Standards - Corporate Governance
Regulatory framework on corporate governance
The corporate governance mechanism for companies in India are described in the following enactments/ regulations/ guidelines/ listing agreement:
- The Companies Act, 2013 inter alia contains provisions relating to board constitution, board meetings, board processes, independent directors, general meetings, audit committees, related party transactions, disclosure requirements in financial statements, etc.
- Securities and Exchange Board of India (SEBI) Guidelines: SEBI is a regulatory authority having jurisdiction over listed companies and which issues regulations, rules and guidelines to companies to ensure protection of investors.
- Standard Listing Agreement of Stock Exchanges: For companies whose shares are listed on the stock exchanges.
- Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI): ICAI is an autonomous body, which issues accounting standards providing guidelines for disclosures of financial information. Section 129 of the New Companies Act inter alia provides that the financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under s 133 of the New Companies Act. It is further provided that items contained in such financial statements shall be in accordance with the accounting standards.
- Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI): ICSI is an autonomous body, which issues secretarial standards in terms of the provisions of the New Companies Act. So far, the ICSI has issued Secretarial Standard on "Meetings of the Board of Directors" (SS-1) and Secretarial Standards on "General Meetings" (SS-2). These Secretarial Standards have come into force w.e.f. July 1, 2015. Section 118(10) of the New Companies Act provide that every company (other than one person company) shall observe Secretarial Standards specified as such by the ICSI with respect to general and board meetings.
Read : Artical on Corporate governance in India by Deloitte
Full regulatory requirements and framework explained by Vaish Associates Advocates
Good governance has 8 major characteristic
Participation
Participation by both men and women is a key cornerstone of good governance. Participation could be either direct or through legitimate intermediate institutions or representatives. It is important to point out that representative democracy does not necessarily mean that the concerns of the most vulnerable in society would be taken into consideration in decision making. Participation needs to be informed and organized. This means freedom of association and expression on the one hand and an organized civil society on the other hand
Rule of law
Good governance requires fair legal frameworks that are enforced impartially. It also requires full protection of human rights, particularly those of minorities. Impartial enforcement of laws requires an independent judiciary and an impartial and incorruptible police force.
Transparency
Transparency means that decisions taken and their enforcement are done in a manner that follows rules and regulations. It also means that information is freely available and directly accessible to those who will be affected by such decisions and their enforcement. It also means that enough information is provided and that it is provided in easily understandable forms and media.
Responsiveness
Good governance requires that institutions and processes try to serve all stakeholders within a reasonable timeframe.
Consensus oriented
There are several actors and as many view points in a given society. Good governance requires mediation of the different interests in society to reach a broad consensus in society on what is in the best interest of the whole community and how this can be achieved. It also requires a broad and long-term perspective on what is needed for sustainable human development and how to achieve the goals of such development. This can only result from an understanding of the historical, cultural and social contexts of a given society or community.
Equity and inclusiveness
A society’s well being depends on ensuring that all its members feel that they have a stake in it and do not feel excluded from the mainstream of society. This requires all groups, but particularly the most vulnerable, have opportunities to improve or maintain their well being.
Effectiveness and efficiency
Good governance means that processes and institutions produce results that meet the needs of society while making the best use of resources at their disposal. The concept of efficiency in the context of good governance also covers the sustainable use of natural resources and the protection of the environment
Accountability
Accountability is a key requirement of good governance. Not only governmental institutions but also the private sector and civil society organizations must be accountable to the public and to their institutional stakeholders. Who is accountable to whom varies depending on whether decisions or actions taken are internal or external to an organization or institution. In general an organization or an institution is accountable to those who will be affected by its decisions or actions. Accountability cannot be enforced without transparency and the rule of law
Sustainability Reporting
| Internal Factors requiring Sustainability Reporting | External Factors requiring Sustainability Reporting |
| Gain better information | Improve stakeholder communication |
|
Improve risk management
|
Improve accountability and transparency |
| Improve performance | Create a positive and trustworthy image |
|
Save resources and money
|
If Public sector, Build trust in the public sector |
| Improve staff satisfaction |
World Resourses Institute
WRI’s mission is to move human society to live in ways that protect Earth’s environment and its capacity to provide for the needs and aspirations of current and future generations.
Terms & Definitions
Communication: Any manner of information sharing with stakeholders, generally through one-way, non-iterative processes Consultation: The process of gathering information or advice from stakeholders and taking those views into consideration to amend plans, make decisions or set directions
Dialogue: An exchange of views and opinion to explore different perspectives, needs and alternatives, with a view to fostering mutual understanding, trust and cooperation on a strategy or initiative Corporate Social Responsibility (CSR): A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders. Other terms used to refer to the same concept include CESR (corporate environmental and social responsibility), corporate citizenship and corporate responsibility
Engagement: An organisation’s efforts to understand and involve stakeholders and their concerns in its activities and decision-making processes
Partnerships: In the context of corporate social responsibility interactions, partnership has been defined as “people and organisations from some combination of public, business and civil constituencies who engage in common societal aims through combining their resources and competencies”3 sharing both risks and benefits
Sustainable Development: First popularised in the 1980s by the Brundtland Commission report, Our Common Future, which proposes that for development to be sustainable it should “meet the needs of the present without compromising the ability of future generations to meet their own needs”
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