corporate governance

Topics: Corporate governance, Board of directors, Corporation Pages: 12 (3254 words) Published: October 24, 2013
CORPORATE GOVERNANCE:
Corporate Governance is essentially all about how corporations are directed, managed, controlled and held accountable to their shareholders. In India, the question of Corporate Governance has come up mainly in the wake of economic liberalization and de-regularization of industry and business. The objective of any corporate governance system is to simultaneously improve corporate performance and accountability as a means of attracting financial and human resources on the best possible terms and of preventing corporate failure. With the rapid pace of globalization many companies have been forced to tap international financial markets and consequently to face greater competition than before. Both policymakers and business managers have become increasingly aware of the importance of improved standards of Corporate Governance.

DEFINITION OF CORPORATE GOVERNANCE

Corporate Governance could be defined as ways of bringing the interests of investors and managers into line and ensuring that firms are run for the benefit of investors.Corporate governance is the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. Corporate Governance consists of procedures and processes according to which an organization is directed and controlled. The Corporate Governance structure specifies the distribution of rights and responsibilities among the different participants in the organization such as the board, managers, shareholders and other stakeholders and lays down the rules and procedures for decision-making. In simple terms Corporate Governance can be defined as a set of laws, rules, regulations, systems, principles, process by which a company is governed.

NEED FOR CORPORATE GOVERNANCE IN INDIA:
A corporation is a congregation of various stakeholders, namely customers, employees, investors, vendor partners, government and society. In this changed scenario an Indian corporation, as also a corporation elsewhere should be fair and transparent to its stakeholders in all its transactions. This has become imperative in today’s globalized business world where corporations need to access global pools of capital, need to attract and retain the best human capital from various parts of the world, need to partner with vendors on mega collaborations and need to live in harmony with the community. Unless a corporation embraces and demonstrates ethical conduct, it will not be able to succeed. Corporations need to recognize that their growth requires the cooperation of all the stakeholders; and such cooperation is enhanced by the corporations adhering to the best Corporate Governance practices. In this regard, the management needs to act as trustees of the shareholders at large and prevent asymmetry of benefits between various sections of shareholders, especially between the owner-managers and the rest of the shareholders.

EVOLUTION OF CORPORATE GOVERNANCE FRAMEWORK IN INDIA:
Liberalization and its associated developments, i.e. de-regulation, privatization and extensive financial liberalization, have made effective Corporate Governance very crucial. Cases of frauds, malpractices can render capital market reforms desultory. Independent and effective corporate governance reforms are, therefore, necessary in order to restore the credibility of capital market and to facilitate the flow of investment finance of firms. There are various reforms which were channeled through a number of different paths with both the Security and Exchange Board of India (SEBI) and the Ministry of Corporate Affairs, Government of India (MCA) playing important roles.

Pre-liberalization:

During the initial years Indian organizations were bound by colonial rules and most of the rules and regulations catered to the whims and fancies of the British Employers. The companies act was introduced in the year 1866 and was gradually revised...

References: http://www.sebi.gov.in
http://www.mca.gov.in/Ministry/latestnews
http://www.conventuslaw.com/legal-framework-governing-corporate-governance-in-india
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