Synopsis Corporate Governance of Kalyan Final 09-06-115.30

7/30/2019 Synopsis Corporate Governance of Kalyan Final 09-06-115.30

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Proposed Research Work for Major Research Project On

A STUDY ON INDIAN CORPORATE GOVERNANCE PRACTICES

Submitted to

University Grants Commission

NewDelhi


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A STUDY ON INDIAN CORPORATE GOVERNANCE PRACTICES

INTRODUCTION:

Corporate Governance is a weapon to safeguard the interests of the stakeholders.

During the past ten years, it got tremendous importance when all most all countries

joined in the WTO. All the member countries opened their economies to the MNCs to

operate in their countries. Some of the firms could not compete with the competition and

slowly disappeared from the market by violating the rules and regulations. For the past

ten to twenty years, number of firms particularly in the financial and manufacturing

sector failed to meet the requirements of the law. Enron, US based firm is one of the

examples for non compliance of International Accounting Standards. Like Enron, some

many firms in various economies violated the Law and became insolvent. Corporate firm

when they become insolvent, shareholders will be severely affected. Shareholders are the

real owners of the corporate firms, the Board of Directors and Management should be

responsible for the management of funds invested by the shareholders. There is a

division of ownership in the corporate world, shareholders who are real owners of the

firm invests funds, but never participate in the day to day affairs of the firm. The

Board of Directors, who is elected by the equity shareholders, will take the responsibility

of managing the firm on behalf of the shareholders. Its not a new concept; it was

implemented earlier also to safeguard the interest of the stakeholders.

As we are aware, Corporate Governance, as a subject of significance for both

public policy and markets, is of recent origin. it is useful to recognize that it is a dynamic

concept, in terms of scope, thrust and relevance. The issue is approached very differently

today compared to original view of the Cadbury Committee on the subject. East Asian

crisis gave a new dimension to Corporate Governance in the context of financial stability.

In the USA, the regulatory regimes, post corporate scandals are very different fromthose of the early 90s. The OECD set out its Corporate Governance principles in 1999

but revised them in 2004. The formal policy announcement in regard to Corporate

Governance was first made by distinguished Former Governor of RBI, Dr Bimal Jalan in

the mid term review of the Monetary and Credit Policy on 21 st October, 2001. Pursuant

to this announcement, a Consultative Group was constituted in November, 2001 under


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the Chairmanship of Dr. A.S. Ganguly; basically, with a view to strengthen the internal

supervisory role of the Boards. An advisory Group on Corporate Governance under the

chairmanship of Dr R.H. Patil had earlier submitted its report in March, 2001 which

examined the issues relating to Corporate Governance in Indian Firms and made

recommendations to bring the governance standards in India on par with the best

international standards.

ORIGIN OF THE RESEARCH PROBLEM:

There has been renewed interest in the corporate governance practices of modern

corporations since 2001, particularly due to the high-profile collapses of a number of

large corporations, most of which involved accounting fraud. Corporate scandals of

various forms have maintained public and political interest in the regulation of corporate

governance. In the U.S., and India these include Enron Corporation and MCI Inc.

(formerly WorldCom), Satyam, Lehman Brothers etc,.

So the Research problem would be

To compare the existing Corporate Governance Practices with the other countries

To study and understand the reasons for the corporate scams suggest the best practices for

firms.

INTERDISCIPLINARY RELEVANCE:All economic activity requires good corporate governance to maximize the benefits to

society. Corporate governance encompasses the relationships between all stakeholders in

determining the strategic direction and performance of organizations.

Corporate Governance is Interdisciplinary in nature . These disciplines include

accounting, financial economics, management and law. The sum of these disciplines is an

appreciation of the economic, legal, financial, managerial and social aspects of


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governance. Corporate governance entails how organizations are controlled; how they

respond to various stakeholders (e.g. owners, employees, customers, regulators); how

they are financed; and how they report on their financial and social performance. The

multi-disciplinary approach will make a unique and innovative contribution to economic,

social and legal debate about what constitutes sound corporate governance in the

development of socially and economically beneficial organizations.

