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Strategic Management - II: Corporate Governance
Strategic Management - II: Corporate Governance
Strategic Management - II
SESSION 9
Corporate Governance
Corporate governance comprises of all activities undertaken to
‘control’, ‘regulate’, ‘manage’ and ‘govern’ the firm
A company's board of directors is the primary force influencing
corporate governance.
The basic principles of corporate governance are accountability,
transparency, fairness, and responsibility.
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Board of Directors
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Board of Directors
Three Broad Functions
Monitoring
• Interests of Stakeholders
Decision making
• Dividends, hiring and firing of top management (CEO)
• Approval on key strategic decisions – M&As, international
expansion etc.
Resource provisioning
• Knowledge
• Financial
• Reputation
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Board of Directors
Executive Directors
Involved in day to day decision making of the firm
Possess more information about the business, the firm and the
business environment
Have the knowledge, power and information to act in self-serving
manner
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Board of Directors
Independent Directors
As per Companies Act,
• Every listed public company shall have at least one-third of the total number
of directors as independent directors
• SEBI clause 49 (listing agreement), requires atleast 50% directors to be
independent
An independent director in relation to a company must satisfy following
criteria
• Is a person of integrity and possesses relevant expertise and experience;
• Does not have any pecuniary relationship to the firm or does not have
transactions more that 10% of his total income
• Is not related to the management of the company
• Is not amongst Managing Director or Nominee director
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Board of Directors
Independent Directors
Bring reputation, information, knowledge and legitimacy to the firm
Monitor the interests of shareholders and other stakeholders
? Not involved in day to day operations of the firm
× Possess less knowledge about the firm, its strengths and weaknesses as
compared to executive directors
× May lack time and interest in decision making
? Less inclined towards risky decision making
? Work with caution, may slow the decision making process
× Suffer from “confirmation bias”
× May not be really independent !!!
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An Illustrative Example
Name Designation Independent
Adil Zainulbhai Non Executive Director Independent Director
Alok Agarwal Chief Financial Officer
Arundhati Bhattacharya Non Executive Director Independent Director
Dipak C Jain Non Executive Director Independent Director
Hital R Meswani Executive Director
K Sethuraman Group Co. Secretary & Compliance Officer
K V Chowdary Non Executive Director
Mukesh D Ambani Chairman & Managing Director
Nikhil R Meswani Executive Director
Nita M Ambani Non Executive Director
P M S Prasad Executive Director
Pawan Kumar Kapil Executive Director
Raghunath A Mashelkar Non Executive Director Independent Director
Raminder Singh Gujral Non Executive Director Independent Director
Savithri Parekh Jt. Co. Secreatary & Compliance Officer
Shumeet Banerji Non Executive Director Independent Director
Srikanth Venkatachari Jt. Chief Financial Officer
Yogendra P Trivedi Non Executive Director Independent Director
https://www.ril.com/OurCompany/Leadership/BoardofDirectors.aspx
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Thank You………..
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