Corporale Governance 87

5. It is only a part of the larger econon)iccontext in which firms

operate. It depends upon legal, regulatory and institutional
environment.

4.7 EATURES OF CORPORATE GOVERNANCE

According to Bansal (2005), corporate governance has the following
features,
1. Constitution of committee: It covers constitution and functioningof
various committee such as audit committee, remuneration committee,
shareholdersgrievance committee, compliance committee.
2. Structuring of boards: It covers aspects relating to the compositionof
boards,representation of insiders and outsiders on the board, role of non-
executiveand independentdirectors.
3. Board systems and procedures: It covers aspects such as convening
of board meetings, frequency and attendance at board meetings, fulfilling
the information requirements of the board for decision making.
4. Shareholders' democracy: Shareholders/ participation in meetings,
fulfillingshareholders' rights and disclosure of information required by the
stakeholders.
5. Value orientation: Corporate governance encompasses ethics, values
and morals of a corporation and its directors.
6. Monitoring of strategic decisions: It involves monitoring and
overseeing strategic decisions in a socio-economic and cultural contexts.

4.8 C VES OF CORPORATE GOVERNANCE

Corporategovernance extends beyond corporate law. It is integral to the
very existenceof a company. The key objectivesof corporate governance
are listed below:
1. Strengthening investors 'confidence: It tries to inspire and strengthen
the investors' confidence by ensuring company's commitment to higher
profits.
2. Transparency: Its rudimentary objectiveis not mere fulfilmentof the
requirementsof legal provisions but to ensure commitment of the board in
managingthe companyin a transparentmanner so as to maximizethe
stakeholders' value.
3. Balanced board: To see that the board is balanced as regards
the representation of adequate number of non-executive director and
independentdirectors to take care of the interests of stakeholders.
 Ethics and Social Responsibility
88 Corporate Governance,

board's policies and procedures: To review that

4. Review of and practices in the interestthe board
procedures
adopts transparent of both
company and stakeholders.
shareholders: To check that the board
5. Board's decision to
pertaining to the developments taking
provides
adequateinformation periodically.
place in the
companyto the shareholders
board: To ensure that the board leads
6, Long-term vision of the the
long-term value and shareholders,
to maximize
company forward so as
wealth.

Need for Corporate Governance versus Corporate

Governance Needs
Needfor Corporate Governance Corporate Governace Needs

Impact of globalization. To prevent expropriation.

Economic changes. Improving the quality of inform-
ation provided.
Change in the structure of share- Enhancing minority shareholder's
holding. participation in decision making.
Financial reporting and trans- Making the board more effective
parency. and independent.
Shareholders/ stakeholders net Reducing the related party trans-
worth/wealth. action.
Failure of corporate directors in Enhanced responsibility on the role
carryingout their fiduciary duties. of internal auditors.
Threshold ownership: minimum
Concentrationof securities in fewer
hands brought about disastrous shareholdings for exercising the
results. rights.
Transparency in information is Disclosure of information of related
encouraged particularly in grey matters affecting the rights of
areas as secrecy of information minority shareholders and prevent
reduces the image and reputation of dominant shareholders from undue
the organizations. advantages.
Family directorships have not
yielded expected performance and Enhancing the effectiveness of the
Board.
outcome.
Enforceabilityof legal provisions is
very much lacking. Regulatory measures to build up the
imace.
The law breakers escape easily due
to various loopholes in law. Suggestingimposition of penalties
and fines for failure in the
performance.