Principles of Corporate Governance

The basic objective of corporate governance is to maximise long-term shareholder value. Therefore, good governance should address all issues that lead to a value addition for the organisation and serve the interests of all ht stakeholders. The main issues in corporate governance are:

• Transprency: Transparency means accurate, adequate and timely disclosure of relevant information to the stakeholders. Without transparency, it is impossible to make any progress towards good governance. Business heads should realise that transparency also creates immense shareholder value. But many a times information-sharing is hindered under the excuse of confidentiality. There is need to move towards international standard in terms of disclosure of information by the corporate sector and through all this to develop a high level of public confidence in business. Once a company has public shareholding it is imperative that its commitment to financial transparency must be total. The company is a trustee of the investors money and this responsibility in turn demands full disclosure. Corporations in India must learn to work with transparency an impeccable integrity as these are the essential ingredients to maximise their wealth and the wealth of the nation.

• Accountability: Corporate governance has to be a top down approach Chairman, Boards of Directors and Chief Executives must fulfill their responsibilities to make corporate governance a reality in India industry. In companies with good governance, accountability is not just bottom up but also follows the reverse order. A department head is, for example, responsible for every decision taken on behalf of this department. Accountability also favors the objective of creating shareholder value.

• Merit – based Management: A strong board of directors is necessary to lead and support merit-based management. The board has to be an independent, strong and non-partisan body where the sole motive should be decision-making through business prudence, Though corporate governance is much broader than corporate management, and efficient and effective administration of corporate sector is essential for meeting the desired objectives. Corporate governance ensures that long-term strategic objectives and plans are established and that the proper management strategic objectives and plans are established and that the proper management structure (organisation, systems and people) is in place to achieve those objectives, while at the same time ensuring that the structure functions to maintain the company’s integrity, reputation and responsibility to its various stakeholders.

• Responsibility: It means ensuring compliance with the laws and regulations that reflect society’s values, including a broad sensitivity to the objectives of the society in which corporations operate.

• Fairness: It is necessary to protect the rights of shareholders and to ensure the enforcement of contracts with the providers of resources.

Thus, corporate governance involves the broad parameters of reporting system, accountability and control.