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Corporate Governance

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Course Objectives Explain What is Corporate GovernanceDefine Corporate GovernanceExplain What is a CorporationDescribe the Features of a CorporationExplain What is Good Corporate GovernanceExplain the Sarbanes Oxley ActDescribe the Role of Government in Corporate GovernanceDescribe the World Bank Directives for Corporate GovernanceExplain the Factors Directing Corporate BehaviorDescribe the Emerging Best Practices of Corporate GovernanceExplain What is Corporate Social ResponsibilityExplain the Role of Board of Directors in Corporate GovernanceDescribe the Benefits of Corporate GovernanceList the Principles of Corporate GovernanceList the Rules of Corporate Governance

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Introduction Look at the news that made headlines in all the leading newspapers across the world. Let us see what really happened.

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Introduction Satyam Computers is a reputed software firm of India with around 185 Fortune 500 companies as customers and operations in 66 countries. Satyam Computers had on December 16, 2008 announced that it will acquire two group firms: Maytas Properties Maytas Infra

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Introduction The Board of Directors of Satyam had approved the founder, Byrraju Ramalinga Raju's proposal to buy 51% stake in Maytas Infra and 100% in Maytas Properties. The total outflow for both the acquisitions were expected to be US$ 1.6bn comprising of US$ 1.3 bn for 100% stake in Maytas Properties and US$ 0.3 bn for 51% stake in Maytas Infra.

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Introduction This is the point that sparked a row over alleged violation of corporate governance laws. The deal was not profitable to the investors. Hence, after this announcement, the investors started raising a hue and cry. The promoters decided to inflate the revenue and profit figures of Satyam. Hence, the company had a huge gap in its balance sheet.

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Introduction So, Satyam Computers Services Ltd. got involved in a multimillion dollar accounting fraud which ultimately led to a huge face loss for the entire Indian IT industry. The involvement of the reputed external agency like Price Waterhouse Coopers (PWC) in the scandal made the entire episode a nightmare for the regulatory bodies, the government and the employees of the organization.

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Introduction Therefore, it is very critical that every corporate should follow the norms of good corporate governance. The objective of corporate governance is the prevention of such scams in businesses which have a huge bearing not only on the immediate shareholders but also on the morale of the larger stakeholder groups.

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Introduction Let us learn about Corporate Governance in detail. Corporate Governance is basically a detailed disclosure of information and an account of an organizations financial situation, performance, ownership and governance, relationship with shareholders and commitment to business ethics and values.

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What is Corporate Governance? Corporate Governance refers to the way a corporation is governed. It is the technique by which companies are directed and managed. It means carrying the business as per the stakeholders desires. It is actually conducted by the board of Directors and the concerned committees for the companys stakeholders benefit. It is all about balancing individual and societal goals, as well as, economic and social goals.

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Corporate Governance Definition It is interesting to note that the definition of corporate governance changes in different cultural contexts. For example: Let us look at a definition provided by the Center of European Policy Studies or CEPS. CEPS define corporate governance as: The whole system of rights, processes and controls established internally and externally over the management of the business entity with the objective of protecting the interests of the stakeholders.

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Evolution of Corporations 2 1 3 Let us now look at the evolution of corporations into the form we know today. To begin with, in the earlier times, the educational and religious corporations were given considerable independence and perpetual existence to evade the all encompassing power of the king. Later, corporations were set to address states specific needs like establishing colonies during the colonial era. Initially, corporations were characterized by a few wealthy people who negotiated amongst themselves, invested capital and worked towards maximizing profits.

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What is Good Corporate Governance? Corporate Governance is the art of directing and controlling the organization by balancing the needs of the various stakeholders. This often involves resolving conflicts of interest between the various stakeholders and ensuring that the organization is managed well meaning that the processes, procedures and policies are implemented according to the principles of transparency and accountability.

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Sarbanes Oxley Act Corporate Governance has been in the news for the last decade or so following a spate of scandals that engulfed companies like Enron which led to their collapse because of mismanagement. This prompted regulators all over the world to implement various acts and rules to check irresponsible corporate behavior that would mar the prospects of the corporations and cause harm to their shareholders and stakeholders. Acts like the Sarbanes Oxley Act were passed to enforce greater oversight over corporations and ensure that they did not overreach themselves in their relentless pursuit of profits. Indeed, it can be said that the Enron debacle was a wakeup call for corporate America to set its house in order.

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The Role of the Government: Legislation and Regulation Another important consideration is the choice of going after the corporation or people, who have been involved in the misconduct. A rather fair and objective view of this issue, is that if the organization has a proper system of safeguards and checks in systems and processes and if the misconduct profits just one person, in this case even the corporate becomes a victim. For such situations, a single person can be accused of embezzlement and liable for prosecution. However, if the fraud is at a larger level involving more people, the situation becomes complex, whether to hold liable the board members and senior leaders for failing to ensure the prevention.

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Community members want jobs which would give them a decent income or wage as well as which challenges their ingenuity and creativity. They need goods and services which are of a decent quality Expectations of the Community from the Corporate The following are the various expectations that the community has from the corporate: Community members also want their share of interest in the corporation either as an employee, shareholders, suppliers, creditors or just as neighbors. They want a safe and healthy work environment.

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Impact of Corporate Behavior The corporate behavior tends to have a direct or sometimes an indirect impact on the economic state of the countries and communities they operate in. Any lack or deficiency in the corporate governance structures has a potential to threat the stability of financial structures globally. The very recent examples were the economic crisis in US, Brazil and Asia in 1998 and the ever continuing financial meltdown of the current times.

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Best Practice #1 Best Practice #2 Best Practice #3 Emerging Best Practices of Corporate Governance Best Practice #1 In the wake of the crisis, several proposals aimed at introducing greater transparency and accountability from the corporate have been set in motion. These include the Dodd-Frank Act or the legislation that has been passed in the US to monitor the accounting and business practices of the banks and corporate.

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Principles of Corporate Governance The following are the principles of good corporate governance: Ethical Approach - organizational image, culture, society Caring for Stakeholders Though some have greater importance than others Balanced Objectives - Agreement of goals by all interested parties Equal Participation of Each Party - Roles of key players such as: owners/directors/staff Existence of Proper Decision-making Process Decisions should reflect all other principles and give due importance to all stakeholders Accountability and Transparency - to all stakeholders

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This is a DEMO Course On Corporate Governance. Register Today and Get Access to 5 FREE Courses. What Do you Get: 1.View All Courses Online. 2.Download Powerpoint Presentation for Each Course. 3.Do the Knowledge Checks for Each Course. This is a DEMO Course On Corporate Governance. Register Today and Get Access to 5 FREE Courses. What Do you Get: 1.View All Courses Online. 2.Download Powerpoint Presentation for Each Course. 3.Do the Knowledge Checks for Each Course. ManagementStudyGuide.com