Corporate Governance: principles, policies and practices

✍ Scribed by Fernando, A C

• Publisher: Pearson Education India
• Year: 2009;2012
• Tongue: English
• Leaves: 605
• Category: Library

✦ Synopsis

Description The second edition of A. C. Fernando's bestselling Corporate Governance: Principles, Policies and Practices sheds light on recent corporate problems using a flexible modularformat, through a detailed explanation of the corporate governancemechanism and the various incentives within today's governancesystem, while offering potential solutions in context. With anemphasis on connecting corporate governance to practicalmanagement, the book provides cutting-edge material comprising newand unique study tools and fresh, thought-provoking content. An integrated flow between chapters, which allows students to clearly see how topics relate to each other from the start Offers readers a comprehensive coverage of corporate governance practices This revision presents new examples and new pedagogical features, adding more value and depth to the text's effective, consistent framework Case studies featuring top companies firmly place the discussion in the modern world of business Clear chapter outlines, keywords, discussion questions and extensive referencing enable readers to access their learning Abbreviations Foreword Preface to the Second Edition Preface About the Author PART ONE: UNDERSTANDING CORPORATE GOVERNANCE Corporate Governance: An Overview The Theory and Practice of Corporate Governance Landmarks in the Emergence of Corporate Governance PART TWO: AGENTS AND INSTITUTIONS IN CORPORATE GOVERNANCE Rights and Privileges of Shareholders Investors' Problems and Protection Corporate Governance and Other Stakeholders Board of Directors: A Powerful Instrument in Corporate Governance Role, Duties and Responsibilities of Auditors Banks and Corporate Governance PART THREE: FACILITATORS, ROLE PLAYERS AND REGULATORS Business Ethics and Corporate Governance Corporate Social Responsibility Environmental Concerns and Corporations The Role of the Media in Ensuring Corporate Governance Monopoly, Competition and Corporate Governance The Role of Public Policies in Governing

✦ Table of Contents

Cover......Page 1
Contents......Page 8
Abbreviations......Page 14
Foreword......Page 20
Preface to the Second Edition......Page 21
Preface......Page 23
About the Author......Page 24
Part 1: Understanding Corporate Governance......Page 26
Chapter 1: Corporate Governance: An Overview......Page 28
America’s Hall of Shame—2002......Page 29
Series of Scams That Shook Investor Confidence......Page 30
Illegal Tactics of Indian Corporates......Page 31
Increasing Awareness......Page 32
Global Concerns......Page 33
From the Academic Point of View......Page 34
From the Angle of Developed Versus Developing Countries......Page 35
Narrow Versus Broad Perceptions of Corporate Governance......Page 38
Perceptional Differences in Definitions......Page 39
Governance Is More Than Just Board Processes and Procedures......Page 40
A Historical Perspective of Corporate Governance......Page 43
The Cadbury Committee......Page 45
The Aftermath of the Cadbury Report......Page 46
Revival of Corporate Governance Issues in the New Millennium......Page 47
Issues in Corporate Governance......Page 48
Relevance of Corporate Governance......Page 51
Governance and Corporate Performance......Page 52
Benefits to society......Page 53
Benefits of Good Corporate Governance to a Corporation......Page 54
Conclusion......Page 55
Notes......Page 56
Suggested Readings......Page 57
Case Study: Infosys Technologies: The Best Among Indian Corporates......Page 58
Chapter 2: The Theory and Practice of Corporate Governance......Page 67
What is a Corporate?......Page 68
The Concept of Governance......Page 70
Problems with the Agency Theory......Page 71
Stewardship Theory......Page 72
Shareholder Versus Stakeholder Approaches......Page 74
Stakeholder Theory......Page 75
Why Corporate Governance?......Page 76
Growing Awareness and Societal Responses......Page 77
Corporate Governance Systems......Page 78
German Model......Page 79
Common Features in the German and Japanese Models......Page 80
