A system of checks and balances between the Board, Management and Investors to produce an efficiently functioning the corporation, ideally geared to produce long term value.
ISSUES IN CORPORATE GOVERNANCE
* Asymmetry of power
* Asymmetry of information
* Interests of shareholders as residual owners
* Role of owner management
* Theory of separation of powers
* Division of corporate pie among stakeholders
CURRENT STATUS ON CORPORATE GOVERNANCE
* Insistence on forms and structures
* Overarching regulations
* Regulatory overkill
* Lack of adequate number of strong, independent directors
* Large liabilities for companies and ...view middle of the document...
* Corporate and Financial Reporting
* Audit Committees
Scope of Code of Corporate Governance, 2002
The code provides a framework for efficient and transparent running of listed companies to enhance shareholder value. The regulators need to be vigilant to enforce the code in its true spirit.
BOARD OF DIRECTORS
* Encourage effective representation of independent non-executive directors, including those representing minority interests.
a. minority shareholders as a class are facilitated to contest. (through the use of proxy)
b. At least one independent director representing institutional equity interest of financial institution. (a director nominated as a director under section 182 and 183 not be taken as independent directors)
c. Executive directors not more than75% of the elected directors. (Voluntary provision)
* The directors to give consent that they are aware of their duties and powers
QUALIFICATION AND ELIGIBILITY TO ACT AS A DIRECTOR
* Director, not to be a director in more than ten other listed companies.
ii. Director needs:
a. to be registered as a National Tax Payer ; and
b. Not to a defaulter as convicted by court of a banking company, development financial institution, or a non-banking financial institution or as a member by the Stock Exchange.
iii Not to be director if spouse is engaged in the business of Stock Brokerage (voluntary)
TENURE OF OFFICE OF DIRECTOR
* iv. Three years, vacancy to be filled in 30 days
RESPONSIBILITIES, POWERS AND FUNCTIONS OF BOARD OF DIRECTORS
Every listed company shall ensure
a. Statement of Ethics and Business practices is prepared
b. Board of directors to adopt vision statement, and overall corporate strategy;...