Corporate Governance: Perception of Executives in India
01 Jun 2012-Vol. 2, pp 35
TL;DR: Corporate governance is about commitment to values, about ethical business conduct and about making a distinction between personal and corporate funds in the management of a company as discussed by the authors The focus is on relationship between owners and board in directing and controlling companies as legal entities in perpetuity.
Abstract: IntroductionCorporate governance is about commitment to values, about ethical business conduct and about making a distinction between personal and corporate funds in the management of a company. Corporate governance comprises the systems and processes which ensure the efficient functioning of the firm in a transparent manner for the benefit of all the stakeholders and accountable to them. The focus is on relationship between owners and board in directing and controlling companies as legal entities in perpetuity. A company's ability to create wealth for its owners however, depends on the role and freedom given to it by society.Sir Adrian Cadbury in his preface to the World Bank publication, Corporate Governance: A Framework for Implementation: states that "Corporate governance is ... holding the balance between economic and social goals and between individual and community goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society. The incentive to corporations is to achieve their corporate aims and to attract investment. The incentive for states is to strengthen their economies and discourage fraud and mismanagement.The focus on corporate governance arises out of the large dependence of companies on financial markets as the preeminent source of capital. The quality of corporate governance shapes the future and the growth of the capital market. Strong Corporate governance is indispensable to resilient and vibrant capital market. But capital markets and financial markets in general can function properly if individuals nave access to accurate basic information about the companies they invest. The link between a company's management, board and its financial reporting system is crucial.Modern business corporations share many of their features with democratically elected Governments. At the top of governance hierarchy, in the case of a business enterprise, is the Board of Directors. Boards of companies need not be uniform with respect to their composition, thinking styles and functioning methodologies. Their strength, in fact, lies in their diversity. Rigidities in thinking styles and composition are likely to reduce the Boards to mere ornamental organs. Such Boards fail to meet the multifaceted demands made on them by the emerging business - economic environment. As business enterprises extend their horizons to international sphere, it becomes imperative for them to attune their governing organs to the expectations of their international counterparts as well. Liberalization and Globalization initiatives have made it essential for Indian corporate to make appropriate changes in their Boards as well as their governance practices.Many agencies in India have suggested ways and means to strengthen corporate governance, however, the recommendations of the Kumar Mangalam Birla Committee and N R Narayana Murthy Committee are extremely relevant in the context of the present framework.Corporate governance therefore calls for three factors:a) Transparency in decision-makingb) Accountability which follows from transparency because responsibilities could be fixed easily for actions taken or not taken, andc) The accountability is for the safeguarding the interests of the stakeholders and the investors in the organization.Corporate governance aims at attaining highest standard of procedures and practices followed by the corporate world so as to have transparency in its functioning with an ultimate aim to maximize the value of various stakeholders.Review of LiteratureVogel (1992) pointed out discrimination in the norms of ethical business behaviors across the different industrialized nations and urged for standardizing and globalizing business ethics.The need of ethical commitment in corporate managers is primarily responded by management education. …
Citations
More filters
Journal Article•
TL;DR: In this article, Prasanna et al. analyzed the corporate governance performance of Indian companies after the introduction of the company bill 2012 and found that there is no significant difference in the extent and quality of disclosures made by Indian companies in selected industries.
Abstract: IntroductionCreating strong corporate governance framework encourages flexibility, innovation and risk management. It helps to ensure that companies take care of the interest of wide range of stakeholders for whom it operates and makes the boards more accountable (Chatterjee D, 2011). Over the past decade, India has made significant strides in the areas of corporate governance reforms, which have improved public trust in the market. These reforms have been well received by the investors, including the foreign institutional investors (FIIs).The enactment of the company bill 2012 is major development in the directions of corporate governance. The new bill replaces the Companies Act, 1956 and aims to improve corporate governance standards, simplify regulations and enhance the interests of minority shareholders (Prasanna, 2013). This paper aims at analyzing the corporate governance performance of Indian companies after the introduction of the reforms in India.Good Governance in capital market has always been high on the agenda of Security Exchange Board of India (SEBI). Corporate Governance is looked upon as a distinctive brand and benchmark in the profile of Corporate Excellence. This is evident from the continuous updating of guidelines, rules and regulations by SEBI for ensuring transparency and accountability (Sehgal and Mulraj, 2007).Corporate governance reforms assume critical significance for developing economies like India, which is moving towards a more transparent and accountable system of economic governance (Sanan and Yadav, 2011). Enacting corporate reforms, however, is significantly difficult than framing those reforms. Thus, if the governance reforms have to occur, they have to take place in the larger context of political and legal reforms that can enable society to exercise control over companies (Ananya M R, 2002). In the opinion of the SEBI, the imperative for corporate governance lies not merely in having a code of corporate governance, but in practicing it. What counts is the way in which these are put to use.Prior studies have investigated the relationship between mechanism of corporate governance and financial performance of the companies. Taking different mechanisms for corporate governance like size of board, number of independent directors, ownership pattern etc, there have been a contradicting findings about the relationship between corporate governance disclosures and financial performance. Therefore, this study identifies different mechanisms of corporate governance based on past literature review and then explores the relationship between different mechanisms of corporate governance disclosures and financial performance of the companies in Indian context.Review of LiteratureCorporate Governance disclosures signify the extent of ethical practice followed by the companies. A lot of research has been done in this field adopting varying methodologies and presenting the extent of disclosure done by companies and its impact on financial performance of the companies.According to Sanan & Yadav (2011) India has adopted a series of reforms in corporate governance. But this has brought only a moderate change in disclosure by the Indian companies. Chatterjee D (2011) found that the top Indian Companies are providing bare minimum information required as per regulations and even some of them are not disclosing the mandatory requirement. Sharma and Singh (2009) reported that voluntary disclosures have improved with the introduction a reforms but the extent of disclosure vary among the different companies selected for the study. Kaur and Misra (2010) found that independent directors and concentrated ownership didn't affect the ranking of the companies but good relations with external auditors and inspectors are a motivating factor for effective governance and monitoring.Bhasin (2012) found that there is no significant difference in the extent and quality of disclosures made by Indian companies in selected industries. …
4 citations
01 May 2015
TL;DR: The role of corporate governance in public sector Enterprises and the role of the apex body for public sector enterprises in India, Standing Conference of Public Enterprises (SCOPE) are also highlighted in the paper as discussed by the authors.
Abstract: This paper is a conceptual paper and is an attempt to make the concept of Corporate Governance understood in a very simple manner. The paper looks at the issues like how the concept of Corporate Governance is important in organizations, the objective of this concept, the performance expectation of all the stakeholders, and the need for corporate governance for Strategic Thinking and Strategy Implementation in an Organization. The mechanisms and controls, the impact of corporate governance on productivity for an organization and the recent research done in the Indian context is also looked in this paper. The various codes on corporate governance, which have evolved in India is also looked into in the paper. Implementation issues in the context of Indian companies are part of the paper. The role of corporate governance in Public Sector Enterprises (PSEs) and the role of the apex body for public sector enterprises in India, Standing Conference of Public Enterprises (SCOPE) are also highlighted in the paper. This is contrasted with existing corporate governance practices in the Private Sector operating in India.
2 citations
Cites background from "Corporate Governance: Perception of..."
...In his paper, Bhalla (2012) [16] has tried to find out the perception of different level of executives about corporate governance in India....
[...]
...Bhalla (2012) [13] found in his study that the corporate governance practices of both public sector and private sector companies are almost similar....
[...]