PRINCIPLES OF CORPORATE GOVERNANCE
HIDAYATULLAH NATIONAL LAW UNIVERSITY RAIPUR, C.G. CORPORATE - II PROJECT ON PRINCIPLES OF CORPORATE GOVERNANCE
Project s!"#tte$ to Dr. Y. P%&% R%o F%c't(, Cor&or%te L%)
Project s!"#tte$ !( S%rt*%+ #s*r% Ecoo"#cs, %jor/ Se"ester VI Sect#o 012 Ro'' o. 343
PRINCIPLES OF CORPORATE GOVERNANCE TA1LE OF CONTENTS CERTIFICATE OF DECLARATION .........................................................................................2 AC5NOWLEDGEENT............................................................................................................3 INTRODUCTION.........................................................................................................................4 RESEARCH ETHODOLOGY .................................................................................................6 O1JECTIVES................................................................................................................................7 CHAPTERISATION .....................................................................................................................8
CHAPTER 1................................................................................................................................8 CHAPTER 2..............................................................................................................................10 CHAPTER 3..............................................................................................................................12 CONCLUSION............................................................................................................................15 1I1LIOGRAPHY........................................................................................................................17
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PRINCIPLES OF CORPORATE GOVERNANCE CERTIFICATE OF DECLARATION I hereby declare that the r!"ect #!r$ e%t&tled 'PRI(CIP)E* +, C+P+RATE -+ER(A(CE/ b&tted t! H() Ra&r & rec!rd ! a% !r&g&%al #!r$ d!%e b y e %der the g&da%ce ! r. . Paa Ra! ,aclty eber H() Ra&r. *artha$ &hra R!ll. (!. 131 *eeter 9 6th
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PRINCIPLES OF CORPORATE GOVERNANCE AC5NOWLEDGEENT I a h&ghly elated t! carry !t y reearch !% the t!&c “PRINCIPLES OF CORPORATE GOVERNANCE”. I #!ld l&$e t! g&:e y deeet regard t! y c!re teacher Dr. Y. Papa Rao, #h! held e #&th h& &e%e ad:&ce d&rect&!% a%d :alable a&ta%ce #h&ch e%abled e t! arch ahead #&th th& t!&c. I #!ld l&$e t! tha%$ y r&e%d #h! ga:e e the&r rec&! t&e !r g&da%ce a%d heled e a l!t &% c!let&%g y r!"ect by g&:&%g the&r hell gget&!% a%d a&ta%ce. I #!ld l&$e t! tha%$ y e%&!r !r the&r :alable !rt. I #!ld al! l&$e t! tha%$ the l&brary ta a%d c!ter lab ta ! y %&:er&ty !r the&r :alable !rt a%d $&%d c!!erat&!%
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PRINCIPLES OF CORPORATE GOVERNANCE INTRODUCTION
I%d&a ha the larget %ber ! l&ted c!a%&e &% the #!rld a%d the e&c&e%cy a%d #ell;be&%g ! the &%a%c&al ar$et & cr&t&cal !r the ec!%!y &% art&clar a%d the !c&ety a a #h!le. It & &erat&:e t! de&g% a%d &lee%t a dy%a&c echa%& ! c!r!rate g!:er%a%ce #h&ch r!tect the &%teret ! rele:a%t ta$eh!lder #&th!t h&%der&%g the gr!#th ! e%terr&e. The cale ! the &%a%c&al cr&& tr&ggered by the ba%$rtcy ! )eha%
et&!% the eect&:e tre%gth ! &%a%c&al &%t&tt&!% a%d the &tab&l&ty ! the&r reglat!ry a%d er:&!ry yte t! deal #&th &%a%c&al &%%!:at&!% &% a gl!bal&=ed #!rld. The a&:e &%"ect&!% ! bl&c %d&%g &% the * a%d Er!e 9 t! 25? ! -P 9 #a acc!a%&ed by a tr!%g !l&t&cal #&ll t! lear% the le!% ! the &%a%c&al cr&& &% all &t d&e%&!% t! re:e%t ch a &tat&!% hae%&%g aga&% &% the tre. I% &t C!%&cat&!% ! 4 arch 200@1 eect&:ely a r!grae !r re!r&%g the reglat!ry a%d er:&!ry rae#!r$ !r &%a%c&al ar$et baed !% the c!%cl&!% ! the )ar!&re re!rt2 the Er!ea% C!&&!% a%%!%ced that &t #!ld B& eDa&%e c!r!rate g!:er%a%ce rle a%d ract&ce #&th&% &%a%c&al &%t&tt&!% art&clarly ba%$ &% the l&ght ! the &%a%c&al cr&& a%d B&& #here ar!r&ate a$e rec!e%dat&!% !r e:e% r!!e reglat!ry eare &% !rder t! reedy a%y #ea$%ee &% the c!r!rate g!:er%a%ce yte &% th& $ey ect!r ! the ec!%!y. *tre%gthe%&%g c!r!rate g!:er%a%ce & at the heart ! the C!&&!% r!grae ! &%a%c&al ar$et re!r a%d cr&& re:e%t&!%. *ta&%able gr!#th ca%%!t eD&t #&th!t a#are%e a% d healthy a%agee%t ! r&$ #&th&% a c!a%y. A h&ghl&ghted by the )ar!&re re!rt &t & clear that b!ard ! d&rect!r l&$e er:&!ry ath!r&t&e rarely c!rehe%ded e&ther the %atre !r cale ! the r&$ they #ere ac&%g. I% a%y cae the hareh!lder d&d %!t r!erly er!r the&r r!le a !#%er ! the c!a%&e. Alth!gh c!r!rate g!:er%a%ce d&d % !t d&rectly cae the cr&& the lac$ ! eect&:e c!%tr!l echa%& c!%tr&bted &g%&&ca%tly t! eDce&:e r&$;ta$&%g !% the art ! &%a%c&al &%t&tt&!%. Th& ge%eral !ber:at&!% & all the !re #!rry&%g beca e c!r!rate g!:er%a%ce ha bee% rel&ed !% a !%e ! the #ay ! reglat&%g b&%e l&e. C!%e>e%tly there & a %eed t! addre the %dae%tal >et&!% ! #hether the eD&t&%g 1 C+ B200@ 114 &%al. 2 Re!rt ! the H&gh;)e:el -r! !% ,&%a%c&al *er:&&!% &% the E bl&hed !% 25 ,ebrary 200@. Page | 4
PRINCIPLES OF CORPORATE GOVERNANCE c!r!rate g!:er%a%ce reg&e & de&c&e%t a ar a &%a%c&al &%t&tt&!% are c!%cer%ed !r #hether &t ha rather bee% !!rly &lee%ted. I% the &%a%c&al er:&ce ect!r c!r!rate g!:er%a%ce h!ld ta$e acc!%t ! the &%teret ! !ther ta$eh!lder Bde!&t!r a:er l&e &%ra%ce !l&cy h!lder etc a #ell a the tab&l&ty ! the &%a%c&al yte de t! the yte&c %atre ! a%y layer. At the ae t&e &t & &!rta%t t! a:!&d a%y !ral ha=ard b y %!t d&&%&h&%g the re!%&b&l&ty ! r&:ate ta$eh!lder. It & there!re the re!%&b&l&ty ! the b!ard ! d&rect!r %der the er:&&!% ! the hareh!lder t! et the t!%e a%d &% art&clar t! de&%e the trategy r&$ r!&le a%d aet&te !r r&$ ! the &%t&tt&!% &t & g!:er%&%g. Th& r!"ect a& at e%erat&%g the r&%c&le ! the c!%ce t ! c!r!rate g!:er%a%ce !:er the er&!d ! t&e &% the c!r!rate ect!r a%d ha tr&ed t! dra# !t a% a%al!gy bet#ee% the !lder a%d !re rece%t %!r ! the c!r!rate g!:er%a%ce a%d thereater &%d &t rele:a%ce &% the eDtreely %ace%t a%d dy%a&c I%d&a% c!r!rate !c&ety.
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PRINCIPLES OF CORPORATE GOVERNANCE RESEARCH ETHODOLOGY The eth!d ! reearch ad!ted !r the r!"ect & the a%alyt&cal a%d decr&t&:e eth!d. The teDt that #ere ed !r the r!"ect &%clde art&cle reearch aer a%d %e# g&:e% &% :ar&! #eb&te a #ell a !%l&%e "!r%al.
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PRINCIPLES OF CORPORATE GOVERNANCE O1JECTIVES → → →
T! d&c the c!%cet ! C!r!rate -!:er%a%ce &% ,&%a%c&al I%t&tt&!%. T! d&c ab!t the :ar&! c!r!rate g!:er%a%ce &%&t&at&:e ta$e% &% I%d&a t&ll date. T! d&c ab!t the rece%t !l&cy te ta$e% by *E
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PRINCIPLES OF CORPORATE GOVERNANCE CHAPTERISATION CHAPTER 3 T*e Coce&t o6 Cor&or%te Go7er%ce # F#%c#%' Ist#tt#os
The trad&t&!%al de&%&t&!% ! c!r!rate g!:er%a%ce reer t! relat&!% bet#ee% a c!a%y e%&!r a%agee%t &t b!ard ! d&rect!r &t hareh!lder a%d !ther ta$eh!lder ch a el!yee a%d the&r reree%tat&:e. It al! deter&%e the trctre ed t! de&%e a c!a%y !b"ect&:e a #ell a the ea% ! ach&e:&%g the a%d ! !%&t!r&%g the relt !bta&%ed.3 I% a %arr!# e%e c!r!rate g!:er%a%ce &%:!l:e a et ! relat&!%h& a!%gt the c!a%yF a%agee%t &t b!ard ! d&rect!r &t hareh!lder &t ad&t!r a%d !ther ta$eh!lder. Thee relat&!%h& #h&ch &%:!l:e :ar&! rle a%d &%ce%t&:e r!:&de the trctre thr!gh #h&ch the !b"ect&:e ! the c!a%y are et a%d the ea% ! atta&%&%g thee !b"ect&:e a #ell a !%&t!r&%g er!ra%ce are deter&%ed. Th the $ey aect ! g!!d c!r!rate g!:er%a%ce &%clde tra%are%cy ! c!r!rate trctre a%d !erat&!%G the acc!%tab&l&ty ! a%ager a%d the b!ard t! hareh!lderG a%d c!r!rate re!%&b&l&ty t!#ard ta$eh!lder. h&le c!r!rate g!:er%a%ce ee%t&ally lay d!#% the rae#!r$ !r creat&%g l!%g;ter trt bet#ee% c!a%&e a%d the eDter%al r!:&der ! ca&tal &t #! ld be #r!%g t! th&%$ that the &!rta%ce ! c!r!rate g!:er%a%ce l&e !lely &% better acce ! &%a%ce.4 C!a%&e ar!%d the #!rld are real&=&%g that better c!r!rate g!:er%a%ce add c!%&derable :ale t! the&r !erat&!%al er!ra%ce •
It &r!:e trateg&c th&%$&%g at the t! by &%dct&%g &%dee%de%t d&rect!r #h! br&%g a
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#ealth ! eDer&e%ce a%d a h!t ! %e# &dea5 It rat&!%al&=e the a%agee%t a%d !%&t!r&%g ! r&$ that a &r ace gl!bally6 It l&&t the l&ab&l&ty ! t! a%agee%t a%d d&rect!r by carelly art&clat&%g the
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dec&&!% a$&%g r!ce7 It are the &%tegr&ty ! &%a%c&al re!rt8 It ha l!%g ter retat&!%al eect a!%g $ey ta$eh!lder b!th &%ter%ally a%d eDter%ally.
3 +EC* P RINCIPLES OF C ORPORATE GOVERNANCE . 11 B2004. 4 D ISCUSSION P APER C ORPORATE GOVERNANCE IN I NDIA: T HEORY AND P RACTICE . 2 (at&!%al ,!%dat&!% !r C!r!rate -!:er%a%ce B2004. 5*ra (!te 4. 6 Ibid at 4. 7 Id at 4. 8 Id at 4. Page | 8
PRINCIPLES OF CORPORATE GOVERNANCE I% a br!ader e%e h!#e:er g!!d c!r!rate g!:er%a%ce; the eD te%t t! #h&ch c!a%&e are r% &% a% !e% a%d h!%et a%%er; & &!rta%t !r !:erall ar$et c!%&de%ce the e&c&e%cy ! ca&tal all!cat&!% the gr!#th a%d de:el!e%t ! c!%tr&eF &%dtr&al bae a%d lt&ately the %at&!%F !:erall #ealth a%d #elare. It & &!rta%t t! %!te that &% b!th the %arr!# a #ell a &% the br!ad de&%&t&!% the c!%cet ! d&cl!re a%d tra%are%cy !ccy ce%tre tage. I% the &rt &%ta%ce they create trt at the &r le:el a!%g the l&er ! &%a%ce. I% the ec!%d &%ta%ce they create !:erall c!%&de%ce at the aggregate ec!%!y le:el. I% b!th cae they relt &% e&c&e%t all!cat&!% ! ca&tal.@ T#! de&%&t&!% ! C!r!rate -!:er%a%ce h&ghl&ght the :ar&at&!% &% the !&%t ! :&e# 0Corporate governance is concerned with ways of bringing the interests of investors and manager into line and ensuring that firms are run for the benefit of investors’ .38 Corporate governance includes ‘the structures, processes, cultures and systems that engender the successful operation of organizations’ .33 I% I%d&a #e ha:e !ght t! re!l:e the 'hareh!lder :. ta$eh!lderFF debate by ta$&%g the :&e#
that &%ce hareh!lder are re&dal cla&a%t &% #ell er!r&%g ca&tal a%d &%a%c&al ar$et #hate:er aD&&=e hareh!lder :ale h!ld aD&&=e c!r!rate r!er&ty a%d bet at&y the cla& ! cred&t!r el!yee hareh!lder a%d the *tate. !re!:er there eD&t #ell;de&%ed la# t! r!tect the &%teret ! el!yee a%d rece%tly raed leg&lat&!% ha:e c!%&derably tre%gthe%ed the r&ght ! the cred&t!r. It & there!re ar!r&ate that c!r!rate g !:er%a%ce reglat&!% &% I%d&a ee$ t! r!!te the r&ght ! hareh!lder #h&le at the ae t&e e%r&%g that the &%teret ! !ther ta$eh!lder are %!t ad:erely aected.
@ ,. AER G *. EAJI( A( A. H-HE* Bed. C ORPORATE GOVERNANCE , COPETITION , AND , I N E PERFORANCE NTERPRISE AND C OUNITY : N E! D IRECTIONS IN C ORPORATE GOVERNANCE
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PRINCIPLES OF CORPORATE GOVERNANCE CHAPTER 9 Cor&or%te :o7er%ce ##t#%t#7es t%+e # I$#% t#'' $%te
There ha:e bee% e:eral a"!r c!r!rate g!:er%a%ce &%&t&at&:e la%ched &% I%d&a &%ce the &d; 1@@0. The &rt #a by the C!%ederat&!% ! I%d&a% I%dtry BCII I%d&aF larget &%dtry a%d b&%e a!c&at&!% #h&ch cae #&th the &rt :!l%tary c!de ! c!r!rate g!:er%a%ce &% 1@@8. The ec!%d #a by the *Ee%tly *E
T*e CII Co$e
!re tha% a year be!re the !%et ! the A&a% cr&& CII et a c!&ttee t! eDa&%e c!r!rate g!:er%a%ce &e a%d rec!e%d a :!l%tary c!de ! bet ract&ce. The c!&ttee #a dr&:e% by the c!%:&ct&!% that g!!d c!r!rate g!:er%a%ce #a ee%t&al !r I%d&a% c!a%&e t! acce d!et&c a #ell a g l!bal ca&tal at c!et&t&:e rate. The &rt drat ! the c!de #a reared by Ar&l 1@@7 a%d the &%al d!ce%t BD"#irab$" Corpora%" Go&"r'a'(": A Cod" #a bl&cly releaed &% Ar&l 1@@8. The c!de #a :!l%tary c!%ta&%ed deta&led r!:&&!% a%d !ced !% l&ted c!a%&e. 5"%r %:%'%" 1#r'% Co""#ttee Re&ort
h&le the CII c!de #a #ell;rece&:ed a%d !e r!gre&:e c!a%&e ad!ted &t &t #a elt that %der I%d&a% c!%d&t&!% a tatt!ry rather tha% a :!l%tary c!de #!ld be !re r!el a%d ea%&%gl. C!%e>e%tly the ec!%d a"!r c!r!rate g!:er%a%ce &%&t&at&:e &% the c!%try #a %derta$e% by *E
The (areh Cha%dra c!&ttee #a a!&%ted &% Agt 2002 by the earte%t ! C!a%y Aa&r BCA %der the &%&try ! ,&%a%ce a%d C!a%y Aa&r t! eDa&%e :ar&! c!r!rate Page | 10
PRINCIPLES OF CORPORATE GOVERNANCE g!:er%a%ce &e. The C!&ttee b&tted &t re!rt &% eceber 2002. It ade rec!e%dat&!% &% t#! $ey aect ! c!r!rate g !:er%a%ce &%a%c&al a%d %!%;&%a%c&al d&cl!re a%d &%dee%de%t ad&t&%g a%d b!ard !:er&ght ! a%agee%t. N%r%(%% rt*( co""#ttee re&ort o cor&or%te :o7er%ce
The !rth &%&t&at&:e !% c!r!rate g!:er%a%ce &% I%d&a & &% the !r ! the rec!e%dat&!% ! the (araya%a rthy c!&ttee. The c!&ttee #a et by *E
Clae 4@ ! the E>&ty )&t&%g Agreee%t c!%&t ! a%dat!ry a #ell a %!%;a%dat!ry r!:&&!%. Th!e #h&ch are ab!ltely ee%t&al !r c!r!rate g!:er%a%ce ca% be de&%ed #&th rec&&!% a%d #h&ch ca% be e%!rced #&th!t a%y leg&lat&:e ae%de%t are cla&&ed a a%dat!ry. +ther #h&ch are e&ther de&rable !r #h&ch ay re>&re cha%ge ! la# are cla&&ed a %!%;a%dat!ry. The %!%;a%dat!ry re>&ree%t ay be &lee%ted at the d&cret&!% ! the c!a%y. H!#e:er the d&cl!re ! the c!l&a%ce #&th a%dat!ry re>&ree%t a%d ad!t&!% Ba%d c!l&a%ce K %!%;ad!t&!% ! the %!%;a%dat!ry re>&ree%t hall be ade &% the ect&!% !% c!r!rate g!:er%a%ce ! the A%%al Re!rt. 3. %$%tor( &ro7#s#os c!r&e ! the !ll!#&%g C!!&t&!% ! e%c y ! eet&%g %ber ! &%dee%de%t •
d&rect!r c!de ! c!%dct !r
PRINCIPLES OF CORPORATE GOVERNANCE •
h&tle
A er Clae 4@ ! the )&t&%g Agreee%t there h!ld be a earate ect&!% !% C!r!rate -!:er%a%ce &% the A%%al Re!rt ! l&ted c!a%&e #&th deta&led c!l&a%ce re!rt !% C!r!rate -!:er%a%ce. The c!a%&e h!ld al! b &t a >arterly c!l&a%ce re!rt t! the t!c$ eDcha%ge #&th&% 15 day r! the cl!e ! >arter a er the recr&bed !rat. The re!rt hall be &g%ed e&ther by the C!l&a%ce +&cer !r the Ch&e EDect&:e +&cer ! the c!a%y. CHAPTER 4 Recent policy steps taken by SE! for ensuring better governance in listed companies
The &%tr!ect&!% that !ll!#ed the *atya e&!de h a relted &% !e a"!r cha%ge &% I%d&a% c!r!rate g!:er%a%ce reg&e. *!e ! the rece%t te ta$e% &% th& regard are a !ll!#
1. &cl!re ! ledged hare It & ade a%dat!ry !% the art ! r!!ter B&%cld&%g r!!ter gr! t! d&cl!e the deta&l ! ledge ! hare held by the &% l&ted e%t&t&e r!!ted by the. ,rther &t #a dec&ded t! a$e ch d&cl!re b!th e:e%t;baed a%d er&!d&c. 2. Peer re:&e# I% the l&ght ! de:el!e%t #&th reect t! *atya *E&red t! d&cl!e deta&l ! ch agreee%t !% the&r #eb&te a%d al! %!t&y the t!c$ eDcha%ge ! the ae !r bl&c d&e&%at&!%. 4. a&%te%a%ce ! #eb&te I% !rder t! e%reKe%ha%ce bl&c d&e&%at&!% ! all ba&c &%!rat&!% ab!t the l&ted e%t&ty l&ted e%t&t&e are a%dated t! a&%ta&% a %ct&!%al #eb&te that c!%ta&% certa&% ba&c &%!rat&!% ab!t the dly dated !r all tatt!ry &l&%g &%cld&%g agreee%t e%tered &%t! #&th ed&a c!a%&e & a%y. 5. C!l!ry deater&al&=at&!% ! Pr!!ter h!ld&%g
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PRINCIPLES OF CORPORATE GOVERNANCE I% !rder t! &r!:e tra%are%cy &% the deal&%g ! hare by r!!ter &%cld&%g ledge K age a c!llateral &t & dec&ded that the ecr&t&e ! c!a%&e hall be traded &% the %!ral ege%t ! the eDcha%ge & a%d !%ly & the c!a%y ha ach&e:ed 100? ! r!!terF a%d r!!ter gr!F hareh!ld&%g &% deater&al&=ed !r. I% all cae #here&% the c!a%&e d! %!t at&y the ab!:e cr&ter&a the trad&%g &% ecr&t&e ! ch c!a%&e hall ta$e lace &% trade !r trade ege%t. 6. Peer re:&e#ed Ad&t!r It ha bee% dec&ded that &% reect ! all l&ted e%t&t&e l&&ted re:&e#Ktatt!ry ad&t re!rt b&tted t! the c!%cer%ed t!c$ eDcha%ge hall be g&:e% !%ly by th!e ad&t!r #h! ha:e b"ected theel:e t! the eer re:&e# r!ce ! ICAI a%d #h! h!ld a :al&d cert&&cate &ed by the MPeer Re:&e# ate acc!%t&%g a%d &%a%c&al a%agee%t eDert&e t! re:&e# a%d cert&y the &%a%c&al tatee%t &t & a%dated that the a!&%te%t ! the C,+ hall be ar!:ed by the Ad&t C!&ttee be!re &%al&=at&!% ! the ae b y the a%agee%t. The Ad&t C!&ttee #h&le ar!:&%g the a!&%te%t hall ae the >al&&cat&!% eDer&e%ce N bac$gr!%d etc. ! the ca%d&date. 8. &cl!re ! :!t&%g relt I% !rder t! e%re #&der d&e&%at&!% ! &%!rat&!% regard&%g :!t&%g atter% #h&ch g&:e a better &ctre ! h!# the eet&%g are c!%dcted a%d h!# the d&ere%t categ!r&e ! &%:et!r ha:e :!ted !% a re!lt&!% l&ted e%t&t&e are re>&red t! d&cl!e the :!t&%g reltK atter% !% the&r #eb&te a%d t! the eDcha%ge #&th&% 48 h!r r! the c!%cl&!% ! the c!%cer%ed hareh!lderF eet&%g. @. E%abl&%g hareh!lder t! electr!%&cally cat the&r :!te I% !rder t! e%able #&der art&c&at&!% ! hareh!lder &% &!rta%t r!!al l&ted c!a%&e are a%dated t! e%able e;:!t&%g ac&l&ty al! t! the&r hareh!lder &% reect ! th!e b&%ee #h&ch are tra%acted thr!gh !tal ball!t b y the l&ted c!a%&e. 10. a%%er ! deal&%g ad&t re!rt &led by l&ted e%t&t&e *Eal&&ed a%%al ad&t re!rt &led by the l&ted e%t&t&e #&th t!c$ eDcha%ge a%d A%%al Ad&t Re!rt #here acc!%t&%g &rreglar&t&e ha:e bee% !&%ted !t by ,&%a%c&al Re!rt&%g Re:&e# al&ty ! &%a%c&al re!rt&%g d!%e by l&ted e%t&t&e &t ha bee% i'%"r)a$ia dec&ded that
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PRINCIPLES OF CORPORATE GOVERNANCE a e&c&e%c&e &% the ree%t r!ce #!ld be eDa&%ed a%d rect&&ed. *Eal&&ed ad&t re!rt. b )&ted e%t&t&e #!ld be re>&red t! &le a%%al ad&t re!rt t! the t!c$ eDcha%ge al!%g #&th the al&cable ,!r B,!r A %>al&&ed K atter ! Eha& Re!rtG ,!r < Lal&&ed K *b"ect T! K EDcet ,!r Ad&t Re!rt. c Ater rel&&%ary crt&%y a%d baed !% ater&al&ty eDcha%ge #!ld reer thee re!rt t! *Eal&&cat&!% are &g%&&ca%t a%d eDla%at&!% g&:e% by C!a%y & %at&act!ry #!ld be reerred t! the ICAI;,RR<. I ICAI;,RR< !&%e that the >al&&cat&!% & "t&&ed *E&re the e%t&ty t! &%!r the ae t! the hareh!lder by a$&%g the a%%!%cee%t t! t!c$ eDcha%ge.
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PRINCIPLES OF CORPORATE GOVERNANCE CONCLUSION
The !lt&!% ha bee% t! &r!:e the %ct&!%&%g ! :&tal !rga% ! the c!a%y l&$e the b!ard ! d&rect!r. The r!ble &% the I%d&a% c!r!rate ect!r Bbe &t the bl&c ect!r the lt&%at&!%al !r the I%d&a% r&:ate ect!r & that ! d&c&l&%&%g the d! &%a%t hareh!lder a%d r!tect&%g the &%!r&ty hareh!lder. A b!ard #h&ch & acc!%table t! the !#%er #!ld !%ly be !%e #h&ch & acc!%table t! the d!&%a%t hareh!lderG &t #!ld %!t a$e the g!:er%a%ce r!ble a%y ea&er t! !l:e. Clearly the r!ble ! c!r!rate g!:er%a%ce abe by the d! &%a%t hareh!lder ca% be !l:ed !%ly by !rce !t&de the c!a%y &tel. C!r!rate g!:er%a%ce abe eretrated by a d!