Indian Model of Governance......Page 81
What is “Good” Corporate Governance?......Page 82
Obligation to Society at Large......Page 84
Obligation to Employees......Page 87
Managerial Obligation......Page 89
Conclusion......Page 91
Keywords......Page 92
Suggested Readings......Page 93
Case Study: Tata Steel: A Company That Also Makes Steel......Page 94
Chapter 3: Landmarks in the Emergence of Corporate Governance......Page 100
Developments in the UK......Page 101
Cadbury Committee on Corporate Governance, 1992......Page 102
The Greenbury Committee, 1995......Page 104
The Combined Code, 1998......Page 105
World Bank on Corporate Governance......Page 106
OECD Principles......Page 107
Sarbanes–Oxley Act, 2002......Page 109
Working Group on the Companies Act, 1996......Page 112
The Confederation of Indian Industry’s Initiative......Page 114
Recommendations of the CII’S Code of Corporate Governance......Page 115
Kumar Mangalam Birla Committee, 1999......Page 117
SEBI’s Response......Page 120
Naresh Chandra Committee Report, 2002......Page 121
Rationale for a Review of the Birla Code......Page 122
Mandatory Recommendations......Page 123
Dr. J.J. Irani Committee Report on Company Law, 2005......Page 125
Power to Shareholders......Page 126
Governance standards......Page 127
Discussion Questions......Page 128
Suggested Readings......Page 129
Case Study: ITC Limited: Is Corporate Governance Only Skin Deep?......Page 130
Part 2: Agents and Institutions in Corporate Governance......Page 142
Chapter 4: Rights and Privileges of Shareholders......Page 144
Long-term Shareholder Value......Page 145
Rights of Shareholders......Page 146
Working Group on the Companies Act, 1996......Page 147
Kumar Mangalam Birla Committee, 1999......Page 148
Naresh Chandra Committee, 2002......Page 151
Narayana Murthy Committee, 2003......Page 152
Poor Track Record of Shareholder Protection......Page 153
Guidelines for Investors/Shareholders......Page 154
Trading of Securities......Page 155
Transfer of Securities......Page 156
Depository and Dematerialisation......Page 157
Discussion Questions......Page 158
Suggested Readings......Page 159
Case Study: The Tussle over Corporate Governance at Reliance......Page 160
Chapter 5: Investors’ Problems and Protection......Page 169
Definition of Investor Protection......Page 170
How do Insiders Steal Investors’ Funds?......Page 171
Rights to Information and Other Rights......Page 172
Impact of Investor Protection on Ownership and Control of Firms......Page 173
Banks and Corporate Governance......Page 175
Investor Protection in India......Page 176
Law Enforcement for Investor Protection......Page 177
Grievance Redressal Mechanisms......Page 178
Some Major Indian Scams......Page 180
SEBI’s Poor Performance—Suggestions for Improvement......Page 182
Conclusion......Page 183
Suggested Readings......Page 184
Chapter 6: Corporate Governance and Other Stakeholders......Page 185
Wealth Creation Requires Capital and Labour......Page 186
Corporate Governance and Customers......Page 188
The Society Bears The Hidden Taxation......Page 189
Customer’s Information Needs......Page 190
Consumer Protection Acts......Page 191
Consumer Protection Act 1986......Page 192
Corporate Governance and Institutional Investors......Page 193
Factors Influencing Investment Decisions......Page 194
Findings of the Study Conducted by Pitabas Mohanty......Page 195
Kumar Mangalam Birla Committee and Institutional Investors......Page 196
The McKinsey Survey on Corporate Governance......Page 197
Adequate Information......Page 198
Diffused Debt......Page 199
Concentrated Debt......Page 200
Corporate Governance and the Community......Page 201
Corporate Governance and the Government......Page 203
Keywords......Page 204
Suggested Readings......Page 205
Case Study: The Tylenol Crisis: How Ethical Practices Saved Johnson & Johnson from Collapse......Page 206
Chapter 7: Board of Directors: A Powerful Instrument in Corporate Governance......Page 212
Company Director and the Board......Page 213
Kinds of directors......Page 214
Duties and Responsibilities of Directors......Page 215
Powers of the Board......Page 216
Nominee Directors......Page 217
