What is Corporate Governance: Understanding the Process

Updated on Jan 31, 2025 08:04 IST
Jaya Sharma

Jaya SharmaAssistant Manager - Content

Corporate governance is the collection of processes, rules and laws for operating and managing businesses. Its principles help in the identifying responsibilities of different members of the corporation. It also ensures delegating responsibilities to the right candidate. Since this is an important part of the corporate structure, you can opt for online corporate governance courses. 

It is important for any organisation to resolve conflict of interest. Within corporate governance, actions are monitored. It is a method for aligning the interests of stakeholders. Corporate governance becomes effective when it is well-defined and ensures that the organisation functions ethically. 

Free Corporate Governance Courses

 

Principles of Corporate Governance

The following points highlight the principles of corporate governance:

  1. Each shareholder should be treated equally and fairly. They should know about their rights and how they should exercise them. 
  2. Important information must be conveyed to investors and members of the community. Any legal and social obligation towards non-stakeholders must be upheld.
  3. The board of directors should be accountable within corporate governance. They should maintain transparency and should appropriately review management practices.
  4. There should be a defined code of conduct for executives and board of members.
  5. Policies and procedures should be only disclosed to relevant stakeholders.  

Acts and Standards in Corporate Governance

Corporate governance has become significant to bring in equality in the corporate sector against abusing authority. Following acts and standards have been passed in order to make the corporate sector secure and fair for all:

  1. Sarbanes-Oxley Act is a 2002 US federal law that works against those who commit fraud by leveraging power. This was introduced to improve corporate governance in the United States. 
  2. The Gramm-Leach-Bliley Act monitors the use of private information by financial institutions. These organisations should explain how they are safeguarding and sharing customer’s personal information.
  3. Basel II is a standard for minimising the financial impact of risk-prone operational decisions. This standard considers the rights of shareholders. 

Purpose of Corporate Governance 

One of the primary purposes of the corporate governance is to manage conflict of interest. This conflict is often between higher management and shareholders. This is known as the principal-agent problem where both parties have different interests and opinions. On one hand, shareholders may seek positive returns on their investments. On the other hand, higher management might put profits behind other business interests.

Corporate Governance Practises in India

The organisation framework of initiatives related to corporate governance in India includes two entities. These are the Securities and Exchange Board of India (SEBI) and Ministry of Corporate Affairs (MCA). Listed companies are regulated under Clause 49 which has been incorporated in the listing agreement of stock exchanges. Listed companies must comply with the provision of clause.

Clause 49 of Corporate Governance

Initially, clause 49 introduced the fundamental corporate governance practices in Indian companies. This brought in changes in governance and disclosures. The clause specified the minimum number of the independent directors in the board of a company. It was mandatory to set up audit committees as well as shareholders’ grievance committees. It put a limit on the number of committees that one director could serve in.

2002

In 2002, the SEBI constituted a committee to assess the effectiveness of corporate governance practices. This committee had to suggest improvements in these practices. Based on the recommendations, SEBI released a modified Clause 49 that came into effect in January 2006.

  1. The revised clause focused on the protection of the interests of investors through improved governance practice. 
  2. It also clarified the independence criteria for directors as well as the responsibilities of the board. 
  3. There was a visible improvement in the quality and quantity of disclosures. 
  4. Responsibilities of the audit committee were consolidated in matters relating to financial reporting and internal controls. 
  5. It stressed on the accountability of the highest level of management. 

2008

In April 2008, SEBI amended the clause to extend the rule about 50% independent directors to each Board of Directors wherein the non-executive Chairman is the promoter or is related to promoters of the company.

In December 2009, at the first India Corporate Week, the Ministry of Corporate Affairs released new Corporate Governance Voluntary and Corporate Social Responsibility Voluntary guidelines.

Why Learn Corporate Governance?

One should plan to learn Corporate Governance for the following reasons:

corporate governance

Syllabus of Corporate Governance

The following topics are covered within the Corporate Governance course:

Section

Topic Area

Exemplification

A: Corporate Governance – Principles and Issues

Definitions and Issues in Corporate Governance

  • Origins and definitions of corporate governance
  • Theories of corporate governance
  • Shareholder primacy theory
  • Agency theory
  • Agency conflict
  • Agency costs
  • Stakeholder theory
  • Approaches to corporate governance
  • Shareholder value approach
  • Stakeholder approach
  • Inclusive stakeholder approach
  • Enlightened shareholder value approach
  • Principles of corporate governance
  • Responsibility
  • Accountability
  • Transparency
  • Independence
  • Participation
  • The corporate governance framework
  • Applicable laws, regulations, standards and codes
  • Rules-based approach
  • Principles-based approach
  • Hybrid approach
  • Concepts of comply or explain
  • Implementation of a governance framework
  • Organization purpose
  • Assimilation of governance practices
  • Organizational success
  • The importance of adopting good governance practices
  • Consequences of weak governance
  • Key issues in corporate governance
  • Composition of boards
  • Financial reporting
  • Stakeholder relation
  • Social responsibility and sustainability
  • Compensation of directors and senior executives
  • Shareholder and member engagement
  • Performance of directors
  • Risk management
  • Technology and information governance
 

