Corporate Governance is the application of best Management Practices, Compliance of Laws in true letter and spirit and adherence to ethical standards for effective management and distribution of wealth

Objectives of Corporate Governance

Corporate Governance  aimes at creating an organization which maximizes the wealth of shareholders. It envisages an organization in which emphasis is laid on fulfilling the social responsibilities towards the stakeholders in addition to the earning of profits.

Elements of Good Corporate Governance

1. Role and Powers of the Board.

2. Legislation

3. Management Environment

4. Board Appointments

6. Board Meetings

7. Code of Conduct

8. Strategy setting

9. Monitoring the Board Performance

10. Audit Committee

11. Risk Management

The Institute of Company Secretaries of India has issued the following Secretarial Standards in order to maintain the uniformity of procedure with regard to the Board Meetings, General Meetings, Payment of Dividend, Maintenance of Registers and Records,

Recording of Minutes and Transfer and Transmission of Shares.

A brief detail of these standards is given as under : –

SS1 – Meetings of Board of Directors

The Secretarial Standard –1 deals with the meetings of the Board of Directors. It deals with the various aspects of the conducting the Board Meetings, the frequency of such

meetings in an year, Quorum required for the meeting, powers of the Chairman in such meetings, and recording of minutes of such meetings.

SS2 – General Meetings

The Secretarial Standard –2 deals with the General Meetings. It explains the procedure of conducting the General Meetings, the frequency of meetings in an year, Quorum required for the conduct of the meeting, powers of the Chairman in such meetings, recording of minutes of such meetings, procedure of voting, etc.

SS3 – Dividend

This Secretarial Standard pertains to Dividend. It illustrates the calculation of amount payable as dividend, declaration of dividend, Treatment of Unpaid Dividend, and Transfer of Dividend to Investor Education and Protection Fund(IEPF).

SS4 – Registers and Records

This Secretarial Standard enumerates the various Registers required to be maintained as per statutory requirements.

SS5 – Minutes

This Secretarial Standard deals with the recording and signing of Minutes of the Meetings.

Minutes should contain :

(a) The appointment of the Chairman of the meeting.

(b) The presence of Quorum,etc

Factors Influencing the quality of Corporate Governance :- 

1. Integrity of the Management

2. Ability of the Board

3. Quality of Corporate Reporting

4. Participation of Stakeholders

5. Quality of Corporate Reporting

Committee Reports on Corporate Governance :- 

Narayana Murthy Report on Corporate Governance: –

Corporate Governance is beyond the realm of Law. It stems from the culture and mindset of management and cannot be regulated by legislation alone.

It is a key element in improving the economic efficiency of the firm. Credibility offered by Corporate Governance also helps in improving the confidence of the investors – both domestic and foreign. It involves a set of relationships between a company’s management, its Board, shareholders and Stakeholders.

Kumarmangalam Birla Committee Report on Corporate Governance: – 

All companies are required to submit a quarterly Compliance Report to the Stock Exchanges within 15 days from the end of financial reporting quarter.

The Report has to be submitted by Compliance Officer or by the Chief Executive Officer after obtaining due approvals, on the following clauses :-

Board of Directors

Audit Committee

Shareholders/ Investors Grievance Committee

Remuneration of Directors

Board Procedures



Report on Corporate Governance 

CII – Desirable Corporate Governance

Corporate Governance helps in maximizing the long-term shareholder value. It is more a way of business life than a mere legal compulsion. Four ideals , which should be the guiding force of company’s philosophy on Corporate Governance are :-

– Transparency

– Accountability

– Disclosure

The Code of Business Conduct and Ethics helps ensuring compliance with legal requirements and other standards of Business Conduct. All company Employees and Trainees are expected to read and understand this code of ethics, comply with all applicable policies and procedures.

The Company expects all employees, agents and contractors to exercise good judgement to ensure all employees, agents and contractors and to maintain competitive, efficient, positive harmonious and productive Work Environment and business organization.

Insider Trading :- 

Insider trading is the trading of a corporation‘s stock or other securities by corporate insiders such as officers, key employees, directors, and holders of more than ten percent of the firm’s shares. Insider trading may be perfectly legal, but the term is frequently used to refer to a practice, illegal in many jurisdictions, in which an insider or a related party trades based on material non-public information obtained during the performance of the insider’s duties at the corporation, or otherwise misappropriated.

Prohibition on dealing communication or counseling on matters relating to inside trading : –

3. No insider shall –

(i) either on his own behalf or on behalf of any other person, deal in securities of a company listed on  stock exchange when in possession of any unpublished price sensitive information; or

(ii) communicate, counsel or procure, directly or indirectly, any unpublished price sensitive information to any person who while in possession of such unpublished price sensitive information shall not deal in securities.

Whistleblower Policy : –

Whistle Blower policy is an internal policy on access to Audit Committees. Elimination of unethical or improper practices is the responsibility of respective Corporate Promoters and Management for which they have to put in place of the systems for efficient administration and transparent transaction.

Clause 49 of the Listing Agreement provides for formulation of an internal Policy, which extends to any level of employment and by virtue of which any personnel who observes an Unethical or improper practices shall be able to approach the Audit Committee without informing their supervisors.

 Cases Reporting Failure of Corporate Governance .

