Ethics and Corporate Governance

8/7/2019 Ethics and Corporate Governance

1/17

ETHICS AND CORPORATE

GOVERNANCEPresentation By

Sanjay Manocha

LecturerBharati Vidyapeeth University

Institute of Management and ResearchNew Delhi


2/17

Sanjay Manocha 2

Corporate

Corporate is adjective meaning of or relating to a

corporation derived from the noun corporation.

A corporation is an organization created (incorporated) by a

group of shareholders who have ownership of the corporation.

The elected Board of directors appoint and oversee

management of the corporation.


3/17

Sanjay Manocha 3

Governance

Oxford English Dictionary defines Governance as the act,

manner, fact or function of governing, sway, control

The word has Latin origins that suggest the notion of

'steering'. It deals with the processes and systems by which

an organization or society operates.


4/17

Sanjay Manocha 4

Corporate

Governance It is a broad concept and has been defined and understood

differently by different groups and at different points of time.

The Cadbury Committee report defines it as the system by which

companies are directed and controlled.

It is generally understood as the framework of rules, relationships,

systems and processes within and by which authority is exercised

and controlled in corporations.


5/17

5

An Indian Definition

fundamental objective of corporate

governance is the enhancement of the

long-term shareholder value while at thesame time protecting the interests of other

stakeholders.

SEBI (Kumar Mangalam Birla) Report on Corporate

Governance, January, 2000


6/17

Sanjay Manocha 6

Governance

Governance can be used with reference to all kind of organisational

structure e.g.

1. NGO- not for profit organisation

2. Municipal corporation/ Gram panchyat

3. Central/ State Government

4. Partnership firm


7/17

Sanjay Manocha 7

Objectives OfGood Corporate

Governance1. Strengthen management oversight functions and accountability

2. Balance skills, experience and independence on the board appropriate

to the nature and extent of company operations

3. Establish a code to ensure integrity

4. Safeguard the integrity of company reporting

5. Risk management and internal control

6. Disclosure of all relevant and material matters7. Recognition and preservation of needs of shareholders


8/17

Sanjay Manocha 8

Why Corporate Governance

1. The liberalization and de-regulation world over gave greater

freedom in management. This would imply greater responsibilities.

2. The players in the field are many. Competition brings in its wake

weakness in standards of reporting and accountability.

3. Market conditions are increasingly becoming complex in the light

of global developments like WTO, removal of barriers/reduction in

duties.

4. The failure of corporate due to lack of transparency and disclosures

and instances of falsification of accounts/embezzlement and the

effect of such undesirable practices in other companies.


9/17

Sanjay Manocha 9

Parties to corporate governance Parties involve in corporate governance include the CEO, the Board of

directors, Management and share holders. Other stakeholders who take

part include suppliers, employees, creditors, customers and the

community at large.

1. Board of directors

2. Managers

3. Workers

4. Shareholders or owners

5. Regulators

6. Customers

7. Suppliers

8. Community (people affected by the actions of the organization)


10/17

Sanjay Manocha 10

All parties to corporate governance have an

interest :

All parties to corporate governance have an interest

Directors , management and workers receive salaries, benefits and

reputation.

Shareholders receive capital return.

Customers receive goods and services.

Suppliers receive compensation for their goods and services.


11/17

Sanjay Manocha 11

What Is The Role Of Investors ?

To help the company in raising finance or

capital in dividend policies.

In selection of Board Of Directors.

Deciding dividends policies.


12/17

Sanjay Manocha 12

Principles

Key elements of good corporate governance principles include

honesty, trust and integrity, openness, performance orientation,

responsibility and accountability, mutual respect, and

commitment to the organization.

Of importance is how directors and management develop a

model of governance that aligns the values of the corporate

participants and then evaluate this model periodically for its

effectiveness.

In particular, senior executives should conduct themselves

honestly and ethically, especially concerning actual or apparent

conflicts of interest, and disclosure in financial reports.


13/17

Sanjay Manocha 13

Principles Of Corporate

Governance :

1. Rights and equitable

treatment of shareholders

2. Interests of other

stakeholders

3. Role and responsibilities of

the board

4. Integrity and ethical

behaviour

5. Disclosure and Transparency


14/17

Sanjay Manocha 14

IMPORTANCE OF CORPORATE GOVERNANCE

Corporate governance has succeeded in attracting a good deal

of public interest because of its apparent importance for the

economic health of corporations and society in general.

Corporate governance provides the structure through which

the objectives of the company are set, and the means of attainingthose objectives and monitoring performance are determined.

Corporate governance provides proper incentives for the board

and management to pursue objectives that are in the interests of

the company and shareholders and should facilitate effectivemonitoring, thereby encouraging firms to use resources more

efficiently.


15/17

Sanjay Manocha 15

The corporate governance structure spells out the rules and

procedures for making decisions on corporate affairs.

Corporate governance is used to monitor whether outcomesare in accordance with plans and to motivate the organization to

be more fully informed in order to maintain or alter

organizational activity.

Corporate governance is a tool for competitive advantage.Normally when we look at the issue of competitive advantage

from a managerial point of view, we can look at those factors,

which are within the control of the enterprise. This relates to the

focus on quality, productivity as well as innovation, which arethe basic requirements, in a highly competitive environment.

This is needed for getting the competitive edge in a market

where the customer is king.


16/17

Sanjay Manocha 16

The corporate governance framework ensures the timely and

accurate disclosure of all material matters regarding the

corporation, including the financial situation, performance,ownership, and governance of the company.

A strong disclosure regime can help to attract capital and

maintain confidence in the capital markets.

Disclosure also helps improve public understanding of thestructure and activities of enterprises, corporate policies and

performance with respect to environmental and ethical

standards, and companies' relationships with the communities in

which they operate.Corporate Governance as a catalyst forOrganizational

Change.


17/17

Sanjay Manocha 17

Ethics and Corporate Governance

Documents