Strategic Financial Migt. Assgn.
Strategic Financial Migt. Assgn.
CORPORATE GOVERNANCE
Program:
Batch: 2016-2020
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CHAPTER I: INTRODUCTION
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the start of the scandal, and its global sales in the first full month following the
news fell 4.5%.
Public and government concern about corporate governance tends to wax and
wane. Often, however, highly publicized revelations of corporate malfeasance
revive interest in the subject. For example, corporate governance became a
pressing issue in the United States at the turn of the 21st century, after fraudulent
practices bankrupted high-profile companies such as Enron and WorldCom. It
resulted in the 2002 passage of the Sarbanes-Oxley Act, which imposed more
stringent recordkeeping requirements on companies, along with stiff criminal
penalties for violating them and other securities laws. The aim was to restore
public confidence in public companies and how they operate.
Other types of bad governance practices include:
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Transparency
Accountability
Independence
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Board Performance:- At least one woman director is necessary, and also the
balance of executive and non-executive directors are not
maintained. Evaluation is not performed from time to time and transparency
is lost somewhere. The performance is not result oriented. These
requirements are not always met with.
Independent Directors:- Even after SEBI guidelines being issued to the
corporates, for the appointment of an audit committee or giving of a
comprehensive definition of the independent directors, the actual situation
appears to be worse.
Accountability to Stakeholders:- The accountability is not restricted to that
of the shareholders or the company, it is for the society at large and also the
environment. The directors are not to keep in mind their own interests but
also the interests of the community.
Risk Management:- The risk management techniques are to be mandatorily
be undertaken by the directors as per the Company Laws and they have to
mention in their report to shareholders as well. This is not being done in the
most sincere manners required for the job.
In the United States there are two primary sources of law and regulation relating to
corporate governance:
State corporate law - both statutory and judicial - governs the formation of
privately held and publicly traded corporations and the fiduciary duties of
directors. Delaware is the most common state of incorporation. Because
Delaware law and interpretation are influential in other states, the Delaware
General Corporation Law (DGCL) is used in this article as the reference
point for all state law discussion. Shareholder suits are the primary
enforcement mechanism of state corporate law.
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On the federal level, the primary sources are the Securities Act of 1933
(Securities Act) and the Securities Exchange Act of 1934 (the Exchange
Act), each as amended. The Securities Act regulates all offerings and sales
of securities, whether by public or private companies. The Exchange Act
addresses many issues, including the organisation of the financial
marketplace generally, the activities of brokers, dealers and other financial
market participants and, as to corporate governance, specific requirements
relating to the periodic disclosure of information by publicly held, or
‘reporting’, companies. A company becomes a reporting company under the
Exchange Act when its securities are listed on a national securities exchange
or when it has total assets exceeding US$10 million and a class of securities
held of record by more than 2,000 persons or a maximum of 500 persons
who are not sophisticated. Both the Securities Act and the Exchange Act
have addressed questions of corporate governance primarily by mandating
disclosure, rather than through normative regulation.
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INDIA:
Corporate India must commit itself as reliable, innovative and prompt service
provider to their customers and should also become reliable business partners in
order to prosper and to have all round growth.
Indian Corporate Bodies having adopted good corporate governance will reach
themselves to a benchmark for rest of the world; it brings laurels as a way of
appreciation. Corporate governance lays down ethics, values, and principles,
management policies of a corporation which are inculcated and brought into
practice. The importance of corporate governance lies in promoting and maintains
integrity, transparency and accountability throughout the organization.
Corporate governance has existed since past but it was in different form. During
Vedic times kings used to have their ministers and used to have ethics, values,
principles and laws to run their state but today it is in the form corporate
governance having same rules, laws, ethics, values, and morals etc which helps in
running corporate bodies in the more effective ways so that they in the age of
globalization become global giants.
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Several Indian Companies like PepsiCo, Infuses, Tata, Wipro, TCS, and Reliance
are some of the global giants which have their flag of success flying high in the sky
due to good corporate governance.
Toady, even law has a great role to play in successful and growing economy.
