Description
The PPT explains about Corporate Governance.
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?
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Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate 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. - Sir Adrian Cadbury
Corporate Governance therefore calls for three factors:
1. 2.
3.
Transparency in decision-making Accountability which follows from transparency because responsibilities could be fixed easily for actions taken or not taken, and The accountability is for the safeguarding the interests of the stakeholders and the investors in the organisation.
?
?
?
The primary purpose of corporate leadership is to create wealth legally and ethically. This translates to bringing a high level of satisfaction to five constituencies – customers, employees, investors, vendors and the society-at-large. The raison d'être of every corporate body is to ensure predictability, sustainability and profitability of revenues year after year. - N. R. Narayana Murthy
?
Corporate Governance is the acceptance by the management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on the behalf of shareholders. It 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.
If management is about running businesses, governance is about ensuring that it is run properly.
?
The Cadbury Report, titled Financial Aspects of Corporate Governance, is a report of a committee chaired by Adrian Cadbury that sets out recommendations on the arrangement of company boards and accounting systems to mitigate corporate governance risks and failures.
The report was published in 1992. The report’s recommendations have been adopted in varying degree by the European Union, the United States, the World Bank and others.
?
Enron / Tyco / WorldCom debacle
Public company Accounting Reform and Investor Protection Act of 2002 - Sarbanes Oxley Act Public company Accounting Oversight Board
?
?
?
Corporate Governance initiatives in India began in 1998 with the Desirable Code of Corporate Governance – a voluntary code published by the CII, and the first formal regulatory framework for listed companies specifically for corporate governance, established by the SEBI.
SEBI followed it up with a committee headed by Kumaramangalam Birla. A new clause 49 was incorporated in the Stock Exchange Listing Agreements.
?
?
Subsequently, the above recommendations were further strengthened by the SEBI Committee on Corporate Governance under the chairmanship of Shri N R Narayana Murthy.
What will drive better corporate governance going forward ?
?
Cross border listings Global investors’ activism And more importantly, the necessity to attract global talent as is the case for many software companies in India ….Wonder why Infosys is so active in Corporate Governance?
?
?
Audit Reports Audit Committees Independent Directors
Financial Disclosures
Corporate Governance
Related Parties
Code of conduct Directorships /Director compensation
Risk Management
Audit Committees
?
Audit committees of publicly listed companies should be required to review the following information mandatorily: Financial statements and draft audit report, Management discussion and analysis of Results; Reports relating to statutory compliance, Management response to internal audit observations and Records of related party transactions. All audit committee members should be ‘financially literate’ and at least one member should have accounting or related financial management expertise.
?
Audit Reports and Audit Qualifications
?
In case a company has followed a treatment different from that prescribed in an accounting standard, management should justify why they believe such alternative treatment is more representative of the underlying business transaction.
?
Management should also clearly explain the alternative accounting treatment in the footnotes to the financial statements.
Related Party Transactions
?
A statement of all transactions with related parties including their bases should be placed before the independent audit committee for formal approval / ratification. If any transaction is not on an arm’s length basis, management should provide an explanation to the audit committee justifying the same.
?
Risk Management Policy
?
Risk Management Procedures should be in place to inform Board members about the risk assessment and minimization procedures. These procedures should be periodically reviewed to ensure that executive management controls risk through means of a properly defined framework. Management should place a report for approval to the Board of Directors every quarter documenting the business risks faced by the company, measures to address and minimize such risks, and any limitations to the risk taking capacity of the corporation.
?
?
Proceeds from Initial Public Offerings (IPOs)
?
Companies raising money through an IPO should disclose to the Audit Committee, the uses / applications of funds by major category (capital expenditure, sales and marketing, working capital, etc) on a quarterly basis.
?
On an annual basis, the company shall prepare a statement of funds utilized for purposes other than those stated in the offer document / prospectus. This statement should be certified by the independent auditors of the company.
Code of Conduct
?
It should be obligatory for the Board of a company to lay down the code of conduct for all Board members and senior management of a company. This code of conduct shall be posted on the website of the company.
?
?
All board members and senior management personnel shall affirm compliance with the code on an annual basis. The annual report of the company shall contain a declaration to this effect signed off by the CEO and COO.
