Corporate Governance in the Indian Context

Companies are the largest form of business organization. Its dimensions can be global. There are many stakeholders in the organization. The company's corporate governance philosophy is to achieve the highest level of transparency, accountability and integrity. Procedures and systems that are consistent with governance best practices. The true meaning of corporate governance is to meet the expectations of all stakeholders, customers, suppliers, leaders, employees, shareholders, and society. The Board supports the broad principles of corporate governance and emphasizes its trusteeship role to coordinate and direct the actions of the organization to achieve the goals of transparency, accountability and integrity.

The structure of the ownership of a company determines to a large extent the management and control of the company. Our corporate sector is characterized by the existence of state-owned enterprises, private enterprises and multinational corporations. The shares of these enterprises (except those belonging to the public sector) are held by institutional investors and small investors. Large shareholders tend to participate actively in corporate governance at their annual plenary meetings through their representatives at the company's board of directors or through their active participation.

Structure of the Company's Board of Directors

With the development of the ownership structure, the Company's Board of Directors has a great influence on the management and control of the Company. The Board is responsible for setting business objectives, developing broad policies and selecting top management to implement these objectives and policies. The board also required management's performance to ensure that the company was functioning well and that shareholders' interests were protected.

The size, composition and structure of the Board of Directors of the Company are different to meet the interests of the Company and the Shareholders. The size of the board of directors may be single / double, the views and practices vary. Some people think that a sufficient size range from 9 to 15. Some people set the number to 10. Also suggested that at least 5 people, up to 10 people.

Financial structure:

Except for the structure of ownership in corporate governance The concept of the financial structure of the company, ie the ratio between debt and equity, has an impact on governance quality. Recent studies have shown that, contrary to Modigliani-Miller's assumption, the financial structure of the company is not related to the value of the firm. The financial structure is also important, but the lender's approach to the firm is governed and controlled. Banks can perform the screening and monitoring of important functions of the company because (banks) have a better understanding of information than other investors. In addition, banks can reduce short-run deviations in management decisions and help generate higher-yielding investments in the long run.

Institutional Environment:

The legal, regulatory and political environment in which the Company operates determines to a large extent the financial position of the Company and the quality of its corporate governance. In fact, corporate governance mechanisms are economic and legal institutions, often the result of political decisions. E.g.

Corporate Governance Mechanism:

Corporate Governance Mechanism:

Corporate Governance Mechanism:

Corporate Governance Mechanism:

Corporate Governance Mechanism:

In India, there are six mechanisms to ensure corporate governance;

1. 1956 Company Law:

The Company is bound by the Companies Act 1956 and has been amended. "Company Law" is one of the largest legislation, with 658 and 14 schedules. To ensure corporate governance, the Act gives shareholders the legal right

a. To vote on each of the resolutions submitted before the annual general meeting.

b. Election of directors responsible for setting goals and setting policies.

c. Determine the remuneration of directors and CEOs

d. Revocation of directors and

e. Actively participate in the annual convention of internationally recognized corporate governance practices to strengthen corporate democracy, protect the interests of minority shareholders and provide companies with the greatest flexibility to respond to market needs.

Securities Act:

India's primary security law is the SEBI Act. Since its inception in 1992, the Commission has taken a number of measures to protect investors. One such move is mandatory disclosures in prospectuses and annual accounts. Although the Companies Act itself provides certain disclosure standards, the SEBI Act greatly increases these requirements to make these documents more meaningful.

Another aspect of the SEBI Code is that, in most public issues, the promoters need to hold about 20% of the minimum equity in the company's capital and retain those shares for a minimum lock-up over a three-year period. Finally, the Board established a committee under the chairmanship of Kumaramangalam Birla to advise on how to promote and enhance the standards of corporate governance of listed companies

Article 49 sets out the best combination of executive directors and non-executive directors Audit committee; directors 'remuneration; management discussion and analysis report forming part of the annual report of shareholders; a separate section of the company's annual report on corporate governance to provide information in corporate governance reports; and auditors' compliance certificates to meet

In a well-functioning capital market, there is a strong incentive for corporate governance to voluntarily adopt a transparent process and to monitor the externalities of corporate governance, To reassure potential investors. Over the past few years, Indian companies have voluntarily accepted international accounting standards, although they are not legally binding. They voluntarily adopt more disclosure and more transparent governance practices than are prescribed by law. They try to cultivate an honest attitude toward investors and focus on maximizing shareholder value.

The capital market is very good at judging and making decisions at the micro level. In fact, the market has been making micro decisions. It is the success of doing so, making it an effective capitalist. Capital Market It is significant that regulators assume as much market burden as possible to ensure corporate governance.

Shareholders who are investors have their nominees on the Board of Directors of the Company.

Statutory audit:

This is another mechanism designed to ensure good corporate governance Auditors are shareholders, lenders' guardians of conscience and others with financial shares in the company. As noted by the Cadbury Board, "annual auditing is one of the cornerstones of corporate governance, and in view of the separation of ownership from management, directors must report their management rights by submitting annual reports and financial reports to shareholders, which provide guidance on the preparation of financial statements and

Code of Conduct:

The Code is therefore based on checks and balances, in particular on the Board of Directors and the Chief Executive Officer (the Chief Executive Officer), on the basis of checks and balances, Level to prevent inappropriate power concentration and full disclosure so that those entitled to the required information are able to exercise them in four parts: the role of the board – the role of non-executive directors – executive directors – financial reporting and control

The Confederation of Indian Industry (CII) issued an "ideal corporate governance" of Indian industry in April 1997 to address the financial sector's threat of concealment, soften the self-regulatory regime, greater possibilities More stringent government regulations. CII guidelines are based on a clear assumption that "good governance helps maximize shareholder value, which will necessarily maximize the value of the business to meet creditor, employee and national requirements," whether the code will stimulate changes in corporate governance



India's corporate governance movement has been buoyed by the rebound in large companies such as Enron, the World Bank and BCCI Bank. At that time, the confidence of financial communities, shareholders, and investors was struck in many parts of the world. It was at that time that foreign financial institutions began to invest in Indian companies, which also raised the need for greater accountability. Today, fund managers believe that Tata Motors, ITC, Ranbaxy, Infosys and Hero Honda Motors and other companies have higher management standards. Fortunately, many companies are demonstrating good governance standards.

The Economic Times conducted a survey of corporate governance in India and published its findings in the August 19, 2005 issue of the Journal.

– Quality of the accounting system used to determine the winners;

– Value Creates the focus

– Fair policies and actions

– Communications

– Effective Board of Directors

As we move into the future, corporate governance will become more relevant and more acceptable. The seeds have been sown to honesty but practice. A growing number of progressive companies are developing and implementing codes of conduct, are accepting stricter accounting standards, and adhere to stricter disclosure guidelines than are prescribed by law. These trends will be further strengthened by the forces that are taking action today and will become stronger in the years to come. This power is

a. Deregulation: Economic reforms not only add to growth prospects, but also make markets more competitive. This means that in order to survive, the company will need large-scale continuous investment.

b. Intermediary: At the same time, the reform of the financial sector makes it necessary for enterprises to rely more on the capital market to meet the demand for additional capital

c. Institutionalization: At the same time, the capital market growth mechanism has greatly enhanced the market's ability to discipline

d. Globalization: The globalization of financial markets has enabled issuers, investors and intermediaries to reach higher disclosure and corporate governance standards in the more developed capital markets

. Tax reform: Tax reform coupled with deregulation and competition has led to the break-up of balance from fragmented currency transactions. This means that the worst forms of error management are less attractive than in the past