Liabilities of Directors......Page 218
Liability for Acts of His Co-directors......Page 219
Public Examination of Directors......Page 220
Disablities of Directors......Page 221
Effectiveness of the Board of Directors......Page 223
Role of the Board......Page 224
Board of Directors and Corporate Governance......Page 226
The Role of Directors......Page 227
Desirability of Having Independent Directors......Page 230
Directors’ Remuneration......Page 231
Pay as a Reward for Performance......Page 232
Performance Hurdles......Page 233
Severance Payments......Page 234
Directors’ Remuneration in India......Page 235
Family-owned Businesses and Corporate Governance......Page 236
Some Pioneering Indian Boards......Page 239
Discussion Questions......Page 241
Suggested Readings......Page 242
Case Study: How Unethical Practices Almost Destroyed WorldCom......Page 243
Chapter 8: Role, Duties and Responsibilities of Auditors......Page 250
Objectives of an Audit......Page 251
Types of Auditors......Page 252
Responsibilities of Auditors......Page 253
Responsibilities of an Audit Firm......Page 254
Audit Failures Leading to Corporate Scams......Page 255
The American Law Governing Auditors’ Responsibilities......Page 257
Preventing Fraudulent Auditing Practices......Page 258
Naresh Chandra Committee......Page 259
Disclosures......Page 260
Provisions of the Bill Regarding Auditing......Page 261
Companies (Auditors Report) Order (CARO), 2003......Page 262
Cost Audit Methodology......Page 263
Quality Audit......Page 264
Keywords......Page 265
Suggested Readings......Page 266
Case Study: The Rise and Fall of Arthur Andersen......Page 267
Chapter 9: Banks and Corporate Governance......Page 275
Why Corporate Governance in Banks?......Page 276
Corporate Governance and the World Bank......Page 277
Basel Committee on Corporate Governance......Page 278
Sound Corporate Governance Practices for Banks......Page 280
Ensuring Sound Corporate Governance Environment......Page 283
The New Basel Capital Accord (Basel II)......Page 284
Implementation of Basel II and Its Impact......Page 285
Corporate Governance in Indian Banks......Page 286
Indian Banking Sector’s Unique Nature and Its Implications......Page 287
Review of Indian Experience in Corporate Governance......Page 288
Ganguly Committee’s Recommendations......Page 289
Risk Management......Page 290
Basel II and Containing Risk......Page 291
Reward and Accountability of Directors......Page 292
Conclusion......Page 293
Notes......Page 294
Suggested Readings......Page 295
Case Study: Global Trust Bank: The Bank That Went Bust......Page 296
Part 3: Facilitators, Role Players and Regulators......Page 304
Chapter 10: Business Ethics and Corporate Governance......Page 306
What is Business Ethics?......Page 307
Importance and Need for Business Ethics......Page 308
The Indian Context......Page 309
Another Dimension: “Corporates in India Cannot Afford To Be Ethical”6......Page 310
Roots of Unethical Behaviour......Page 311
Why Should Businesses Act Ethically?......Page 312
How Corporates Observe Ethics in Their Organisations?......Page 313
Coercion......Page 314
Conflicts of Interest......Page 315
Corporate Governance Ethics......Page 316
Characteristics of an Ethical Organisation......Page 317
How Ethics Can Make Corporate Governance More Meaningful?......Page 318
Conclusion......Page 319
Notes......Page 320
Suggested Readings......Page 321
Case Study: The Enron Fiasco: Does End Justify the Means?......Page 322
Chapter 11: Corporate Social Responsibility......Page 333
Conflicting Perspectives on the Issue......Page 334
Definitions of Corporate Social Responsibility (CSR)......Page 335
Corporate Social Responsibility and the Stakeholder......Page 336
Trusteeship Model......Page 337
What Are Corporates Expected To Do?......Page 338
The Scope of Social Responsibility......Page 339
Social Responsibility and Indian Corporations......Page 343
Keywords......Page 344
Notes......Page 345
Case Study: TVS Group of Companies: Commitment Far Beyond a Sense of Corporate Social Responsibility......Page 346
Chapter 12: Environmental Concerns and Corporations......Page 355
History of Environmentalism......Page 356
Environmental Philosophy......Page 357
