primary securities law in our country is SEBI Act.

 One of the aspect of the SEBI regulations is that in most
public issues, the promoters are required to take a
minimum stake of about 20 per cent in the capital of the
company and to retain these shares for a minimum lock
in period of three years.
 SEBI has laid down guidelines, relates to prohibiting
preferential allotments to dominant shareholders at a
price lower than the average market price during the
preceding six months.
DISCIPLINE OF THE CAPITAL MARKET
 Minority shareholders can refuse to subscribe to the
capital of a company in the primary market and in the
secondary market, they can sell their shares, thus
depressing the share prices.
 A depressed share price makes the company attractive
take-over target.
NOMINEES ON COMPANY BOARDS
 Development banks hold large blocks of shares in
companies.
 They are equally big debthholders too.
 Being equity holders, these investors have their

nominees in the boards of companies
 These nominees can effectively block resolution which
may be detrimental to their interests.
STATUTORY AUDIT
 It enhances the credibility of financial reports by an
enterprise.
 The auditing process ensures that financial statements
are accurate and complete, thereby enhancing their
reliability and usefulness for making investment
decisions.
 Credible financial statements are essential for business
enterprises to raise capital and for society to have trust in
limited companies.
 Good corporate governance depends, in part, on good
auditing.
CODES OF CONDUCT
Comprises of 4 sections
 Role of board of directors-it was proposed that the
executive directors be balanced by adequate number of
non-executive directors
 Role of non executive directors-the majority of the board
should be independent that non executjve directors
should be appointed only for a shor period and there
must be a formal process for the appointment
 Executive directors- the main concern was
remuneration,and the pay should be set by the
remuneration committee,consisting mainly of non
executive directors
 Financial reporting and controls- it was recommended
that properly constituted audit committeesof the board be
appointed and that non executive directors report
regularly on the effectiveness of systems and internal
financial control.
THANK YOU

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CORPORATE GOVERNANCE

 The ownership structure can be either dispersed among

 The legal, regulatory and political environment within

1. Vote on every resolution placed before an annual

 The primary securities law in our country is SEBI Act.

 Being equity holders, these investors have their

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