CORPORATE GOVERNANCE

INTRODUCTION:

Corporate governance (CG) is one of the most talked about topics in business,
indeed in society, today. Most academics, business professionals, and lay observers
would agree that CG is defined as the general set of customs, regulations,habits,
and laws that determine to what end a firm should be run. Much more fraught,
however, is the question: “what defines good corporate governance?”

NEED

It is clear that CG exists at a complex intersection of law, morality, and economic

efficiency. Less clear,
however, is the extent to which current MBA education reflects that complexity. CG
is usually not a
distinct academic discipline, but integrated into other courses. Considering that
issues of executive
compensation, financial scandals, and shareholder activism are all tied up with CG,
its teaching is a topic
worth investigation.

Companies pool capital from a large investor base both in the domestic and in the
international capital markets. In this context, investment is ultimately an act of faith
in the ability of a company’s management. In order to manage the affairs of a
company and to act in the best interests of all at all times, there must be a system
whereby the directors are entrusted with responsibilities and duties in relation to
the direction of the company affairs. Corporate governance is a system of making
Management accountable towards the stakeholders for effective management
of the companies.

Factors behind the Origin of Corporate Governance

• In the era of globalization, foreign investors have become very careful about
investing their money.
• Kumar Mangalam Birla Committee Report appointed by SEBI has formulated
some guidelines.
• Increasing active rate of investigative reporting in business journalism.
• Mergers and acquisitions taking place at a fast pace.

IMPORTANCE

Principles of corporate governance revolve around three basic interrelated

segments. These are:
• Integrity and Fairness
• Transparency and Disclosures
• Accountability and Responsibility

In other words, 'good corporate governance' is simply 'good business'.

Practices that the Board of Directors of a listed entity follows to fulfill
theexpectations of all stakeholders (i. e. Shareholders, employees, creditors,
customers, government, regulatory authorities and society at large) is called
corporate governance practices.

Good corporate governance practices ensure:

• Adequate disclosures and effective decision making to achieve corporate
objectives
• Transparency in business transactions
• Statutory and legal compliances
• Protection of shareholder interests
• Commitment to values and ethical conduct of business.
• Long-term survival of the companies.

Specific steps to improve Corporate Governance

• Abolition of the Sick Industries Companies Act (SICA) and BIFR.
• Banking Secrecy Act – Reveal thosewho are wilful defaulters.
• Benami Transactions Prohibition Act and Prevention of Money Laundering Act

CONCLUSION
Corporate governance is the net result of the individual sense of values, the values
held in society or part of a society like professional bodies or business associations
and finally the system of public governance. If those who violate the norms are
effectively punished then there is a fear and there will be adherence of the
principles of corporate governance.

THE BOTTOM LINE

■ Issues of corporate governance are found in many disciplines at the MBA level,
including Accounting, CSR/Ethics, Entrepreneurship, Law, Finance, Organizational
Behavior, and Strategy
■ While a few MBA programs engage students in this fundamental debate, most
define CG explicitly as
a) making sure that boards and managers don’t lie, cheat and steal, or
b) clarifying that shareholders are the “real owners” of the firm (a legal stance that
appears to be
untrue)