Unit1 - Corporate Governance

Noida Institute of Engineering and Technology, Greater
Noida
INTRODUCTION OF CORPORATE
GOVERNANCE
Unit: 1
Corporate Governance, Values

& Ethics AMBA0302 SHRUTI SHARMA
MBA
MBA 2nd Year (3RD Sem) Department
March 19, 2024 Shruti sharma AMBA 0302

Unit-1 1
Noida Institute of Engineering and
Technology, Greater Noida
(Unit –I) Topic 1
Meaning, Definition, Nature, Issues,

need of corporate governance code,
Code of Corporate Practices,
Shruti sharma AMBA

0302 Unit-1
Topic Objective & Topic Outcome
S No Topic CO
1 Fundamentals of corporate governance and CO 1
its concept
2 Code of conduct CO 1
3 Framework of corporate governance and CO 1
Investor Protection in India
March 19, 2024 Shruti sharma AMBA 030 3

2 Unit-1
Session Learning Objective with CO mapping
1. Understand the meaning of Fundamentals of corporate

governance and its concept
Topic Course
Outcome
1. to make them understand the Fundamentals CO1
of corporate governance and its concept
March 19, 2024 4
Shruti sharma AMBA 030

2 Unit-1
Introduction Of Corporate Governance
Introduction
Corporate governance is the system of rules, practices, and processes by
which a firm is directed and controlled. Corporate governance essentially
involves balancing the interests of a company's many stakeholders, such as
shareholders, senior management executives, customers, suppliers,
financiers, the government, and the community.
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5

2 Unit-1
Definition Of Corporate Governance
In essence we believe that good corporate governance consists of a system of

structuring, operating and controlling a company such as to achieve the following:
• a culture based on a foundation of sound business ethics fulfilling the long-term

strategic goal of the owners while taking into account the expectations of all the
key stakeholders, and in particular
• maintaining proper compliance with all the applicable legal and regulatory
requirements under which the company is carrying out its activities.
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2 Unit-1
Scope Of Corporate Governance
•If the corporate governance of the company is proper it will ultimately lead
to better economic growth and more success rate.
•Better corporate governance helps in getting the confidence of the investor
which will ultimately help the company in raising and acquiring the capital
fast and effectively.
•It also lowers the cost of the capital that is required for investment.
•It also helps in increasing the share price of the company.
•Proper corporate governance help in attaining efficiency and also minimizes
mismanagement, risk, and corruption.
•It plays in building up the goodwill of the corporation.
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2 Unit-1
Issues Of Corporate Governance
There are some problems also with corporate governance as it needs to achieve the
objective of each and every one of its stakeholders. The goals of each of its stakeholders
should be considered and neither of them should be undermined. Some of the common
issues are discussed below :
• Interest May Be Conflicted

Interest may be conflicted when the one who has a controlling power has some financial
interest that could affect his decision making and may also conflict with the company’s
objectives.
• Issues Of The Oversight

For proper corporate governance to be effective the directors’ team of the company
should have proper sight over the company’s processes.
March 19, 2024 Shruti sharma AMBA 030

2 Unit-1
Issues Of Corporate Governance
Some of the common issues are discussed below :
Issues Of The Accountability

• Accountability is something that is necessary for the proper functioning of
corporate governance. From a high-level position to lower-level positions job,
role and accountability should be clearly mentioned, So, that there is no
confusion among the members.
Issues Of Transparency
• For bringing transparency in the organization corporation must make accurate
and fair reporting of their profit and loss and should present a true picture of it
to those who invest in the company.
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9

2 Unit-1
Introduction Of Corporate Governance
The Bottom Line

• Corporate governance consists of the guiding principles that a company puts in
place to direct all of its operations, from compensation to risk management to
employee treatment to reporting unfair practices to its impact on the climate, and
more.
• A strong, transparent corporate governance leads a company to make ethical
decisions that benefit all of its stakeholders, allowing the company to place itself
as an attractive option to investors if its financials are also healthy.
• Bad corporate governance leads to a breakdown of a company, often resulting in
scandals and bankruptcy.
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10