Government and judiciary have enacted several laws and regulations like SEBI,
FEMA, Cyber laws, Competition laws etc and have brought several amendments
and repeal the laws in order that they don’t act as barrier for these corporate bodies
and developing India. Judiciary has also helped in great way by solving the
corporate disputes in speedy way.
Corporate bodies have their aim, values, motto, ethics and principles etc which
guide them to the ladder of success. Big and small organizations have their
magazines annual reports which reflect their achievements, failure, their profit and
loss, their current position in the market. A few companies have also shown
awareness of environment protection, social responsibilities and the cause of
upliftment and social development and they have deeply committed themselves to
it. The big example of such a company can be of Deepak Fertilizers and
Petrochemicals Corporation Limited which also bagged 2nd runner up award for
the corporate social responsibility by business world in 2005.
Corporate governance from the futuristic point of view has great role to play. The
corporate bodies in their corporate have much futuristic approach. They have
vision for their company, on which they work for the future success. They take risk
and adopt innovative ideas, have futuristic goals, motto, and future objectives to
achieve.
With increase in interdepence and free trade among countries and citizens across
the globe, internationally accepted corporate governance standards are of
paramount importance for Indian Companies seeking to distinguish themselves in
global footprint. The companies should always keep improving, enhancing and
upgrading themselves by bringing more reliable integrated product and service
quality. They should be more transparent in their conduct.
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Corporate governance should also have approach of holistic view, value based
governance, should be committed towards corporate social upliftment and social
responsibility and environment protection. It also involves creative, generative and
positive things that add value to the various stakeholders that are served as
customers. Be it finance, taxation, banking or legal framework each and every
place requires good corporate governance.
ABOUT COMPANY:
The Ford Motor Company often referred to simply as Ford, is an automobile maker founded by
Henry Ford in Detroit, Michigan, and incorporated on June 16, 1903. Ford radically reformed the
methods for large-scale manufacturing of cars, and large-scale management of an industrial
workforce. Ford implemented the ideas of Eli Whitney, who developed the first assembly line using
interchangeable parts, which made it possible to put the cars together at a much lower cost and with
greater reliability and repeatability.
Ford was launched from a converted wagon factory, with $28,000 cash from 12 investors.
During its early years, the company produced just a few cars a day at the Ford factory on Mack
Avenue in Detroit. Groups of two or three men worked on each car from components made to order
by other companies. In 1908, the Ford company released the Ford Model T. By the end of 1913,
Ford was producing 50% of all cars in the United States, and by 1918 half of all cars in the country
were Model Ts. Referring to the Model T, Henry Ford is reported to have said that "Any customer
can have a car painted any color that he wants so long as it is black." This was because black paint
was quickest to dry; earlier models had been available in a variety of colors.
Today, Ford Motor Company manufactures automobiles under the highly-recognized Lincoln and
Mercury brand names. . Ford has major manufacturing operations in Canada, Mexico, the United
Kingdom, Germany, Brazil, Argentina, Australia and several other countries, including South
Africa.
Ford also has a cooperative agreement with GAZ. In recent years Ford has acquired Aston Martin,
Jaguar, Volvo Cars and Land Rover, as well as a controlling share of Mazda, with which it operates
an American joint venture plant called Auto Alliance. It has spun off its parts division under the
name Visteon. Its prestige brands, with the exception of Lincoln, are managed through its Premier
Automotive Group.
Ford Motor Company currently has 3.22 billion shares outstanding and 25.19 Billion dollars is
it’s the current market capitalization.
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I PURPOSE
These Corporate Governance Principles, adopted by the Board of Directors of the Company,
together with the charters of the Audit Committee, the Compensation Committee, the Sustainability
Committee, the Finance Committee and the Nominating and Governance Committee of the Board,
provide the framework for the governance of Ford Motor Company. The Board reviews these
principles and other aspects of Ford governance annually or more often, as the Board deems
necessary or appropriate.
The Board of Directors of the Company is elected by and responsible to the shareholders. Ford's
business is conducted by its employees, managers and officers, under the direction of the chief
executive officer (the CEO) and the oversight of the Board, to enhance the long-term value of the
Company for its shareholders. The Board of Directors monitors the performance of the CEO and
senior management to assure that the long-term interests of the shareholders are being served.
The directors are elected each year by the shareholders at the annual meeting of shareholders.
