Notes: 5 Module: 3

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CORPORATE GOVERNANCE
1. Corporate Governance: Meaning
Corporate Governance encompasses the systems, processes, and practices by which
companies are directed and controlled. It is a framework of rules, practices,
processes, and structures that govern the relationships and interactions between
various stakeholders within a corporation. These stakeholders typically include
shareholders, management, board of directors, employees, customers, suppliers,
creditors, regulators, and the broader community in which the corporation operates.
The primary objective of corporate governance is to ensure that the corporation
operates in a manner that is ethical, responsible, transparent, and accountable to its
stakeholders. It is a crucial aspect of business operations and ethics.

Corporate governance plays a critical role in shaping the behavior, culture, and
performance of corporations. By promoting transparency, accountability, and ethical
conduct, it helps build trust with stakeholders, mitigate risks, and enhance long-term
value creation for shareholders and the broader community.

2. Key Components / Elements of Corporate Governance

1. Accountability and Oversight: Corporate governance establishes mechanisms for
accountability and oversight to ensure that decision-makers are held responsible
for their actions and decisions. This includes the role of the board of directors
in providing strategic guidance and oversight, the independence and objectivity
of auditors and other external monitors, and the mechanisms for assessing and
addressing performance and compliance issues.
2. Transparency and Disclosure: Transparency is essential for good corporate
governance. It involves providing stakeholders with accurate, timely, and
relevant information about the corporation's financial performance, operations,
strategy, risks, and governance practices. Disclosure requirements ensure that
stakeholders have access to the information they need to make informed
decisions and hold the corporation accountable for its actions.
3. Rules and Practices: Corporate governance is guided by a set of rules, principles,
codes, and standards that dictate how the corporation should be managed and
controlled. These rules often include legal requirements, regulatory standards,

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 industry best practices, and ethical norms. They provide a framework for
decision-making, behavior, and interactions within the organization.
4. Processes and Structures: Corporate governance involves establishing processes,
mechanisms, and structures to facilitate effective decision-making, oversight,
and accountability. This includes the composition and functioning of the board of
directors, the roles and responsibilities of key executives and committees, the
design of internal controls and risk management systems, and the mechanisms
for monitoring and reporting performance.
5. Stakeholder Relationships: A fundamental aspect of corporate governance is
managing the relationships between the corporation and its various stakeholders.
This involves balancing the interests and expectations of shareholders,
management, employees, customers, suppliers, creditors, regulators, and the
wider community. Effective corporate governance ensures that the needs and
concerns of all stakeholders are considered and addressed in decision-making
processes.
6. Ethical Conduct: Ethical behavior is a core principle of corporate governance. It
requires the corporation and its employees to adhere to high standards of
honesty, integrity, fairness, and responsibility in all their actions and decisions.
Ethical conduct helps build trust and credibility with stakeholders, enhances the
corporation's reputation, and reduces the risk of legal and reputational damage.

3. Importance of Corporate Governance

The importance of corporate governance cannot be overstated, as it plays a vital role
in shaping the behavior, performance, and reputation of corporations. Here are some
key reasons why corporate governance is important:

1. Protection of Stakeholder Interests: Corporate governance ensures that the

interests of various stakeholders, including shareholders, employees, customers,
suppliers, creditors, and the wider community, are protected and considered in
decision-making processes. By balancing these interests, corporate governance
contributes to the long-term sustainability and success of the corporation.
2. Enhancement of Shareholder Value: Effective corporate governance practices
are associated with higher levels of shareholder value creation. By promoting
transparency, accountability, and ethical behavior, corporate governance instills
confidence in investors and reduces the perceived risk of investing in the
company, leading to higher stock prices and better access to capital.

