Principles of Corporate Governance

The key pillars of corporate governance are discussed below:

1.    Transparency. Transparency means accurate, adequate and timely disclosure of relevant information to the stakeholders. Without transparency, it is impossible to make any progress towards good corporate governance. Transparency and disclosure provide all the stakeholders with the information necessary to judge whether their interests are being taken care of. But many times, information-sharing is hindered under the excuse of confidentiality. There is need to move towards international standards in terms of disclosure of information by the corporate sector and through all this to develop a high level of public confidence in business. Once a company has public shareholding, it is imperative that is commitment to financial transparency must be total.

2.    Accountability. In good corporate governance, accountability is of great importance. The chairman, board of directors and chief executive of the company must fulfill their accountability to the shareholders, customers, workers, society and the government. Since they have considerable authority over the use of the company’s resources, it is natural that they should accept accountability for all their decisions and actions.

3.    Independence. For good corporate governance, the board of directors of the company has to be an independent, strong and non-partisan body where all decision-making is based on business prudence. Corporate governance is much broader than corporate management. Corporate governance ensures that long-term strategic objectives and plans are established and that the proper management structure (organization, system and people) is in place to achieve those objectives. It should also be ensured that the management functions to maintain the company’s integrity, reputation and responsibility to its various stakeholders. Further, the Complaints Act now provides for constitution of Audit Committee in every company to ensure independent review and control of financial matters of the company.

4.    Reporting. Good corporate governance also involves adequate reporting to the shareholders and others stakeholders. For instance, a company should publish its quarterly, half-yearly and yearly performance and performance and operating results in newspaper. It should share the details of directors and other prominent officials of the companies in the company’s annual reports. It should also report to the shareholders the functioning of various committees set up by the Board f Directors for efficient administration.

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