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Corporate Governance states the set of principles, processes, and systems that regulate the Company. On the basis, these principles, processes, and guidelines company directs and control the decisions to fulfill its goals and objectives, to add the value to the company and proves beneficial for all the stakeholders in the long term. Further, in this blog, we will try to understand the essentials of corporate governance. Who are the stakeholders? How corporate Governance in India affects these stakeholders.
Corporate governance states the collection of procedures, processes, and relations through which the company controls and operates. It refers to the mechanism by which the company directs and manages its affairs. As per the good corporate governance, the company carries out the business according to the stakeholders’ desire to earn profits. Board of directors and other related committees responsible to run the organization conduct these business decisions to maintain a balance between individual & societal goals, and economic & social goals.
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Stakeholders include various people ranging from members of the company, members of the general public, elected officials, etc. The list includes:
There is a social responsibility of business to make profits along with social welfare.
To increase the share value of the investors in the short-term, company may take some irrational steps such as putting off the safety corners, or reducing expenditure on research and development, or compromising with the workplace safety, or stopping the customer support, etc.
But these will only create a short-term increase in the share value and satisfy the investors. However, this is not what shareholders want. Any shareholder invests his or her money, once they have trust in a company as a whole. These shareholders want better returns but not only in the short run. They are looking for steady and increasing dividends out of their investments.
And this all will only be possible with the perfect essentials corporate governance of a company involved.
The company must look to protect and ease the way to exercise the rights of shareholders. Below are the rights of shareholders-
We will further discuss these elementary principles of good corporate governance-
Corporate governance plays an important role in every company. Let’s see how it is important for an organization-
If the company is practicing good corporate governance in India, it ensures lots of benefits to the Company-
There is an institutional framework for corporate governance in India that lay out the constitution of Corporate Governance. Below is the list of noticeable forums and institutions of corporate governance-
For the smooth and better operation of the company, the Ministry of Corporate Affairs has mandated good corporate governance in India. It keeps the stakeholders intact with the company. The company could focus on long-term growth and huge profits. The company needs to follow the fundamental principle of the essentials of corporate governance for better profits and keep the shareholders happy. In case of not practicing the good corporate governance, companies face brutal consequences, losing their shareholders, drop in share prices etc.
Read our article:Corporate Governance Failures from the Global and Indian Perspective
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