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