CORPORATE GOVERNANCE (module) - PPT.pptx

CORPORATE GOVERNANCE (module)

1. Why a new Law was needed ? 1 RRR CHAMBERS Email ID- [email protected] RRR Chambers - [email protected]

2. Why a new Law was needed ? ‘is corporate governance a vital component of successful business or is it simply another fad that will fade away over time? ISSUES AND CONCEPTS 2 www.b5consulting.com RRR Chambers - [email protected]

3. Why a new Law was needed ? Emergence 3 www.b5consulting.com Notorious collapse of Enron in 2001 - has focused international attention on company failures and the role of strong corporate governance RRR Chambers - [email protected]

4. Why a new Law was needed ? Corporate Governance - theoretical perspective 4 www.b5consulting.com Accountability to shareholders . Accountability to shareholders & and other stakeholders RRR Chambers - [email protected]

5. Why a new Law was needed ? What is CG ?? 5 www.b5consulting.com corporate governance is the system of checks and balances , both internal and external to companies, which ensures that companies discharge their accountability to all their stakeholders and act in a socially responsible way in all areas of their business activity . RRR Chambers - [email protected]

6. Why a new Law was needed ? CG - UK 6 www.b5consulting.com RRR Chambers - [email protected]

7. Why a new Law was needed ? T he development of corporate governance UK 7 www.b5consulting.com RRR Chambers - [email protected]

8. Why a new Law was needed ? : 8 www.b5consulting.com m RRR Chambers - [email protected]

9. Why a new Law was needed ? 9 www.b5consulting.com RRR Chambers - [email protected]

10. Why a new Law was needed ? 10 www.b5consulting.com RRR Chambers - [email protected]

11. Why a new Law was needed ? 11 www.b5consulting.com RRR Chambers - [email protected]

12. Why a new Law was needed ? Companies Act 2006 - CG 12 www.b5consulting.com RRR Chambers - [email protected]

13. Why a new Law was needed ? 13 www.b5consulting.com RRR Chambers - [email protected]

14. Why a new Law was needed ? 14 www.b5consulting.com CORPORATE GOVERNANCE IN GERMANY Philosophy- “confrontation” at one end and “co-operation” at the other RRR Chambers - [email protected]

15. Why a new Law was needed ? Management board ( Vorstand ) - responsible for managing the enterprise Supervisory Board ( Aufsichtsrat ) Dual Board System, 15 www.b5consulting.com RRR Chambers - [email protected]

16. Why a new Law was needed ? 16 www.b5consulting.com Key characteristics influencing German corporate governance Feature Key characteristic Main business form ------ Public or private companies limited by shares Predominant ownership structure ---- Financial and non-financial companies Legal system --- civil law Board structure --- dual Important aspect ---- compulsory employee representation on supervisory board RRR Chambers - [email protected]

17. Why a new Law was needed ? 17 www.b5consulting.com Japan’s Corporate Governance System is often likened to that of Germany because banks can play an influential role . stakeholders is seen to be an important aspect. CORPORATE GOVERNANCE IN JAPAN RRR Chambers - [email protected]

18. Why a new Law was needed ? Obligation Family & Consensus. Charkham (1994) 18 www.b5consulting.com RRR Chambers - [email protected]

19. Why a new Law was needed ? Key characteristic 19 www.b5consulting.com RRR Chambers - [email protected]

20. 20 www.b5consulting.com www.ahaladaraoassociates.com The Code

21. Why a new Law was needed ? Asian Corporate Governance Association (ACGA) 21 www.b5consulting.com ‘White Paper on Corporate Governance in Japan The system of governance in most listed companies is not meeting the needs of stakeholders or the nation at large in three ways: • By not providing for adequate supervision of corporate strategy ; • By protecting management from the disdpline of the market, thus rendering the development of a healthy and effident market in corporate control all but impossible; • By failing to provide the returns that are vitally necessary to protect Japan’s soda!safety net-its pension system. RRR Chambers - [email protected]

22. Why a new Law was needed ? The fundamental objective of Corporate Governance – ‘enhancement of shareholder value, keeping in view the interests of other stakeholders’ CORPORATE GOVERNANCE IN INDIA 22 www.b5consulting.com RRR Chambers - [email protected]

23. Why a new Law was needed ? Emergence of Corporate Governance in India 23 www.b5consulting.com RRR Chambers - [email protected]

24. Why a new Law was needed ? non-executive chairman one-third of the board independent directors The Code - Listing Rules 24 www.b5consulting.com executive chairman half of the board should be independent Board of directors : RRR Chambers - [email protected]

