<–2/”>a >Organisation for Economic Co-operation and Development defines Corporate Governance as 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.
Corporate governance provides following benefits to an organization:-
• It improves strategic thinking at the top by inducting independent directors who bring a wealth of experience, and a host of new ideas
• It rationalizes the management and monitoring of risk that a firm faces globally
• It limits the liability of top management and directors, by carefully articulating the DECISION MAKING process
• It assures the Integrity of financial reports
• It has long term reputation effects among key stakeholders, both internally and externally
Corporate Governance works with and objective to serve its various claimants. Corporate Governance has several claimants – shareholders, suppliers, customers, creditors, the bankers, employees of company and Society. The committee for SEBI keeping view has prepared primarily the interests of a particular class of stakeholders namely the shareholders this report on corporate governance. It means enhancement of shareholder value keeping in view the interests of the other stack holders. Committee has recommended C G as company‘s principles rather than just act The company should treat corporate governance as way of life rather than code.
Corporate Social Responsibility(CSR) is increasingly an essential issue for companies. It is a complex and multi- dimensional organisational phenomenon that is understood as the scope for which, and the ways in which, an organisation is consciously responsible for its actions and non-actions and their impact on its stakeholders. It represents not just a change to the commercial setting in which individual companies operates, but also a pragmatic response of a company to its consumers and society. It is increasingly being understood as a means by which companies may endeavour to achieve a balance between their efforts to generate profits and the societies that they impact in these efforts. This chapter discusses these issues. First, it describes CSR and its core principles. Second, it describes CG and narrates CG‘s convergence with CSR. Third, it highlights how different economies are incorporating CSR notions in their corporate regulation.
The convergence of Corporate Social Responsibility(CSR) and Corporate governance(CG) has helped to develop the standardisation regime. Most global companies have acknowledged this development. They exclusively consider certain of these initiatives to measure their suppliers‘ performance Some of them weed out suppliers from their chains on the results of performance tests based on these initiatives. Using these initiatives they select strategic suppliers to
(a) reduce their transaction costs;
(b) increase their profitability;
c) reduce costs as a result of a reduced need to switch suppliers; and
(d) increase their competitiveness in the marketplace through improved relationships with consumers.
GOI issued the Companies (Corporate Social Responsibility Policy) Rules, 2014 (CRS Rules) which has come into effect from 1 April 2014. Under Section 135 of the Companies Act ,it provides the threshold limit for applicability of the CSR to a Company i.e.
(a) net worth of the company to be Rs 500 crore or more;
(b) turnover of the company to be Rs 1000 crore or more;
(c) net profit of the company to be Rs 5 crore or more. Further as per the CSR Rules,
the provisions of CSR are not only applicable to Indian companies, but also applicable to branch and project offices of a foreign company in India.
Under the rules, Every qualifying company requires spending of at least 2% of its Average net profit for the immediately preceding 3 financial years on CSR activities. Further, the qualifying company will be required to constitute a committee (CSR Committee) of the Board of Directors (Board) consisting of 3 or more directors. The CSR Committee shall formulate and recommend to the Board, a policy which shall indicate the activities to be undertaken (CSR Policy); recommend the amount of expenditure to be incurred on the activities referred and monitor the CSR Policy of the company. The Board shall take into account the recommendations made by the CSR Committee and approve the CSR Policy of the company.
The activities that can be done by the company to achieve its CSR obligations include eradicating extreme hunger and POVERTY, promotion of Education, promoting Equality/”>Gender Equality and empowering Women, reducing child mortality and improving maternal Health, combating human immunodeficiency virus, acquired, immune deficiency syndrome, malaria and other diseases, ensuring environmental sustainability, EMPLOYMENT enhancing vocational skills, social business projects, contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-Economic Development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women and such other matters as may be prescribed.,
Corporate governance is the system of rules, practices, and processes by which a company is directed and controlled. It is concerned with the relationships between the company’s management, its board of directors, its shareholders, and other stakeholders.
Corporate social responsibility (CSR) is a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, employees, shareholders, communities and the Environment in all aspects of their operations.
Board of directors
The board of directors is responsible for the oversight of the company’s management. They are elected by the shareholders and are responsible for setting the company’s strategy, appointing the management team, and overseeing the company’s financial performance.
Executive compensation
Executive compensation is the total remuneration received by a company’s executives. It includes salary, bonuses, stock Options, and other forms of compensation. Executive compensation is often a controversial issue, as it can be seen as excessive.
Shareholder rights
Shareholders are the owners of a company. They have the right to vote on the company’s board of directors, to receive dividends, and to sell their Shares. Shareholders also have the right to sue the company if they believe that it has violated their rights.
Auditing and reporting
Auditing is the process of reviewing a company’s financial statements to ensure that they are accurate and complete. Reporting is the process of providing information about a company’s financial performance to its shareholders and other stakeholders.
Corporate social responsibility
CSR is a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, employees, shareholders, communities and the environment in all aspects of their operations.
Environmental sustainability
Environmental sustainability is the practice of meeting the needs of the present without compromising the ability of future generations to meet their own needs. It is a broad concept that encompasses a wide range of issues, such as Climate change, pollution, and resource depletion.
Human rights are the basic rights and freedoms that belong to all people, regardless of their race, religion, nationality, gender, or any other status. They include the right to life, Liberty, and security of person; the right to freedom from torture and other cruel, inhuman, or degrading treatment or punishment; the right to equality before the law; and the right to freedom of expression and assembly.