2 Unit-1
Benefits Of Corporate Governance
Benefits of Corporate Governance
Good corporate governance ensures corporate success and economic growth.
Strong corporate governance maintains investors’ confidence, as a result of which,

company can raise capital efficiently and effectively.
It lowers the capital cost.
There is a positive impact on the share price.
It provides proper inducement to the owners as well as managers to achieve objectives

that are in interests of the shareholders and the organization.
It helps in brand formation and development.
Good corporate governance also minimizes wastages, corruption, risks and

mismanagement. 11
March 19, 2024

2 Unit-1
Discussion for next session
Corporate ethics or marketing?
March 19, 2024

12

2 Unit-1
Recap
1. The Meaning Of CORPORATE GOVERNANCE

2. Definition of CG
3. Stake holders
4. The Various needs of CG.
5. The benefits of CG
6. The Scope Of CG.
March 19, 2024 13

2 Unit-1
Daily Quiz
• What Are the 4 Ps of Corporate Governance?

The four P's of corporate governance are people, process, performance, and
purpose.
• Why Is Corporate Governance Important?

Corporate governance is important because it creates a system of rules and
practices that determine how a company operates and how it aligns the
interest of all its stakeholders. Good corporate governance leads to ethical
business practices, which leads to financial viability.
• What Are the Basic Principles of Corporate Governance?

The basic principles of corporate governance are accountability, transparency,
fairness, and responsibility.
• What Are Examples of Corporate Governance?

Examples of corporate governance include the Anglo-US model, the German
model, and the Japanese model. 14
March 19, 2024

2 Unit-1
Noida Institute of Engineering and Technology, Greater
Noida
Code of Corporate Practices, Corporate Social Responsibility,

Corporate Social Reporting, Corporate Governance and the Role of
Board (BOD)
Session 2
CORPORATE GOVERNANCE
SHRUTI SHARMA
MBA
MBA 2nd Year (3RD Sem) Department
15
March 19, 2024

2 Unit-1
(Unit –I) Topic 2
Code of Corporate Practices, Corporate

Social Responsibility, Corporate Social
Reporting, Corporate Governance and the
Role of Board (BOD)
Shruti sharma AMBA

0302 Unit-1
1. Understand the meaning of Corporate Code of conduct
Topic Course Outcome
CO1
1. to make them understand Code of conduct
March 19, 2024 17

2 Unit-1
Code Of Corporate practices
What are company values?
company values (also called corporate values or core values) are the set of guiding
principles and fundamental beliefs that help a group of people function together as a
team and work toward a common business goal. These values are often related to
business relationships, customer relationships, and company growth.
Examples of company values

Company values don’t have to be unique; they should be what your company wants
to see in itself and its employees. Some examples are:
•Loyalty
•Honesty
•Trust
•Ingenuity
•Accountability
•Simplicity
•Respect
•Value-centricity
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18

2 Unit-1
Why are company values important?
From a business perspective, having a core set of company values makes

it easier for a company to make decisions, foster teamwork and help
employees collaborate, quickly communicate principles to clients and
customers, and hire employees with the right attitude.
The way I see it, creating a business is a bit like creating a community:
• if you want the community to act as a group, you need a shared
code/vision/identity/ethos, an organizational culture that drives whom you
choose to invite in and how the community functions as a whole.
• If you don’t own, define, and care about the values of your community, they
will evolve on their own, potentially in ways that hurt your business.
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19

2 Unit-1
4 elements of effective company core values
1. Lead with your vision statement : Your company values are the principles that
support this vision: before you can articulate effective company values, you need
to think about what impact your company can have on people (even if it’s a tiny
niche) and write a sentence that sums up that ideal scenario.
2. Keep your values unique: We’ve all heard values like ‘think big’ or ‘be curious’
from a handful of giants like Netflix and Amazon; it’s not unusual that smaller
companies are influenced by them and end up having pretty much the same
values.
Eg: if you are a 100% profit-driven organization, embrace that. Use your values to
make sure you hire people that think the same, unique way.
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2 Unit-1
3. Make values simple to understand and remember
4. Evolve your values over time
Eg: Google
Google has a list of 10 company values called “ ten things we know to be true”.
Focus on the user and all else will follow.
1.It’s best to do one thing really, really well.
2.Fast is better than slow.
3.Democracy on the web works.
4.You don’t need to be at your desk to need an answer.
5.You can make money without doing evil.
6.There’s always more information out there.
7.The
March 19, 2024 need for information crosses all borders.
21
8.You can be serious without a suit.
9.Great just isn’t good enough.
2 Unit-1
• Codified set of ethical standards to which a corporation aims to adhere.

