Changing Scenario of Corporate Governance

Topics: Corporate governance, Board of directors, Non-executive director Pages: 14 (3972 words) Published: January 25, 2011

Authors :
*Jaspreet Kaur, Lecturer in Department of Commerce, Sri Aurobindo College of Commerce and Management, Ferozepur Road, Ludhiana. E- mail:, Phone No: 9915509226


*Jaspreet Kaur ABSTRACT
Corporate governance has been a highly discussed issue in the United States and Europe over the last decade. In India, these issues came into force in the last couple of years. The corporate governance code was modelled on the lines of the Cadbury Committee (1992) in the United Kingdom. On account of the interest generated by Cadbury Committee Report, the Confederation of Indian Industry (CII), the Associated Chambers of Commerce and Industry (ASSOCHAM) and the Securities and Exchange Board of India (SEBI) constituted Committees to recommend initiatives in CorporateGovernance. In the Indian context, the need for corporate governance has been highlighted because of the scams occurring frequently since the emergence of the concept of liberalization from 1991 such as the Harshad Mehta Scam, Ketan Parikh Scam, UTI Scam, Vanishing Company Scam, Bhansali Scam and so on. In the Indian corporate scene, there is a need to induct global standards so that at least while the scope for scams may still exist, it can be at least reduced to the minimum. The present paper endeavours to study the constituents of good corporate governance, the legal and the conceptual framework under which a company has to advance and various controls exercised by the companies so that strict compliance could be adhered to .In order to have more clarity about the governing practices followed by various companies, a case study of Vardhman Textiles Limited is being taken in to consideration. The case emphasized that how the company is following the norms and rules prescribed under clause 49.

Key words: Corporate Governance, conceptual & legal framework, Clause 49, International financial markets, Government policy and regulations.

Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders/members, management, and the board of directors. Other stakeholders include labour (employees), customers, creditors (e.g., banks, bond holders), suppliers, regulators, and the community at large.

Corporate governance is a multi-faceted subject. An important theme of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem. A related but separate thread of discussions focuses on the impact of a corporate governance system in economic efficiency, with a strong emphasis on shareholders' welfare. In A Board Culture of Corporate Governance, business author Gabrielle O'Donovan defines corporate governance as 'an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity, accountability and integrity. Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes'. Report of SEBI committee (India) on Corporate Governance defines corporate governance as the acceptance by management of the absolute rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It is about commitment to values, about ethical...
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