Corporate Governance

Introduction

The rules and regulations I am going to discuss is helpful in evaluating and improving the legal institutional and regulatory frame work for corporate governance in deferent organizations and provide suggestions for stock exchanges, investors, corporations and other parties, that have role in the process of developing good corporate governance. Our focus is on mostly publicly traded companies financial and non financial and it will also be a useful tool to improve corporate governance in non traded companies for example private and state owned enterprises

Corporate Governance is one key element in improving economic efficiency and growth as will as enhance the investor confidence. Corporate governance involves a set of relationship between a company management, its board, its shareholders, and other stake holders. Corporate governance also provide the structure through which the objective of the company are set, and the means of attaining those objectives and monitoring performance are determine

Good corporate governance should provide proper incentives for the board and management to pursue objectives ,that are in the interest of company and its shareholder and should facilitate effective monitoring .A good corporate governance system in the individual company or across an economy as whole ,helps to provide a degree of confidence that is necessary for the proper functioning of market economy as a result cost of capital is lower of the firm and firms are encouraged to use resources more efficiently

Corporate governance is part of large economic context:

Corporate governance is part of large economic context in which firms operate ,for example macroeconomic polices and the degree of competition in product and factor markets .The corporate governance framework also depends on the legal ,regulatory and institutional environment .also corporate governance depend on business ethics and corporate awareness of the environment and social interest of the communities in which a company operates can also have an impact on its reputation and is long term success

Factors affect Governance and decision making process of the firm:

Factors affect Governance and decision making process of the firm and are important to their long term success. The principle focus on governance problems that result from the separation of ownership and control, also the problem arises because of the central controlling shareholders over minority shareholders. The governance decision making also effect through anti corruption or ethical concerns

Effect of relationships:

Corporate governance is also affected by the relationship among participating in governance system .Controlling shareholders which may be individuals, family holdings, bloc alliances, or cross shareholders can significantly influence the corporate behavior. As owner of equity, institutional investors are increasingly demanding a voice in corporate governance right but may be highly concerned about obtaining fair treatment from controlling shareholders and management

Creditors, employees and stake holderÐŽ¦s role:

Creditors play an important role in a number of governance systems and can serve as external monitors over the corporate performance. Employees and stake holders play important role contributing to the long term success and performance of the framework for corporate governance

Corporate Governance and Investment decision:

The basic principle of good corporate governance is considering important factors for investment decision. There should be relevance in the relationship between corporate governance practices and the increasingly international character of investment. Corporate governance should follow the international rules and regulations that will enable the companies to convince the foreign investors to invest. A good corporate governance system will improve the confidence of domestic investors, and reduce the cost of capital and it will induce the more stable source of financing

Following are some summarized rules, their application and their usefulness

1) Ensuring the Basis for an Effective Corporate Governance Framework

„« The corporate governance framework should be develop with a view to its impact on over all economic performance ,market integrity and the incentives it creates for market participants and the promotion of transparent and efficient markets

„« The legal and regulatory requirement that affect corporate governance practices in a jurisdictions should be consistent with the rule of law ,transparent and enforceable

„« The division of responsibilities among different authorities in a jurisdiction should be clearly articulated and ensure that the public interest is served

„« Supervisory and regulatory authorities should have powers to fulfill their duties in a professional and objective ,and timely manner

2) Rights of shareholders and key ownership functions.

„« Shareholder rights

„« Secure method of owner ship registration

„« Convey or transfer shares

„« Obtain relevant info on timely and regular bases

„« Participate and vote in general shareholder meetings

„« Elect and remove members of the board

„« Share in the profits of the corporation

„« Shareholder should have right to participate in and to be sufficiently informed on decision concerning fundamental corporate change such as amendments, authorization of additional shares, extra ordinary transaction

„« Share holder should have opportunity to participate effectively and vote in general shareholder meeting s and should be informed of the rules including voting procedures that govern general shareholder meetings

a) Shareholders should be furnished with sufficient and timely information regarding data, location of and agenda of general meetings and fully inform them regarding any decision in meetings

b) Share holders have the opportunity to ask about annual external audit and propose resolutions about deferent matters

c) Share holder participate in