company is the largest form of business organization. It may be a global dimension. There is a lot of interest in the body corporate owners. Corporate philosophy in corporate governance is to achieve the highest level of transparency, accountability and integrity. Procedures and systems that are in accordance with the best practices in order to rule. The true meaning of corporate governance is to satisfy the aspirations of all stakeholders, customers, suppliers and leaders, employees, shareholders and society's expectations of the owners. The Board of Directors supports the general principles of corporate governance and emphasizes a series on the role of trusteeship to align and guide the Organization's actions to achieve its pledge of transparency, accountability and integrity goals.
factors affecting corporate governance.
ownership structure.
company's ownership structure determines, to a large extent, how to manage and control the company. Featuring our corporate sector by c o existence of state-owned enterprises, private and multinational. Held shares of these companies (except those belonging to the public sector) by the institutions as well as small investors. Major shareholders tend to be active in corporate governance either through their representatives on corporate boards / through the active participation I n the annual meetings of the General Assembly. This was demonstrated by Reliance Industries Limited, which has the largest number of shareholders are spread all over the country.
structure councils company.
along with the ownership structure, the structure of corporate boards have a big impact on the way companies are managed and controlled. The Board of Directors is responsible for setting corporate objectives, and to develop policies and a wide selection of executives at a high level to the parking those objectives and policies. The Council also requires the performance of the administration to ensure that the company is well run and the interests of any shareholders. Allows
company boards vary in size and composition and structure to serve the interests of the company and shareholders. Panels can be a tired one / two tired with respect to the size of the Board of Directors, views and practices vary. Some argue that sufficient size in the range of 9 to15. Some figure at 10. situation with others recommend a minimum of 5 and a maximum of 10.
financial structure:
along with the idea that the ownership of things the structure of the companies the idea of governance that the financial structure of the company any ., ratio between debt and equity, had an impact on the quality of governance. Recent research contrary to the Modigliani Miller's hypothesis that the financial structure of the company not related to the company's value has shown, that the financial structure does not matter, it's no secret that lenders exercise great influence on the way the company is managed and controlled. Banks can perform an important function for the inspection and control of companies (such as banks) and more knowledgeable than other investors. Moreover, banks can reduce the bias in the short term to take administrative decisions by favoring investments that would generate higher benefits in the long term. Banks play a more positive role than other investors to reduce financial distress costs.
institutional environment:
legal, regulatory and political environment in which the company determines to a large extent the quality of corporate governance. In fact, corporate governance mechanisms are economic and legal institutions are often the result of political decisions. For example for. The extent to which shareholders can control management based on their voting rights as defined in the Companies Act and the extent of the market for efficient control of the companies are working to discipline under the management performance will depend on the regulations take over.
corporate governance mechanisms:
in India, there are 6 mechanisms to ensure corporate governance. Law
1. companies in 1956:
regulated companies by the Companies Act of 1956, as amended up to - date. Companies Act is one of the largest legislation with 658 sections and 14 schedules. To ensure corporate governance, and a law granting legal rights to shareholders for
a. Vote on every decision and placed in front of the Annual General Meeting.
b. To elect the managers responsible for setting goals and policy development.
c. Determine the remuneration of directors and CEO of the company
d. Remove from the administration and
e. An active role in the annual general meeting internationally accepted corporate governance, which aims to strengthen the institutional practices of democracy, and protect the interests of small shareholders and provide maximum flexibility for companies to respond to the needs of the market. Among these amendments, which made headlines and allow companies to buy back shares and investment liberalization between the companies.
Securities Act:
primary security law in India is the SEBI Act. , The Council in 1992 has taken since the beginning of its number of initiatives aimed at protecting investors. One of these initiatives to impose disclosure of information both in the prospectus and in the annual accounts. While the company law itself stipulates certain standards of information disclosure, said SEBI Act greatly to these needs in an attempt to make these documents more pronounced in.