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 3. Risk Management and Compliance: Corporate governance frameworks include
mechanisms for identifying, assessing, and managing risks that could affect the
corporation's ability to achieve its objectives. By implementing robust risk
management processes and ensuring compliance with laws, regulations, and
industry standards, corporate governance helps safeguard the corporation from
legal, financial, and reputational risks.
4. Improvement of Decision-Making Processes: Good corporate governance fosters
sound decision-making processes by establishing clear roles, responsibilities, and
accountability mechanisms. By ensuring that decisions are made based on
accurate information, objective analysis, and consideration of stakeholder
interests, corporate governance helps optimize resource allocation, mitigate
conflicts of interest, and enhance the quality of strategic decisions.
5. Promotion of Ethical Conduct: Ethical behavior is a core principle of corporate
governance. By promoting honesty, integrity, fairness, and responsibility in all
aspects of corporate operations, governance frameworks help build trust and
credibility with stakeholders, enhance the corporation's reputation, and reduce
the risk of legal and reputational damage.
6. Creation of Long-Term Value: Corporate governance is essential for creating
sustainable long-term value for shareholders and the broader community. By
focusing on long-term strategic objectives, stakeholder engagement, and
responsible management practices, corporate governance contributes to the
corporation's resilience, adaptability, and ability to thrive in a dynamic and
competitive business environment.
7. Enhancement of Corporate Reputation: Companies with strong corporate
governance practices tend to have better reputations in the marketplace. This
can lead to increased customer loyalty, improved employee morale and retention,
and better relationships with suppliers, regulators, and other external
stakeholders.

In summary, corporate governance is critical for ensuring the effective, ethical, and
responsible management of corporations. By promoting transparency, accountability,
and stakeholder engagement, corporate governance helps build trust, mitigate risks,
and enhance long-term value creation for shareholders and the broader community.

4. Objectives of Corporate Governance

The objectives of corporate governance are multifaceted, encompassing various
aspects of responsible and effective management aimed at ensuring the sustainable

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growth and success of corporations. Here are the primary objectives of corporate
governance:

1. Protection of Shareholder Interests: One of the primary objectives of

corporate governance is to protect the interests of shareholders, who are the
owners of the corporation. This involves ensuring that shareholders receive a
fair return on their investments and that their rights are respected and upheld
by the company's management and board of directors.
2. Enhancement of Shareholder Value: Corporate governance aims to enhance
shareholder value by promoting transparency, accountability, and sound
management practices. By fostering an environment of trust and confidence
among investors, corporate governance contributes to the creation of long-term
sustainable value for shareholders.
3. Fair Treatment of Stakeholders: Corporate governance seeks to ensure fair
treatment of all stakeholders, including employees, customers, suppliers,
creditors, and the broader community. This involves balancing the interests of
different stakeholders and considering their needs and concerns in decision-
making processes.
4. Ethical Conduct and Integrity: Corporate governance promotes ethical behavior
and integrity within the organization. This includes adherence to high standards
of honesty, fairness, transparency, and responsibility in all business dealings and
interactions. By upholding ethical principles, corporate governance helps build
trust with stakeholders and enhances the corporation's reputation.
5. Effective Risk Management: Corporate governance aims to establish robust risk
management processes to identify, assess, and mitigate risks that could impact
the corporation's ability to achieve its objectives. By proactively managing risks,
corporate governance helps safeguard the company's assets, reputation, and
long-term viability.
6. Compliance with Laws and Regulations: Corporate governance ensures that the
corporation complies with applicable laws, regulations, and industry standards.
This includes financial reporting requirements, corporate disclosure obligations,
and adherence to ethical and legal standards of conduct. Compliance with laws
and regulations helps mitigate legal and regulatory risks and enhances the
company's credibility and trustworthiness.
7. Efficient Operations and Decision-Making: Corporate governance aims to
promote efficient operations and decision-making processes within the
organization. This involves establishing clear roles, responsibilities, and
accountability mechanisms, as well as implementing effective internal controls

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 and performance monitoring systems. By improving operational efficiency,
corporate governance enhances the company's competitiveness and financial
performance.
8. Long-Term Sustainability: Corporate governance focuses on ensuring the long-
term sustainability and success of the corporation. This involves strategic
planning, risk management, and stakeholder engagement to address current
challenges and opportunities while positioning the company for future growth
and prosperity.

