Essay On Corporate Governance

CORPORATE GOVERNANCE

The term corporate governance, as is understood, includes the set of systems, principles and processes by which a company is governed. These cumulatively provide the guidelines for directing and controlling the company in a manner that fulfill the goals and objectives, by adding value to the company, and further, is also beneficial for all stakeholders in the long run. Stakeholders include everyone ranging from the board of directors, management, shareholders to customers, employees and society. The management of the company hence assumes the role of a trustee for all these other members.

The definition of corporate governance which is most widely used is "the system by which companies are directed and controlled" . More specifically it is the scale by which the various stakeholder interests are balanced, or, as the IFC states, "the relationships among the management, Board of Directors, controlling shareholders, minority shareholders and other stakeholders" .

The Preamble to OECD Principles of Corporate Governance states:

"Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined."

Corporate governance is based on principles such as conducting the business with all integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions, complying with all the laws of the land, accountability and responsibility towards the stakeholders and commitment in order to conduct the business in an et...

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...ll not enter into certain transactions unless its board has given its consent for entering into such transactions. In certain cases, an approval by special resolution at general meeting will be required. In this context, the proviso states as below:

“Provided that no contract or arrangement, in the case of a company having a paid-up share capital of not less than such amount, or transactions not exceeding such sums, as may be prescribed, shall be entered into except with the prior approval of the company by a special resolution.”

Ideally, an approval by special resolution should be required for transactions where amount involved is not less than the prescribed amount. There seems to be a drafting error in this clause. The MCA may take care of the same while prescribing final rules.

2) The Bill does not explain who will be treated as person connected with director.