Public Opinion......Page 358
Corporations......Page 359
Government......Page 360
International Issues......Page 361
Costs and Benefits of Environmental Regulation......Page 362
Trade and the Environment......Page 363
Role of Corporates in Environmental Management......Page 364
Innovative Business Responses to Environmental Regulations......Page 366
Pollution Prevention......Page 368
Key Strategies for Industrial Pollution Prevention......Page 369
Improving Corporate Environmental Performance......Page 371
Environmental Audit......Page 372
Managing Environmental Issues......Page 374
Managing Regulation......Page 375
Redefining Markets......Page 376
Environmental Risk Management......Page 377
Environmental Management in India......Page 378
Charter for Voluntary Pollution Control......Page 379
Private Sector Initiatives......Page 380
Eco-efficiency Strategy of Powergrid......Page 381
Laws Governing Environment......Page 382
The National Environmental Policy, 2004......Page 383
Keywords......Page 385
Suggested Readings......Page 386
Case Study: World’s Worst Man-made Disasters......Page 387
Case Study: Bhopal Tragedy: Mother of all Industrial Disasters......Page 390
Chapter 13: The Role of the Mediain Ensuring Corporate Governance......Page 396
Corporate Advertising......Page 397
Corporate Governance and the Press......Page 398
Business School Governance and Business Week Rankings......Page 400
Consumer Demand and Selective Coverage......Page 401
Ethics in Advertising......Page 402
Adverse Effects of Advertising......Page 403
Unfair Trade Practices Through Advertisements Under the MRTP Act......Page 405
Recent Trends in Advertising......Page 406
Cigarette Code......Page 407
Remedies for the Evils of Advertising......Page 408
Suggested Readings......Page 409
Chapter 14: Monopoly, Competition and Corporate Governance......Page 410
The Concept, Logic and Benefits of Competition......Page 411
Regulation of Competition......Page 412
Banks’ Role in Restraining Emergence of Securities Markets......Page 413
Competition in the Product Market......Page 414
Economic Power and Political Influence......Page 415
Effects of Monopoly on Corporate Governance......Page 416
What Is a Good Competition Policy?......Page 418
Indian Competition Act......Page 419
Competition Commission of India......Page 420
The Three Focus Areas of Competition Act......Page 421
The MRTP Act and the Competition Act......Page 422
Competition Boosts Corporate Governance......Page 424
Discussion Questions......Page 425
Suggested Readings......Page 426
Chapter 15: The Role of Public Policies in Governing Business......Page 427
Government and Public Policy......Page 428
Areas of Public Policy......Page 429
Need for Public Policy in Business......Page 430
Different Levels of Public Policy......Page 431
Elements of Public Policy......Page 432
The Corporation and Public Policy......Page 433
Involvement of Business in Public Policy Decision Making......Page 434
Business and Politics—Levels of Involvement......Page 435
National Economic Growth......Page 436
Monetary Policy......Page 438
Objectives of Fiscal Policy......Page 439
Physical Controls......Page 441
Problems of Government Regulation......Page 442
Environmental Protection Law......Page 443
Trade Unions Act, 1926......Page 445
Payment of Bonus Act, 1965......Page 447
The Workmen’s Compensation Act, 1923......Page 448
Consumer Protection......Page 449
Custom Law and Procedures......Page 450
MRTP Act, 1969......Page 451
Small-scale Industries Tax Exemption Scheme......Page 452
Anti-dumping Policies......Page 453
Conclusion......Page 454
Suggested Readings......Page 455
Chapter 16: SEBI: The Indian Capital Market Regulator......Page 456
Phenomenal Growth of Indian Capital Market......Page 457
Nature of the Indian Capital Market......Page 458
Development of the Indian Capital Market......Page 459
Deficiencies in the Indian Capital Market......Page 460
Role of Securities Market in Economic Growth......Page 461
Abolition of Controller of Capital Issues and Emergence of SEBI......Page 462
The Securities and Exchange Board of India......Page 463
SEBI’s Role in Promoting Corporate Governance......Page 467
