CORPORATE GOVERNANCE

Corporate governance is the broad term describes the processes, customs, policies, laws and institutions
that direct the organizations and corporations in the way they act, administer and control their
operations. It works to achieve the goal of the organization and manages the relationship among the
stakeholders including the board of directors and the shareholders.

It also deals with the accountability of the individuals through a mechanism which reduces the
principal-agent problem in the organization. Corporate governance mechanisms are those mechanisms
that protect shareholders interests.
AGENCY COSTS
Agency costs are internal costs incurred due to the competing interests of shareholders (principals) and
the management team (agents). Expenses that are associated with resolving this disagreement and
managing the relationship are referred to as agency costs.

The key takeaway point is that these costs arise from the separation of ownership and control.
Shareholders want to maximize shareholder value, while management may sometimes make decisions
that are not in the best interests of the shareholders (i.e., those that benefit themselves).
For example, agency costs are incurred when the senior management team, when traveling,
unnecessarily books the most expensive hotel or orders unnecessary hotel upgrades. The cost of such
actions increases the operating cost of the company while providing no added benefit or value to
shareholders.
 
Two categories of agency costs:
Costs incurred when the agent (management team) uses the company’s resources for his or her own
benefit.
Costs incurred by the principals (shareholders) to prevent the agent (management team) from
prioritizing him/herself over shareholder interests.
 
SHAREHOLDERS ROLE IN CORPORATE GORVENANCE

Shareholder oriented models of corporate governance therefore aim for an increase in profit, which
leads to an increase in shareholders’ return, by arguing that shareholders own the company and
therefore also bear the financial risk (Sundaram and Inkpen, 2004).
Accordingly, shareholders are the owners of the company and managers act on their behalf (Smith,
2003).
Consequently, it is the task of the shareholders to ensure and control that managers use the provided
fund in a way that maximizes their return (Tse, 2011).

The shareholding model offers several solutions to the agency problem.

Firstly, it suggests that restrictions on factor markets must be removed in order to encourage
competition (Letza et al., 2004).

Secondly, it calls for the introduction of a voluntary corporate governance code of ethics and conduct,
which is usually underpinned by the universal business principles of accountability, discipline, fairness,
independence, responsibility, and transparency to regulate director and managerial behaviour (Cadbury,
1992).

Thirdly, it recommends the strengthening of the managerial incentive system by instituting

performance-linked executive compensation schemes to help align shareholder-managerial interests
(Weimer and Pape, 1999)

. Finally, it calls for the introduction of efficient contracts to govern the relationship between owners of
capital and labour (Letza et al., 2004).

IMPORTANCE OF KEY PERFORMANCE INDICATORS

To monitor company health. KPIs are a scorecard for company health. You only need a handful of
KPIs to monitor your company's vital signs. Only measure what you want to move so you can put energy
where you want to effect change. We’ve found that it is important to measure a few KPIs in each of 4
categories: Employees, Customers, Processes, and Revenue.  These fall under the disciplines of human
resources, customer satisfaction, business processes, business strategy and many more.  First make sure
you choose the right KPIs for your business, then worry about who is accountable for them.
To measure progress over time. Track key results indicators like Revenue, Gross Margin, # of
locations, # of employees, etc. Set targets at the beginning of each year and each quarter and use KPIs
weekly to measure your progress toward those goals.  Setting the right KPIs help you measure your
progress towards your long-term goals and business strategy.
To make adjustments & stay on track. In addition to your results, you also need leading
indicators to let you know when you’re in danger of missing those targets before it’s too late. Leading
indicator KPIs help you predict what will happen in the future and your future results. They let you know
if you are on track to achieve the results you want. Leading indicators have two characteristics: they are
measurable, and you can directly influence them.  They are good KPIs to have on your dashboard to
keep your projects on track.
To solve problems or tackle opportunities. Use a combination of KPIs in a dashboard so that you
have the right information at your fingertips to solve problems or tackle opportunities. Let’s say you are
in a sales slump. Identify a handful of KPIs that can help you turn the tide (maybe it is # of outbound
calls, # of appointments kept, # of trade shows attended). Put them on a dashboard and track them
weekly to see if you’ve found the right lever that helps you generate more predictable sales. Or, let’s say
you have a great idea for a new product. Maybe you test it out with a few clients and use KPIs to
validate your business model before launching it on a large scale; you might monitor # of customers
interested, $ to support new product, NPS score, implementation time, # of defects, etc.
To analyze patterns over time. If you measure the same KPIs quarter over quarter, you can begin to
detect patterns in your numbers. There are countless ways these patterns can help you in your business.
Maybe you can predict when your slowest quarter will be and use that time to do a system update or
company-wide training initiative. Maybe you can tell that your sales manager always forecasts that
you’ll come in 5 deals over or under where you usually end up at the end of the quarter. Maybe you can
see that you’ve got some team members who are habitually under-performing or over-performing on
their KPIs and can use this data to talk about consequences, bad or good.

SHARE PROSPECTUS

A prospectus is a legal disclosure document that provides information about an investment

offering to the public, and that is required to be filed with the Securities and Exchange
Commission (SEC) or local regulator. The prospectus contains information about the company,
its management team, recent financial performance, and other related information that
investors would like to know.

 Investors use the legal document to determine the growth and profitability prospects of the
selling company to decide whether they will take part in the offering or not.

contents os annual report and accounts

 Chairman’s Speech:

Chairman’s speech highlights corporate activities, strategies, researches, labour relations, main

achievements, focuses on future goals, growth

Director’s Report:

Section 217 of the Company law makes it mandatory on the part of directors to make out and

attach to every balance sheet laid in an annual general meeting of the company, a report, known

as director’s report.
Auditor’s Report:

Section 227 of the Companies Act says that the auditors shall make a report to the members of

the company.

Further to our comments in the Annexure referred to in Paragraph 3 above, we report

that:

(a) We have obtained all the information and explanations, which to the best of our knowledge

and belief were necessary for the purpose of our audit.

(b) In our opinion, proper books of accounts as required by Law have been kept by the company

so far as appears from our examination of such books.

(c) The balance sheet and profit and loss account and cash flow state

Balance Sheet:

Balance sheet which is also known as position statement provides a bird’s eye view on

company’s financial position as well as condition.

chedules:

An average annual report generally contains some schedules forming part of balance sheet and

others forming part of profit and loss account. 

cash Flow Statement:

The accounting standard AS-3 (Revised) cash flow statements issued by ICAI in March 1997 has

made obligatory on the part of companies for reporting its cash flows as per the requirements of

the standard.