Directorship / Director’s compensation
?
There shall be no nominee directors.
?
Where an institution wishes to appoint a director on the Board, such appointment should be made by the shareholders and such directors shall have the same responsibilities and shall be subject to the same liabilities as any other director.
Nominee of the Government on public sector companies shall be similarly elected and shall be subject to the same responsibilities and liabilities as other directors.
?
Directorship / Director’s compensation…contd.
?
Compensation of non-executive directors may be fixed by the Board of Directors and should be approved by shareholders.
?
Limits should be set for the maximum number of stock options that can be granted and the vesting period.
Such compensation policies of Non- Executive Director should be made public. Non-executive directors should be required to disclose their stock holding in the listed company in which they are proposed to be appointed as directors , prior to their appointment.
?
?
Independent Directors
?
If the Chairman of the Board is a non-executive director, atleast one-third of the Board should comprise independent directors. If the chairman is an executive director, atleast onehalf (or 50 %) should be independent directors. The definition of an independent director has been expanded.
Independent Director is a non-executive director of the company who :
?
?
?
?
?
Does not have any material pecuniary relationships with the company, its promoters, and associated companies except receiving director remuneration; Is not related to promoters or management at the board level or at one level below; Has not been an executive of the company in the immediately preceding three financial years Is not a partner or an executive of the statutory audit firm / legal firm or the internal audit firm that is associated with the company Is not owning two percent or more of the block of voting shares
Whistle Blower Policy
?
Personnel who observe an unethical or improper practice (not necessarily a violation of law) should be able to approach the audit committee without necessarily informing their superiors.
Analyst Reports
?
Disclosure in the report issued by a security analyst whether the company that is being written about is a client of the analyst’s employer or an associate of the analyst’s employer, and the nature of services rendered to such company, if any; and Disclosure in the report issued by a security analyst whether the analyst or the analyst’s employer or an associate of the analyst’s employer hold or held (in the 12 months immediately preceding the date of the report) or intend to hold any debt or equity instrument in the issuer company that is the subject matter of the report of the analyst.
?
doc_477932839.ppt
The PPT explains about Corporate Governance.
?
?
?
Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate 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. - Sir Adrian Cadbury
Corporate Governance therefore calls for three factors:
1. 2.
3.
Transparency in decision-making Accountability which follows from transparency because responsibilities could be fixed easily for actions taken or not taken, and The accountability is for the safeguarding the interests of the stakeholders and the investors in the organisation.
?
?
?
The primary purpose of corporate leadership is to create wealth legally and ethically. This translates to bringing a high level of satisfaction to five constituencies – customers, employees, investors, vendors and the society-at-large. The raison d'être of every corporate body is to ensure predictability, sustainability and profitability of revenues year after year. - N. R. Narayana Murthy
?
Corporate Governance is the acceptance by the management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on the behalf of shareholders. It 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.
If management is about running businesses, governance is about ensuring that it is run properly.
?
The Cadbury Report, titled Financial Aspects of Corporate Governance, is a report of a committee chaired by Adrian Cadbury that sets out recommendations on the arrangement of company boards and accounting systems to mitigate corporate governance risks and failures.
The report was published in 1992. The report’s recommendations have been adopted in varying degree by the European Union, the United States, the World Bank and others.
?
Enron / Tyco / WorldCom debacle
Public company Accounting Reform and Investor Protection Act of 2002 - Sarbanes Oxley Act Public company Accounting Oversight Board
?
?
?
Corporate Governance initiatives in India began in 1998 with the Desirable Code of Corporate Governance – a voluntary code published by the CII, and the first formal regulatory framework for listed companies specifically for corporate governance, established by the SEBI.
SEBI followed it up with a committee headed by Kumaramangalam Birla. A new clause 49 was incorporated in the Stock Exchange Listing Agreements.
?
?
Subsequently, the above recommendations were further strengthened by the SEBI Committee on Corporate Governance under the chairmanship of Shri N R Narayana Murthy.
What will drive better corporate governance going forward ?
?
Cross border listings Global investors’ activism And more importantly, the necessity to attract global talent as is the case for many software companies in India ….Wonder why Infosys is so active in Corporate Governance?