Commonly generated by corporations themselves, corporate codes of
conduct vary extensively in design and objective.
• Crucially, they are not directly subject to legal enforcement. In an era acutely
aware of the dramatic social and environmental effects of corporate activity
across the world, such codes of conduct have become the focus of
considerable attention
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22

2 Unit-1
The pillars of this Code of Best Practice of Corporate Governance are

• Transparency
• Accountability
• Fairness
• Ethics
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2 Unit-1
The Code is made up of six parts:
• Owners –shareholders, quotaholders or partners

• Board of Directors –the body representing the owners
• Management –the chief executive officer and top managers
• Auditing –the independent auditors
• Surveillance –the fiscal council
• Ethics/Conflicts of interest
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24

2 Unit-1
Corporate ethics or marketing?
March 19, 2024

25

2 Unit-1
Corporate governance practices in India
The organizational framework for corporate governance initiatives in India

consists of the Ministry of Corporate Affairs (MCA) and the Securities and
Exchange Board of India (SEBI).
• SEBI monitors and regulates corporate governance of listed companies in

India through Clause 49. This clause is incorporated in the listing
agreement of stock exchanges with companies and it is compulsory for
listed companies to comply with its provisions.
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26

2 Unit-1
Corporate governance practices in India
• MCA through its various appointed committees and forums such as

National Foundation for Corporate Governance (NFCG), a not-for-profit
trust, facilitates exchange of experiences and ideas amongst corporate
leaders, policy makers, regulators, law enforcing agencies and non-
government organizations.
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27

2 Unit-1
Corporate Social Responsibility
• Corporate social responsibility (CSR), introduced to promote the idea that

corporate activities should, at the very least, avoid disruption to the wider
society and preferably generate positive effects.
• Examples of CSR practices include the preservation of the environment

through low-pollution and energy-efficient measures, the production of
merchandise that is recycle and biodegradable, and the promotion of
uniform treatment of employees across labour markets, thus ensuring
acceptable working conditions irrespective of local market standards (such
as the refusal of child labour). 28
March 19, 2024

2 Unit-1
Corporate Social Reporting
So, what is a CSR report? What do quality CSR reports look like, and why do they
matter for businesses and society?
WHAT IS A CSR REPORT?
According to the online course sustainable business strategy, corporate social
responsibility is the idea that a business has a responsibility to the society and
environment in which it operates. Many businesses striving to be socially
responsible use the triple bottom line—an organization’s impact on people and
the planet, in addition to its profits—to determine strategic priorities.
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29

2 Unit-1
Corporate Social Reporting
WHY ARE CSR REPORTS IMPORTANT?

• CSR reports are a way for an organization to communicate its mission, efforts,
and outcomes to external and internal stakeholders. In addition to employees,
decision-makers, and shareholders, these include customers, the local
community, and society at large.
• If a company has been bold and successful in its CSR efforts, the release of its
CSR report is as much a communication tool as it is a marketing and public
relations event.
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30

2 Unit-1
Corporate Governance and the Role of Board (BOD),
• Corporate Governance is concerned with the functioning of Board of

Directors (BODs) –its structure, styles, process, their relationships and
roles, activities etc.
• Therefore, Boards of directors (BODs) is considered as a crucial part of
the Corporate Governance.
• Directors are appointed by the shareholders of the company, who set
overall policy for the company, and the board appoints one or more of
them as managing directors/whole time directors/ executive directors to
be approved by the shareholders.
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31

2 Unit-1
Corporate Governance and the Role of Board (BOD),
• They are a link between the people who provide capital (the
shareholders) and the people who use that capital to create value (the
managers).
• The board’s primary role is to monitor management on behalf of the
shareholders. Board of directors is the important element of Corporate
Governance.
March 19, 2024

32

2 Unit-1
Corporate Governance System Worldwide
• Our language, beliefs, cultures, tastes, attitudes and politics have

developed over centuries and are what make each of our nations unique.
• Unsurprisingly, our business practices have evolved in an equally as diverse

pattern and, despite the increasing globalization of our biggest businesses,
governance rules now also vary considerably between countries.
• All global governance rules aim to protect shareholders and stakeholders

while ensuring the prosperity of the business, but not all follow the same
model and can lead to very different structures, spheres of influence and
succession plans.
33
March 19, 2024