Shareholders may propose nominees for consideration by the Nominating and Governance
Committee of the Board by submitting the names, qualifications, and other supporting information
to: Secretary, Ford Motor Company, One American Road, Dearborn, MI 48126. Properly submitted
nominations must be received by the date set forth in the most recent proxy statement to be
considered by the Nominating and Governance Committee for inclusion in the following year's
nominations for election.
The Board proposes a slate of nominees to the shareholders for election to the Board. The Board also
determines the number of directors on the Board, provided that there are at least 10 and not more
than 20 directors, as provided in the By-Laws of the Company. Between annual shareholder
meetings, the Board may elect directors to vacant Board positions to serve until the next annual
meeting.
A majority of the directors must be independent directors under the New York Stock Exchange
(NYSE) Listed Company rules or any other applicable regulatory requirements; as such
requirements may change from time to time. The Board of Directors recognizes, however, that
directors who do not meet the NYSE's independence standards have historically made, and can be
expected to continue to make, valuable contributions to the Board and to the Company by reason of
their experience, judgment, intelligence and wisdom.
The Board has established the following Committees to assist the Board in discharging its
responsibilities:
i. Audit
ii. Compensation
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iii. Sustainability
iv. Finance
v. Nominating
and Governance. The Committee chairs report on the matters considered at each of their meetings
to the full Board of Directors following each Committee meeting. In addition to the requirement
that a majority of the Board satisfy the independence standards discussed above, members of the
Audit Committee must also satisfy additional independence requirements.
III MEETINGS
The Board of Directors ordinarily has 7 scheduled meetings a year. Directors ordinarily are expected
to attend all scheduled Board and Committee meetings, the annual meeting of shareholders, and are
expected to review the materials provided to them in advance of each meeting.
In addition to the Board's general oversight of the CEO and senior management, the Board also is
responsible for:
selecting, evaluating and compensating the CEO and overseeing CEO succession
planning;
providing counsel and oversight on the selection, evaluation, development and
compensation of the officers of the Company; and
approving and maintaining a succession plan for the CEO and other key senior
executives including an emergency succession plan for the CEO.
As part of its overall responsibility to serve the long-term interests of the shareholders, the
Board alsoshall:
review, approve and monitor fundamental financial and business strategies and
major Company actions;
review and discuss reports by management on the performance of the Company, its
plans, products and prospects;
assess major risks facing the Company -- and review and approve strategies for
addressing such risks; and
ensure processes are in place for maintaining the integrity and reputation of the
Company -the integrity of the financial statements, compliance with law and Company policy, the
integrity of relationships with customers and suppliers, and the integrity of relationships with other
Company stakeholders.
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The Board and each of the Committees will perform an annual self-evaluation. Each of the
directors will be requested to provide his or her assessment of the effectiveness of the Board and the
Committees on which he or she serves. If determined by the Board to be desirable, the Board may
retain independent corporate governance experts to assist the Board and the Committees with the
self-evaluations.
Corporate Social Responsibility is being willing to help others, being environmentally conscious and
socially tolerant.
As a global business, Ford accepts the social responsibility and the commitment to people all over
the world. They have designed a special program to promote tolerance and equal opportunities, and
actively support social and environmental protection programs. They were also the first car
manufacturer to obtain ISO 14001 certification, a stringent environmental standard, for all of the
facilities worldwide.
Ford has received official allergy friendly accreditation for its range of cars including the Ka, Fiesta,
Focus, C-MAX, Mondeo, S-MAX and Galaxy. The accreditation has been provided by the German
standards authority TUV following a series of rigorous tests, assuring that all interiors of Ford cars
minimise the allergy risk to the lowest possible level. The Ford range of allergy-friendly cars has
also received the official approval from the British Allergy Foundation and the European Centre for
Allergy Research Foundation (ECARF). The Ford Kuga was launched at Ford's Allergy Free garden
at the Bloom Festival.
Ford Motor’s main competitors in the consumer discretionary sector are General Motors Company
(GM), Toyota Motor (TM), Daimler (DDAIF), Honda Motor Company (HMC), Tesla Motors
(TSLA), Navistar International (NAV), and Spartan Motors (SPAR).