Financial aspects of corporate governance, including the economic impact of outside

directors and auditors is being addressed and Corporate governance in financial

institutions, especially its role in effective risk management, Legal and ethical aspects.

Social aspects of governance, including an examination of unresolved political and social

issues that arise from notions of stakeholder relations and triple bottom line

reporting.Corporate Governance focuses upon developing cross-disciplinary participation,

addressing key issues of corporate governance on several dimensions:

Corporate governance and economic activity

Corporate governance and performance measurement

Comparative corporate governance across national and economic boundaries

Corporate governance and legal, regulatory and ethical accountability

REVIEW OF RESEARCH AND DEVELOPMENT IN THE SUBJECT:

** Greer Lesley and Tonge, Alyson (2006) made a note that The Department of

Company Affairs had set up a National Foundation For Corporate Governance in

partnership with CII, ICAI, ICSI. Ultimately, Corporate Governance in any country

can be improved by making corporate operations more transparent, without

sacrificing business strategy and secrets. Which are absolutely necessary for success

in the Competitive market place.

*** Das and Ghosh (2004) indicate that the adverse effect of regulation on Corporate

Governance mechanisms occurs when regulation restricts concentration of ownership.


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** Greer Lesley and Tonge, Alyson (2006) Ethical Foundation : A New Frame

Work for Reliable Financial Reporting, Business Ethics A European View.

July,Vol.15,No.3.

**** Arun and Turner(2004) describes the Corporate Governance in banks has

heightened interest and is a result of (a) an overwhelmingly dominant position in

Indian Financial Systems, and being an important engine of economic growth (b)

banks being the most important source of finance, and (c) banks has the main

depositories for the economys savings.

***** Nagarajan (2006) made a note that Liberalization and deregulation of industry

and business demanded a new corporate ethos to satisfy various types of stakeholders

along with a paved social development.

****** Bhasin(2008) made a note that Corporate Governance being a complex issue

dealing with cultural, political, technological and market valuations cannot find a

strong footing unless the banks set a sound strategic objective in values and Ethics .

===========================================================

***** Nagarajan (2006) Corporate Governance-Current Scenario in India , The

Management Accountant , November 2006, Pg:864-866.


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****** Bhasin(2008) Using Dharma in Corporate Governance : Problem of

increasing Transparency in the Asian Countries , GITAM Journal of Management ,

Vol.6 ,No.4, Oct-Dec, Pg: 52-81.

INTERNATIONAL STATUS:

Corporate Governance is an international matter. This is seen especially with the current

initiatives by many countries around the world to investigate the reasons for the global

economic crisis and to identify how to avoid them in the future. . Topics like diversity,

board member education and board effectiveness are discussed in many industrial nations

as well as on regional and global level.

Taking a look at corporate governance developments in other countries is not only

interesting for those responsible for corporate governance in multinational companies.

German corporate governance rules and regulations tend to follow global trends, so that

taking a look at a global level can indicate further developments in the German corporate

governance landscape.

The European Commission has adopted a Green Paper on European corporate

governance which launches a public consultation on options to improve existing

corporate governance mechanisms. The Green Paper contains three chapters: boards,

shareholders and the comply-or-explain principle. It allows all interested parties to see

which areas the Commission has identified as relevant in the field of corporate

governance. It is also an opportunity for the public to express their views on the questions

raised, and to provide any relevant material. The period of consultation ends on July 22,

2011.


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NATIONAL STATUS:

According to Milton Friedam, corporate governance is to conduct the business in

accordance with owners or shareholders desires, which generally will be to make as

much money as possible but this context is based on marked maximization that

underpins shareholder capitalism. But this context was further expanded by

J.Wolfensohn, president, World Bank, has said that corporate governance is about

promoting corporate fairness, transparency and accountability.

Even the Experts at Organization of Economic Co-Operation and Development (OECD)

have defined corporate governance as the system by which business corporations are

directed and controlled, it means according to them it is a structure which specifies the

distribution of rights and responsibilities among different participants in the corporation.

