Assignment submitted

In partial fulfillment of even semester internal evaluation

Submitted to

Stuti ma’am

ICFAI Law School

ICFAI University, Dehradun

TOPIC- Good governance is very critical in the efficient running of

corporates in the modern world.

Academic session 2020-21

Submitted by: Shreya Agrawal Submitted to: Stuti ma’am

Name: Shreya Agrawal Faculty-In-charge

Course: BBA- LLB (HONS.) 3rd year

Section-C

Enrollment No-18FLICDDN01133

Subject-Corporate Governance and Business ethics

 QUESTION- Elaborate the following statement -Good governance is very critical in the
efficient running of corporate in the modern world.

ANSWER- Every organization should strive and try its best to have good management and
good governance.

Good governance means where the management of an organization manages its operations
smoothly and efficiently. Under good governance, an organization can simultaneously meet the
needs of society and the organization’s objectives. Good governance helps the stakeholders in
making the major financial decisions of a company and therefore it helps in decision making of
the company. Thus, the productivity, output and the profit of the company gets increased through
good governance. On the other hand, if the governance is not good and the decisions that are
taken in an organization are inefficient and cannot be relied upon, it may even lead to closure of
the corporate.

Corporate Governance is intended to increase the accountability of your company and avoid
massive disasters before they occur. Failed energy giant Enron and its bankrupt employees and
shareholders, is an important part to look at for the importance of good corporate governance.
Good corporate governance should be similar to a police department’s internal affairs unit which
performs all operations with good care.

OWNERSHIP STRUCTURE OF THE COMPANIES KEEPS ON

CHANGING-
The ownership structure of companies has changed a lot in the recent years. Public financial
institutions like the mutual funds etc. are the single largest shareholder in most of the large
companies. So, they have effective control on the management of the companies. Therefore, they
put pressure on the management to become more efficient, transparent and accountable, etc.
They also ask the management to make consumer-friendly policies, to protect all social groups
and to protect the environment. So, the changing ownership structure has resulted in good
corporate governance.

THE SCAMS HAVE BEEN INCREASING CONTINUOUSLY -

Many scams and frauds and corrupt practices have taken place. Misuse and misappropriation of
public money are happening everyday in India and worldwide. In order to avoid these scams and
there is a need to ensure good corporate governance.

SHAREHOLDERS’ ASSOCIATIONS ARE NOT STRONG-

Shareholders are inactive in the management of their companies. They only attend the Annual
general meeting. Proxies are not allowed to speak in the meetings. Shareholders associations are
not strong. Therefore, directors misuse their power for their own benefits. So, there is a need for
corporate governance to protect all the stakeholders of the company.

IMPROVED GOVERNANCE STRUCTURES ENSURE QUALITY

DECISION MAKING: Improved governance structures and processes ensure quality
decision-making and also encourage effective planning for senior management and enhance the
long-term prosperity of companies.

INCREASED ACCESS TO GLOBAL MARKET : Good corporate governance

systems attract investment from global investors which leads to greater efficiencies in the
financial sector.

TRANSPARENCY IN BUSINESS TRANSACTIONS AND COMBATTING

CORRUPTION: Companies that are transparent provide full disclosure of accounting and
auditing procedures, allow transparency in all business transactions and provide for an
environment where corruption could be combated. Corporate Governance enables a corporation
to compete more efficiently and prevent fraud and malpractices within the organization. For
example- in the Satyam Scam, fraud was going on in the company for years and the
management was unaware. If good governance would have been there in the organization,
this wouldn’t have had happened. Therefore, it is important for an organization to ensure
good governance within its premises.

THE RISKS OF CORPORATE CRISIS GETS REDUCED: A transparent and

accountable system makes the board of a company aware of the majority of the mask risks
involved in a particular strategy, which places various control systems in place to monitor the
related issues.

ACCOUNTABILITY: Investor relations are essential part of good corporate governance.

Investors directly or indirectly trust management of the company to create enhanced value for
their investment. The company is therefore obliged to make timely disclosures on regular basis
to all its shareholders for enhanced corporate governance. Good Corporate Governance practices
create the environment whereby boards cannot ignore their accountability to these stakeholders.

THEREFORE, EFFECTIVE MEASURES SHOULD BE TAKEN AND POLICIES SHOULD

BE IMPLEMENTED ACCURATELY WITHIN AN ORGANIZATION FOR GOOD
GOVERNANCE OF AN ORGANIZATION.