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INTRODUCTION

The business corporation is an instrument through which capital is assembled for the activities of producing & services & making investment. Accordingly, a basic premise of corporations law is that a business corporation should have its objective the conduct of such activities with a view to enhancing the corporations profits & the gains of the corporations owners, that is the shareholders. By Melvin Avon Eisenberg Every corporation facilitates of large amount of capital in order to create wealth It aims at increasingly its international trade, thereby increasing employment opportunities and encouraging rapid business development. Traditionally a corporate body has been regarded as an inanimate object concerned with earning profit by providing products and services to the community. The traditional view about corporation is constricted , narrow and incorrect. A change can be observed in thinking about the role of corporate coupled with internationalization of the capital markets, liberalisation of domestic economies in different countries and the rise of professionalism have brought about a sea change in corporate objectives. Under these influence modern corporation has become perceived as a caring entity discharging its social and economic obligations. The focus has thus shifted from mere profitability to the adoption of good quality corporate governance system. Such a system would cater to the expectations of a large group of stakeholders. To introduce and sustain such a system Board of Directors must have to exhibit a high degree of professionalism and greater degree of familiarity with management functions finance production marketing and research and development. It is true that the basic cause of difference between a successful and an unsuccessful organization is not the inadequacy of economic resources but the quality of governance.

PRINCIPLES OF CORPORATE GOVERNANCE


Commonly accepted principles of corporate governance include: Rights and equitable treatment of shareholders : organizations should respect the rights of shareholders and help shareholders to exercise those rights. They can help shareholders exercise understandable and accessible and encouraging shareholders to participate in general meetings Interests of other stakeholders: organization should recognize that they have legal and other obligations to all legitimate stakeholder. Role and responsibilities of board: the board needs a range of skills and understanding to be able to deal with various business issues and have the ability to view and challenge management performance. It needs to be of sufficient size and have and appropriate level of commitment of

fulfill its responsibilities and duties. There are issues about the appropriate mix of executive and non-executive directors. Te key roles of chairperson and CEO should not be held by the same person. Integrity and ethical behavior : Ethical and responsible decision making is not only important for public relation but it is also a necessary element in risk management and avoiding lawsuits. Organization should develop a code of conduct for their director and executives that promotes ethical and responsible decision making. It is important to understand though that reliance by a company on the integrity and ethics of individuals is bound to eventual failure . Because of this, many organizations establish compliance and ethics program to minimize the risk that te firm steps outside of ethicaland legal boundaries. Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide shareholders with a level of accountability. They should also implement procedures to independently verify and safeguard the integrity of the companys financial reporting. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clesr factual information

Fundamental principles of CG 1. Transparency : It involve the explaining of the companys policies and actions to those to whom it owes responsibilities. It should lead to the making of the appropriate disclosure without jeopardizing companys strategies interests. Internally, transparency means openness in a companys relationship with its employees as well as the conduct of its business in a manner that will bear scrutiny. Unfortunately total transparency is not the dominant culture in corporations. Transparency requires courage. The destruction in shareholders value in enron and marcona did not occur due to wrong business decisions but because they did not share their setbacks with the shareholders. 2. Accountability: It signifies that the board of directors are accountable to the shareholder and management is accountable to the board of directors. Both the board and the management must be accountable to the shareholders for the performance of effective management of resources and achievement of results with efficiency coupled with empowerment. Accountability provides impetus to performance. 3. Trusteeship: Large corporation have both social and economical purpose. They represent a mixture of interest of shareholder, lender of capital as well as business associates and employees. It creates a responsibility of trusteeship on the shareholders value. The board must ensure that the company fulfils its obligation and responsibility to all its stakeholders

4. Ethics: A corporation must set a specific standard of ethical relationship. Deviation from ethical principal corrupts organizational culture and undermines stakeholders value. 5. Oversight: It means the existence of a system of checks and balances. It should prevent misuse of power and facilitate timely management response to change and resk 6. Fairness to all stakeholders : It involves a fair and equitable treatment of all participants in the corporate governance structure. There should be no discrimination between any group of stakeholders.

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