Essence of Corporate Governance

Generally the company’s philosophy on corporate governance is to attain the highest level of transparency, accountability and integrity. The true meaning of corporate governance is to satisfy the aspirations of all stack holders, customers, suppliers, leaders, employees, the shareholders and the expectations of the society. The Board of directors supports the broad principles of corporate governance and direct the action of the organization to achieve it’s a vowed objective of transparency, accountability and integrity.

Fundamental principles of corporate governance:

The basic objective of corporate governance is to maximize long term shareholder value. Therefore, good governance should address all issues that lead to a value addition for the organization and serve the interests of all the stakeholders.


Transparency means accurate, adequate and timely disclosure of relevant information to the stakeholders. Without transparency, it is impossible to make any progress towards good governance. Business heads should realize that transparency also creates immense shareholder value. But, information Sharing is hindered under the excuse of confidentiality. There is need to move towards international standards in terms of disclosure of information by the corporate sector and through all this to develop a high level of public confidence in business. Once a company has public shareholding it is imperative that its commitment to financial transparency must be total. The Company is a trustee of the investors’ money and this responsibility in turn demands full disclosure. Corporations in India must learn to work with transparency and impeccable integrity as these are the essential ingredients to maximize their wealth and wealth of the nation. Transparency and disclosure are the pillars of corporate governance because they provide all the stakeholders with the information necessary to judge whether their interests are being taken care of.


Corporate governance a top down approach chairman, Board of directors and chief executives must fulfill their responsibilities to make corporate governance a reality in Indian Industry. In companies with good governance, accountability is not just bottom up but also follows the reverse order. A department head is responsible for every decision taken on behalf of his department. Accountant also favors the objective of creating shareholder value.

Merit based Management:

A strong board of directors is necessary to lead and support merit based management. The board had to be an independent, strong and non- partisan body where the sole motive should be decision making through business prudence. Though corporate governance is much broader than corporate management, an efficient and effective administration of corporate sector is essential for meeting the desired objectives. Corporate governance ensures that long term strategic objectives and plans are established and that the proper management structure is in place it achieve those objectives while at the same time ensuring that the structure functions to maintain the company’s integrity, reputation and responsibility to its various stakeholders. Thus, corporate governance involves the broad parameters of reporting system accountability and control.

Suggested List of items to be included in the Report on Corporate Governance in the Annual Reports of Boards:

1. A brief statement on company’s philosophy on code of governance.

2. Board of Directors(BOD):

– Composition and category of directors.
– Attendance of each director at the BOD meetings and the last Annual General Meeting.
– Number of other BODS or Board Committees he/she is a member or chairperson of.
– Number of BOD meetings held, dates on which held.

3. Audit Committee:

– Brief description of terms of reference.
– Composition, names of members and chairperson.
– Meetings of attendance during the year.

4. Remuneration committee:

– Brief description of terms of reference.
– Composition, names of members and chairperson.
– Attendance during the year.
– Remuneration policy.
– Details of remuneration to all the directors, as per format in main report.

5. Shareholders Committee:

– Name of non- executive director heading the committee.
– Name and designation of compliance officer.
– Number of shareholders compliance officer.
– Number of shareholders complaints received so far.
– Number not solved to the satisfaction of shareholders.
– Number of pending share transfer.

6. General Body Meetings:

– Location and time, where last Three Annual General Meetings held.
– Whether special resolutions were put through postal ballot last year, details of voting pattern.
– Person who conducted the postal ballot exercise.
– Procedure for postal ballot.

7. Disclosures:

– Disclosures on materially significant related party transactions i.e., transactions of the company of material nature, with its promoters, the directors, the management, their subsidiaries or relatives etc., that may have potential conflict with the interests of company at large.
– Details of non- compliance by the company penalties, structures imposed on the company by the stock exchange, SEBI or any statutory authority, on any matter related to capital markets, during the last three years.

8. Means of communication:

– Half yearly report sent to each household of shareholders.
– Quarterly results in which web site, where displayed.
– Where it also displays official news releases.
– The presentations made to institutional investors or to the analysts.

9. General shareholder information:

– Annual General meeting: Date, Time and Venue- Financial Calendar – Date of Book closure – Dividend payment date- Listing on stock exchanges – stock code – Market price data:- High low during each month in last financial year. Performance in comparison to broad based indices such as BSE Sensex, CRISIL Index, etc.,
– Registrar and Trade Agents: Share transfer system – Distribution of Share holding – dematerialization of shares and liquidity – Outstanding warrants or any convertible instruments, conversion date and likely impact on equity- Plant locations – address for correspondence.

Future of Corporate Governance:

Nowadays, more and more progressive companies are drawing and enforcing codes of conduct and accepting tougher accounting standards which are mandated by law. These tendencies would be further strengthened by a variety of forces like deregulation of economic reforms, disintermediation of financial sector reforms, institutionalization of capital markets, globalization of financial markets and tax reforms for block money transactions.

Pungky Dwiasmoro Hiswardhani

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