Chapter 11 Corporate Governance Forums – CS Professional Governance, Risk Management, Compliances and Ethics Notes is designed strictly as per the latest syllabus and exam pattern.
Corporate Governance Forums – Governance, Risk Management, Compliances and Ethics Study Material
Question 1.
Write short note on the following:
National Foundation for Corporate Governance. (June 2012, 3 marks)
Answer:
National Foundation for Corporate Governance:
With the goal of promoting better corporate governance practices in India, the Ministry of Corporate Affairs, Government of India, has set up National Foundation for Corporate Governance in partnership with confederation of Indian Industry, Institute of Company Secretaries of India, Institute of Chartered Accountants of India, ICWAI and the National Stock Exchange.
Mission of NFCG:
(i) To foster a culture for promoting good governance, voluntary compliance and facilitate effective participation of different stakeholders;
(ii) To create a framework of best practices, structure, processes and ethics.
NFCG endeavours to built capabilities in the area of research in corporate governance and to disseminate quality and timely information to concerned stakeholders. It works to foster partnerships with national as well as international organizations.
Question 2.
Write short note on the following:
ICSI Motto, Vision Statement and Mission Statement (Dec 2018, 2 marks)
Answer:
Motto of ICSI
Speak the Truth, Abide by the Law
Vision statement of ICSI
To be a global leader in promoting Good Corporate Governance
Mission statement of ICSI
To develop high calibre professionals facilitating good Corporate Governance.
Question 3.
Write short note on:
Mission and objectives of International Corporate Governance Network (ICGN). (Dec 2020, 3 marks)
Answer:
The International Corporate Governance Network (“ICGN”) is a not-for-profit company limited by guarantee and not having share capital under the laws of England and Wales founded in 1995.
ICGN’s mission is to promote effective standards of corporate governance and investor stewardship to advance efficient markets and sustainable economies world-wide.
ICGN’s positions are guided by the ICGN Global Governance Principles and Global Stewardship Principles, which were first published in 2003, as a statement on shareholder stewardship responsibilities both of which are implemented by:
- Influence policy by providing a reliable source of investor opinion on governance and stewardship;
- Connect peers at global events to enhance dialogue between compani >s and investors around long term value creation; and
- Inform dialogue through education to enhance the professionalism of governance and stewardship practices.
It has four primary purposes:
- to provide an investor-led network for the exchange of views and information about corporate governance issues internationally;
- to examine corporate governance principles and practices; and
- to develop and encourage adherence to corporate governance standards and guidelines;
- to generally promote good corporate governance.
Question 4.
Organisation for Economic Co-operation and Development (OECD) defines corporate governance as “a system by which business corporations are directed and controlled.” In the light of this statement, enumerate the principles of corporate governance as evolved by OECD. (June 2012, 6 marks)
Answer:
OECD has defined corporate governance to mean “a system by which business corporations are directed and controlled
Thus corporate governance structure specifies the distribution of rights and responsibilities among different participants in the company such as board, management, shareholders and other stakeholders, and spells out the rules and procedures for corporate decision making. By doing this, it provides the structure through which the company’s objective are set along with the means of attaining these objectives as well as for monitoring performance.
As the globalisation expanded to make the world more interdependent, the need for internationally accepted forms of corporate governance become more apparent and found expression in private sector, public sector and the Government Thinking. The focal point of official efforts has been the OECD principles of corporate governance endorsed by OECD ministry in May 1999 and thereafter revised in 2004.
The following principles are covered with the respective areas by OECD:
- They call on government to have in place an effective institutional and legal framework to support good corporate governance practices by insuring the basis for an effective corporate governance framework which is to be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities to provide transparent and efficient markets.
- They call for a corporate governance framework that protect and facilitates the exercise of shareholders right and very ownership function.
- They also strongly support the equal treatment of all shareholders including minority and foreign share-holders. All shareholders should have the opportunity to obtain effective redress for violation of their rights.
- They recognise the importance of the role of stakeholders in corporate governance and encourage active cooperation between corporations and stakeholders in creating wealthy jobs.
- They look at the importance of timely, accurate and transparent disclosure mechanism.
- They deal with board, structure, responsibilities and procedures.
Question 5.
Discuss briefly the following:
National Foundation for Corporate Governance (Dec 2013, 3 marks)
Question 6.
Discuss in brief the following:
OECD Was the first organisation to spell out the principles of good corporate governance. [Old Syllabus] (June 2014, 2 marks)
Answer:
The OECD Principles of Corporate Governance set out a framework for good practice which was agreed by the governments of all 30 countries that are members of the OECD. They were designed to assist governments and regulatory bodies in both OECD countries and elsewhere in drawing up and enforcing effective rules, regulations and codes of corporate governance. They also provide guidance for stock-exchanges, investors, companies and others that have a role in the process of developing good corporate governance.
Question 7.
