5+Corporate+Governance

8/8/2019 5+Corporate+Governance

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CORPORATE GOVERNANCE


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Members

Name Roll No.Komal Bhatt 50Tejal Rana 51

Lavina Dsouza 61Reena Rajgor 39Ramakrishnan V 40


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Conc ept

The system by which companies are directedand controlled.

In todays turbulent world, innovating bycontinually creating and re-inventing newmarkets, products, services, business models& organizational capabilities is critical for anybusiness.


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CORPORATE GOVERNANCE

It determines the strategy which the companyshould follow and implement.It reflects in the vision and mission of theorganization.It decides whom the organization should serve.It gives direction and purpose to the company.

It decides the approach that the organizationshould take to enrich the society and ensuresthat these decisions are implemented faithfully.


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TATA GROUP


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A t the Tata group we are committed to improving thequality of life of the communities we serve. We do this bystriving for leadership and global competitiveness in the

business sectors in which we operate.

Our practice of returning to society what we earn evokestrust among consumers, employees, shareholders and

the community. We are committed to protecting thisheritage of leadership with trust through the manner inwhich we conduct our business.


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Rol e of Co rp o rate Gov er n a nc e

To provide entrepreneurial leadership

To set and implement strategy within aframework of effective internal controls

To ensure the best performance of resources

F OR STAKEHOLDERS


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F a c to rs Influ e ncing Co rp o rate Gov er n a nc e

Ownership StructureStructure of Company Boards

Financial Structure


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MECHANIS MS O F CORPORATE GOVERNANCE

Companies A ct 1956Securities law

Discipline of the capital marketNominees on Company BoardsStatutory A udit

Code of Conduct


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Wh o are stake h old ers?

Those individuals or groups who depend onthe organization to fulfill their own goals andon whom, in turn, the organization depends.


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S take h old ers fo r a nOr g a niz at ion

P romoters/OwnersShareholders

Institutional LendersBuyers and SuppliersConsumers

E mployeesG overnmentCommunity


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S take h old er p ow er

There are internal and external stakeholders

The principle objective of corporations is tomaximize shareholders wealth

Internal stakeholders may make use of power for their own benefits.


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Pow er/ In terest matr ix


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Wh os Resp on s ib ility?

Board of DirectorsE mployees

Internal & E xternal auditorsStatutory bodiesLegal bodies


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Co rp o rate gov er n a nc e a ndstrate g y fo rm ul at ion

It is the duty of the board of directors to

exercise strong oversight and see that fivetasks of strategic management are done in amanner that benefits shareholders or stakeholders.


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B o ar d of di re c to r s o b lig at ion s

Be inquiring critics and overseers

E valuate the caliber of senior executivesstrategy making and strategy executing skills

Institute a compensation plan for topexecutives


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Gov er ning b o ar d

India, UK, US Single tier boardIncorporates both executive and non

executive directors

E uropean countries: G ermany, Netherlands,France, etc. Two tier board mandatory


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Gov er ning b o ar d - Indi a

A s per Companies A ct 1956 Minimum 3 directors

No upper limit

A s per S E BI requirement

50 % of the board: Non executives


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Governance and performance

Good governance leads to good performanceIt creates an open and transparent systemIt improves communication and breaks downsystematic barriers to flow of informationGood governance allows decision making based ondata. It reduces risk.Good governance helps in creating a brand andcreates comfort for all stakeholders and society


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Gov er n a nc e iss u es

No separation between ownership andmanagement

Make organizations visibly accountableTime lag in implementationStrategies and tactics need to change toaccommodate governance with performanceStakeholders concerns for performance or promised performance


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Re lia nc e Indu str ies - In s id er Tra ding


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S atyam

H ad two companies with the samemanagement

Funds siphoned by Satyam to Maytas toacquire Land banksMinority shareholders interest were neglectedby chairman and board to transfer funds toother entities.


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Governance and Performancemeasurement - issues

Is governance behavior motivated by legislation?D o standards vary with jurisdictions or do you adopt thebest option?D o you choose the right thing to do irrespective of whether its mandatory or not?

Is performance evaluation limited to valuation metrics?Is it only ROE, Net margin, growth, shareholder wealthcreation?

D o performance measures need to be holistic?W e need to encompass all stakeholders

Governance is an enabler for holistic performanceH ow do managers better understand governancerequirements?

D o we need market research for governancerequirements?


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W o r ld Cl ass Co rp o rate Gov er n a nc e

J udicious mix of 3 available routesLegislation

RegulationSelf discipline

A World class corporate governance systemis where values are as important as rules


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2 5

1 Reputational agents refer to private sector agents, self-regulating bodies, the media, and civic society thatreduce information asymmetry, improve the monitoring of firms, and shed light on opportunistic behaviour

External

Private

R eputational agents1

y Accountsy Lawyersy Credit R atingy Investment Bankersy Financial mediay Investment advisorsy R esearchy Corporate GovernanceAnalysis

M arketsy Competitive factor and

product marketsy Foreign direct investmenty Corporate control

S tandards(for example, accountingand auditing)Laws and

regulations

Regulatory

Financial S ectory Debty Equity

Shareholders

Board of Directors

Management

Core functions

R eports to

A ppointsand

monitors

Operates

I nternal

Stakeholders

Modern corporations are disciplined byModern corporations are disciplined byinternal and external factorsinternal and external factors


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Or g a niz at ion a l Cul tu reCo rp o rate cul tu re is the total sum of the values,customs, traditions, and meanings that make acompany unique.Corporate culture is often called "the character of anorganization", since it embodies the vision of thecompanys founders.S tr ong cul tu re is said to exist where staff respondto stimulus because of their alignment toorganizational values.W eak cul tu re where there is little alignment withorganizational values and control must be exercisedthrough extensive procedures and bureaucracy.


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Co mp on e n ts of o r g a niz at ion a lcul tu re


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Ma n a ging th e S trate g y-Cul tu re Re lat ion s h ip

Link changes to basicmission andfundamentalorganizational norms

Reformulate strategy or prepare carefully for long-term, difficultchange.

Synergistic Focus onreinforcing culture.

Manage around theculture

MANY

CHA

NGES

F EW

HIGH LO W

POTENTIAL CO MPATI B ILITY W ITH EXISTINGCULTURE


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THANK YOU

5+Corporate+Governance

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