Corporate Governance is the process under which people in power, monitor, direct and lead an organization in order to create, modify or destroy the structure and procedures under which the organization operates. It deals with:
- Provision of fair return on investment to shareholders
- Development of a value oriented organization
- Creating transparency in dealings
- Taking effective strategic decisions for the company
- Achieving socio-economic goals of the company
The word governance is derived from a Latin word “Guvernare” which means to steer or to control. Therefore, it provides direction to an organization and set standards regarding the working and performance of an organization.
Objectives of Corporate governance
- To create social responsibility
- To create a transparent working system
- To create a management accountable for corporate functioning
- To protect and promote the interest of shareholders
- To develop an efficient organization culture
- To aid in achieving social and economic goals
- To improve social cohesion
- To minimise wastages, corruption, red-tapaism etc.
Pillars of Good corporate governance
- Transparency of operations
- Accountability towards shareholders
- Fairness in dealing
Pre-requisites of Corporate Governance
- Presence of a good organizational structure with defined authority and responsibilities
- Presence of a proper system for guiding, monitoring, reporting and controlling
- Presence of visionary goals and a mission to grow the organization
Tools of Corporate Governance
- Efficient use of resources
- Value addition to product
- Maximizing customer satisfaction
- Creation of Wealth for the business
- Developing a value oriented organization
- Develop ethical working standards
- Management of Risk
In India, corporate governance has become a very prominent issue, this can be clearly seen in the working of SEBI (Securities and Exchange board of India). The government of India has appointed a committee on corporate governance under the chairmanship of Kumar Mangalam Birla. This committee is responsible for formulating and implementing, rules and regulations for all companies registered with SEBI that fullfill the socio-economic goals of the Business owners and the Government.