?
?
Audit Reports Audit Committees Independent Directors
Financial Disclosures
Corporate Governance
Related Parties
Code of conduct Directorships /Director compensation
Risk Management
Audit Committees
?
Audit committees of publicly listed companies should be required to review the following information mandatorily: Financial statements and draft audit report, Management discussion and analysis of Results; Reports relating to statutory compliance, Management response to internal audit observations and Records of related party transactions. All audit committee members should be ‘financially literate’ and at least one member should have accounting or related financial management expertise.
?
Audit Reports and Audit Qualifications
?
In case a company has followed a treatment different from that prescribed in an accounting standard, management should justify why they believe such alternative treatment is more representative of the underlying business transaction.
?
Management should also clearly explain the alternative accounting treatment in the footnotes to the financial statements.
Related Party Transactions
?
A statement of all transactions with related parties including their bases should be placed before the independent audit committee for formal approval / ratification. If any transaction is not on an arm’s length basis, management should provide an explanation to the audit committee justifying the same.
?
Risk Management Policy
?
Risk Management Procedures should be in place to inform Board members about the risk assessment and minimization procedures. These procedures should be periodically reviewed to ensure that executive management controls risk through means of a properly defined framework. Management should place a report for approval to the Board of Directors every quarter documenting the business risks faced by the company, measures to address and minimize such risks, and any limitations to the risk taking capacity of the corporation.
?
?
Proceeds from Initial Public Offerings (IPOs)
?
Companies raising money through an IPO should disclose to the Audit Committee, the uses / applications of funds by major category (capital expenditure, sales and marketing, working capital, etc) on a quarterly basis.
?
On an annual basis, the company shall prepare a statement of funds utilized for purposes other than those stated in the offer document / prospectus. This statement should be certified by the independent auditors of the company.
Code of Conduct
?
It should be obligatory for the Board of a company to lay down the code of conduct for all Board members and senior management of a company. This code of conduct shall be posted on the website of the company.
?
?
All board members and senior management personnel shall affirm compliance with the code on an annual basis. The annual report of the company shall contain a declaration to this effect signed off by the CEO and COO.
Directorship / Director’s compensation
?
There shall be no nominee directors.
?
Where an institution wishes to appoint a director on the Board, such appointment should be made by the shareholders and such directors shall have the same responsibilities and shall be subject to the same liabilities as any other director.
Nominee of the Government on public sector companies shall be similarly elected and shall be subject to the same responsibilities and liabilities as other directors.
?
Directorship / Director’s compensation…contd.
?
Compensation of non-executive directors may be fixed by the Board of Directors and should be approved by shareholders.
?
Limits should be set for the maximum number of stock options that can be granted and the vesting period.
Such compensation policies of Non- Executive Director should be made public. Non-executive directors should be required to disclose their stock holding in the listed company in which they are proposed to be appointed as directors , prior to their appointment.
?
?
Independent Directors
?
If the Chairman of the Board is a non-executive director, atleast one-third of the Board should comprise independent directors. If the chairman is an executive director, atleast onehalf (or 50 %) should be independent directors. The definition of an independent director has been expanded.
Independent Director is a non-executive director of the company who :
?
?
?
?
?
Does not have any material pecuniary relationships with the company, its promoters, and associated companies except receiving director remuneration; Is not related to promoters or management at the board level or at one level below; Has not been an executive of the company in the immediately preceding three financial years Is not a partner or an executive of the statutory audit firm / legal firm or the internal audit firm that is associated with the company Is not owning two percent or more of the block of voting shares
Whistle Blower Policy
?
Personnel who observe an unethical or improper practice (not necessarily a violation of law) should be able to approach the audit committee without necessarily informing their superiors.
Analyst Reports
?
Disclosure in the report issued by a security analyst whether the company that is being written about is a client of the analyst’s employer or an associate of the analyst’s employer, and the nature of services rendered to such company, if any; and Disclosure in the report issued by a security analyst whether the analyst or the analyst’s employer or an associate of the analyst’s employer hold or held (in the 12 months immediately preceding the date of the report) or intend to hold any debt or equity instrument in the issuer company that is the subject matter of the report of the analyst.
?
doc_477932839.ppt