But today the concept of corporate governance has taken a new dimension and it runs as

follows, Corporate governance is the application of best management practices,

compliance of law in true letter and spirit and adherence to ethical standards for effective

management and distribution of wealth and discharge of social responsibility for

sustainable development of all stakeholders.

ave put the spotlight on corporate governance practices of Indian companies. A key

aspect that is being


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SIGNIFICANCE OF THE STUDY:

Corporate Governance is the set of processes, customs, policies, laws and

institutions affecting the way a corporation is directed, administered or controlled.

Corporate Governance also includes the relationships among the many stakeholders

involved and the goals for which the corporation is governed. The principal stakeholders

are the shareholders, management and the board of directors. Other stakeholders include

employees, customers, creditors, suppliers, regulators and the community at large.

Corporate Governance (CG) can be viewed from two angles. One being transparency in

the corporate functioning, thus protecting the investors interests and the other being

concerned with having a sound risk management system in place. Though various

accepted definitions of CG finds reference, the standard definition stemming from agency

theory defines it as to how equity and debt holders can influence managers of a firm to

act in the best interest of those who provided capital.

With the advent of competition and globalization, MNCs role is vital in developing an

economy. It is obvious that Indian Companies are playing significant role in developing a

nation and with the entry of foreign and domestic players in our country, the degree of

competition has been rapidly increasing.


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OBJECTIVES OF THE STUDY

Though the present Corporate Governance principles are much helpful in safeguarding

the interests of the stakeholders a lot but there are some firms in our country still could

not comply the requirements of the law this motivated me to study the pros and cons of

existing structure of Corporate Governance. The primary objective of the study is to

examine the various Corporate Governance practices in India .However the detailed

objectives are as follows: -

To Study the Corporate Governance mechanisms in Indian Firms.

To study the role of stakeholders in Corporate Governance.

To study the impact of scams on retail investors in Corporate Governance.

To study and discuss Corporate Governance practices in other countries.

To study the impact of Corporate Governance practices on Corporate Social

Responsibility (CSR) in Indian Firms.

RESEARCH METHODOLOGY

Sources of Data

The study makes use of Primary and Secondary sources of data.

The Primary data collection methods include the following:-

Observational studies

A well structured questionnaire will be administered on the respondents and

Interviewing the stakeholders like board of directors, management, employees.

The Secondary data collection methods consists of

News papers

Journals

Internet

Annual Reports of banks


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Corporate Governance Reports of banks

Data Analysis

The data will be analyzed with the help of percentages, means, bar charts, piediagrams, correlation, regression and other appropriate statistical tools and

techniques.

Scope of the Study

The Scope of the study is wide from a Concept point of view, because it covers major

aspects of Corporate Governance Practices. However from an empirical point of view

the study is narrow. On the aspect of Corporate Governance Practices and, the studyconfines to different firms in India. The study confines to select Companies in India

to identify the practices of Corporate Governance.

Period of Study

The time period of the Study 2 years.

Limitations of the Study

The proposed study has some limitations. They are

. It is confined to Indian Firms .

. Time & Cost factors could be mentioned as other limiting factor

YEAR WISE PLAN OF WORK AND TARGETS TO BE ACHEIVED

Sl.

No

ACTIVITY DURATION

1. Review of Literature /Referring Journals/Dissertations / Research Papers/WorkingPapers

3 Months

2. Secondary Data Collection 6 Months

3.Primary Data Collection and Data Analysis 9 Months


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4.

Interpretation 4 Months

5.Report Writing 2 Months

FINANCIAL ASSISTANCE REQUIRED:

SI.No

Item Estimated Expenditure

1.

Project Fellow @ Rs8000/- p.m +HRA 250000

2.

Field work and travel 200000

3.

Contingency 50000

4.

Books and Journals (including e-journalss) 300000

5.

Equipment System (2nos), printers (2nos),Internet AccessTOTAL 1000000

Documents

Synopsis Corporate Governance of Kalyan Final 09-06-115.30