corporate governance

Category: Education

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each and every thing


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Corporate governance - Performance and Measurement : 

Corporate governance - Performance and Measurement By gyan agnihotri

Corporate Governance : 

Corporate Governance A system of checks and balances between the board, management and investors to produce an efficiently functioning corporation, ideally geared to produce long-term value

Issues in Corporate Governance : 

Issues in Corporate Governance Asymmetry of power Asymmetry of information Interests of shareholders as residual owners Role of owner management Theory of separation of powers Division of corporate pie among stakeholders

Current status on corporate governance : 

Current status on corporate governance Insistence on forms and structures Overarching regulations Regulatory overkill Lack of adequate number of strong, independent directors Large liabilities for companies and officers Has the pendulum swung too far? For the first time in the decade-long history of the Index of Economic Freedom, the U.S. is no longer among the top ten “most free” countries Wall Street Journal and the Heritage Foundation “Index of Economic Freedom”

Current status on corporate governance : 

Current status on corporate governance Source: Crisil Report on Corporate Governance

Governance and performance : 

Governance and performance Good governance leads to good performance It creates an open and transparent system It improves communication and breaks down systematic barriers to flow of information Good governance allows decision making based on data. It reduces risk Good governance helps in creating a brand and creates comfort for all stakeholders and society

Does performance depend on governance : 

Does performance depend on governance Short term performance does not necessarily depend on governance Market asymmetries are responsible for this. However, this increases risk. This also creates barrier to long term growth We all know what happened to Enron?

Does performance depend on governance : 

Does performance depend on governance Medium to long term performance requires governance Most companies which have grown in the last 25 years have outstanding performance and have good governance structure A good governance structure treats all stakeholders fairly Governance alone cannot ensure performance

Governance and Performance - issues : 

Governance and Performance - issues Is governance a luxury that can be afforded only by the performing companies? Do strategies and tactics need to change to accommodate governance with performance? Is there a time-lag between governance and performance? Are stakeholders concerned about “performance” or “promised performance” ?

Governance and Performance measurement - issues : 

Governance and Performance measurement - issues Is governance behavior motivated by legislation? Do standards vary with jurisdictions or do you adopt the best option? Do you choose the right thing to do irrespective of whether it’s mandatory or not? Is performance evaluation limited to valuation metrics? Is it only ROE, Net margin, growth, shareholder wealth creation? Do performance measures need to be holistic? We need to encompass all stakeholders Governance is an enabler for holistic performance How do managers better understand governance requirements? Do we need market research for governance requirements?

Investing in Corporate Governance : 

Investing in Corporate Governance Companies need to invest in good governance Corporate governance has a direct bearing on business performance and thereby ROI Leverage the power of IT On average, businesses with superior governance practices generate 20 percent greater profits than other companies A study based on 256 companies conducted at the MIT Sloan School of Management

Thank You : 

Thank You