Corporate Governance

Topics: Corporate governance, Board of directors, Non-executive director Pages: 27 (8115 words) Published: March 1, 2013
TABLE OF CONTENTS PAGE
1. INTRODUCTION……………………………………………………………… 1 1.1 Defining Corporate Governance………………………………………… 2 1.2 Principles of Corporate Governance……………………………………. 3 1.3 Importance of Corporate Governance………………………………….. 4 1.4 Objective…………………………………………………………………… 5

1. DIRECTORS & CORPORATE GOVERNANCE in INDIA……………….. 6 2.5 Need for Directors- Who is a Director…………………………………... 7 2.6 Statutory Definition of Director…………………………………………… 7 2.7 Clause 49 of listing agreement by SEBI………………………………… 7 2.8 Role of Independent Director…………………………………………….. 8 2.9 Current Scenario in India…………………………………………………..11

2. A case Study: SATYAM COMPUTER SERVICES……………………….. 13 3.10 Facts of the Satyam Case Scam…………………………………………. 13 3.11 Independent Director’s Profile…………………………………………….. 15 3.12 Mass Resignations of Indian Independent Directors in 2009………….. 16

3. ACADEMIC PERSPECTIVES ON THE ROLE OF INDEPENDENT DIRECTORS…………………………………………………………………….. 19 4.13 Companies Bill 2009- Duties & Responsibilities…………………………. 19 4.14 Watchdog for Public Shareholders………………………………………... 22 4.15 Strategic Advisor to the Controlling Shareholder………………………… 22 4.16 Judicial Interpretations in India…………………………………………….. 23

4. CONCLUSION & RECOMMENDATIONS……………………………………..26 * Independent Directors & Vicarious Liability…………………………….26 * Limitations- Need for Stricter Legal Norms……………………………..26 * Research Proposals……………………………………………...……….27 BIBLIOGRAPHY…………………………………………………………………..29

1. Introduction:

Corporate governance is an era that has grown rapidly in the last few years. The global financial crisis, corporate scandals and collapses, and public concern over the apparent lack of effective boards and etc. have all contributed to explosion of interests in this area. Today every sector whether it is corporate, investment, public, voluntary or non-profit organizations are all placing more emphasis on good governance. Indeed corporate governance is now an integral part of everyday business life and is an ardent aspect of the corporate world. Corporate governance has only relatively recently come to prominence in the business world. However, the theories underlying the development of corporate governance, and the areas it covers, date from much earlier and are drawn from a variety of disciplines including finance, economics, accounting, law, management, and organizational behavior.

As corporations take center stage in almost every activity including investment, employment, and trade and production of goods and services, the manner in which they conduct their businesses creates issues of concern to the investors, creditors, employees and the society. The various parties look towards formal (legal) and informal (non-legal) ways to protect their interests. The extent to which the formal or informal mechanism works to resolve the issues depends upon the corporate governance system of that particular jurisdiction. “Corporate governance varies from one jurisdiction to that of the other and even within a specific jurisdiction, overlapping features may be found”, (Gilson, 2005). The corporate governance system of a particular jurisdiction is shaped by various factors such as historical, legal, political and social factors of that particular jurisdiction. Empirical studies particularly identify legal rules as critical factors in shaping a corporate governance system and this is perhaps because of the importance of legal mechanisms for investor’s protection. The studies by Rafael La Port et al., (2000), are particularly important in this regard as they argue that countries such as U.S and U.K, which have strong legal rules for shareholder protection have market based corporate governance...

References: * Clarke. Thomas, International Corporate Governance, p. 36, 2007.
* Clarke. Thomas, International Corporate Governance, p. 56, 2007.
* Gilson & Gordan, Controlling Shareholders and Corporate Governance, vol. 119, p. 1641, April 2009
* Goswami, 2000, in Solomon, 2010, (Jill Solomon, Corporate Governance and Accountability, third edition, p
* Mallin, Christine A., Corporate Governance, third edition, 2010
* Mallin, Christine A., Corporate Governance, third edition, p
* The Cadbury committee, 1992,
* The Companies Act 1956
* The SEBI Act 1992
* The Organization of Economic Corporation and Development (OECD), (Principals of corporate governance, 2004)
ARTICLES
* After The Satyam Scam 7 Ways to Clean Up the Market January 13, 2009
* Clarke, D.C., Three Concepts of the Independent Director, 32 Del. J. Corp. L. 2007
* Et al, Rafael La Port., Investor Protection and Corporate Governance, 58 J
* Guha, R. & Kumar, J. S., Satyam’s Raju Brothers Jailed, Wall Street Journal, Jan. 10, 2009
* Monks
* Satyam’s Independent Directors had Raised Concerns over the Deal, The Hindu Business Line, Dec. 19, 2008
* The Directors Database Chronological Cessation Index
* The Economist, Jan. 10, 2009, p. 57
* Tibken, S., Satyam Scandal Shocks IT Sector, Wall Street Journal, Jan
* Gilson, Ronald J., controlling shareholders and corporate governance: complicating the comparative taxonomy at http://ssrn.com/astract=784744, on 12 Nov. 2012.
* http://articles.timesofindia.indiatimes.com/2010-08-07/hyderabad/28317553_1_satyam-scam-ch-srisailam-invoice-management-system, on 16 Nov. 2012.
* http://legalservicesindia.com/article/article/independence-of-independent-directors-in-india-992-1.html, on 14 Nov. 2012.
* http://www.businessdictionary.com/article/618/why-is-corporate-governance-important/, on 12 Nov. 2012.
* http://www.ecgi.org/codes/documents/hampel23.pdf, on 14 Nov. 2012
* http://www.ecgi.org/codes/documents/hampel23.pdf, on 14 Nov
* http://www.lawisgreek.com/role-independent-directors, on 10 Nov. 2012.
* http://www.mahindrasatyam.com/, on 2 Nov. 2012.
* Tabulated based on data available at http://directorsdatabase.com
* www.encycogov.com, Mathiesen, 2002, on 14th Nov
* www.sebi.gov.in, on 14 Nov. 2012.
* Financial times (1997)
* 340 Independent Directors Quit in 2009, Indian Express, May 14, 2009
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