Overall, the objectives of corporate governance are interconnected and aim to

promote responsible, ethical, and effective management practices that benefit
shareholders, stakeholders, and the broader community. By achieving these
objectives, corporate governance contributes to the overall success and sustainability
of corporations in the long run.

5. Basic Ingredients of Corporate Governance

The basic ingredients of corporate governance are the fundamental components and
principles that form the foundation of effective governance practices within a
corporation. These ingredients provide a framework for responsible and transparent
management and help ensure the alignment of corporate objectives with the interests
of stakeholders. Here are the key basic ingredients of corporate governance:

1. Clear Governance Structure: A well-defined governance structure outlines the

roles, responsibilities, and relationships among key stakeholders within the
corporation. This typically includes the board of directors, executive
management, shareholders, and other relevant stakeholders. The governance
structure provides clarity on decision-making processes, oversight mechanisms,
and accountability structures.
2. Independent Board of Directors: An independent board of directors plays a
critical role in corporate governance by providing oversight, guidance, and
strategic direction to the corporation. Independent directors bring diverse
expertise and perspectives to the board and help ensure that decisions are made
in the best interests of shareholders and other stakeholders, free from
conflicts of interest.
3. Effective Leadership: Effective leadership is essential for good corporate
governance. This includes strong leadership from the board of directors,
executive management, and other key stakeholders. Leaders should demonstrate

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 integrity, vision, and a commitment to ethical conduct, transparency, and
accountability.
4. Transparent Disclosure Practices: Transparency is a fundamental principle of
corporate governance. Transparent disclosure practices ensure that
stakeholders have access to accurate, timely, and relevant information about the
corporation's financial performance, operations, strategy, risks, and governance
practices. This helps build trust and confidence among stakeholders and
enhances the corporation's credibility.
5. Ethical Conduct and Integrity: Ethical conduct is a cornerstone of corporate
governance. Companies should adhere to high standards of honesty, integrity,
fairness, and responsibility in all their business dealings and interactions. Ethical
behavior fosters trust with stakeholders and enhances the corporation's
reputation and long-term success.
6. Stakeholder Engagement: Effective stakeholder engagement is essential for
good corporate governance. Companies should actively engage with shareholders,
employees, customers, suppliers, regulators, and other relevant stakeholders to
understand their needs and concerns and to solicit their input on key decisions
and initiatives. This helps build relationships, foster mutual trust, and align
corporate objectives with stakeholder interests.
7. Risk Management Processes: Robust risk management processes are integral to
corporate governance. Companies should identify, assess, and mitigate risks that
could impact their ability to achieve their objectives. This includes financial
risks, operational risks, legal and regulatory risks, and reputational risks.
Effective risk management helps safeguard the company's assets, reputation,
and long-term viability.
8. Compliance with Laws and Regulations: Compliance with applicable laws,
regulations, and industry standards is a fundamental aspect of corporate
governance. Companies should ensure that their operations and practices comply
with legal and regulatory requirements, including those related to financial
reporting, corporate governance, and ethical conduct. Compliance helps mitigate
legal and regulatory risks and enhances the company's credibility and
trustworthiness.

Overall, these basic ingredients provide the framework for establishing and
maintaining effective corporate governance practices that promote responsible
management, transparency, accountability, and long-term value creation for
shareholders and stakeholders.

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 6. Principles of Corporate Governance
The principles of corporate governance serve as guiding frameworks that outline the
fundamental values, beliefs, and standards that underpin effective governance
practices within corporations. These principles provide a roadmap for responsible and
transparent management and help ensure the alignment of corporate objectives with
the interests of stakeholders. While specific principles may vary slightly depending
on the context and jurisdiction, there are several widely recognized principles of
corporate governance. Here are some of the key principles:

1. Transparency: Transparency is a cornerstone principle of corporate governance.

Companies should provide accurate, timely, and relevant information about their
financial performance, operations, strategy, risks, and governance practices to
stakeholders. Transparent disclosure practices build trust and confidence among
stakeholders and enhance the corporation's credibility.