Briefly discuss the scope of work of the International Corporate Governance Network (ICGN). (Dec 2014, 5 marks)
Answer:
The International Corporate Governance Network (“ICGN”) is a not-for-profit company limited by guarantee and not having share capital under the laws of England and Wales founded in 1995. It has four primary purposes:
- to provide an investor-led network for the exchange of views and information about corporate governance issues internationally;
- to examine corporate governance principles and practices;
- to develop and encourage adherence to corporate governance standards and guidelines; and
- to generally promote good corporate governance.
The Network’s mission is to develop and encourage adherence to corporate governance standards and guidelines and to promote good corporate -governance worldwide.
Membership of ICGN is open to those who are committed to the development of good corporate governance. The Membership section explains the benefits of membership, the different types of membership and how to join the ICGN. The ICGN is governed by the ICGN Memorandum and Articles of Association.
The management and control of ICGN affairs are the responsibility of the Board of Governors. The Board in turn appoints a number of committees to recommend policy positions, to implement approved projects and to perform such functions that he Board may specify.
The functions of the ICGN Secretariat were first undertaken by the Association of British Insurers (ABI) and then in 2000, by the Institute of Chartered Secretaries and Administrators (ICSA) in London.
Question 8.
Explain the following:
Mission of National Foundation for Corporate Governance. (Dec 2014, 3 marks)
Answer:
Mission of National Foundation for Corporate Governance:
- To foster a culture for promoting good governance, voluntary compliance and facilitate effective participation of different stakeholders;
- To create a framework of best practices, structure, processes and ethics;
- To make significant difference to Indian Corporate Sector by raising the standard of corporate governance in India towards achieving stability and growth.
NFCG endeavours to build capabilities in the area of research in corporate governance and to disseminate quality and timely information to concerned stakeholders. It works to foster partnerships with national as well as international organisations.
Question 9.
Briefly explain OECD principles of Corporate Governance. (June 2015, 5 marks)
Answer:
OECD Principles of Corporate Governance: The organisation for Economic Co-operation and Development (OECD) was established in 1961. The OECD was one of the first non – government organizations to spell out the principles that should govern corporate.
The OECD principles of Corporate Governance set out a framework for good practice which was agreed by the governments of the 30 countries that are members of the OECD. They were designed to assist government and regulatory bodies in both OECD countries and elsewhere in drawing up and enforcing effective rules, regulations and codes of corporate governance. They also provide guidance for stock exchanges, investors, companies and others that have a role in the process of developing good corporate governance.
The original OECD Principles were issued in 1999, they became a generally accepted standard in this area. The original principles of OECD were revised and the revised principles were issued in 2004. The revision of the original principles was to take into account the developments and the corporate governance scandals highlighted the need for improved standards. It was recognized that the integrity of the stock market was critical and the revised principles were designed to underpin this integrity.
The OECD Principles of Corporate Governance cover six main areas:
(a) They call on governments to have in place an effective institutional and legal framework to support good corporate governance practices.
(b) They call for a corporate governance framework that protects and facilitates the exercise of shareholder’s rights.
(c) They also strongly support the equal treatment of all shareholders in corporate governance.
(d) They recognise the importance of the role of stakeholders in corporate governance.
(e) They look at the importance of timely, accurate and transparent disclosure mechanisms.
(f) They deal with board structures, responsibilities and procedures.
Question 10.
Explain the focus areas of Global Corporate Governance Forum. (June 2016, 5 marks)
Answer:
The Global Corporate Governance Forum is the leading knowledge and capacity building platform dedicated to corporate governance reform in emerging markets and developing countries. The Forum offers a unique collection of expertise, experiences, and solutions to key corporate governance issues from developed and developing countries.
The Forum’s mandate is to promote the private sector as an engine of growth, reduce the vulnerability of developing and emerging markets to financial crisis, and provide incentives for corporations to invest and perform efficiently in a transparent, sustainable and socially responsible manner. In doing so, the Forum partners with international, regional, and local institutions, drawing on its network of global private-sector leaders.
The Forum is a multi-donor trust fund facility located within the IFC, co-founded in 1999 by the World Bank and the Organization for Economic Cooperation and Development (OECD).
Question 11.
The Organisation of Economic Co-operation and Development (OECD) was established in 1961. The OECD was one of the first non-government organisations to spell out the principles that should govern corporate. What are the existing OECD principles of corporate governance? (Dec 2016, 5 marks)
Answer:
The OECD Principles of Corporate Governance are:
1. The Rights of Shareholders and Key Ownership Functions: The corporate governance framework should protect and facilitate the exercise of shareholders’ rights.
2. Disclosure and Transparency: The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership and governance of the company.
3. The Role of Stakeholders in Corporate Governance: The corporate governance framework should recognise the rights of stakeholders established by law or through mutual agreements and encourage active co-operation between corporations and stakeholders in creating wealth, jobs and the sustainability of financially sound enterprises.
4. Ensuring the Basis for an Effective Corporate Governance Framework: The corporate governance framework should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities.
