OECD Principles Of Corporate Governance in India

Principles of corporate governance

1. OECD Principles of Corporate Governance Submitted By: Roopanshi Virang

2. Corporate Governance Corporate Governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, managers, shareholders and other stakeholders and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set , and the means of attaining those objectives and monitoring performance. arose partly in response to pressure from the increasingly prevalent institutional ownership, and partly in response to financial scandals at the end of 1980s. Cadbury Report was a direct reaction to the scandals. This report contained a no of recommendations regarding good corporate governance also called “best practice” or code of conduct(1992)

3. In July 2002, less than a year after Enron scandal Sarbanes-Oxley Act popularly called SOX was enacted, made fundamental changes in general and auditor independence, conflict of interests, corporate responsibility, enhanced financial disclosures and severe penalties for willful default by managers and auditors, in particular. The first effort to offer a global set of principles was by the OECD by attempting to harmonize practices across 29 country members, ranging from the US to South Korea.

4. Corporate Governance was not in agenda of Indian Companies until early 1990s. After liberalization major steps are: In 1998 by CII giving India first Code on Desirable Corporate governance In 1999 by SEBI through Kumar Manglam Birla Committee on CG In 2000 SEBI implemented Birla Committee’s proposal through enacting Clause 49 of Listing Agreement In 2002 by DCA through Naresh Chandra committee on corporate Audit and governance In 2003 by SEBI again establishing NR Narayan Murthy committee In 2009 SEBI committee on Disclosure and Accounting Standards In 2009 Voluntary Guidelines by MCA The MCA has set up National Foundation for Corporate Governance (NFCG) in association with CII, ICSI and ICAI.

5. OECD Principles The first global framework of CG has been provided by OECD in 1999 and last updated in 2004 used as a benchmark by individual jurisdictions and Financial Stability Board’s Key Standards for Sound Financial Systems provide the basis for assessment of the corporate governance component of the Reports on the Observance of Standards and Codes of the World Bank. The Principles provide guidance through six chapters: Ensuring the basis for an effective corporate governance framework The rights and equitable treatment of shareholders and key ownership functions Institutional investors, stock markets and other intermediaries

6. d. The role of stakeholders in corporate governance e. Disclosure and transparency; f. The responsibilities of the board Application of OECD in India SEBI through clause 49 Companies Act 2013 Ministry of Corporate Affairs specified Voluntary Guidelines on Corporate Governance In March 2012, Ministry of Corporate Affairs constituted a committee under the Chairmanship of Mr. Adi Godrej, Chairman, Godrej Industries Limited, to formulate policy document on Corporate Governance.

7. Suggestions and Conclusion Appropriate relationship between shareholders and the management should be established To achieve the right balance between stakeholders and management interest. Independent directors should be members of all key committees to bring more transparency in the operations. Corporate governance principles should be strictly followed by the corporate Paramount consideration should be given to the interests of the stakeholders The governance of Business Corporation must fulfill the requirement of trusteeship of all stakeholders and not only owner’s interest. Good Governance depends on the cooperation and involvement of a large number of citizens and organizations Every corporation should engage itself in complete openness; - spreading of knowledge in the board's composition; - frequent meetings; - splitting up of special functions; - thorough preparation and recording of all meetings; - replacement of weak or regularly absent directors; - sufficient time to discuss.

8. For the effective implementation of OECD Principles in India, corporations should consider three main values an orientation towards Justice through the actualization of the fairness, integrity and objectivity; an orientation towards Truth through the values of openness, trustfulness, and transparency; the orientation wards Harmony through attitudes of collaboration, care and diligence. Because today corporate governance stands for a tendency towards a decent, fair and reliable direction, "to do the right (good) things and to do things right (well)".