Corporate Governance is Heart of the Corporate world.Every single organisation and the corporate entity is paying vast attention on corporate governance these days.Corporate governance is day to day to the task which must be entrusted in every corporate entity.without corporate governance, no corporate entity can survive for a long time in the corporate world.These days almost all the corporate organisation are employing various qualified professional to ensure it’s corporate governance formula in its entity,and one of the Very Well known professional which are mostly required by the corporate world to ensure it’s corporate governance is Company Secretary professionals.Company Secretary professional one of the most demanded professional these days to ensure Corporate governance and smooth functioning of the corporate organisations.
What is Corporate Governance?
Corporate Governance is the Road or path in which Corporate entities are governed.
It is one of the best technique by which companies and other corporate organisations are guided and managed. in simple words major objective of corporate governance is to meet the Desires of its stakeholders. It is actually administered by the board of Directors and the concerned committees for the company’s stakeholder’s advantage. It is all about coordinating individual and societal goals, as well as, economic and social goals.
Corporate Governance is the cooperation between various participants (shareholders, a board of directors, and company’s management) in developing corporation’s performance . Corporate governance is the tool which ensures The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the two.
Corporate Governance simply distinguishes between the owners and the managers. The managers are the crucial authority. In modern corporations, the functions/ tasks of owners and managers should be clearly defined, rather, harmonizing.
Corporate Governance dispenses with planning ways to take effective and efficient important decisions. It gives ultimate authority and complete responsibility to the Board of Directors. In today’s market- oriented and Cut-Throat Competition economy, the demand for corporate governance arises. Also, efficiency, as well as globalisation, are vital factors urging corporate governance. Corporate Governance is necessary to develop added value to the stakeholders assign with the corporate entity.
Corporate Governance guarantees transparency which ensures strong and balanced economic development. This also ensures that the interests of all shareholders ( the majority as well as minority shareholders) both are safeguarded. corporate governance ensures that all shareholders fully exercise their rights and that the organization fully recognizes their rights.
Benefits of Corporate Governance
⇒Good corporate governance assures corporate success and economic growth.
⇒corporate governance keeps investors’ confidence, as a result of which, the company can raise capital efficiently and productively.
⇒It lowers the capital cost.
⇒Corporate governance also helps to ensure thatnThere is a positive influence on the share price.
⇒corporate governance provides a proper incentive to the owners as well as managers to achieve objectives that are in interests of the shareholders and the organization.
⇒Good corporate governance also reduces wastages, corruption, risks, and mismanagement.
⇒corporate governance helps a corporate world in the brand formation and development.
⇒corporate governance also ensures that organization in managed in a manner that fits the best interests of all.
Importance of Corporate Governance
corporate governance is a method of governing the company like a sovereign state, in stating its own procedures, rules,policies and laws to its employees from the highest to the lowest levels. Corporate governance is dedicated to improving the accountability of company and to avoid huge disasters before they occur.Some Major Importance of Corporate Governance can be Sorted out as follows:-
⇒Growing Number of Scams : –In recent years, many scams, frauds, and corrupt manners have taken place. Abuse and misappropriation of public money are falling every day in India and worldwide. Scams are happening in the stock market, banks, financial institutions, companies and government offices. In order to evade these scams and financial irregularities, many companies have started corporate governance.
⇒Shareholders part:- In general and mostly shareholders are inactive in the management of their companies. They only attend the Annual general meeting. A Postal ballot is still absent in India,Proxies are not allowed to speak in the meetings(Except some of the corporate entity) . Shareholders associations are not strong. Therefore, there is big chance that directors misuse their power for their own benefits. So, there is a requirement for corporate governance to protect all the stakeholders of the company.
⇒Globalisation:- in the days of globalisation most big corporate entity are selling their goods in the global market. So, they have to bring foreign investor and foreign customers. They also have to follow foreign rules and norms. All this needs corporate governance. Without Corporate governance, it is impossible to enter, survive and succeed the global market for a long time.
⇒Takeovers and Mergers:- There are many takeovers and mergers in the Corporate world. Corporate governance is required to preserve the interest of all the parties and stakeholders during takeovers and mergers.
⇒SEBI :- Security and exchange board of India has made corporate governance mandatory for certain companies. This had been done to protect the interest of the investors and other stakeholders.
Principle of Corporate Governance
The main Principle of corporate governance are to clearly explain to the board, the stakeholders, and the shareholders what their duties and responsibilities are within the company.I am Enumerating 5 Principle of Governance Below:-
There must be a very efficient and An effective board should have to head each company. The Board should drive the company to meet its business purpose in both the short and long term.
The Board should have a proper mix of skills, experience, and independence to empower its members to discharge their duties and responsibilities efficiently and adequately.
With good corporate governance, it’s much simple to know what the key members of the business are assumed to do.
The Board should report to the company’s shareholders and other stakeholders, at regular intervals, a fair, balanced and reasonable assessment of how the company is performing its business purpose and reaching its other responsibilities.
The Board should conduct the business to create value and allocate it honestly and sustainably to reinvestment and distributions to stakeholders, including shareholders, directors, employees and customers.
Integrity one of the must valuable principle of corporate governance.The Board should guide the company to manage its business in a fair and transparent manner that can withstand scrutiny by stakeholders.