2. Accountability: Accountability refers to the obligation of corporate leaders and

decision-makers to answer for their actions, decisions, and performance. Companies
should establish clear roles, responsibilities, and accountability mechanisms to ensure
that decision-makers are held responsible for their actions and that appropriate
consequences are enforced for misconduct or poor performance.

3. Fairness: Fairness is essential for maintaining trust and confidence among

stakeholders. Companies should treat all stakeholders, including shareholders,
employees, customers, suppliers, and creditors, fairly and equitably. This involves
avoiding conflicts of interest, providing equal opportunities, and ensuring that
decisions are made impartially and without bias.

4. Integrity: Integrity is a fundamental principle of corporate governance. Companies

should adhere to high standards of honesty, integrity, and ethical conduct in all their
business dealings and interactions. This includes avoiding fraudulent or deceptive
practices, maintaining confidentiality, and upholding the rights of stakeholders.

5. Responsibility: Responsibility refers to the duty of corporate leaders and decision-

makers to act in the best interests of the company and its stakeholders. Companies
should take responsibility for their actions, decisions, and the consequences of their
operations on society and the environment. This involves considering the long-term
impacts of corporate activities and adopting sustainable business practices.

6. Independence: Independence is crucial for ensuring the objectivity and

impartiality of governance processes. Companies should have an independent board of
directors composed of directors who are free from conflicts of interest and undue

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influence from management or other stakeholders. Independent directors bring
diverse perspectives and expertise to the board and help ensure that decisions are
made in the best interests of shareholders and stakeholders.

7. Stewardship: Stewardship refers to the responsible management and preservation

of corporate resources and assets for the benefit of current and future
stakeholders. Companies should adopt prudent financial management practices,
exercise diligence in overseeing corporate operations, and ensure the sustainability of
the business over the long term.

8. Compliance: Compliance with laws, regulations, and industry standards is essential

for maintaining the trust and credibility of the company. Companies should ensure
that their operations and practices comply with legal and regulatory requirements,
including those related to financial reporting, corporate governance, and ethical
conduct. Compliance helps mitigate legal and regulatory risks and enhances the
company's reputation.

These principles provide a foundation for establishing and maintaining effective

corporate governance practices that promote responsible management, transparency,
accountability, and long-term value creation for shareholders and stakeholders.

7. Theories of Corporate Governance

Various theories of corporate governance have been developed to understand the
dynamics, structures, and outcomes of governance practices within corporations.
These theories provide different perspectives on how corporations are governed, the
roles of various stakeholders, and the factors that influence corporate behavior.
Here are some of the key theories of corporate governance:

1. Agency Theory: Agency theory focuses on the relationship between principals (such
as shareholders) and agents (such as management) within a corporation. It suggests
that conflicts of interest may arise when agents act on behalf of principals but have
different goals and incentives. The theory examines mechanisms, such as executive
compensation, board oversight, and shareholder activism, that can mitigate agency
problems and align the interests of principals and agents.

2. Stakeholder Theory: Stakeholder theory posits that corporations have

responsibilities to a broad range of stakeholders, including shareholders, employees,
customers, suppliers, communities, and the environment, rather than solely focusing
on maximizing shareholder value. The theory emphasizes the importance of

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considering the interests and welfare of all stakeholders in corporate decision-
making and governance practices.

3. Resource Dependency Theory: Resource dependency theory explores how

corporations depend on external resources, such as capital, labor, technology, and
information, to achieve their objectives. It suggests that corporations engage in
strategic relationships and alliances with external stakeholders, such as suppliers,
customers, and regulators, to acquire necessary resources and reduce dependency
risks. Corporate governance mechanisms are seen as tools for managing external
dependencies and safeguarding the corporation's access to critical resources.

4. Transaction Cost Economics: Transaction cost economics examines the costs and
benefits of different governance structures and mechanisms in managing
transactions and contractual relationships within corporations. It suggests that
governance mechanisms, such as vertical integration, contracts, and monitoring
systems, are designed to minimize transaction costs, such as opportunistic behavior,
information asymmetry, and coordination failures, and to facilitate efficient
exchange and coordination of resources.

