CORPORATE GOVERNANCE

Corporate governance means that company manages its business in a manner that is accountable and responsible to the shareholders.In a wider term, it includes company accountability to shareholders and stakeholders like its employees,customers,suppliers, government etc.It refers to the accountability of board of directors towards the shareholders.

MAIN FEATURES OF CORPORATE GOVERNANCE

• It is pursued to make board of directors and other top level manages accountable to the various stakeholders of the company.
• It’s main concern is that important decisions of the company are taken effectively.
• It is a process to determine strategic direction and control performance of the company.
• It specifies the rules and procedures through which decisions on corporate affairs would be taken.
• It is used to monitor whether outcomes are in accordance to the set plans and motivates the management to be fully informed in order to maintain or alter company activities.

NEED AND IMPORTANCE OF CORPORATE GOVERNANCE

1. Separation of ownership and management
2. Scattered shareholders
3. To meet the expectations of the society
4. Globalization of the economy
5. Investor protection is the main concern today
6. Hostile takeovers
7. Fear of government interference
8. Financial reporting to the stakeholders
9. To take loans from banks and financial institutions easily.

KEY PILLARS OF CORPORATE GOVERNANCE

1. TRANSPARENCY-It means accurate, timely and adequate disclosure of relevant information to the stakeholders of the company. Without transparency it is impossible to move towards corporate governance. This helps to build high level of public confidence.
2. ACCOUNTABILITY– The chairman, board of directors and CEO of the company must be accountable to the stakeholders of the company.Since they have ultimate authority to take decisions therefore they must accept the accountability.
3. INDEPENDENCE– The board of directors has to be an independent, strong and non-partisan body where decisions are based on business prudence. Companies act now provides constitution of Audit Committee to get an independent review and control on financial records.
4. REPORTING- Corporate governance also involves adequate reporting to the shareholders and other stakeholders of the company.It involves publishing the reports on the company’s performance regularly. It should also share its relevant information with the shareholders and also publish it on the company’s website.

It is the need of the hour to adopt the principles of corporate governance, specially after the scams like satyam scam,2g scam, common wealth games scam etc, to keep a check on the working of the top management and directors. Thus it is the duty of the government to create awareness about this issue and make it compulsory for the companies to follow corporate governance.

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