Labor practices
Labor practices are the policies and procedures that a company uses to manage its employees. They include issues such as wages, working hours, and safety.
Anti-Corruption
Anti-corruption is the practice of preventing and combating corruption. Corruption is the abuse of power for personal gain. It can take many forms, such as bribery, extortion, and Nepotism.
Consumer protection is the practice of protecting consumers from unfair or deceptive business practices. It includes issues such as product safety, advertising, and credit.
Community relations
Community relations is the practice of building and maintaining positive relationships with a company’s community. It includes issues such as philanthropy, environmental stewardship, and employee relations.
Diversity and inclusion
Diversity and inclusion are the practice of creating a workplace that is welcoming and supportive of people from all backgrounds. It includes issues such as race, gender, ethnicity, sexual orientation, and religion.
Ethics
Ethics is the study of morality. It is concerned with the principles that guide human behavior. In the context of business, ethics is concerned with the principles that guide business behavior.
Governance codes
Governance codes are sets of principles that companies are expected to follow. They are designed to promote good corporate governance.
Regulatory compliance
Regulatory compliance is the practice of complying with the laws and regulations that apply to a company. It includes issues such as environmental protection, labor laws, and financial reporting.
Sustainability reporting
Sustainability reporting is the process of reporting on a company’s environmental, social, and governance performance. It is designed to provide information to stakeholders about a company’s commitment to sustainability.
Social impact investing
Social impact investing is the practice of investing in companies that have a positive social or environmental impact. It is designed to generate both financial and social returns.
Voluntary disclosure
Voluntary disclosure is the practice of disclosing information to stakeholders that is not required by law or regulation. It is designed to provide information to stakeholders about a company’s performance and activities.
What is corporate governance?
Corporate governance is the system of rules, practices, and processes by which a company is directed and controlled. It is concerned with the relationship between the company’s management, its board of directors, its shareholders, and other stakeholders.
What are the benefits of good corporate governance?
Good corporate governance can help companies to:
- Attract and retain investors
- Improve financial performance
- Reduce risk
- Build a strong reputation
- Enhance employee morale
What are the risks of poor corporate governance?
Poor corporate governance can lead to:
- Financial losses
- Damage to reputation
- Legal problems
- Shareholder activism
- Employee turnover
What are the key Elements of good corporate governance?
The key elements of good corporate governance include:
- A strong board of directors
- Effective risk management
- Transparency and disclosure
- Accountability
- Independent oversight
What are the different types of corporate governance structures?
There are two main types of corporate governance structures: unitary and dual. In a unitary structure, the board of directors is responsible for both the strategic and operational management of the company. In a dual structure, there is a separate board of directors for the strategic management of the company and a separate board of directors for the operational management of the company.
What are the challenges of corporate governance?
The challenges of corporate governance include:
- Ensuring that the board of directors is independent and objective
- Balancing the interests of different stakeholders
- Managing risk effectively
- Ensuring transparency and disclosure
- Maintaining accountability
What are the latest trends in corporate governance?
The latest trends in corporate governance include:
- Increased focus on sustainability
- Increased focus on diversity and inclusion
- Increased use of technology
- Increased focus on risk management
- Increased focus on shareholder engagement
What are the future of corporate governance?
The future of corporate governance is likely to be shaped by a number of factors, including:
- The increasing importance of sustainability
- The increasing focus on diversity and inclusion
- The increasing use of technology
- The increasing focus on risk management
- The increasing focus on shareholder engagement
Sure, here are some MCQs on the following topics:
- What is corporate governance?
Corporate governance is the system of rules, practices, and processes by which a company is directed and controlled. It is concerned with the relationship between the company’s management, its board of directors, its shareholders, and other stakeholders.
- What are the main principles of corporate governance?
The main principles of corporate governance are accountability, transparency, fairness, and responsibility. These principles are designed to ensure that companies are run in the best interests of their shareholders and other stakeholders.
- What are the benefits of good corporate governance?
Good corporate governance can lead to a number of benefits, including:
- Improved financial performance
- Reduced risk
- Increased investor confidence
- Enhanced reputation
Improved employee morale
What are the risks of poor corporate governance?
Poor corporate governance can lead to a number of risks, including:
- Financial losses
- Damage to reputation
- Increased legal costs
- Regulatory action
Shareholder activism
What are the different types of corporate governance structures?
There are a number of different types of corporate governance structures, including:
- The unitary board structure
- The two-tier board structure
- The supervisory board structure
The monistic board structure
What are the roles of the board of directors?
The board of directors is responsible for the overall governance of the company. Its main roles include:
- Setting the company’s strategy
- Appointing and overseeing the management team
- Monitoring the company’s performance
Ensuring that the company complies with laws and regulations
What are the roles of the management team?
The management team is responsible for the day-to-day running of the company. Its main roles include:
- Implementing the board’s strategy
- Managing the company’s Resources
Reporting to the board on the company’s performance
What are the roles of the shareholders?
The shareholders are the owners of the company. Their main roles include:
- Appointing the board of directors
- Approving the company’s financial statements
Voting on major corporate decisions
What are the roles of the stakeholders?
The stakeholders are all the people or groups who have an interest in the company, such as employees, customers, suppliers, and the community. Their main roles include:
- Providing input to the board of directors
- Monitoring the company’s performance
Holding the company accountable
What are the challenges of corporate governance?
The challenges of corporate governance include:
- Ensuring that the board of directors is independent and effective
- Managing conflicts of interest
- Ensuring that the company complies with laws and regulations
- Responding to shareholder activism
I hope this helps!