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HISTORY & NEED OF CORPORATE GOVERNANCE

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Ques. 1 : What do you mean by Corporate Governance ? differentiate
between Corporate Governance & Corporate Management.
Ans : Corporate governance involves regulatory and market mechanisms, and the
roles and relationships between a company’s management, its board, its shareholders
and other stakeholders, and the goals for which the corporation is governed. Lately,
corporate governance has been comprehensively defined as "a system of law and sound
approaches by which corporations are directed and controlled focusing on the internal
and external corporate structures with the intention of monitoring the actions of
management and directors and thereby mitigating agency risks stemming from the
devious deeds of these corporate officers"
In contemporary business corporations, the main external stakeholder groups
are shareholders, debt holders, trade creditors, suppliers, customers and communities
affected by the corporation's activities. Internal stakeholders are the board of
directors, executives, and other employees.
Much of the contemporary interest in corporate governance is concerned with
mitigation of the conflicts of interests between stakeholders. Ways of mitigating or
preventing these conflicts of interests include the processes, customs, policies, laws,
and institutions which have an impact on the way a company is controlled. An
important theme of corporate governance is the nature and extent of accountability of
people in the business.
A related but separate thread of discussions focuses on the impact of a corporate
governance system on economic efficiency, with a strong emphasis on shareholders'
welfare. In large firms where there is a separation of ownership and management and
no controlling shareholder, the principalagent issue arises between upper-
management (the "agent") which may have very different interests, and by definition
considerably more information, than shareholders (the "principals"). The danger arises
that rather than overseeing management on behalf of shareholders, the board of
directors may become insulated from shareholders and beholden to management. This
aspect is particularly present in contemporary public debates and developments in
regulatory policy.(see regulation and policy regulation).
Economic analysis has resulted in a literature on the subject. One source defines
corporate governance as "the set of conditions that shapes the ex post bargaining over
the quasi-rents generated by a firm." The firm itself is modeled as a governance
structure acting through the mechanisms of contract,
possibly in tandem with corporate
finance.
There has been renewed interest in the corporate governance practices of modern
corporations, particularly in relation to accountability, since the high-profile collapses
of a number of large corporations during 2001-2002, most of which involved accounting
fraud. Corporate scandals of various forms have maintained public and political interest
in the regulation of corporate governance. In the U.S., these include Enron
Corporation and MCI Inc. (formerly WorldCom). Their demise is associated with the U.S.
federal government passing the Sarbanes-Oxley Act in 2002, intending to restore public
confidence in corporate governance. Comparable failures in Australia (HIH,One.Tel) are
associated with the eventual passage of the CLERP 9 reforms. Similar corporate failures
in other countries stimulated increased regulatory interest (e.g.,Parmalat in Italy).

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difference between Corporate Governance & Corporate Management
In terms of the meanings of the words, it does not seem too much difference
between management and governance, they both have a relationship with “to direct” or
“to act”.
But if the words “management” and “governance” are associated with the concept
of corporate management and corporate governance, the difference between
management and governance will be very visible.
The difference between governance and management in terms of the difference
between Corporate Governance and Corporate Management are as follows:
Governance focuses on oversight, accountability and strategic decisions, while
management focuses on strategic decisions, management decisions and control, and
operational management.
Intersection between governance and management is on the area of strategic
decisions. Coverage area of governance is the upper-middle while the coverage area of
management is the lower-middle.
Ques 2 : What factors affect Corporate Governance in Indian Scenario and
roll of Board of Directors of the Company ?
Ans : factors affecting Corporate Governance in Indian Scenario are following -
The Ownership structure
The structure of ownership of a company determines, to considerable extent, how
a corporation is managed and controlled. Our corporate sector is characterized by the c
o-existence of state owned, private and multinational enterprises. The shares of these
enterprises (except those belonging to the public sector) are held by institutional as well
as small investors. Large shareholders tend to be active in Corporate Governance either
through their representatives on company boards/through their active participation I n
annual general body meetings. This has been demonstrated by Reliance Industries Ltd.,
which has the highest number of equity shareholders spread across the country..
The Structure of Company Boards
Along with the structure of ownership, the structure of company boards has
considerable influence on the way the companies are managed and controlled. The
Board of Directors is responsible for establishing corporate objectives, developing broad
policies and selecting top-level executives to carry out those objectives and policies. The
board also requires management's performance to ensure that the company is run well
and shareholder's interests are protected.
Company boards are permitted to vary in size, composition and structure to best
serve the interests of the corporation and the shareholders. Boards can be single-
tired/two-tired with regard to the size of the board, opinions and practices vary. Some

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Ques. 1 : What do you mean by Corporate Governance ? differentiate between Corporate Governance & Corporate Management. Ans : Corporate governance involves regulatory and market mechanisms, and the roles and relationships between a company’s management, its board, its shareholders and other stakeholders, and the goals for which the corporation is governed. Lately, corporate governance has been comprehensively defined as "a system of law and sound approaches by which corporations are directed and controlled focusing on the internal and external corporate structures with the intention of monitoring the actions of management and directors and thereby mitigating agency risks stemming from the devious deeds of these corporate officers" In contemporary business corporations, the main external stakeholder groups are shareholders, debt holders, trade creditors, suppliers, customers and communities affected by the corporation's activities. Internal stakeholders are the board of directors, executives, and other employees. Much of the contemporary interest in corporate governance is concerned with mitigation of the conflicts of interests between stakeholders. Ways of mitigating or preventing these conflicts of interests include the processes, customs, policies, laws, and institutions which have an impact on the way a company is controlled. An important theme of corporate governance is the nature and extent of accountability of people in the business. A related but ...
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