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Regulatory Framework: to ensure corporate governance:

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CORPORATE GOVERNANCE
Mushtaque Ahmed
Principal
SBSC. Dhaka.
With the dismantling of administered banking and since the winds of liberalization
and deregulation blowing hard, several crucial areas like asset management, interest
rates etc have to be decided by the banks themselves, These fundamental reasons
make corporate governance essential.
Greater freedom brings greater responsibility. Globalisation has also given this subject
a totally new dimension and wider interest. It is essential for risk containment by
providing early warning system to facilitate prompt corrective action to prevent
failure. It is not risk aversion but it involves risk assessment and coverage because
earlier detection, lower the cost. Three essential ingredients of corporate governance
merit attention.
Check & balances like audit committees, independent accounting, systems
etc.
Clear demarcation of responsibilities for effective accountability.
Complete disclosure and transparency.
What is Corporate Governance ? The Cadbury Committee report say- “it is
the system by which companies are directed and controlled”. It tries to enunciate the
responsibility of Board of Directors and managers, whether defined by the law or not,
to ensure good performance. Corporate Governance establishes the relationship
between the shareholders and other stakeholders with the management and its Board.
Good Corporate Governance should provide proper incentives for the Board and
Management to pursue objectives that are in the interest of the company and
shareholders and should facilitate effective monitoring, thereby encouraging firms to
use resources more efficiently.
It may be appropriate to say that good corporate governance should result in making a
corporate to a responsible corporate citizen, who will not only protect and enhance
shareholders wealth but will also contribute towards the good of the community at
large.
The need for good corporate Governance:
A Responsible Corporate Citizen should not only enhance the shareholder’s wealth
but also exhibit fairness to other stakeholders like consumers, employees and the
community in general. Maximization of shareholder wealth has to be achieved by
adherence to ethical values and transparency in dealings. The principles of Corporate
Governance are developed
to ensure that the companies do justice to all the shareholders, investors and society in
general. It has also to be ensured that investors are not ‘enronised’ by corporates in
future.
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Evolution of corporate Governance:
Increasing competition all over the world led to failure of a large number of
companies. (a) The demand to make the Board of Directors and Management
accountable and (b) the need for ethical practices in the corporate management and (c)
adherence to the law of the land are responsible for the emergence of Corporate
Governance.
Internal pressure to Adhere to good corporate Governance:
The good practice followed by Corporate like Banks to meet the representatives of the
media and the investment analysts who dissect and discuss the details of performance
at quarterly intervals puts internal pressure to prepare the organization for exposure in
public.
Transparency in operations is the hallmark of a good corporate citizen. Access to
information may be made a fundamental right of an investor in respect of the
operations of every corporate.
Limited Liability Vs no liability: The concept of limited liability of shareholders is a
great step forward in capital formation, which enabled many corporate to take up
entrepreneurial projects.
Focus on the investors:
Retention of investor’s confidence is essential to help capital formation which is very
important for economic development Therefore, good Corporate Governance has to
recognize the following facts:
- The shareholders are the real owners of a company and the BOD and the
Managers are the agent of the shareholders.
- A company comes into existence only out of the shareholders willingness to
put a part of their resources at risk.
- If the company makes loss it is the shareholder who has to bear the loss.
- A shareholder cannot leave the company unless someone else steps into his
shoes or the company buys back his shares.
The Rights of shareholders:
- A shareholder has the right to know as frequently as possible details of the
performance of the company.
- It is the shareholders right to decide who should represent him in the BOD
(Board of Directors).
- The criteria of fairness to all shareholders should decide the composition of the
BOD.
- The BOD should conduct the affairs of the company in such a manner that they
are fair to all the shareholder.
- The BOD are accountable to the shareholders.
- The shareholders are entitled to protection from ‘Insider Trading’.
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CORPORATE GOVERNANCE Mushtaque Ahmed Principal SBSC. Dhaka. With the dismantling of administered banking and since the winds of liberalization and deregulation blowing hard, several crucial areas like asset management, interest rates etc have to be decided by the banks themselves, These fundamental reasons make corporate governance essential. Greater freedom brings greater responsibility. Globalisation has also given this subject a totally new dimension and wider interest. It is essential for risk containment by providing early warning system to facilitate prompt corrective action to prevent failure. It is not risk aversion but it involves risk assessment and coverage because earlier detection, lower the cost. Three essential ingredients of corporate governance merit attention. Check & balances like audit committees, independent accounting, systems etc. Clear demarcation of responsibilities for effective accountability. Complete disclosure and transparency. What is Corporate Governance ? The Cadbury Committee report say- “it is the system by which companies are directed and controlled”. It tries to enunciate the responsibility of Board of Directors and managers, whether defined by the law or not, to ensure good performance. Corporate Governance establishes the relationship between the shareholders and other stakeholders with the management and its Board. Good Corporate Governance should provide proper incentives for the Board and Management to pu ...
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