2 Unit-1
What governance models are there around the globe?

CG is the system of rules, practices and processes by which a company is
directed and controlled. Corporate governance essentially involves balancing
the interests of a company’s many stakeholders, such as shareholders,
management, customers, suppliers, financiers, government and the
community.
34
March 19, 2024

2 Unit-1
Recap
1. The Meaning Of CORPORATE GOVERNANCE and ROB

2. Definition of ROB
3. Importance of CG worldwide
4. The Various CG practices in India.
5. The Code of corporate practices
March 19, 2024 35

2 Unit-1
Daily Quiz
• CSR & corporate governance represent a -------- between

business and society.
1. Social climate
2. Special contract
3. Special climate
4. Social contract
• Corporate governance is a form of-

1. External regulation
2. Self regulation
3. Government control
4. Charitable action
March 19, 2024 36

2 Unit-1
(Unit –I) Topic 3
Corporate Disclosure and Investor Protection in

India
Shruti sharma AMBA

0302 Unit-1
1. Understand the meaning of Framework of corporate governance

and Investor Protection in India
Topic Course
Outcome
CO1
1. to make them understand Framework of corporate
governance and Investor Protection in India
38
March 19, 2024

2 Unit-1
For example,
• In the US shareholders elect a board of directors, who in turn hire and fire the
managers who actually run the company. In Germany, the board is not legally
charged with representing the interests of shareholders, but is rather charged
with representing the interests of stakeholders, including workers and creditors
as well as the shareholders. It also usually has a member of the labour union
on the board.
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39

2 Unit-1
For example,
• In the UK, the majority of public companies voluntarily abide by the Code of
Best Practice on corporate governance. It recommends there should be at least
three outside directors and the board chairman and the CEO should be
different individuals.
• China has colossal corporate structures where businesses have parent,

grandparent and even great-grandparent companies. Each level has a board
and Communist Party officials usually have a seat. In India, the founding family
members usually hold sway over the board.
March 19, 2024

40

2 Unit-1
Corporate Disclosure and Investor Protection in India
Defining corporate disclosure
• Corporate disclosure can be defined as the communication of information by

people inside the public firms towards people outside .
• The main aim of corporate disclosure is “to communicate firm performance
and governance to outside investors” (Haely and Palepu, 2001).
• This communication is not only called for by shareholders and investors to
analyze the relevance of their investments, but also by the other
stakeholders, particularly for information about corporate social and
environmental policies.
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2 Unit-1
Defining corporate disclosure
Disclosure takes different forms. The first one is financial reporting, essentially
financial statements whose contents are defined by accounting standards (for
instance the International Financial Reporting Standards).
• As compliance with good practice in corporate governance is now required,
reporting also concerns governance (for instance, the “comply or explain”
principle has been enforced since 2008 in the European Union).
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2 Unit-1
Benefits of disclosure for shareholders:
• Shareholder value creation

• Investors’ behavior and increased share liquidity
• Change in managerial behavior: better governance and a fall in agency costs
The costs of disclosure:
• Practical costs
• Unfair competition and regulatory capture
• Governance costs
Fraud and concealment: when disclosure does not provide

information
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2 Unit-1
• Reporting must respect specific rules, even specific formats, restricting the
discretion of managers, and allowing stakeholders a better understanding of
information. Besides reporting, managers also communicate information in a
less formal way, for instance by press conferences, by announcement on
websites and so on.
Whatever the form the disclosure takes, two other distinctions can be done.
• The first distinction is based on the opposition between financial and non-
financial disclosure.
• The latter includes information relating to the company’s social and
environmental responsibility and company’s corporate governance as well as
information relating to the firm’s operating methods or to managers’ health
(Healy and Palepu, 2001).
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2 Unit-1
• The second distinction is based on the opposition between voluntary and

mandatory disclosure.
• Voluntary disclosure is a measure of self-regulation or a response to the
expectations of stakeholders and civil society for more disclosure (Chandler,
1997).
• Mandatory disclosure results from legislation or regulation.
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2 Unit-1
Investor Protection Measures by SEBI

• Investors are the pillar of the financial and securities Market. They determine the
level of activity in the market.
• They put the money in funds, stocks, etc. to help grow the market and thus, the
Economy. It thus very important to protect the interests of the investors. investor
protection involves various measures established to protect the interests of
investors from malpractices.
• Securities and Exchange Board of India (SEBI) is responsible for regulations of the
Mutual Funds and safeguard the interests of the investors.
• Investor protection measures by SEBI are in place to safeguard the investors from
the malpractices in shares, the stock market, Mutual Fund, etc.
46
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2 Unit-1
What is Investor Protection?

