Corporate Governance: The Essence

Corporate Governance: The Essence

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The philosophy behind the corporate governance of a company is that of attaining integrity, accountability and transparency to its highest level. Corporate governance's real meaning is that of satisfying the aspirations of shareholders, employees, leaders, suppliers, customers, stakeholders as well as fulfilling society's expectations

Corporate governance - fundamental principles:

Maximizing the shareholder value in the long term remains the core objective of a company's corporate governance. This boils down to the fact that good corporate governance must add value to the organization by addressing all issues and at the same time serve to the interest of the stakeholders.

1. Transparency:

Disclosing adequate and accurate information timely to the stakeholders is called transparency. Transparency is one of the building blocks of good corporate governance. Massive shareholder value is also created by transparency. Getting rid of the confidentiality excuse, a company must adhere to the international standards of information disclosure as this will help to develop high public confidence. Once a company attains public shareholding, it must be totally committed to its financial transparency. With public shareholding, the company becomes the trustee of people's money and hence, it is the responsibility of the company to become transparent and disclose information in totality. With proper transparency, the stakeholders can actually understand whether the company is taking care of their interests or not.

2. Accountability:

For corporate governance to be good, a company needs to ensure that accountability should not only take bottom up approach but also top down approach and this is because of the fact that the head of a department takes all the decisions on behalf of the department and hence, the head is also accountable.

3. Merit based Management:

Merit based management must be supported and led by a very strong BOD (Board of Directors). The BOD must be a non-partisan, strong and independent body whose only motive must be to make proper decisions and this must be done via business prudence. Through corporate governance it is ensured that the strategic plans and objectives of the long run are attained and a management framework is present which can help in attaining the objectives. It also ensures that the management framework operates well to make sure that the responsibility of the company towards its stakeholders, the reputation of the company and the integrity of the company is maintained. Thus, there are broad parameters like control and system accountability reporting in corporate governance.

The Boards Annual Report consists of the Corporate Governance Report and the CG report must consist of the following items:

A statement of corporate governance philosophy.

BOD composition, dates of BOD meetings held, attendance of the directors etc.

Audit committee composition, meetings held and attendance of members and chairperson.

Remuneration committee composition, meeting attendance, policy and directors' remuneration.

Details of shareholders committee.

Details of General Body meeting along with details of every meeting and exercise.

Disclosure of any transaction which can impact the company interests at large as well as non-compliance details which will generally include penalties imposed on the company in last 3 years.

All means of communication with shareholders, analysts and institutional investors.

All information on general shareholder.


Copyright (c) 2012 Joe Maldonado

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