1. 5th Module
Corporate Governance

2. Introduction
• The concept of Corporate Governance, which
emerged as a response to corporate failures and
wide spread dissatisfaction with the way many
corporate function, has become one of the wide
and deep discussions around the globe recently.
• Although it did not receive much attention until
the dawn of the 1990s, it has become very popular
with in a short period

3. Definition by Sir Adrian Cadbury
• “Corporate governance is concerned with holding
the balance between economic and social goals and
between individual and communal goals. The aim is
to align as nearly as possible the interests of
individuals, corporations, and society”.
• corporate governance, includes the structure,
process, cultures and systems that engender the
successful operation of the organizations.

4. • Definition of corporate governance by the Institute of
Company Secretaries of India is as under :
• “Corporate Governance is the application of best
Management practices, Compliance of law in true
letter and spirit and adherence to ethical standards for
Effective Management and distribution of wealth and
discharge of social Responsibility for sustainable
development of all stakeholders”.

5. OECD on Corporate Governance
• The Organization for Economic Cooperation and
Development (OECD) Principles of Corporate
Governance states:
• “Corporate governance involves a set of relationships
between a company’s management, its board, its
shareholders and other stakeholders. Corporate
governance also provides the structure through which
the objectives of the company are set, and the means of
attaining those objectives and monitoring performance
are determined.”

6. Issues in corporate governance
• Factors influencing corporate governance:
The ownership structure of a corporation
Its financial structure
The structure and functioning of the company
boards and
The legal, political and regulatory environment
within which the company operates
The institutional investors
Executive compensation

7. Relevance of corporate governance
 It ensures that an adequate and appropriate system of
control operates within a company and hence assets may be
safeguarded
 It prevents any single individual exercising undue power.
 It is concerned with the relationship between a company’s
management, the board of directors, shareholders, and other
stakeholders.
 It seeks to ensure that the company is managed in the best
interests of the shareholders and other stakeholders.
 It tries to encourage both transparency and accountability,
which investors are increasingly looking for in an
organization’s functioning.

8. Need and Importance of corporate governance

9. Benefits of good corporate governance
• Good corporate governance ensures corporate success and economic growth.
• Strong corporate governance maintains investors’ confidence, as a result of which,
company can raise capital efficiently and effectively.
• It lowers the capital cost.
• There is a positive impact on the share price.
• It provides proper encouragement to the owners as well as managers to achieve
objectives that are in interests of the shareholders and the organization.
• Good corporate governance also minimizes wastages, corruption, risks and
mismanagement.
• It helps in brand formation and development.
• It ensures organization is managed in a manner that fits the best interests of all

10. The concept of corporate
• Pertaining to corporations.
• Corporations are the most common form of business organization, and one which
is agreement by a state and given many legal rights as an entity separate from its
owners.
• This form of business is characterized by the limited liability of its owners, the issuance
of shares of easily transferable stock, and existence as a going concern.
• The process of becoming a corporation, called incorporation, gives the company
separate legal standing from its owners and protects those owners from being
personally liable in the event that the company is sued (a condition known as limited
liability).

11. The concept of governance
• “Governance is the process where by people in
power make decisions that create, destroy or
maintain social systems, structures and processes.
• Corporate governance is therefore the process
where by people in power direct, monitor and lead
corporations, and there by either create, modify or
destroy the structures and systems under which
they operate” .

12. Obligation to society