Megna Carta Of Corporate Governance

Corporate Governance indicates that it is primarily concerned with “System and process by which companies are directed and controlled” with the single overriding objective of all publicly listed companies being its presentation and the greatest practical enhancement overtime of their shareholders investment”. For corporations the corporate governance system will involve the entire network of formal and informal relations and interaction between the board, management shareholders, auditors and other interested parties. These relations and interactions will determine how control are exercised with company and how risks and returns from corporate activities are determined. The real genesis of corporate Governance lies in the business scams

The Committee was set up in May 1991 by the financial reporting council of the London Stock Exchange and the accountancy profession to the address the financial aspect of corporate governance. There was unexpected failure of the major companies like world com. Xerox, Enron etc. Moreover there was heavy criticism by the investors media and the general public of the lack of effective board accountability in respect of these massive failures. Further, there was a huge demand by these agencies to take penal action against the directors and management and also to clarify the responsibilities. The Cadbury committee drew on these documents and wide range of submissions from interested parties in producing its draft report that was issued for public comments on 27 may

The board should include non-executive director’s sufficient caliber and number for their views to carry weight in the board’s decisions’.

II. Non-Executive Directors

I. Non-executive directors should bring an independent judgment to bear on issues of strategy, performance, resources, including key appointments and standards of conduct.

II. The majority should be independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgment, apart from their fees and shareholding. Their fees should reflect the time which they commit to the company.

III. Non-executive directors should be appointed for specified terms and reappointment should not be automatic.

Executive Directors

I. Directors’ service should not exceed three years without shareholder’s approval.

II. Directors pay and emoluments, including pension contributions and stock options and the amount and the basis for any performance related element, should be fully disclosed and subject to the recommendations of a remuneration committees consisting mainly or wholly of non-executive directors and preferably chaired by a non-executive directors.

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