25. Why a new Law was needed ? 25 www.b5consulting.com RRR Chambers - [email protected]

26. Why a new Law was needed ? 26 www.b5consulting.com RRR Chambers - [email protected]

27. Why a new Law was needed ? CORPORATE GOVERNANCE IN USA 27 www.b5consulting.com “The world moves forward on the character of good men” — Rev. Edmund A. Walsh. S. J. RRR Chambers - [email protected]

28. Why a new Law was needed ? Management - Focus 28 www.b5consulting.com RRR Chambers - [email protected]

29. Why a new Law was needed ? Executive Compensation 29 www.b5consulting.com RRR Chambers - [email protected]

30. Why a new Law was needed ? ISS - Recommendations 30 www.b5consulting.com RRR Chambers - [email protected]

31. Why a new Law was needed ? New Corporate Governance 31 www.b5consulting.com RRR Chambers - [email protected]

32. Why a new Law was needed ? Corporate Governance In Family Business 32 www.b5consulting.com Relatively Small Group Of Individuals Can Retain Ownership, Power, And Control RRR Chambers - [email protected]

33. Why a new Law was needed ? Change over 33 www.b5consulting.com Acquisitions facilitated the growth of family controlled firms in the first half of the century, they also diluted their ownership and ultimately their control in the second half. RRR Chambers - [email protected]

34. Why a new Law was needed ? Family-owned firms and governance 34 www.b5consulting.com RRR Chambers - [email protected]

35. Why a new Law was needed ? Advantages 35 www.b5consulting.com RRR Chambers - [email protected]

36. Why a new Law was needed ? Advantages Of A Formal Governance Structure 36 www.b5consulting.com RRR Chambers - [email protected]

37. Why a new Law was needed ? Cadbury plc; 37 www.b5consulting.com An Example Of A Family Firm Founded in the first part of the nineteenth century by john cadbury His two sons joined the firm in 1861 The firm became a private limited liability company, cadbury brothers Ltd Non-family directors were first appointed to the firm in 1943 , 1962 , a publicly quoted company with the family members still being the majority on the board and holding a control-ling interest The direct family involvement , via either large shareholdings or board membership, therefore declined over the years 2007 , Cadbury Schweppes revealed plans to split its business into two separate entities In 2009 , Kraft launched a hostile takeover bid for Cadbury. Cadbury decided to fight to retain its independence. RRR Chambers - [email protected]

38. Why a new Law was needed ? Difficulties Encountered in Governance The board of directors will comprise essentially of bureaucrats drawn from various ministries The chief executive or managing director not necessarily professionals with the required expertise Difficult to attract expert professionals as independent directors. Managed and governed according to the whims and fancies of politicians and bureaucrats. Corporate Governance in state-owned business - the MOU system Introduction 38 www.b5consulting.com RRR Chambers - [email protected]

39. Why a new Law was needed ? OECD Guidelines State-owned Enterprises 39 www.b5consulting.com RRR Chambers - [email protected]

40. Why a new Law was needed ? Responsibilities Of The Boards -State-owned Enterprises 40 www.b5consulting.com RRR Chambers - [email protected]

41. Why a new Law was needed ? Governance in India 41 www.b5consulting.com The Indian economy is characterized by strong macro-fundamentals Challenges : Economy’s transition to a higher and more inclusive growth path Structural changes Expectations RRR Chambers - [email protected]

42. Why a new Law was needed ? Concept of MoU 42 www.b5consulting.com RRR Chambers - [email protected]

43. Why a new Law was needed ? MoU in India 43 www.b5consulting.com The Memorandum of Understanding ( MoU ) System in India was introduced in the year 1986 RRR Chambers - [email protected]

44. Why a new Law was needed ? 1. Arjun Sengupta Committee Report (1984) 2. National Council of Applied Economic Research (2004) 3. Report of the Working Group (2008) 4. S.K. Roongta Committee Report (2011) 5. Mankad Committee and Task Force (2012) various committees 44 www.b5consulting.com RRR Chambers - [email protected]

45. Why a new Law was needed ? 45 www.b5consulting.com www.ahaladaraoassociates.com

46. Why a new Law was needed ? Memorandum of Understanding system in India has been consistently moving towards improvement Corporate governance practices need to be understood as a significant part of the broader CPSE reform and renewal programmed Conclusion 46 www.b5consulting.com RRR Chambers - [email protected]

47. Why a new law was needed ? 47 Www.B5consulting.Com The following good governance practices to enhance the autonomy as well as efficiency of the cpses : A. Professionalizin g the CPSE boards by including managers from the private sector in the CPSE boards as independent directors; B. Rolling out leadership development programmes which would be compulsory for the board members; and C . Increasing transparency of the cpses by making internal controls and audit strong, as well as carrying out supplementary audits on a timely basis. RRR Chambers - [email protected]

48. Why a new law was needed ? 48 Www.B5consulting.Com RRR Chambers - [email protected] THANK YOU