Jumpstart Automotive Group, a leading automotive marketing and publishing network, announced
that Ford has officially separated from the rest of the automakers, trumping primary competitors like
Chevrolet, Toyota and Honda across Jumpstart's portfolio of 11 automotive shopping websites.
"Ford's 2010 surge reflects continuous improvement of the automaker's brand perception and
awareness," said Joe Kyriakoza, Vice President of Marketing Communications at Jumpstart. "Ford
vehicle redesigns and refreshes, as well as the development of industry-leading technologies like
Sync, have helped the company resonate exceptionally well among consumers."
It appears the shopping patterns observed by Jumpstart are translating into sales activity, with
Ford enjoying a 30 percent growth in sales. Vehicles like Ford Focus, Ford Taurus and Ford
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Fusion are challenging the historic segment leaders, while Ford's F-Series continues its domination
among competitive brands with a 35 percent sales growth from January to May of this year.
In the United States, corporations are directly governed by state laws, while the exchange of
securities in corporations is governed by federal legislation. Many U.S. states have adopted
the Model Business Corporation Act, but the dominant state law for publicly-traded corporations
is Delaware, which continues to be the place of incorporation for the majority of publicly-traded
corporations. Individual rules for corporations are based upon the corporate charter and, less
authoritatively, the corporate bylaws. Shareholders cannot initiate changes in the corporate charter
although they can initiate changes to the corporate by laws.
Recognizing that new international principles and best practices now exist, in
2005, sebi amended its corporate governance code, or clause 49 of the listing
agreement, ensuring that Indian companies match their business counterparts
anywhere in the world. Such meticulousness has brought numerous plaudits from
investors as well as the institute of international finance [iif],Washington d.c.,
whose India task force recently affirmed that Indian corporate governance norms
strengthen domestic capital market.
Banks in a broad sense, are institiutions whose business is handling other peoples
money, a joint stock bank, also known as commercial bank, is a company whose
business is banking. These are more particularly institiutions that deal directly with
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the general public, as opposed to the merchant banks and other institutions more
concerned with trade and industry. These banks specialize in business connected
with bills of exchange, especially the acceptance of foreign bills. A merchant
banker is thus a financial intermediary who helps in transferring capital from those
who posses it to from those who need it, merchant banking includes a wide range
of activities management of customer’s and appraisal, underwriting of shares and
debentures, acting as banker of refund orders, handling interest and dividend
warrants, etc.
As the country’s financial markets are underdeveloped, bank in India are the
most significant source of finance for a majority of firms in Indian industry.
Banks are also the channels through which the country’s savings are
collected and Sued for investments.
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Due to the unique nature of the banking firm, whether in the developed or
developing world, requires that a broad view of corporate governance, which
encapsulated both shareholders and depositors, be adopted for banks. In
particular, the nature of the banking firm is such that regulation is necessary
to protect depositors as well as the overall financial system.
The separation of ownership and control has given rise to an agency problem
whereby management operate the firm in their own interests, not those of
shareholders.
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The code should cover all the functional areas like cash, safe custody of others
valuable, deposits accounts, investment portfolio, credit portfolio, foreign
exchanges transaction and treasury operation. The bpc may also incorporated
practices that would help prevention of losses to its customers and include suitable
guidance to such customer.
The involvement of government is discernibly higher in banks due to importance
of stability of financial system and the larger interests of the public.
Reserve bank of india has taken various steps further corporate governance in the
indian banking system. These can broadly be classified into the following three
categories:
1. Transparency: transparency and accounting standard in india have been
enhanced to align with international best practices. However there are many
gaps in the disclosure in india vis-à-vis the international standards,
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particularly in the area of risk management strategies and risk parameters, risk
concentrations, performance measures. Hence disclosure of standard needed.
Since banks are important players in the indian financial system, special
focus on the corporate governance in the banking sector becomes critical.
The reserve bank of india, as a regulator, has the responsibility on the nature
of corporate governance in the banking sector.
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www.google.com
www.scribd.com
bbamantra.com
www.upcounsel.com
www.icaew.com
www.investopedia.com
Iclg.com
www.lexology.com
Corporate Governance: Principles, Policies:- By Robert Ian Tricker
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