Professional Documents
Culture Documents
Presentation By: Sneha Shah Kunal Bhatt Sri Harsha Reddy Swetha Rani Puneeth Gupta Anshu Bafna Santosh Kumar & Hardik Deliwala
Presentation By: Sneha Shah Kunal Bhatt Sri Harsha Reddy Swetha Rani Puneeth Gupta Anshu Bafna Santosh Kumar & Hardik Deliwala
Sneha Shah
Kunal Bhatt
Sri Harsha Reddy
Swetha Rani
Puneeth Gupta
Anshu Bafna
Santosh Kumar
& Hardik Deliwala
Index
What is Corporate Governance?
History of Corporate Governance
History of Corporate Governance In India
Principles of Corporate Governance
Corporate Governance and Firm Performance
Effects on Good Corporate Governance Economy
Effects on Bad Corporate Governance Economy
New Corporate Governance moves that are Expected
HR’s Role in Corporate Governance
Examples of Companies
Good Corporate Governance
Bad Corporate Governance
Good Vs Bad Corporate Governance
Concluding Remarks
What is Corporate Governance?
Corporate governance - Set of processes,
customs, policies, laws, and institutions
affecting the way a corporation is directed,
administered or controlled.
Corporate governance also includes the
relationships among the many stakeholders
involved and the goals for which the
corporation is governed.
History of Corporate Governance
In the 19th century, state corporation laws
enhanced the rights of corporate boards to govern
without unanimous consent of shareholders in
exchange for statutory benefits like appraisal rights,
to make corporate governance more efficient.
Probably United States of America was the first
country to introduce the concept of corporate
governance
History Of Corporate Governance In India
Unlike South-East and East Asia, the corporate governance
initiative in India was not triggered by any serious nationwide
financial, banking and economic collapse
Also, unlike most OECD countries, the initiative in India was
initially driven by an industry association, the Confederation
of Indian Industry
In December 1995, CII set up a task force to design a voluntary code of
corporate governance
The final draft of this code was widely circulated in 1997
In April 1998, the code was released. It was called Desirable Corporate
Governance: A Code
Between 1998 and 2000, over 25 leading companies voluntarily
followed the code: Bajaj Auto, Hindalco, Infosys, Dr. Reddy’s
Laboratories, Nicholas Piramal, Bharat Forge, BSES, HDFC, ICICI and
many others
History Of Corporate Governance In India
Following CII’s initiative, the Securities and Exchange Board of India
(SEBI) set up a committee under Kumar Mangalam Birla to design a
mandatory-cum-recommendatory code for listed companies
The Birla Committee Report was approved by SEBI in December
2000
Became mandatory for listed companies through the listing
agreement, and implemented according to a rollout plan:
2000-01: All Group A companies of the BSE or those in the S&P CNX
Nifty index… 80% of market cap
2001-02: All companies with paid-up capital of Rs.100 million or more or
net worth of Rs.250 million or more
2002-03: All companies with paid-up capital of Rs.30 million or more
History Of Corporate Governance In India
Following CII and SEBI, the Department of Company Affairs
(DCA) modified the Companies Act, 1956 to incorporate
specific corporate governance provisions regarding
independent directors and audit committees
In 2001-02, certain accounting standards were modified to
further improve financial disclosures. These were:
Disclosure of related party transactions
Disclosure of segment income: revenues, profits and capital employed
Deferred tax liabilities or assets
Consolidation of accounts
Initiatives are being taken to (i) account for ESOPs, (ii)
further increase disclosures, and (iii) put in place systems
that can further strengthen auditors’ independence
Principles of Corporate Governance
There are five reasons why one doesn’t expect the corporate sector
in India to exhibit the excesses that occurred in the US
1. The amount of stock options to be granted to employees is strictly
limited. Expensing options (if adopted) will create a further natural
limit
2. In general, companies are controlled by a sizeable shareholder,
typically owning over 35% of stocks. This tends to limit agency costs
of dispersed ownership
3. The variable compensation package is much more linked to profits
and/or Economic Value Added (EVA), than stock prices or P/E
4. Much greater importance is given to accumulating cash. “Profit is an
opinion; cash is fact”
5. For better or for worse, most Indian companies still don’t have to give
forward looking earnings estimates
New Corporate Governance Moves that are Expected: