Corporate governance

Corporate governance is leading a company to a well-organized, controlled and leading to successful operations within the framework of company law.

Company Law prescribes certain regulations to govern the Company which cannot be violated. Further, the Company is free to have its own Articles of Association wherein they can write all the finer details of the company management, it's dealing with shareholders and the general public, etc. However, whatever is written in the Articles of Association, it should be well within the Companies Act and it cannot be ultra-virus the Company act.

What are the facts? What is the context?

The organizational framework for corporate governance initiatives in India consists of the Ministry of Corporate Affairs (MCA) and the Securities and Exchange Board of India (SEBI). SEBI monitors and regulates corporate governance of listed companies in India through Clause 49. This clause is incorporated in the listing agreement of stock exchanges with companies and it is compulsory for listed companies to comply with its provisions. MCA through its various appointed committees and forums such as National Foundation for Corporate Governance (NFCG), a not-for-profit trust, facilitates exchange of experiences and ideas amongst corporate leaders, policy makers, regulators, law enforcing agencies and non- government organizations.

• Corporate governance is the structure of rules, practices, and processes used to direct and manage a company.
• A company's board of directors is the primary force influencing corporate governance.

Governance refers specifically to the set of rules, controls, policies, and resolutions put in place to dictate corporate behavior.

The board of directors is pivotal in governance, and it can have major ramifications for equity valuation.

Corporate governance consists of the guiding principles that a company puts in place to direct all of its operations, from compensation to risk management to employee treatment to reporting unfair practices to its impact on the climate, and more.

Corporate governance is important because it creates a system of rules and practices that determine how a company operates and how it aligns the interest of all its stakeholders. Good corporate governance leads to ethical business practices, which leads to financial viability.

 

As per your question, it is essential for you to understand that Corporate Governance is basically a system of rules, practices and processes by which a company is directed and controlled.
In simple terms, Corporate Governance refers to the way in which companies are governed and to what purpose.

It ensures that the businesses consists of appropriate decision-making processes and controls/regulates in place so that the interests of all stakeholders (shareholders, employees, suppliers, customers and the community) can be protected and balanced.

In general, Corporate Governance is concerned with practices and procedures for trying to make sure that a company is run in such a way that it achieves its objectives, while ensuring that stakeholders can have confidence that their trust in that company is well founded.

Corporate governance have been established to protect the interest of all the parties during takeovers and mergers.

However, in India, SEBI (i.e. Security Exchange Board of India) has mandated Corporate Governance (has been made compulsory) for certain companies, in order to protect the interest of the investors and other stakeholders. Although, it is not mandatory for all types of companies/organization's.

Hope It Helps

Regards
Kevin M. Paul