SEBI’s Record of Performance......Page 469
Primary Market Reforms......Page 470
Secondary Market Reforms......Page 473
SEBI’s Shortcomings......Page 477
Suggestions for SEBI’s Improvement......Page 479
Keywords......Page 480
Suggested Readings......Page 481
Case Study: Ketan Played Around with Others’ Money......Page 482
Chapter 17: The Role of the Government in Ensuring Corporate Governance......Page 484
Government Interference in Market Economies......Page 485
Different Roles of Government in the Economy......Page 486
State Intervention in a Developing Economy......Page 488
Political Governance Requires Restraints of Power......Page 489
Role of Governments in Limiting Corporate Power......Page 490
The Limits of Corporate Power......Page 491
Demand for Corporate Constitutionalism is a Knee-jerk Reaction......Page 492
Public Versus Corporate Governance—A Study of Comparison......Page 494
Keywords......Page 499
Notes......Page 500
Part 4: Issues and Problems of Corporate Governance in Emerging Economies......Page 502
Chapter 18: Corporate Governance in Developing and Transition Economies......Page 504
Introduction......Page 505
Problems Faced by Developing and Transition Economies......Page 506
The Why and Wherefore of Corporate Governance......Page 507
Defining Corporate Governance......Page 508
Corporate Governance Models......Page 509
Developing a Corporate Governance Framework......Page 510
The Institutional Framework for Effective Corporate Governance......Page 511
Sound Stakeholder Relationships are Good for Business......Page 515
Corporate Governance Challenges in Developing, Emerging and Transition Economies......Page 516
Current Corporate Governance Settings in Transition Economies......Page 517
Keywords......Page 519
Suggested Readings......Page 520
Case Study: Problems and Issues of Corporate Governance in Emerging Economies: Russian Example......Page 521
Chapter 19: Corporate Governance: The Indian Scenario......Page 532
The Need for Corporate Governance in India......Page 533
Ethics and Values in Corporate Governance......Page 534
The Emergence of Corporate Governance Issues in India......Page 535
Naresh Chandra Committee, 2002......Page 536
Legislative Changes......Page 537
Introduction of Regulations......Page 538
Clause 49 of the Listing Agreement What is Clause 49?......Page 539
Differences in the Key Provisions of the Original Clause and the New Clause......Page 540
CEOs Accountable for Companies’ Risk Systems......Page 541
Reserve Bank’s and Other Regulations......Page 542
Industry Initiatives......Page 543
Individual Initiatives......Page 544
Banks and Corporate Governance......Page 545
Setting up of Centre for Corporate Excellence......Page 546
Best Practices......Page 547
Establishment of the National Foundation of Corporate Governance......Page 548
Need For Accounting Standards......Page 549
ICRA’s Rating Methodology......Page 550
Corporate Governance in India—A Performance Appraisal......Page 552
A Report Card That Does Not Impress......Page 553
The Future of Corporate Governance in India......Page 557
Impetus for the Growth of Corporate Governance in India......Page 558
Key Words......Page 559
Suggested Readings......Page 560
Reports......Page 561
Case Study: Insider Trading: HLL–BBLIL Merger......Page 562
Chapter 20: The Corporation in a Global Society......Page 566
Factors Facilitating Globalisation......Page 567
Doing Business in a Diverse World......Page 568
Role of Multinational Corporations......Page 569
Caux Round Table......Page 570
CRT Principles for Business......Page 571
Need for Dialogue on the Role of the Corporation......Page 572
Public Awareness and Scrutiny......Page 573
The Physical Environment......Page 574
Key Global Issues for Business......Page 575
Corporate Governance—A Prerequisitie for Globalisation......Page 577
Conclusion......Page 578
Suggested Readings......Page 579
Glossary......Page 580
Bibliography......Page 589
Useful Web Sites on Corporate Governance and CSR......Page 595
Official Reports......Page 596
Prominent Guidelines on Corporate Governance......Page 597
Links on Corporate Governance......Page 598
Name Index......Page 600
Subject Index......Page 602