5. Institutional Theory: Institutional theory focuses on the role of formal and

informal institutions, such as laws, regulations, norms, and organizational cultures, in
shaping corporate governance practices. It suggests that corporations conform to
institutional pressures and expectations, including legal requirements, industry norms,
and societal values, to gain legitimacy and acceptance. Corporate governance practices
are influenced by institutional factors and may vary across different institutional
contexts.

6. Contingency Theory: Contingency theory argues that there is no one-size-fits-all

approach to corporate governance, and the effectiveness of governance mechanisms
depends on the specific characteristics and circumstances of the corporation, such
as its size, industry, ownership structure, and competitive environment. The theory
emphasizes the need for flexibility and adaptation in designing governance practices
to fit the unique needs and challenges of each organization.

7. Principal-Principle Alignment Theory: This theory focuses on aligning the interests

and incentives of principals (shareholders) with the principles (values, goals, and
objectives) of the corporation. It suggests that effective governance practices
should ensure that corporate objectives are aligned with shareholder interests and
that mechanisms, such as performance-based executive compensation, board
oversight, and shareholder engagement, are in place to promote alignment and
accountability.
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These theories provide valuable insights into the complexities of corporate
governance and help inform the design and implementation of governance practices
that promote responsible management, transparency, accountability, and long-term
value creation for shareholders and stakeholders.

8. Phases of Development of Corporate Governance in India

The development of corporate governance in India has evolved through several
phases, driven by changes in the economic, regulatory, and corporate landscape.
Here's a brief overview of the key phases of corporate governance development in
India:

1. Pre-liberalization Era (Pre-1991):

- Prior to economic liberalization in 1991, India followed a controlled economy model

with strict government regulations and limited private sector participation.

- Corporate governance practices were largely unregulated and informal, with

limited focus on transparency, disclosure, and accountability.

- Most companies were family-owned or controlled by business groups, leading to

concentrated ownership structures and potential conflicts of interest between
controlling shareholders and minority investors.

2. Post-liberalization Era (1991-2000):

- Economic liberalization in 1991 brought significant reforms aimed at opening up

the Indian economy, attracting foreign investment, and promoting competition.

- The Securities and Exchange Board of India (SEBI) was established in 1992 as
the primary regulator of securities markets in India. SEBI introduced regulations and
guidelines to enhance transparency, disclosure, and investor protection.

- The introduction of listing requirements, such as mandatory disclosure norms,

independent directors, audit committees, and corporate governance codes, marked
the beginning of formal corporate governance practices in India.

- The Confederation of Indian Industry (CII) released the first voluntary code of
corporate governance in 1998, known as the 'Desirable Corporate Governance: A
Code.'

3. Consolidation and Reform (2001-2013):

- The early 2000s saw a period of consolidation and refinement of corporate

governance practices in India.

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 - SEBI issued several amendments and updates to existing regulations, including the
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which
consolidated listing requirements related to corporate governance.

- The Ministry of Corporate Affairs (MCA) introduced the Companies Act, 2013,
which replaced the outdated Companies Act of 1956 and significantly revamped
corporate governance provisions. The Act mandated the establishment of new
governance structures, such as independent directors, audit committees, and board
evaluation processes, and introduced stricter disclosure requirements.

- Stock exchanges and industry bodies, such as the National Stock Exchange (NSE)
and the Confederation of Indian Industry (CII), played active roles in promoting
corporate governance through initiatives, guidelines, and awards.

4. Focus on Enforcement and Implementation (2014-Present):

- The recent years have seen an increased focus on enforcement and

implementation of corporate governance norms in India.

- SEBI has taken proactive measures to strengthen regulatory oversight and

enforcement mechanisms, including stricter enforcement of listing requirements,
enhanced surveillance and monitoring, and imposition of penalties for non-compliance.

- The Insolvency and Bankruptcy Code (IBC) was introduced in 2016 to address
corporate insolvency and restructuring processes, promoting transparency,
accountability, and creditor rights.

- Corporate governance has become a key area of focus for investors, regulators,
and stakeholders, with growing awareness of its importance in driving sustainable
business practices and long-term value creation.

