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DIMENSIONS OF CORPORATE GOVERNANCE IN INDIA

DeepukumarAssistant ProfessorGFGC KushalnagaraCoorg District.

Girisha.M CAssistant ProfessorGFGC Periyapattana Mysore District.

INTRODUCTION

To achieve global competence in a sustained manner Corporate Governance (CG) is vital

CG is concerned with agency problem i.e. separation of ownership and control.

It is an arrangement and mechanisms employed by the owners to induce the management.

The emphasis is on responsibility and accountability of owners and management and other parties.

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GOOD CORPORATE GOVERNANCE3

•The importance of GCG goes beyond the interest of an individual company and it is crucial to the integrity and credibility of our market system.

•It is all about governing a company with transparency, honesty, openness and conscience.•According to OECD the GCG is a system of process, practices, customs, polices, laws by which the companies are directed and controlled.

CORPORATE GOVERNANCE IN INDIA INITIATIVES & REGULATORY FRAMEWORK

In India concerns were triggered by a wave of crises in the early 1990’s

In India, the Companies Act 1956 provides the legal framework for companies and is the main instrument for corporate governance.

The ICAI and ICSI both statutory institutions perform a significant role in promoting better corporate practice and governance.

SEBI as a statutory body further regulates the listed companies - It has introduced clause 49 of the listing agreement .

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ISSUES IN INDIAN CG

The relationship between shareholders particularly in

family owned or controlled companies

Related party transactions & Quality of financial disclosure

The role of promoters

Independent oversight of the Indian accounting profession

Limited activism of domestic institutional investors,

Issues of director independence and board effectiveness

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LACK OF ENFORCEABILITY

Enforcement is possibly the critical issue, and one that demands foremost priority.

Most CG assessments and reports repeatedly point to the lack of enforcement as a major weakness.

The OECD warned that enforcement remained the most significant challenge in India.

In Corporate Governance Watch Report 2010 India has been down rated to 7th place from 2nd due to lack of enforceability.

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ROLE OF PROMOTERS

Accountability of promoters is a key challenge at the heart of the governance problem.

A large No. of governance problem in India are related to the position of controlling shareholders to that of minority shareholders.

Family group ownership still dominates the Indian corporate landscape.

Promoters play an important and pervasive role in Indian corporate governance.

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ACCOUNTING PROFESSION

In India one of the important issues is the need for more independent oversight of the accounting profession.

The case of Satyam is a wake-up call to mandate thorough accounting and auditing procedures, as well as disclosure requirements, to safeguard against fraud and divergence.

The world should adopt a uniform global accounting standard (IFRS)

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INDEPENDENT DIRECTORS 9

There continues to be a lot attention focused on this issue.

They are nominated by controlling stockholders

Many independent directors does not possess the skills necessary to address exploitation of minority share holders.

Need to focus on a higher level of director professionalism on Indian boards.

INSTITUTIONAL INVESTORS 10

The success of corporate governance relays on the expectation that institutional investors will responsibly engage with companies.

It is an obligation that is not sufficiently exercised in most emerging markets including India.

Without a vibrant institutional investor community, companies are not going to take corporate governance very seriously.

LOOKING FORWARD

International investing is governed by quality of good governance.

GCG in big companies is a guiding force for the mid and small companies to devise effective governance framework.

The Govt. must Promote investor friendly environment.

Indian companies should stand in high in designing effective policies, philosophies and procedures.

Adoption of the modern practices would greatly enhance the image of the GCG in India.

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CONCLUSION

As capital flows world wide, CG has become need for the future growth and stability.

Adopting good standards help the corporations to become good corporate citizens in the global community.

Sound and GCG practices are closely linked to India’s future.

Rules must be effectively enforced and they must be timely, consistent, predictable, transparent and impartial to all market players.

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Thank you