Institute of Company Secretaries of India –
“Corporate Governance is the application of Best Management Practices, Compliance with Laws in their letter and spirit, and adherence to ethical standards for the effective management and distribution of wealth and compliance with social responsibility for development. sustainable for all stakeholders.
Standard and Poor: “Corporate governance is the way a company is organized and managed to ensure that all financial stakeholders receive a fair share of the company’s earnings and assets.”
Corporate Governance Objectives:-
Corporate Governance aims to create an organization that maximizes shareholder wealth. It envisions an organization in which emphasis is placed on fulfilling social responsibilities to stakeholders in addition to making profits. The objectives of Corporate Governance are to ensure the following:
1. Duly constituted Board of Directors, capable of making independent and objective decisions.
2. The Board of Directors is independent regarding the Non-Executive and Independent Directors.
3. The board adopts transparent procedures and practices.
4. The Board of Directors has an effective machinery to address the concerns of the Stakeholders.
5. Directory for monitoring the operation of the Management Team.
6. Duly constituted Board of Directors, capable of making independent and objective decisions.
7. The Board of Directors is independent in terms of Non-Executive and Independent Directors.
8. The Board adopts transparent procedures and practices.
9. The Board of Directors has an effective machinery to address the concerns of the Interested Parties.
10. Directory for monitoring the operation of the Management Team.
11. The Board remains in effective control of the affairs of the Company.
Elements of Good Corporate Governance: –
1. Role and Powers of the Board.
2. Legislation
3. Management environment
4. Board Skills
5. Board Appointments
6. Board induction and training
7. Independence of the Board
8. Board Meetings
9. Board Resources
10. Code of Conduct
11. Establishment of strategies
12. Financial and operational reports
13. Monitoring of the performance of the Board
14. Audit Committee
15. Risk management
Secretariat rules: –
The Institute of Indian Company Secretaries has issued the following Rules to maintain the uniformity of procedure in respect of Board Meetings, General Meetings, Payment of Dividends, Keeping of Records and Records, Recording of Minutes and Transfer and Transmission of Shares.
A brief detail of these standards is given below:-
SS1 – Board Meetings: –
Secretary’s Policy -1 deals with meetings of the Board of Directors. It deals with the various aspects of the conduct of Board Meetings, the frequency of said meetings in a year, the Quorum required for the meeting, the powers of the President in said meetings and the recording of the minutes of said meetings.
SS2 – General Meetings: –
The Secretariat Rule -2 deals with the General Meetings. It explains the procedure for conducting the General Assemblies, the frequency of the assemblies in a year, the Quorum required to conduct the assembly, the powers of the President in said assemblies, the record of minutes of said assemblies, a voting procedure, etc.
SS3 – Dividend: –
This Secretariat Rule refers to Dividends. Illustrates the calculation of the amount payable as a dividend, declaration of dividends, treatment of unpaid dividends, and transfer of dividends to the Investor Education and Protection Fund (IEPF).
SS4 – Records and Records
This Clerk’s Policy lists the various Records that must be maintained as required by law. You are required to keep the following records:
Registration of partners and bondholders.
Register of Contracts u/s 301.
Register of Directors u/s 303.
Registration for Transfer of Shares.
SS5 – Minutes
This Secretariat Rule deals with the registration and signing of the Minutes of the Assemblies.
The minutes must contain:
(a) The appointment of the President of the meeting.
(b) The presence of Quorum.
(c) The fact that certain records and documents were available for inspection.
(d) The number of members present in person, including representatives.
(e) The number of proxies and the number of shares represented by them.
(f) The presence of the Chairman of the Audit Committee at the General Shareholders’ Meeting.
(g) The presence, if applicable, of the Accounts Auditors, the Secretary of the Operating Company that issued the Certificate of Compliance, of the observers or scrutineers designated by the Court.
(h) Reading of the notice of the meeting.
(i) Reading of the auditors’ report.
(j) Summary of the President’s opening remarks.
(k) Summary of clarifications provided.
(l) With respect to each resolution, the type of resolution, the names of the persons who proposed and seconded, and the majority with which said resolution was approved. Resolutions must be written in the present tense.
SS6 – Assignment and Transfer of Shares
This Secretary’s Rule deals with the Alienation and Transfer procedure of individual and jointly owned shares. The record and minutes corresponding to the transfer must be kept permanently and kept under the custody of the company secretary or any other person authorized by the Board for such purpose.
Factors influencing the quality of corporate governance: –
1. Management Integrity
2. Board skill
3. Suitability of the Process
4. Quality of corporate reports
5. Stakeholder engagement
6. Quality of corporate reports
Reports of the committee on corporate governance: –
Narayana Murthy Report on Corporate Governance:-
Corporate Governance is beyond the scope of the Law. It derives from management culture and mindset and cannot be regulated by legislation alone. Corporate Governance is about openness, integrity and responsibility.
It is a key element to improve the economic efficiency of the company. The credibility offered by Corporate Governance also helps improve the confidence of investors, both domestic and foreign. It is a set of relationships between the management of a company, its Board of Directors, the shareholders and the Stakeholders.
Kumarmangalam Birla Corporate Governance Committee:-
All companies must submit a quarterly Compliance Report to the Stock Exchanges within 15 days after the end of the financial reporting quarter.
The Report must be presented by the Compliance Officer or by the General Director after obtaining the due approvals, on the following clauses:-
Board of Directors
Audit Committee
Shareholder/Investor Grievance Committee
Directors Remuneration
Board Procedures
management
Shareholders
Corporate Governance Report
IIC – Desirable Corporate Governance: –
Corporate Governance helps maximize long-term value for shareholders. It is more a corporate way of life than a maternal legal compulsion. Four ideas, which should be the guiding force of the company’s philosophy on Corporate Governance are: –
– Transparency
– Responsibility
– Disclosure
– Value creation.
The Code of Business Conduct and Ethics helps ensure 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, and ensure that all agents and contractors are aware of, understand, and adhere to these standards.
The Company expects all employees, agents and contractors to exercise good judgment to ensure that all employees, agents and contractors maintain a competitive, efficient, positive, harmonious and productive business organization and work environment.
Use of privileged information: –
Insider trading is the trading of a corporation’s stock or other securities (for example, bonds or stock options) by corporate insiders, such as officers, key employees, directors, or owners of more than ten percent of the company’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 related party trades on nonpublic inside information obtained while performing of insider functions in the corporation, or otherwise misappropriated.
Prohibition of dealing with communications or advice on matters related to insider trading:-
3. No privileged information shall –
(i) either on your own behalf or on behalf of any other person, deal in the securities of a company listed on any stock exchange when in possession of any confidential unpublished price information; Prayed
(ii) communicating, advising or procuring, directly or indirectly, any confidential unpublished pricing information to any person who, while in possession of such confidential unpublished pricing information, does not deal in securities.
(iii) With the understanding that none of the foregoing will be applicable to any communication required in the ordinary course of business or by virtue of any law.
3A. No company will deal in the securities of another company or associate of that other company while in possession of any confidential unpublished price information.