• The investor insurance money is a symbol of assurance. In simpler words
investor protection implies that up to a specific breaking point, you get your
cash back if the dealer goes into Bankruptcy or submits extortion.
• It is a significant Factor to consider when you open a Trading Account or a
record with an online dealer. At the point when you open an exchanging
account at a brokerage, you normally get financial backer security.
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2 Unit-1
What is SEBI?
• The Securities and Exchange Board of India is a legal administrative body set up
on the 12th of April, 1992.
• The main purpose of SEBI is to manage and regulate the securities and
commodity market of India while forming guidelines and rules.
• The administrative center of SEBI is in Bandra Kurla Complex, Mumbai. SEBI has
a corporate structure involving different divisions, each oversaw by an office
head. There are about 20+ divisions.
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2 Unit-1
What are the functions of SEBI?

SEBI is basically set up to ensure the interests of financial backers in the
protections market.
• It advances the improvement of the protections market and controls the
business.
• SEBI gives a stage to stockbrokers, sub-dealers, portfolio chiefs, speculation
consultants, share market specialists, brokers, trader financiers, trustees of
trust deeds, recorders, guarantors, and other related individuals to enlist and
manage work.
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2 Unit-1
Investor Protection Measures by SEBI

• Recording and monitoring the work of custodians, depositors, participants,
foreign investors, credit rating agencies, etc.
• Registering investment schemes like Mutual fund & venture Capital funds, and
regulating their functioning. Promotion and controlling of self-regulatory
companies.
• Stock Exchange and other securities market business regulation. Registering

and regulating the intermediaries of the business like brokers, transfer agents,
bankers, trustees, registrars, portfolio managers, investment
50 consultants,
merchant bankers, etc.
March 19, 2024
2 Unit-1
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UNIVERSITY) question paper

2 Unit-1
END SEMESTER QUESTION PAPER ( SESSIONALS +
UNIVERSITY)

2 Unit-1

Unit1 - Corporate Governance

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Noida Institute of Engineering and Technology, Greater

Corporate Governance, Values

March 19, 2024 Shruti sharma AMBA 0302

(Unit –I) Topic 1

Meaning, Definition, Nature, Issues,

Shruti sharma AMBA

March 19, 2024 Shruti sharma AMBA 030 3

1. Understand the meaning of Fundamentals of corporate

March 19, 2024 4

Shruti sharma AMBA 030

March 19, 2024

Shruti sharma AMBA 030

In essence we believe that good corporate governance consists of a system of

• a culture based on a foundation of sound business ethics fulfilling the long-term

March 19, 2024

Shruti sharma AMBA 030

March 19, 2024

Shruti sharma AMBA 030

• Interest May Be Conflicted

• Issues Of The Oversight

March 19, 2024 Shruti sharma AMBA 030

Some of the common issues are discussed below :

Issues Of The Accountability

March 19, 2024

Shruti sharma AMBA 030

The Bottom Line

March 19, 2024

Shruti sharma AMBA 030

Benefits of Corporate Governance

Good corporate governance ensures corporate success and economic growth.

Strong corporate governance maintains investors’ confidence, as a result of which,

There is a positive impact on the share price.

It provides proper inducement to the owners as well as managers to achieve objectives

It helps in brand formation and development.

Good corporate governance also minimizes wastages, corruption, risks and

March 19, 2024

Corporate ethics or marketing?

March 19, 2024

Shruti sharma AMBA 030

1. The Meaning Of CORPORATE GOVERNANCE

March 19, 2024 13

Shruti sharma AMBA 030

• What Are the 4 Ps of Corporate Governance?

• Why Is Corporate Governance Important?

• What Are the Basic Principles of Corporate Governance?

• What Are Examples of Corporate Governance?

March 19, 2024

Code of Corporate Practices, Corporate Social Responsibility,

Shruti sharma AMBA 030

(Unit –I) Topic 2

Code of Corporate Practices, Corporate

Shruti sharma AMBA

1. Understand the meaning of Corporate Code of conduct

Topic Course Outcome

March 19, 2024 17

Shruti sharma AMBA 030

Examples of company values

Shruti sharma AMBA 030

Why are company values important?

From a business perspective, having a core set of company values makes

Shruti sharma AMBA 030

4 elements of effective company core values