{"id":26641,"date":"2021-02-28T10:30:35","date_gmt":"2021-02-28T05:00:35","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=26641"},"modified":"2021-02-27T15:43:21","modified_gmt":"2021-02-27T10:13:21","slug":"factors-that-influence-corporate-governance-in-india","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/factors-that-influence-corporate-governance-in-india\/","title":{"rendered":"Factors that Influence Corporate Governance in India"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The corporate Governance in India states the set of processes, principles, &amp; systems that control the company. On this basis, these processes, principles, &amp; guidelines controls company &amp; direct the decisions to meet its goals &amp; objectives. It also helps the company to reap more value and proves productive for all the stakeholders in the long term. In this write-up, you will learn about the factors affecting corporate Governance along with its objectives.<\/p>\n\n\n\n<p>Corporate Governance in\nIndia is not just a legal compliance but is a need to ensure the right balance\nbetween economic &amp; social goals and between individual &amp; communal\ngoals. Corporate Governance is about advocating transparency, corporate\nfairness &amp; accountability. It is about working legitimately and striking\nthe right balance between economic and social goals. It encompasses the ability\nto function profitably while staying in line with existing regulations.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/factors-that-influence-corporate-governance-in-india\/#Elementary_Principles_Related_to_the_Corporate_Governance_in_India\" >Elementary Principles Related to the Corporate Governance\nin India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/factors-that-influence-corporate-governance-in-india\/#Scope_Application_of_the_Corporate_Governance_in_India\" >Scope &amp; Application of the Corporate Governance in\nIndia&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/factors-that-influence-corporate-governance-in-india\/#Factors_Affecting_Corporate_Governance_in_India\" >Factors Affecting Corporate Governance in India&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/factors-that-influence-corporate-governance-in-india\/#Shareholders_Expectation_from_Corporate_Governance\" >Shareholders Expectation from Corporate Governance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/factors-that-influence-corporate-governance-in-india\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Elementary_Principles_Related_to_the_Corporate_Governance_in_India\"><\/span>Elementary Principles Related to the Corporate Governance\nin India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Elementary\nprinciples related to corporate Governance in India are as follows;<\/li><li>Good\ncorporate Governance aims to carry the business activities with all fairness,\nintegrity.<\/li><li>It\nmakes sure all that transactions remain as transparent as possible.&nbsp;<\/li><li>The\ncompany makes all the decisions &amp; disclosure within the legal framework.<\/li><li>It\ntakes responsibility &amp; accountability towards the stakeholders. Commit to\ncarrying business activities with all integrity and fairness.&nbsp;<\/li><li>Given\nSEBI reports regarding the essentials of Corporate Governance, the company&#8217;s\ncontroller must be able to draw a thick line between personal and corporate\nfunds.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Scope_Application_of_the_Corporate_Governance_in_India\"><\/span>Scope &amp; Application of the Corporate Governance in\nIndia&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The scope of Corporate\nGovernance in India includes collecting processes, procedures, &amp; provisions\nthrough which the company operates &amp; controls. It refers to the mechanism\nby which an organization manages and directs its affairs. Business ethics play\na vital role in Corporate Governance &amp; it is the substantial factor\ninfluencing Corporate Governance.<\/p>\n\n\n\n<p>The ideal model of\nCorporate Governance excels on the globally accepted principles of corporate\nGovernance. As per the ideal model, the company conducts its business as per\nthe stakeholder&#8217;s desire to reap profits. Board of Directors (BODs) and other\nassociated committees are accountable for running the company and maintaining a\nbalance between individual and societal goals, and social goals, and economic\ngoals.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Factors_Affecting_Corporate_Governance_in_India\"><\/span>Factors Affecting Corporate Governance in India&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Corporate Governance is\nan ideal practice that comprises provisions &amp; procedures to manage the\norganization. It influences and gets influenced by various factors.&nbsp;These\nfactors can range from internal to external factors. Let us read more about the\nfactors affecting corporate Governance.<\/p>\n\n\n\n<p>The <em><strong>market factor<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Factor_market\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> can be considered as a perfect example of external factors; meanwhile, the practice of communication can be regarded as an example of internal factors.&nbsp;<\/p>\n\n\n\n<p>There are various models\nof corporate Governance there are active at present as per the affiliated\neconomic ecosystem and local laws. These have multiple problems as per the organization&#8217;s\naffairs and the influence of external factors.