History of Corporate Governance in Canada

  • Background\
  • The Dey Report
  • The Kirby Report
  • The Saucier Reports
  • National Policy 58-201 & National Instrument 58-101
  • Other Financial Disclosure Rules
  • Future Directions
 

Governance in other countries and other sectors

  • Governance in US - SOX & Dodd-Frank5
  • Governance in UK – Cadbury to 2018
  • Governance Code
  • Governance in Germany, Japan, China
  • Global principles of corporate governance
  • Governance issues in developing and emerging markets
  • Governance in other sectors
  • Financial institutions
  • Public sector
  • Not-for-profit sector 
  • Governance for family-controlled companies
 

Role of the Company Secretary/ Governance Professional in Corporate Governance

  • The corporate secretary and corporate governance
  • The requirements for a corporate secretary
  • The role of the corporate secretary
  • The corporate secretary as the ‘conscience of the company'
  • The Corporate Secretary: Building trust through governance
  • Qualifications and skills
  • Position in the organisation
  • Independence of the corporate secretary
  • Liability of the corporate secretary
  • Inhouse v. outsource corporate secretary

B: The Board of Directors and Leadership

Directors’ Duties and Powers

  • Powers of directors
  • General duties of directors under the CBCA
  • Duty to act within powers and for proper purposes
  • Duty to promote the success of the company
  • Duty to exercise independent judgement
  • Duty to exercise reasonable skill, care and diligence
  • Duty to avoid conflicts of interest
  • Duty not to accept benefits from third parties
  • Duty to declare interests in transactions
  • Who can bring an action for a breach of the general duties
  • Fraudulent and wrongful trading
  • Directors’ and officers’ insurance
 

Role and Membership of the Board

  • Role of the board
  • Matters reserved for the board
  • Role of the chair
  • Role of the chief executive officer
  • Separation of the roles of chair and chief executive
  • Non-executive directors – role and independence
  • Non-executive directors – effectiveness
  • Senior independent director
  • Board committees and NED
  • Role of the Corporate Secretary
 

Board Composition and Succession Planning

  • Board size
  • Balance of skills, knowledge and experience
  • Diversity
  • Nomination committee
  • Appointments to the board
  • Accepting an offer of appointment
  • Succession planning
  • Refreshing board membership
  • Annual Re-election
 

Board Effectiveness

  • Decision-making processes
  • Supply of information
  • Board portals and electronic board papers
  • Use of social media by boards
  • Corporate culture
  • Independent professional advice
  • Performance evaluation
  • On boarding and Professional Development

C: Disclosure

Financial Reporting to Shareholders and the External Audit

  • Financial reporting
  • Requirements for financial reporting
  • Investor confidence in financial reporting
  • The role of the board in financial reporting
  • Role of the corporate secretary in financial reporting
  • Audit committee requirements
  • Role and responsibility of the audit committee
  • Meetings of the audit committee
  • Audit committee relationship with the board
  • Audit committee relationship with shareholders
  • Audit committee report
  • Role of the corporate secretary in relation to the audit committee
  • External auditor
  • Role of the external auditor
  • Auditor independence
  • Non-audit services
  • Auditor rotation
  • Role of the corporate secretary in relation to the external auditors
 

Corporate Social Responsibility, Sustainability and Business Ethics

  • Definition of corporate social responsibility (CSR)
  • History of CSR
  • The business case for CSR
  • Categories of CSR activity
  • CSR frameworks
  • Integrated thinking
  • Advising the board on being socially responsible
  • Sustainability
  • Advising the board on planning for sustainability
  • Business ethics
  • The role of the corporate secretary in building an ethical culture
  • Difference between business ethics, corporate responsibility and sustainability
 

CSR and Sustainability Reporting on non-financial issues

  • CSR reporting and the law
  • Drivers for voluntary CSR reporting
  • Measuring CSR initiatives
  • Triple bottom line reporting
  • Integrated reporting
  • Global Reporting Initiative
  • Sustainability Accounting Standards Board
  • IIRC integrated reporting framework
  • Corporate Reporting Dialogue
  • CSR benchmarking
  • External assurance
  • Environmental Profit & Loss Accounts
  • The corporate secretary’s role in CSR reporting

D: Risk Management and Internal Control

Risk Management and Internal Control Systems

  • The Nature of Risk
  • Internal Control System
  • The Canadian Corporate Governance Framework
  • The Turnbull Committee Report on Internal Control
  • The Role of Internal Audit
  • Risk Management
  • The Role of the Board (or Audit Committee) in Risk Management and internal controls
  • Risk Management Committees
  • Common failures of boards
 

Risk structures, policies, procedures and compliance

  • Governance structures and players
  • Policies and procedures
  • Whistleblowing
  • Cybersecurity
  • Information Governance
  • Disaster recovery plans
  • The Corruption of Foreign Public Officials Act
  • Conflict prevention and resolution
  • Senior Executive Compensation and Risk

