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Manpreet Kaur, Lovely Professional University Unit 11: Corporate Governance

Unit 11: Corporate Governance Notes

CONTENTS
Objectives

Introduction
11.1 Corporate Governance

11.1.1 Need of Corporate Governance
11.1.2 Features of Good Corporate Governance
11.2 Corporations as Social Entity

11.3 Corporate Managers as Trustees
11.4 Corporate Managers as Protectors of Interests
11.5 Corporate Governance in the Indian Scenario

11.6 Summary
11.7 Keywords
11.8 Review Questions

11.9 Further Readings

Objectives

After studying this unit, you will be able to:
Define corporate governance;

Describe corporate manager as trustee;
Explain corporate governance in the Indian scenario.

Introduction

Corporate governance became a dominant business topic in the wake of the spate of corporate
scandals of midyear 2002-Enron, Worldcom and Tyco, to name a few. Interest in corporate
governance is not new, but the severity of the financial impact of these scandals undermined the
confidence of both the institutional and the individual investor and heightened concerns about
the ability and resolve of private enterprises to protect their stakeholders. The crisis in confidence
in the corporate sector contributed to the downward pressure on stock prices worldwide and
particularly in the United States. In the first six months of 2002, the S&P 500 fell 16 percent, the
technology heavy NASDAQ fell 36 percent. The U.S. government intervened, and new legislation
required CEOs to personally attest to the accuracy of their firms’ accounts and report results
more quickly. Simultaneously, corporate America increased the level of self-regulation.

11.1 Corporate Governance

Corporate governance consists of the set of processes, customs, policies, laws and institutions
affecting the way people direct, administer or control a corporation. Corporate governance also

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