Corporate Governance

Corporate Governance

Corporate governance is a set of rules and policies which governs a company. It provides a frame work for managing a company and achieving its objectives. It gives guidelines for internal control, performance measurement and corporate disclosure. Corporate governance lays down the rules and responsibilities of the stakeholders of a company primarily the shareholders, the directors and the management. The role of board of directors is very important in corporate governance. It is the board that provides the guidelines for the company and its other stakeholders including employees, customers, suppliers and financiers. Corporate governance is based on the four fundamental pillars of fairness, transparency, accountability and responsibility.

In India the Kumara Mangalam Birla Committee 2000, Narayana Murthy Committee 2003 , Adi Godrej Committee 2008, and presently Uday Kotak Committee were constituted to give a comprehensive framework for Corporate Governance. The present corporate governance norms, included in the Companies Act 2013, SEBI listing regulations and Clause 49 of the listing agreement are the outcome of discussion by these committees.

The Indian Corporate Governance framework requires listed companies

i) to have independent directors on the board; At least one third of the directors have to be independent directors.

ii) to have at least one independent woman director ,

iii) to disclose all deals and payments to related parties.

iv) to disclose details of managerial compensation

v) CEO and CFO to sign stating that the governance norms have been complied with in the financial statements.

It can thus be concluded that the presence of active governance norms in a company enhances the image of the company, increases investor confidence and safeguards the interests of the shareholders and the society. The new norms laid down in Companies Act 2013 by bringing in transparency in corporates have raised the governing standards of Indian companies as per International Standards.