Overall, the development of corporate governance in India has progressed

from informal and unregulated practices to a more structured and regulated
framework aimed at enhancing transparency, accountability, and investor protection.
While significant strides have been made, there remain challenges related to
enforcement, compliance, and corporate culture that require ongoing attention and
improvement.

9. Evolution of Corporate Governance at the Global Level

The evolution of corporate governance at the global level has occurred over several
phases, driven by changes in economic, social, regulatory, and technological factors.
Here's an overview of the key phases of development:
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 1. Early Development (Pre-20th Century):

- The origins of corporate governance can be traced back to the emergence of

joint-stock companies and the Industrial Revolution in the 17th and 18th centuries.

- During this period, corporate governance was primarily characterized by informal

mechanisms of control, with company owners often directly involved in management
and decision-making processes.

- The lack of regulatory oversight and accountability mechanisms led to instances

of abuse, fraud, and mismanagement in some corporations.

2. Emergence of Regulatory Frameworks (20th Century):

- The early 20th century saw the introduction of regulatory frameworks and
corporate governance reforms in response to corporate scandals, market crashes, and
economic downturns.

- Countries like the United States enacted securities laws, such as the Securities
Act of 1933 and the Securities Exchange Act of 1934, to regulate securities markets
and promote transparency and investor protection.

- The establishment of regulatory bodies, such as the Securities and Exchange

Commission (SEC) in the U.S., marked a significant milestone in the development of
corporate governance globally.

3. Focus on Shareholder Rights and Accountability (1960s-1980s):

- The 1960s and 1970s saw a growing emphasis on shareholder rights and
accountability in corporate governance.

- Shareholder activism gained momentum, with investors advocating for greater

shareholder democracy, board accountability, and transparency in corporate decision-
making.

- Academic research, such as the seminal work of economist Michael Jensen and
others on agency theory, provided theoretical foundations for understanding
governance mechanisms and shareholder-value maximization.

4. Rise of Corporate Governance Codes and Standards (1990s-2000s):

- The 1990s and 2000s witnessed the proliferation of corporate governance codes,
standards, and best practices at the national and international levels.

- Organizations such as the Organisation for Economic Co-operation and

Development (OECD) and the International Corporate Governance Network (ICGN)
developed guidelines and principles to promote good governance practices globally.

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 - Corporate scandals, such as Enron, WorldCom, and Parmalat, spurred reforms and
regulatory interventions aimed at strengthening governance frameworks and
restoring investor confidence.

5. Globalization and Convergence (2000s-Present):

- The early 21st century has been characterized by increasing globalization and
convergence of corporate governance practices across countries and regions.

- International initiatives, such as the Principles of Corporate Governance by the

OECD and the Global Reporting Initiative (GRI) for sustainability reporting, have
facilitated harmonization and alignment of governance standards.

- Multinational corporations have adopted common governance practices and

standards to enhance transparency, accountability, and investor relations in global
markets.

- Emerging trends, such as the rise of environmental, social, and governance (ESG)
considerations, digital transformation, and stakeholder capitalism, are shaping the
future direction of corporate governance at the global level.

Overall, the development of corporate governance at the global level reflects a

dynamic and evolving process, driven by changing economic, regulatory, and societal
dynamics. While progress has been made in promoting transparency, accountability,
and shareholder rights, ongoing efforts are needed to address emerging challenges
and ensure the effectiveness of governance mechanisms in the face of evolving
business environments and stakeholder expectations.

10. Code of Corporate Governance

The Code of Corporate Governance refers to a set of principles, guidelines, and best
practices that companies are encouraged to adopt voluntarily or are mandated to
follow by regulatory authorities. These codes aim to promote transparency,
accountability, fairness, and integrity in corporate operations and decision-making
processes.

The Code of Corporate Governance in India is primarily guided by regulatory

frameworks issued by the Securities and Exchange Board of India (SEBI), as well as
guidelines from industry bodies such as the Confederation of Indian Industry (CII)
and the Institute of Company Secretaries of India (ICSI).

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Here are the key components and features of the Code of Corporate Governance
in the Indian perspective:

1. Board of Directors: The code typically outlines the composition, structure, roles,
and responsibilities of the board of directors. It emphasizes the need for an
adequate number of independent directors, board diversity, separation of
chairman and CEO roles, and the establishment of board committees such as the
audit committee, nomination and remuneration committee, and risk management
committee.
2. Transparency and Disclosure: The code emphasizes the importance of
transparent and timely disclosure of information to shareholders and other
stakeholders. Companies are required to adhere to stringent disclosure norms
regarding financial performance, related-party transactions, corporate
governance practices, risk factors, and other material information. Compliance
with disclosure requirements enhances transparency and helps investors make
informed decisions.
3. Shareholder Rights and Protection: The code aims to safeguard shareholder
rights and promote shareholder democracy. It includes provisions for
facilitating shareholder participation in corporate governance, such as the right
to vote on key matters, access to information, and mechanisms for shareholder
redressal and grievance resolution. Shareholders are encouraged to actively
engage with companies through annual general meetings, proxy voting, and
electronic platforms.
4. Audit and Internal Controls: The code emphasizes the importance of effective
internal controls, risk management systems, and robust audit processes.
Companies are required to establish an independent audit committee responsible
for overseeing financial reporting, internal controls, and audit functions.
External auditors play a crucial role in providing assurance on the accuracy and
reliability of financial statements.
5. Ethical Conduct and Corporate Social Responsibility (CSR): The code promotes
ethical conduct, integrity, and accountability in corporate operations. Companies
are encouraged to adopt ethical business practices, adhere to corporate
governance principles, and uphold the highest standards of integrity and
professionalism. Additionally, the code encourages companies to integrate
environmental, social, and governance (ESG) considerations into their business
strategies and operations and fulfill their CSR obligations.
6. Compliance and Enforcement: Regulatory authorities such as SEBI monitor
compliance with corporate governance norms and take enforcement actions

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 against non-compliant companies. Listed companies are required to submit
periodic compliance reports and disclosures to stock exchanges and regulatory
bodies. Non-compliance with governance requirements can result in penalties,
fines, and adverse reputational consequences for companies and their directors.

Overall, the Code of Corporate Governance in the Indian perspective serves as a

framework for promoting responsible and transparent corporate behavior, enhancing
investor confidence, and fostering sustainable long-term growth and value creation.
Compliance with governance norms helps companies build trust with stakeholders,
mitigate risks, and contribute to the overall development of the Indian economy.

11. Committees on Corporate Governance in India

The Indian government and regulatory agencies have constituted various committees
to study and recommend reforms related to corporate governance practices. These
committees are tasked with evaluating the existing regulatory framework, identifying
gaps and challenges, and proposing measures to strengthen corporate governance
standards in India. Here are some notable committees constituted by the Indian
government or government agencies to submit reports on corporate governance:

1. Kumar Mangalam Birla Committee (2000):

 Constituted by the Securities and Exchange Board of India (SEBI).
 Objective: To recommend improvements to corporate governance
practices in India.
 Recommendations: The committee proposed several reforms, including
the mandatory appointment of independent directors, the formation of
audit committees, enhanced disclosure requirements, and measures to
strengthen the role of independent directors in corporate decision-
making.
2. Naresh Chandra Committee on Corporate Audit and Governance (2002):
 Constituted by the Ministry of Finance, Government of India.
 Objective: To review and recommend reforms related to corporate audit
and governance practices.
 Recommendations: The committee proposed measures to enhance the
quality and independence of corporate audits, strengthen the role of
audit committees, improve financial reporting standards, and promote
transparency and accountability in corporate governance.
3. J.J. Irani Committee on Company Law (2005):
 Constituted by the Ministry of Company Affairs, Government of India.
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  Objective: To review and recommend amendments to the Companies Act,
1956.
 Recommendations: The committee proposed comprehensive reforms to
modernize company law in India, including provisions related to corporate
governance, board structure, shareholder rights, disclosure
requirements, and corporate social responsibility (CSR).
4. Uday Kotak Committee on Corporate Governance (2017):
 Constituted by the Securities and Exchange Board of India (SEBI).
 Objective: To review and suggest amendments to the SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015, pertaining
to corporate governance norms.
 Recommendations: The committee proposed several reforms, including
enhancing the role and independence of independent directors,
strengthening board oversight functions, improving disclosure standards,
and addressing issues related to related-party transactions and board
diversity.
5. Injeti Srinivas Committee on Corporate Governance (2018):
 Constituted by the Ministry of Corporate Affairs, Government of India.
 Objective: To review and recommend reforms to corporate governance
norms in India.
 Recommendations: The committee submitted a report with
recommendations to improve corporate governance practices, enhance
board effectiveness, strengthen regulatory oversight, and promote
responsible business conduct.

