What is Corporate Governance?
The manner in which the company is managed and controlled is termed corporate governance. It can be also termed as a blueprint of a company which completely explains its each and every step to direct it towards its objectives. Its main objective is to carry on all the business activities in the interest of its stakeholders.
Corporate governance is completely managed and controlled by the company’s director team and concerned team solely for its stakeholder’s benefit. It is all about bringing the balance between societal & individual goals, and also, social and economic goals.
It may be defined as the meeting between the various stakeholder of the company (directors team, shareholders & management team of the company) whose main purpose is to direct the company towards its pre-decided goals.
Scope of Corporate governance in India
- If the corporate governance of the company is proper it will ultimately lead to better economic growth and more success rate.
- Better corporate governance helps in getting the confidence of the investor which will ultimately help the company in raising and acquiring the capital fast and effectively.
- It also lowers the cost of the capital that is required for investment.
- It also helps in increasing the share price of the company.
- Proper corporate governance help in attaining efficiency and also minimizes mismanagement, risk, and corruption.
- It plays in building up the goodwill of the corporation.
- It helps in managing and running the operations in the organization according to the interest of all of its stakeholders.
Issues of Corporate Governance in India
There are some problems also with corporate governance as it needs to achieve the objective of each and every one of its stakeholders. The goals of each of its stakeholders should be considered and neither of them should be undermined. Some of the common issues are discussed below :
Interest May Be Conflicted
Interest may be conflicted when the one who has a controlling power has some financial interest that could affect his decision making and may also conflict with the company’s objectives. This will ultimately lead to a clash between different members and will affect the normal working environment of the organization.
Issues of the oversight
For proper corporate governance to be effective the directors’ team of the company should have proper sight over the company’s processes. There should be the proper mechanism through which each and every task of the corporation should be monitored otherwise it will endanger the normal growth of the business.
Issues Of The Accountability
Accountability is something that is necessary for the proper functioning of corporate governance. From a high-level position to lower-level positions job, role and accountability should be clearly mentioned, So, that there is no confusion among the members. Accountability of each part of the corporation should be clearly defined otherwise it will endanger the success rate of the company or investors demotivating them for their investment.
Issues Of Transparency
For bringing transparency in the organization corporation must make accurate and fair reporting of their profit and loss and should present a true picture of it to those who invest in the company. Manipulating figures can seriously damage the company’s relationship with its stakeholders and also may lead to a fine from various regulatory agencies.
Corporate governance serves as one of the parameters for the finance providers as through it they make sure of getting a fair return on their investment. It also removes the confusion between the duties of the owners and managers. As if the duties of owners and managers are not clearly mentioned it will affect the progress of the company. It helps in making better strategic decisions.
For a healthy organization and non-existence of any conflict in the organization, the owner must make sure that there is mutual consent among all the members. These all above mentions dimensions which directly affect the corporate governance of the company should not be overlooked.