E: Corporate Governance Systems, Controls and Issues

Shareholders’ and Members’ Rights and Engagement

  • Definitions
  • Separation of Ownership and Control
  • The relationship between the board and shareholders
  • Shareholder Rights
  • Common abuse of shareholder rights
  • Shareholder expectations
  • Institutional shareholder responsibilities
  • Proxy Advisor Influence
  • Responsible Investment v. socially responsible investment
  • Member Rights in the NFP world
 

Board Engagement with Shareholders and other Stakeholders

  • Shareholder engagement
  • Annual general meetings
  • Electronic communication
  • Engagement with other stakeholders
  • CBCA requirements to consider other stakeholders
  • The role of the Governance Professional in Stakeholder Engagement
 

Compensation of Directors and Senior Executives

  • Compensation as a corporate governance issue
  • Elements of compensation for executive directors and senior executives
  • CCGG Principles on compensation
  • Compensation committee
  • Compensation Disclosures for public companies
  • Directors’ compensation policy
  • Compensation for loss of office and rewards for failure
  • Listing Rule provisions on long-term incentive schemes

Online Courses To Learn Corporate Governance

Students can enrol in the following courses to learn Corporate Governance in detail:

Course Name

About The Course

Masterclass on Corporate Governance

This course helps in understanding the concepts of Corporate Governance and related regulations. Relevant corporate governance practices will be discussed in this course along with the significance of the practices.

Certified Corporate Governance Professional 

This course aims to transform learners into skilled corporate government professionals. Corporate governance principles, models of corporate governance, Stock Exchange Listing Standards  and Sarbanes-Oxley Act of 2002 will be covered in this course.

Fundamentals of Ethics Corporate Governance and Business Law 

Business Ethics and Ethical Conflict, Corporate Governance Controls and Corporate Social Responsibility, General Principles of the Legal System Contract and Employment Law and Company administration will be covered in this course.

PMQ Course In Corporate Governance 

This course is offered to the members of ICSI so that they can gain expertise in good corporate governance practice and apply their principles. Conceptual Framework of Corporate Governance, Board Effectiveness and Its Processes Board Committees, Internal Control and Risk Management System, Transparency and Disclosures and Legislative Framework of Corporate Governance in India will be covered in this course. 

Corporate governance is a type of system through which companies are directed and controlled. Board of directors are the ones that are involved in the governance of their companies. The role of shareholder is in the governance to appoint the directors and auditors. Effective corporate governance helps companies in maintaining integrity, make better decisions for the company and create a long-term value for the stakeholders. All this is done while being legally and ethically compliant.

Explore more corporate governance courses

Popular Corporate Governance Colleges in India

Following are the most popular Corporate Governance Colleges in India. Learn more about these Corporate Governance colleges (Courses, Reviews, Answers & more) by downloading the Brochure.
1 Course
24.2 L
25 LPA
90 K
5.0
2 L - 10 L
7.25 LPA

Banking, Finance & Insurance Applications open. Apply Now

5 Courses
3.1 L - 20.77 L
15 LPA
6.75 L
6.8 LPA
4 Courses
540 - 27.5 K
10.2 LPA

Popular Private Corporate Governance Colleges in India

2 Courses
10.85 L
5.0

Banking, Finance & Insurance Applications open. Apply Now

3 L - 9 L
5.15 - 7.78 LPA

Banking, Finance & Insurance Applications open. Apply Now

1 Course
14.72 L
4.0
75 K
10 Courses
1.2 L - 4 L
3.8

Banking, Finance & Insurance Applications open. Apply Now

3.4 L - 3.71 L
3.6 - 4.5 LPA

Popular Corporate Governance Specializations

Following are the most popular Corporate Governance Specializations . You can explore the top Colleges offering these Specializations by clicking the links below.

Popular Specializations

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Andaman & Nicobar--------0101
Andhra Pradesh1811240843105
Arunachal Pradesh--03----0710
Assam050818063875
Bihar35016323115237
Chandigarh05--09032239
Chhattisgarh1235061056119
Dadra and Nagar Haveli and Daman Diu--------0505
Delhi36197225116268
Goa--0304032535
Gujarat15336122105236
Haryana36--491887190
Himachal Pradesh170212063067
Jammu & Kashmir010105021120
Jharkhand071608063370
Karnataka753910844191457
Kerala1101460741106
Ladakh--------0303
Lakshadweep----------0
Madhya Pradesh51725034147354
Maharashtra605015857265590
Manipur--01----0506
Meghalaya--01----0203
Mizoram--------0303
Nagaland--01----0506
Odisha1621130849107
Puducherry----01--0708
Punjab124--8539156404
Rajasthan3326402086205
Sikkim--0101--0305
Tamil Nadu1430317757285665
Telangana1811160851104
Tripura0204--011219
Uttar Pradesh267113281225181246
Uttarakhand04--02022129
West Bengal76147031140331
Total1068388142656226846128

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