These committees have played instrumental roles in shaping the evolution of

corporate governance in India by proposing reforms, amendments, and best practices
to enhance transparency, accountability, and investor protection in the corporate
sector. The recommendations of these committees often serve as the basis for
regulatory reforms and policy initiatives aimed at strengthening corporate
governance standards and fostering a conducive environment for sustainable business
growth.

12. Committees on Corporate Governance in Global Level

Various committees at the global level have been constituted to study, analyze, and
provide recommendations on corporate governance practices worldwide. These
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committees are often formed by international organizations, industry bodies, or
independent groups of experts to address emerging issues, promote best practices,
and enhance governance frameworks across countries. Here are some notable
committees constituted at the global level to submit reports on corporate
governance:

1. Organization for Economic Co-operation and Development (OECD):

- The OECD has established several committees and working groups focused on
corporate governance, including the OECD Corporate Governance Committee.
- Objective: To develop and promote internationally recognized corporate
governance principles and guidelines.
- Key Publications: The OECD Principles of Corporate Governance (1999, revised
2015) and various reports on corporate governance practices, enforcement
mechanisms, and country-specific reviews.
2. International Corporate Governance Network (ICGN):
- The ICGN is a global organization of institutional investors, asset managers, and
corporate governance professionals.
- Objective: To promote global standards of corporate governance and advocate
for investor rights and responsibilities.
- Key Publications: The ICGN Global Governance Principles (latest version in 2018)
and various reports and policy papers on corporate governance issues,
shareholder rights, and stewardship practices.
3. World Economic Forum (WEF) - Global Future Council on Transparency and
Anti-Corruption:
- The WEF's Global Future Council on Transparency and Anti-Corruption focuses
on promoting transparency, integrity, and accountability in corporate
governance.
- Objective: To address challenges related to corruption, fraud, and unethical
behavior in business and promote responsible corporate conduct.
- Key Publications: Reports and initiatives on transparency, anti-corruption
measures, and corporate governance reforms.
4. United Nations Global Compact (UNGC):
- The UNGC is a voluntary initiative promoting corporate sustainability and
responsible business practices.
- Objective: To advance principles of environmental, social, and governance (ESG)
sustainability and support the integration of sustainability into corporate
governance frameworks.

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 - Key Publications: Reports, guidance documents, and best practice examples on
integrating sustainability into corporate governance, stakeholder engagement,
and reporting.
6. Financial Stability Board (FSB) - Enhanced Disclosure Task Force (EDTF):
- The EDTF was established by the FSB to improve the quality and comparability
of corporate reporting, including disclosures related to governance practices.
- Objective: To develop recommendations for enhanced corporate disclosure and
transparency in key areas, such as risk management, executive compensation,
and board composition.
- Key Publications: The EDTF recommendations on corporate governance
disclosure (latest version in 2012) and progress reports on implementation by
G20 countries.

These global committees and initiatives play crucial roles in shaping

international standards, promoting best practices, and fostering dialogue and
collaboration among stakeholders to strengthen corporate governance frameworks
globally. The reports and recommendations issued by these committees provide
valuable insights and guidance for policymakers, regulators, companies, investors, and
other stakeholders seeking to enhance corporate governance practices and promote
sustainable and responsible business conduct on a global scale.

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