Another aspect of the regulations SEBI is that in most public issues, ask the promoter to take the minimum stake of around 20% in the capital of the company and retain these shares for a minimum lock-in period of three years. Finally, the Board constituted a committee headed by Kumaramangalam Birla to propose ways to promote and raise the level of corporate governance in listed companies.
paragraph 49 provides for the composition of the Executive optimized and put a non-executive director consists of the Audit Committee qualified and independent. Directors' remuneration of the director. Management's Discussion and Analysis of the report is part of the annual report to shareholders. A separate section on corporate governance in the annual reports of the company; for information to be furnished in a report on corporate governance. And a certificate of compliance to the auditor's effort that all the terms of governance has been committed.
discipline of the capital market:
in the capital market works well, there is a strong incentive for the management of the companies themselves voluntarily to adopt transparent processes and submission to external monitor to reassure potential investors. In the past few years, Indian companies by the International Accounting Standards accept voluntarily even though they are not legally binding. They went voluntarily to greater disclosure and corporate governance practices more transparent than are tasked by law. They have sought to cultivate a true image with investors and being concerned about maximizing shareholder value.
capital market is very good provisions in the infinitely small level decisions. In fact, the market will take small decisions all the time. It is successful in doing so that makes it such an effective provision of capital. The head of the rationale for the capital market regulator to pass as much of the burden of ensuring corporate governance as possible to the markets. Regulator can then focus on making markets more efficient to perform this task.
candidates in the boards of companies:
shareholders as investors have their candidates in corporate boards. These filters effectively block decisions that may be harmful to their interests.
Statutory audit:
a mechanism after the other directed to ensure good corporate governance Auditors are the conscience - the keepers of the shareholders, lenders and others who have financial stakes in companies. As a committee Cadbury noted "the annual audit is one of the most important pillars of corporate governance. In view of the separation of ownership from management, the administration must submit a report on their leadership through the annual report and financial statements sent to shareholders. Provides audit in an external and objective check on the way the data has been prepared financial, view, and it is an essential part of the controls required and balances
codes of conduct:
Thus, the code checks and balances depends, especially at the level of the board of Directors and Chief Executive Officer, in order to prevent excessive concentration of power and disclosure sufficient to enable those who are entitled to get the information they need, in order to exercise their rights and includes four sections ;. role of the board - the role of the administration is an executive - executives - financial reporting and controls
issued a Confederation of Indian Industry (CII) project blog "undesirable corporate governance" Indian industry in April 1997, perhaps in response to the ministries of Finance veiled threats that reduce the self-regulation system, the greater the likelihood of more government regulations. Confederation of Indian Industry Act, explicitly based on the assumption that "good governance and help to maximize shareholder value which will not necessarily maximize the company's value, and thus meet the creditors, employees and the state claims" Whether spur change in corporate governance code only time will tell.
Online:
and corporate governance chose movements in India momentum after deback from major companies such as Enron, World Com and BCCI international. Were those times when the confidence of the financial community, shareholders, investors and beatings took over the world. It was around that time that foreign financial institutions that invest money in Indian companies, which also caused the need for greater accountability. Today, fund managers offer companies such as Tata Motors, ITC, Ranbaxy, Infosys and Hero Honda Motors, the presence of senior government standards. Fortunately, many companies in the exhibition of good governance standards.
no economic times poll governance of Indian companies, and the results were published in the issue dated August 19, 05. The criteria used by the survey Economic Times to determine the winners are;
- the quality of accounting
- value creating focus
- policies and procedures
fair - communications
- effective board of Governors
- reliability
THE fUTURE:
as we go into the future, will corporate governance becomes more important and the practice more acceptable. And it planted the seeds already has some honest but practices. More and more progressive, drawing and enforce corporate codes of conduct, and acceptance of accounting standards and tougher disclosure standards follow more stringent than are tasked by law. These trends will be reinforced by a variety of forces at work today, and will become stronger in the coming years. These forces are;
a. The lifting of restrictions: economic reforms have not increased, but the outlook for growth, but it also made it more competitive markets. This means that in order to survive, companies need to continuously invest in large scale.
b. Mediation: At the same time, financial sector reforms have made it imperative for companies to rely on capital markets to a greater degree to the needs of additional capital.
c. Institutionalization: simultaneously growing institution of capital markets has greatly enhanced the power of the discipline of the market
d. Globalization: globalization of financial markets has revealed issuers, investors and intermediaries to the top of disclosure and corporate governance that prevail in most developed capital markets standards.
e. Tax reforms: tax reforms as well as deregulation and competition tends balance away from the mass of money transactions. This means that the worst forms of misrule less attractive than it was in the past.
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