Corporate Governance

INTRODUCTION

WHAT IS CORPORATE GOVERNANCE?

Modern Business Corporations share many of their features with democratically elected Governments. Both are leaders in their respective spheres namely business and political, though in some cases the distinction may tend to blur. Both command enormous economic resources and enjoy the mandate of their electorates to use these resources for the greater benefit of all. At the top of governance hierarchy, in the case of a business enterprise, is the Board of Directors. Boards of companies need not be uniform with respect to their composition, thinking styles and functioning methodologies. Their strength lies in their diversity. Rigidities in thinking styles and composition are likely to reduce the Boards to mere ornamental organs. Such Boards fail to meet the multifaceted demands made on them by the emerging business – economic environment. As business enterprises extend their horizons to international sphere, it becomes imperative for them to attune their governing organs to the expectations of their international counterparts as well. Liberalisation and Globalisation initiatives have made it essential for Indian corporate to make appropriate changes in their Boards as well as their Governance practices. Many agencies in India have suggested ways and means to strengthen corporate governance.

N.R. Narayana Murthy Committee on Corporate Governance constituted by SEBI has defined Corporate Governance as:

“Corporate Governance is the acceptance by management of the inalienable rights of the 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 business conduct and about making a distinction between personal and corporate funds in the management of a company”

Cadbury Committee, U.K has defined corporate governance as follows:

“It may also be defined as a system of structuring, operating and controlling a... [continues]

Read full essay