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What Is The Role of Government in Ensuring Corporate Governance?
What Is The Role of Government in Ensuring Corporate Governance?
What Is The Role of Government in Ensuring Corporate Governance?
Promotional Role
When the infrastructural facilities are inadequate or entrepreneurial activities are scarce, Govt. has to assume the promotional role When there is an economic crisis faced by the private corporate, Govt. may act as a banker or takeover it even at a loss Govt. also helps it in crisis by becoming a trustee of the firm
Government Intervention
Market forces alone cannot ensure high rate of investment and growth in output
And hence Govt. intervention is necessary to remove economic rigidity and structural disequilibrium
exploitation
Example for Govt. regulators SEBI, RBI, TRAI, etc.
But the breakthrough was made by the committee headed by Kumaramangalam Birla Which had proposed the Clause 49 in the Listing Agreement
The audit committee Responsible for review of financial performance regularly for appointment of auditors for fixing of remuneration of auditors
Remuneration of Directors
Remuneration of non-executive directors is to be fixed by the board Procedures of Board Board should meet at least 4 times in a year The discussion and analysis report should contain the following Structure of industry and developments Opportunities and threats
Shareholders information Quarterly results should be published A report on corporate governance A certificate from auditors on compliance of provisions A minimum of 2 meetings per year of the shareholders grievance committee
Apart from all these acts and regulations from Govt. side, RBI also is putting its own efforts to ensure good governance in the corporate sector by way of demanding transparency in financial transactions, share transfer, etc.
Corporate Initiatives
India has evolved a system and structure of corporate governance It is one of the best among the developing countries The corporate activities like administration of companies, disclosures, shareholders rights, dividend announcements, etc. have been followed properly Major surveys on corporate excellence revealed that Infosys, Hindustan Unilever Ltd. and Wipro are among Asias top
10 corporations
Other corporates which are well governed are ICICI, Ranbaxy, HDFC, Tata group, etc.
Individual Initiatives
In India, veterans like J R D Tata, Mahindra, N R Narayana Murthy, Kumar Mangalam Birla, etc. have shown what is good corporate governace
Punishment for executive directors who do not comply with listing requirements Proper disclosures to shareholders Meaningful and transparent accounting and reporting
Shareholding structure
Governance structure This focus on how effectively the information such as corporate loans, capital expenditure,diversification, etc. are presented to a companys board
Board Structure and process Board size, Proportion of independent directors Expertise they have, Compensation of directors Frequency of board meetings Relations to stakeholders Transparency and Disclosures Financial discipline
Some of the Indian companies that received awards for excellence are Asea Brown Boveri Ltd. Asian Paints Ltd. Bajaj Auto Ltd. Bharat Forge Ltd., etc.
Professionalism is dominating
Old companies are disappearing from scene New companies are giving importance to professionalism Strong Media Financial Institutions are demanding They prefer companies with better corporate governance
Political reforms
Communist block has been dismantled New countries are coming up for trades Transport and communications facilities have been developed More developing nations started engaging in business Development of technology provides avenues for new products Development of new production process
Developments in Technology
Developments in technologies such as computer hardware, software, pharmaceuticals, etc. have brought about tremendous transformation in world trade
Social Environment
In order to meet the challenges and opportunities posed by the technological development, the government started allocating more resources for education and training Corporates were forced to adopt a policy of creating job opportunities To sustain economic growth, private sector employment is to be increased Corporates now understand the importance of keeping trust, honesty and transparency which are essential for surviving in a global market
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