Documentos de Académico
Documentos de Profesional
Documentos de Cultura
Stakeholders
Stakeholders
The principal stakeholders are the shareholders/members, management, and the board of directors. Other stakeholders include labor (employees), customers, creditors (e.g., banks, bond holders), suppliers, regulators, and the community at large. For Not-Profit-For Corporations or other membership Organizations the shareholders means members.
It can be seen as one that addresses the problems that result from the separation of ownership and control.
Shareholders
Board
Management
Employees
4.
5.
Corporate context
Aligned Incentives
High disclosure
The control model governance chain (model 2) described below is represented by underdeveloped equity markets, concentrated (family) ownership, less shareholder transparency and inadequate protection of minority and foreign shareholders familiar in Asia, Latin America, and some East European countries. In such transitional and developing capital economies, there is need to build, nurture and grow supporting institutions such as strong and efficient capital market regulator and judiciary to enforce contracts or protect property rights
Insider boards
Reliance on family, bank, public finance Under developed New issue market Limited takeover market
Corporate context
Corporate Misgovernance
From the early years of the new millennium, a few US companies got mired in a grave crisis of credibility. Business conglomerates like Xerox, WorldCom, and Enron perpetuated frauds to artificially inflate turnovers and profits. Such problems of corporate America and developing economies like India were growing due to the failure of auditing profession to safeguard the interests of shareholders and other stakeholders. Corporate lootings have destroyed the term business ethics. The swashbuckling CEOs are suddenly being looked upon as crooks who gamble the retirement savings of hapless workers and unwary investors.
Misgovernance in India
Only after 1947, industrial growth and corporate culture had started in India. But the Indian scene was dominated by: Feudalistic forces Political system bordering on pseudo-democracy Business firms practicing unethical methods on the market place showing little respect to human and organizational values in regard to employees, shareholders, and customers Increasing corruption at all levels of government fanned the desires of firms not held accountable for more and more unethical practices
Various public sector undertakings enjoying monopoly passed on to the hapless customers costs of corporate misgovernance Private firms fleeced their customers and denied due to the government; they also resorted to rampant corporate corruption Employees at all levels of government and at the top levels of private sector firms indulged in or contributed to corporate misgovernance
Big Bull Harshad Mehtas security scam uncovered in April, 1992 During 1993-94, stock market index shot up by 120% during this boom 3911 companies that raked in Rs. 25,000 crore had vanished or failed to set up projects
1995-96 witnessed the plantation companies scam worth Rs. 50.000 crore raised from gullible investors looking for huge returns 1995-1997 saw the scam worth Rs. 50,000 crore in the so-called non-banking finance sector when the firms performed the vanishing act 1995-98 also produced the mutual fund scam worth Rs. 15,000 crore borne out of the huge returns promised by public sector banks In 2001, Ketan Parek resorted to price rigging in association with a bear cartel
Winds of change
Prior to reforms in 1991, Indian companies were insulated by closed economy, a sheltered market, limited access to global business, lack of competitive spirit and regulatory framework all these changed on account of: Market-driven performs Economic liberalization Dismantling of control and quota regime Delicensing and deregulation of industries Changes in import/export policies Globalization of the economy within and outside the ambit of the WTO
More additions to the ambit of corporate governance included business ethics, social responsibility, management discipline, corporate strategy, life-cycle development, stakeholder participation in decision making processes, and promotion of sustainable economic development
All these had gone far beyond the original prescription of Milton Friedman that the companies should conduct the business purely in accordance with the desires of the shareholders
Michael Oxley
The Sarbanes Oxley Act was formulated to protect investors by improving the accuracy and reliability of corporate disclosures. The act contained a number of provisions that dramatically change the reporting and corporate directors governance obligations of public companies, the directors, and officers.
1. Appoint and remove CEO 2. Indirectly oversee the conduct of the business 3. Review and approve companys financial objectives, corporate plans and objectives 4. Advice and counsel top management 5. Identify and recommend candidates to shareholders for electing directors 6. Review systems to comply with laws and regulations
The board of directors of a company shall have an optimum combination of executive and non-executive directors with not less than 50 per cent of the board of directors to be non-executive directors. The number of independent directors would depend whether the chairman is executive or non-executive. In case of a non-executive chairman, at least one third of the board should comprise independent directors and in case of executive chairman, at least half of the board should be independent directors.
Board of Directors
Executive Directors
Non-Executive Directors
Independent Directors
Affiliated Directors
(Nominee Directors)
Types of Directors
Executive director an executive of the company and also a member of the board Non-Executive director no employment relationship Independent non-executive directors free from any business or other relationship which may interfere with the exercise of independent judgment Affiliated director who has some kind of independence, yet may have links with suppliers, customers, etc.
Arthur Andersen
Accountancy firm Arthur Andersen was declared guilty of obstructing justice by shredding documents relating to the failed energy giant Enron. The verdict could be the death knell for the 89-year old company, once one of the world's top five accountants.
Andersen has already lost much of its business, and two-thirds of its once 28,000 strong US workforce. Following the conviction, multi-million dollar lawsuits brought by Enron investors and shareholders demanding compensation are likely to follow, and could bankrupt the firm.
Satyam
Price Waterhouse resigned as statutory auditor of Satyam Computer Services Ltd with effect from February 12, 2009, while stating that it would co-operate with the ongoing investigations into the Rs 7,800 crore fraud at the IT major.
Protection of shareholder rights and their expectations Dialogue with Institutional investors Should investors have a say in making company socially responsible corporate citizen?