corporate governance by drk

ROLE OF GOVERNMENT IN ENSURING CORPORATE GOVERNANCE

D. RAMAKRISHNA, ASST.PROFESSOR, RIMS, KKD [email protected], (+91) 9030233744


Lesson Objectives

ROLE OF GOVERNMENT IN ENSURING CORPORATE GOVERNANCE

BOARD OF DIRECTORS FRAMEWORK FOR CG ROLE OF CEO EXECUTIVE Vs NE DIRECTORS


Government plays both administrative and coordinative roles through its organs at various ministerial levels.

It is responsible for the maintenance of basic security, public law and order, and protection of property.

It has an obligation to protect the vulnerable members of society.

Overarching role of government in corporate governance


Participatory role of government in corporate governance

Government plays a participatory role on economic development through parastatals and state owned enterprises.

Government plays a facilitative role in the economy by creating a sound infrastructure

Government provides relevant infrastructure and basic service enablers such as electricity, water, communication, infrastructure etc.

This enables companies, individuals and government itself to function or perform efficiently towards wealth creation and economic development of the country.


Monitoring Role

• Government oversees and monitors organizations such as the Securities Exchange Commission, the Stock Exchange etc.


Legislative and regulatory role operate under through making

regulatory and statutory frameworks the interpretation and enforcement

of legislation is done through the courts or judiciary and other national enforcement agencies.


Role of Government in Controlling Corruption

Corruption ultimately robs the wealth of a nation making the poor people poorer while increasing the wealth of the rich.

Leaders should lead by example, should walk the talk


Enforcement Mechanism of Corporate Governance

Enforcement could be on a statutory basis (that is legislated) or as a Code of Principles and practices (on a voluntary or self-regulatory basis) or a combination of both legislation and voluntary.

Some governments apply the statutory basis and this implies that companies should “comply or else”. In this sense there would be legal consequences in the event of non compliance.


Government should play a role in instilling values and ethicsWith a society or citizens with

good moral values, it is easy for the government to use the comply or explain, apply or explain, and adopt or explain bases in corporate governance and thus obviate the need of legislation.

The voluntary basis works well where the moral fibre of society is strong.


References http://www.nccg.co.zw/index.php?

option=com_content&view=article&id=82:governments-role-a-corporate-governance&catid=42:highlights-of-the-code&Itemid=204


Introduction

A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization.

Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors. It may also be called "the executive board" and is often simply referred to as "the board".


TYPICAL DUTIES OF BOARDS OF DIRECTORS

• Governing the organization by establishing broad policies and objectives;

• Selecting, appointing, supporting and reviewing the performance of the chief executive;

• Ensuring the availability of adequate financial resources;

• Approving annual budgets;• Accounting to the stakeholders for the organization's

performance;• Setting the salaries and compensation of company

management;


TERMINOLOGY

• Director - a person appointed to serve on the board of an organization, such as an institution or business.

• Inside director - a director who, in addition to serving on the board, has a meaningful connection to the organization

• Outside director - a director who, other than serving on the board, has no meaningful connections to the organization


• Executive director - an inside director who is also an executive with the organization. The term is also used, in a completely different sense, to refer to a CEO

• Non-executive director - a director who is not an executive with the organization

• Shadow or de facto director - an individual who is not a named director but who nevertheless directs or controls the organization

• Nominee director - an individual who is appointed by a shareholder, creditor or interest group (whether contractually or by resolution at a company meeting) and who has a continuing loyalty to the appointor/s or other interest in the appointing company

TERMINOLOGY

https://en.wikipedia.org/wiki/Non-executive_director


INSIDE DIRECTOR

• A Chief Executive Officer (CEO) who may also be chairman of the board

• Other executives of the organization, such as its Chief Financial Officer (CFO) or executive vice president

• Large shareholders (who may or may not also be employees or officers)

• Representatives of other stakeholders such as labor unions, major lenders, or members of the community in which the organization is located.


OUTSIDE DIRECTOR

• An outside director is a member of the board who is not otherwise employed by or engaged with the organization, and does not represent any of its stakeholders.

• A typical example is a director who is president of a firm in a different industry.

• Outside directors are not employees of the company or affiliated with it in any other way.


Mr. Seshasayee has been an Independent Director on the Company’s Board since January 2011 and is the chairperson of the Audit Committee. Mr. Seshasayee’s other board positions include Non-Executive Vice Chairman of Ashok Leyland Ltd. and Chairman of IndusInd Bank Ltd.

corporate governance by drk

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