INTRODUCTION
Corporate governance is "the system by which companies are
directed and controlled". It involves regulatory and market
mechanisms, and the roles and relationships between a
company’s management, its board, its shareholders and other
stakeholders, and the goals for which the corporation is
governed. In contemporary business corporations, the main
external stakeholder groups are shareholders, debt holders,
trade creditors, suppliers, customers and communities affected
by the corporation's activities. Internal stakeholders are the
board of directors, executives, and other employees.

Historical Background
In India, SEBI and CII have been in the forefront to introduce better
governance in the corporate sector specially for listed companies. In
1988’s, a CII Committee under the Chairmanship of Shri Rahul Bajaj
published a report on Corporate Governance. Later SEBI constituted a
committee to formulate the Code of Corporate Governance under the
Chairmanship of Shri Kumarmangalam Birla (Member of SEBI Board) to
promote and raise the standards of Corporate Governance in respect of
listed companies. The recommendations of SEBI Committee on Code of
Corporate Governance infact were given a legal shape by inclusion of
Clause 49 of the Listing Agreement, with stock exchanges and issuing
guidelines for investors’ protection etc. Thus enforcement of Corporate
Governance has been through introducing new provisions in various
laws.

What is Corporate Governance?
According to Cadbury, the “corporate
governance is a system by which companies
are directed and controlled .” It goes on to
say that: “Board of Directors are responsible
for the governance of their companies. The
shareholders role is to appoint the directors
and the auditors and to satisfy themselves that
appropriate governance is in place”.

Some Definitions
1. “Good corporate governance practices instill in companies
the essential vision, processes, and structures to make
decisions that ensure longer-term sustainability. More
than ever, we need companies that can be profitable as well
as achieving environmental, social, and economic value for
society.”
-Rachel Kyte | Vice President, Business Advisory Services,
IFC

2. “Good corporate governance is the glue that holds together
responsible business practices, which ensures positive
workplace management, marketplace responsibility,
environmental stewardship, community engagement, and
sustained financial performance. This is even more true
now as we work worldwide to restore confidence and
promote economic growth.”
-Thierry Buchs (head, private sector development division of
Switzerland’s state secretariat For economic affairs (seco)

A balancing act

Principles of corporate
governance
• Principles of corporate governance
• Interests of other stakeholders
• Role and responsibilities of the board
• Integrity and ethical behavior
• Disclosure and transparency

Main Objective of Corporate
Governance
• To make the markets safe and investors friendly
• To provide investor protection
• To empower the shareholders
• To provide greater value to their holdings
The primary objective is entity’s growth and shareholders
prosperity.

Mechanisms and controls
Internal corporate
governance controls
• Monitoring by the board of
directors
• Internal control procedures
and internal auditors
• Balance of power
• Remuneration Performance
• Monitoring by large
shareholders
• Banks and other large
creditors
External corporate
governance controls
• Competition
• Debt covenants
• Demand for and
assessment of performance
information
• Government regulations
• Managerial labour market
• Media pressure
• Takeovers

CONCLUSION
The quality of corporate governance is often reflected in the
quality of decision making. Public sector bodies must
combine reliable information produced by ‘hard’ systems and
processes with the ‘softer’ issues of openness and integrity to
inform their judgment on key decisions. The more open and
honest organisations are with themselves about their
performance, the more open and honest they can be with
service users and the public. This honesty is the foundation
for deciding appropriate action to remedy poor performance.
Better quality services are then more likely; improved
performance and being more open will increase public trust.