Corporate Governance Issues

We have come across companies which apparently were very efficiently managed but which landed in troubles due to poor governance. There are cases in India where the companies that are considered as blue chip companies, going in for allegedly illegal transaction. It basically means issue of agency function namely how to ensure that the interests of the investors are taken care of. This is not only in terms of return on investment by effective management, but also ensuring that the enterprises do not indulge in corrupt practices or acts, which are unethical. Such practices may have adverse consequences on the long-term interests of the stakeholders.

CG is concerned with the way in which corporate entities are governed as distinct from the way in which business within those companies are managed. It addresses various issues facing the boards of directors, which relate to the interaction with top management supervision and accountability to the stakeholders come under the ambit of corporate governance

Corporate Governance addresses three basic issues

• Ethical issues
• Efficiency issues
• Accountability issues

ITC's Corporate Governance initiative is based on two core principles. These are :

• Management must have the executive freedom to drive the enterprise forward without undue restraints; and
• This freedom of management should be exercised within a framework of effective accountability.

ITC believes that any meaningful policy on Corporate Governance must provide empowerment to the executive management of the Company, and simultaneously create a mechanism of checks and balances which ensures that the decision making powers vested in the executive management is not only not misused, but is used with care and responsibility to meet stakeholder aspirations and societal expectations.

The growing scale of corporations and their style of functioning have raised many new issues that must be addressed by corporate governance. Some of these issues are :

• The growth of private companies
• The magnitude and complexity of corporate groups
• The important of institutional investors
• Rise in hostile activities of predators
• Insider trading
• Litigations against directors
• Need for restructuring of boards
• Changes in auditing practices