&%a%t hareh!lder !e a d&&clt reglat!ry d&lea &% that reglat!ry &%ter:e%t&!% #!ld !te% &ly a &cr!;a%agee%t ! r!t&%e b&%e dec&&!%. The reglat!r & !rced t! c!%&%e h&el t! br!ad r!cr&t&!% #h&ch lea:e l&ttle r!! !r d&cret&!%ary act&!%. a% y c!r!rate g!:er%a%ce r!ble are &ll &ted t! th& tyle ! reglat&!%. The at e# year ha:e #&t%eed a &le%t re:!lt&!% &% I%d&a% c!r!rate g!:er%a%ce #here a%agee%t ha:e #!$e% t! the !#er ! &%!r&ty hareh!lder #h! :!te #&th the&r #allet. I% re!%e t! th& !#er the !re r!gre&:e c!a%&e are :!l%tar&ly accet&%g t!gher ac c!%t&%g ta%dard a%d !re tr&%ge%t d&cl!re %!r tha% are a%dated by la#. They are al! ad!t&%g !re healthy g!:er%a%ce ract&ce. It & e:&de%t that thee te%de%c&e #!ld be tre%gthe%ed by a :ar&ety ! !rce ch a •
D"r"*+$a%io': Ec!%!&c re!r ha:e %!t !%ly &%creaed gr!#th r!ect bt they ha:e al! ade ar$et !re c!et&t&:e. Th& ea% that &% !rder t! r:&:e c!a%&e #&ll
•
%eed t! &%:et c!%t&%!ly !% a large cale. Di#i'%"r"dia%io': ea%#h&le &%a%c&al ect!r re!r ha:e ade &t &erat&:e !r &r t!
•
rely !% ca&tal ar$et t! a greater degree !r the&r %eed ! add&t&!%al ca&tal. I'#%i%+%io'a$i-a%io': *<a%e!ly the &%crea&%g &%t&tt&!%al&=at&!% ! the ca&tal ar$et
•
ha tree%d!ly e%ha%ced the d&c&l&%&%g !#er ! the ar$et. G$oba$i-a%io': -l!bal&=at&!% ! !r &%a%c&al ar$et ha eD!ed &er &%:et!r a%d &%tered&ar&e t! the h&gher ta%dard ! d&cl!re a%d c!r!rate g!: er%a%ce that re:a&l &%
•
!re de:el!ed ca&tal ar$et. Ta r"/or#: TaD re!r c!led #&th dereglat&!% a%d c!et&t&!% ha:e t<ed the bala%ce a#ay r! blac$ !%ey tra%act&!%. Th& a$e the #!rt !r ! &;g!:er%a%ce le attract&:e tha% &% the at. Page | 15
PRINCIPLES OF CORPORATE GOVERNANCE h&le thee act!r #&ll a$e the ca&tal ar$et !re eect&:e &% d&c&l&%&%g the d!&%a%t hareh!lder there are a%y th&%g that the g!:er%e%t a%d the reglat!r ca% d! t! e%ha%ce th& ab&l&ty •
&cl!re ! &%!rat&!% & the re;re>&&te !r the &%!r&ty hareh!lder !r !r the ca&tal ar$et t! act aga&%t erra%t a%agee%t. The reglat!r ca% e%ha%ce the c!e re>e%cy
•
>al&ty a%d rel&ab&l&ty ! the &%!rat&!% that & d&cl!ed. Reglat!ry eare that r!!te a% e&c&e%t ar$et !r c!r!rate c!%tr!l #!ld create a% eect&:e threat t! !e clae ! d!&%a%t hareh!lder a d&ced earl&er.
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PRINCIPLES OF CORPORATE GOVERNANCE 1I1LIOGRAPHY
A. PAHOA <.*.
IP O!r%al ! C!r!rate -!:er%a%ce :!l. @B3 . 6@;
88 B2010. O.P. A)*H O.J. *EAR 'O N THE E FFICIENCY OF I NTERNAL AND E 0TERNAL C ORPORATE C ONTROL ECHANISS / The Acadey ! a%agee%t Re:&e# :!l. 15 (+.3 4219458 B1@@0. (.
IP O!r%al !
C!r!rate -!:er%a%ce :!l. @B5 . 573;585 B200@. R.
Page | 17