As is commonly known, corporate governance is the system by which companies are directed and controlled. So it is not about the day-to-day operational management of the company, but what the board of a company does and how the values of the company are set by the Board. This means having the best persons in the Board. There are three issues to be considered in the case of corporate governance in public sector banks.

First, being a listed entity PNB would have to adhere to Clause 49 (2014) of the Securities and Exchange Board of India (SEBI) listing agreement. In fact it is precisely this capability that is enshrined in clause 49 too. As a responsibility of the Board: ‘Board should provide the strategic guidance to the company, ensure effective monitoring of the management and should be accountable to the company and the shareholders’.

And It was also seen that PNB does not possess a well qualified Audit Committee., to look after the Internal Audit of the banks and ensuring timely check of financial statements and  furnishing Audit Reports as ans when required.

The case “Corporate Governance Failure at Ricoh India: Rebuilding Lost Trust”  is also a leading case in the Corporate world which  discusses the series of events post disclosure of falsification of the accounts and violation of accounting principles, leading to a loss of INR 11.23 bn for the company, eroding over 75 per cent of its market cap in 2016.. It is also found out that Many top companies are unable to minain quality corporate governance..Recently Ranbaxy have also suffered failure in their Corporate Governance Framework.

Issues and  Challenges of Corporate Governance

The main problem with corporate governance is that it doesn’t stand alone; it has to work in conjunction with a company’s mission and values statement to give directors and stakeholders a clear guide about how they should behave. There are several problems that a business might struggle with as follows:

Conflicts of interest: A conflict of interest occurs when a controlling member of the company has other financial interests that could influence his decision-making or conflict with the objectives of the company .

Governance standards: A board can have all the equitable rules and policies it likes but if it can’t propagate those standards throughout the business, what chance does the company have? Resistant managers can subvert good corporate governance at the operational level, leaving the business exposed to state or federal law violations and reputational damage with stakeholders. A policy of corporate governance needs a clear enforcement mechanism, applied consistently, as a check and balance against the actions of executive staff.

Short-termism: Good corporate governance requires that boards should have the right to manage the company for the long-term, to create sustainable value. This is problematic for a couple of reasons. First, the rules governing a listed company’s performance tend to prioritize short-term performance for the benefit of shareholders. Managers face an unrelenting pressure to meet quarterly earnings targets, since dropping the earnings per share by even a cent or two could hit the company’s stock price.

Diversity: It’s common sense that boards should have an obligation to ensure the proper mix of skills and perspectives in the boardroom, but few boards take a hard look at their composition and ask whether it reflects the age, gender, race and stakeholder composition of the company.

Accountability issues: Under the current model of corporate governance, the board is positioned squarely between shareholders and management. Authority flows from the shareholders at the top and accountability flows back the other way. In other words, it’s shareholders – not stakeholders generally – who are most protected by corporate governance and shareholders – not stakeholders – who get to withhold critical votes unless certain reforms are implemented.

A Promise of a Better Tomorrow: Recent Notable Progress by India

In June 2017, SEBI formed a committee under the leadership of Uday Kotak (of the Kotak Mahindra Bank) on corporate governance and elicited recommendations to improve the standards of corporate governance of listed companies in the country. The Kotak Committee submitted its report in October 2017, post which public comments were invited. Last month SEBI announced that its board of directors had accepted several recommendations in their entirety, and some with modifications. Key recommendations regarding directorship like decreasing the number of listed companies in which a person may be a director, increasing the minimum board size, having one independent woman director, and separation of roles between the CEO/MD and the chairperson, have been accepted.

 Nextly, recommendations on enhancing the eligibility criteria and roles for independent directors, increasing the role for committees, setting meetings and procedure guidelines and increasing disclosure and transparency have also been accepted. The way in which these accepted recommendations will be implemented remains to be seen, but they set a fine precedent for the future of corporate governance in India

Every entity should  adhere to the recommendations given by ICSI and other Regulatory agencies in order to achieve quality Corporate Governance in their organization.

Recommendations For Improving Corporate Governance in India are:-

– Ensuring Directors have Information they need

– Evaluate Boards and Directors performance

– Recognising managing risk is boards duty

– Monitor Organisational Policy

– Recognising Good Governance is not just Compliance

– Appointment Of Competent Chairperson etc


The more the level of corporate governance, the stronger is the company in the eyes of the shareholders of the company. The independent and the active directors are the ones who infuse and contribute towards displaying the corporate as that of having a positive outlook. Corporate governance requirements in India deliberate the companies to audit their working culture and give the shareholders community a more positive outlook as their actions have many legal implications. New norms after the Companies Act 2013 came into the picture, are very balanced.Shareholders are involved in the decision making of the companies and various safeguards have been put in order  that the interests of the shareholders and the society as a whole is not sidelined. Corporate Governance imbibes the much-required transparency in Corporates. Therefore, it pushes India ahead in the race of emerging economies of the world.


1. Corporate Governance Book by Robert Tiakar 1984

2. Corporate Governance In India; An Evaluation by Subash Das 2008

3. Corporate Governance Issues and Challenges,

4.Important Issues in Corporate Governance

5.Corporate Governance Concepta and Issues

6. Boook on Business Ethics by AC Fernando

7 Book on .Ethics and Governance by Timothy L. Fort

Author Bio

Qualification: Student - CA/CS/CMA
Company: College- VIPS
Location: delhi, New Delhi, IN
Member Since: 23 Aug 2019 | Total Posts: 1

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June 2021