&nbsp;<\/p>\n\n\n\n<p><strong><em>Following are the viable factors that influence Corporate Governance in India&nbsp;<\/em><\/strong><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"626\" height=\"418\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/Factors-Affecting-Corporate-Governance.png\" alt=\"Factors Affecting Corporate Governance\" class=\"wp-image-26686\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/Factors-Affecting-Corporate-Governance.png 626w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/Factors-Affecting-Corporate-Governance-300x200.png 300w\" sizes=\"(max-width: 626px) 100vw, 626px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Shareholders\nActivism&nbsp;<\/h3>\n\n\n\n<p>Activist shareholders\ninfluence organizations to stamp approval for their proposal. Such individuals\nhave reason to believe that the proposal will improve equity&#8217;s market values.<\/p>\n\n\n\n<p>They may try out several ways to influence the board, such as leveraging legal proceedings and seeking representation on the board. Intimating their concerns with a member during shareholders&#8217; meetings or even in the public domain is another way practiced by activist shareholders to affect the decision making.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/variation-and-procedure-in-shareholders-rights\/\">Shareholders Right \u2013 Know Its Variations and Procedures of Modification<\/a><\/mark><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Legal\nEnvironment<\/h3>\n\n\n\n<p>Another factor that\naffects the bonding of an organization and its stakeholders is the existing\nlegal framework. The legal system affects the affairs of corporate Governance.<\/p>\n\n\n\n<p>Shareholders tend to\nhave improved protection in nations where common law is in existence. As per\nthis system, the previously held ruling can be considered as the rule of law.\nThis is not identical to the civil law system, where the law book&#8217;s rules have\nthe utmost authority. The compensation, punishment, and procedures are defined\nin the law book, and rulings depend on these established laws.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Hostile\nTakeover<\/h3>\n\n\n\n<p>The management acts as\nthe shareholder&#8217;s agent. The ultimate responsibility of the board is to serve\nthe shareholder&#8217;s interest. If the management fails to serve this purpose, the\nshareholders may go for the board&#8217;s replacement. Shareholders conduct such\ntasks with an aim to improve managerial performance for the sake of better\nresults.&nbsp;<\/p>\n\n\n\n<p>This threat keeps the\nmanagement under continuous pressure to act in the interest of the\nshareholders. Policies, practices, and procedures opted by the boards are\naffected by their alignment with the shareholder&#8217;s interest. This may act as a\nfactor to push the stakeholders back and to keep them in a disadvantaged\nposition. Good corporate governance principles anticipate that the board works\nlegitimately without being unbiased to anyone.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Shareholders_Expectation_from_Corporate_Governance\"><\/span>Shareholders Expectation from Corporate Governance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Businesses adhere to\nsocial responsibility to make profits in tandem with social welfare. To\nincrease the investor&#8217;s share value in the short-term, the company might opt\nfor unreasonable measures such as reducing expenditure on R&amp;D, putting off\nthe safety corners, stopping the funding for customer support activities, etc.\nThese steps will ensure the improved share value and meet the investor&#8217;s\nrequirement for a shorter timeframe.&nbsp;<\/p>\n\n\n\n<p>However, this is not\nprecisely what shareholders wish for.&nbsp;Shareholders seek a better return in\nthe shorter as well as longer-term. The increased return will ensure the\nincreased dividends. These goals cannot be accomplished without a perfect\nCorporate Governance model. Dissatisfied shareholders adversely affect Corporate\nGovernance, which leads to negative growth for a company.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For a smooth and better\ncompany&#8217;s operation, the MCA (Ministry of Corporate Affairs) has mandated good\nCorporate Governance. It keeps the stakeholders intact with the organization.\nThe company could focus on growth prospects and profit.&nbsp;<\/p>\n\n\n\n<p>The organization needs\nto stay in line with the fundamentals of corporate Governance to ensure stable\ngrowth. Taking utmost care of factors influencing corporate Governance paved\nthe roadmap for stakeholders&#8217; satisfaction.&nbsp;<\/p>\n\n\n\n<p>In case of overlooking the good corporate Governance, companies confront severe consequences such as disconnection with shareholders, drop in share prices, etc. Please share your doubts and question related to the working of Corporate Governance in India in the message box.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/shareholders-meeting-is-crucial-to-your-business\/\">Shareholders Meeting is Crucial to Your Business. Learn Why!<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The corporate Governance in India states the set of processes, principles, &amp; systems that control the company. On this basis, these processes, principles, &amp; guidelines controls company &amp; direct the decisions to meet its goals &amp; objectives. It also helps the company to reap more value and proves productive for all the stakeholders in the [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":26685,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[153],"tags":[1569],"acf":{"service_id":"215"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":11309,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/26641"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=26641"}],"version-history":[{"count":10,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/26641\/revisions"}],"predecessor-version":[{"id":26687,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/26641\/revisions\/26687"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/26685"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=26641"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=26641"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=26641"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}