5. The Responsibilities of the Board: The corporate governance framework should ensure the strategic guidance to the company, the effective monitoring of management by the board and the board’s accountability to the company and the shareholders.
6. The Equitable Treatment of Shareholders: The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights.
Question 12.
(a) With the goal of promoting better corporate governance practices in India, the Government of India has set up National Foundation for Corporate Governance (NFCG). Explain in brief the mission of NFCG. (June 2018, 5 marks)
(b) What is Asian Corporate Governance Association (ACGA)? Discuss the scope of work of ACGA. (5 marks)
Answer:
(a) Mission of NFCG
- To foster a culture for promoting good governance, voluntary compliance and facilitate effective participation of different stakeholders;
- To create a framework of best practices, structure, processes and ethics;
- To make significant difference to Indian Corporate Sector by raising the standard of corporate governance in India towards achieving stability and growth.
At the national level, NFCG works with premier management institutes as well as nationally reputed professional organisations to design and administer Directors Training Programmes.
NFCG also would work to have arrangements with globally reputed organisations with the aim of promoting bilateral initiatives to improve regulatory framework and practices of corporate governance in a concerted and coordinated manner
(b) Asian Corporate Governance Association’s scope of work covers three areas: •
(1) Research
Tracking corporate governance developments across 11 markets in Asia and producing independent analysis of new laws and regulations, investor activism and corporate practices.
(2) Advocacy
Engaging in a constructive dialogue with financial regulators, stock exchanges, institutional investors and the implementation of better corporate governance practices in Asia.
(3) Education
Organizing conferences and seminars that foster a deeper understanding of the competitive benefits of sound corporate governance and ways to implement it effectively.
Question 13.
Describe the role of International Corporate Governance Network (ICGN) governed by the ICGN Memorandum and Article of Associations. (Dec 2018, 5 marks)
Answer:
The International Corporate Governance Network (“ICGN”) is e. not-for-profit company limited by guarantee and not having share capital under the laws of England and Wales founded in 1995. It has four primary purposes:
- to provide an investor-led network for the exchange of views and information about corporate governance issues internationally;
- to examine corporate governance principles and practices;
- to develop and encourage adherence to corporate governance standards and guidelines; and
- to generally promote good corporate governance.
The Network’s mission is to develop and encourage adherence to corporate governance standards and guidelines, and to promote good corporate governance worldwide.
The Institute of Company Secretaries of India is a member of ICGN and also the country correspondent from India.
The ICGN Global Governance principles describe the responsibilities of board of directors and investors respectively and aim to enhance dialogue between the two parties. They embody ICGN’S mission to inspire effective standards of governance and to advance efficient markets worldwide. The combination of responsibilities of boards of directors and investors in a single set of Principles emphasizes a mutual interest in protecting and generating sustainable corporate value. These principles were first initiated in 1995. The fourth edition fo Principles was released in 2014.
Question 14.
Write a brief note on ‘The ICSI National Awards for Excellence in Corporate Governance”. (June 2019, 5 marks)
Answer:
The ICSI National Awards for Excellence in Corporate Governance: In pursuit of excellence and to identify, foster and reward the culture of evolving globally acceptable standards of corporate governance among Indian companies, the “ICSI National Award for Excellence in Corporate Governance” was instituted by the ICSI in the year 2001. The Awards are based on the outcome of concerted and, comprehensive process of evaluation which enables the Jury to judge on the basis of parameters, the practices of corporate governance as followed by Indian corporates and acknowledge the best practices worthy of being exemplified. The underlying guideline for the Corporate Governance Award is to identify the corporates, which follow the best corporate governance norms in letter and spirit. The institution of the Award aims at promoting the cause of Corporate Governance by:
- Recognizing leadership efforts of corporate boards in practising good corporate governance principles in their functioning
- Recognizing implementation of innovative practices, programmes and projects that promote the cause of corporate governance
- Enthusing the corporates in focusing on corporate governance practices in corporate functioning and
- Implementation of acknowledged corporate governance norms in letter and spirit.
The Institute also annually bestows upon a corporate leader the “ICSI Lifetime Achievement Award for Translating Excellence in Corporate Governance into Reality” keeping in view the attributes like: - Outstanding contribution to social upliftment and institution building
- Exemplary contribution in enhancement of stakeholders’ value
- A visionary with innovative ideas
- Long tradition of trusteeship, transparency and accountability
- Qualities of leadership, team spirit, integrity and accountability
- Proven track record of adherence of statutory obligations; and
- Social acceptance and approval.
Question 15.
With what mission, International Corporate Governance Network (ICGN) was incorporated? Describe the purpose of the ICGN. (Dec 2019, 5 marks)
Answer:
The International Corporate Governance Network (“ICGN”) founded in 1995 is a not-for-profit company limited by guarantee and not having share capital under the laws of England and Wales.
ICGN’s mission is to promote effective standards of corporate governance and investor stewardship to advance efficient markets and sustainable economies worldwide. ICGN’s positions are guided by the ICGN Global Governance Principles and Global Stewardship Principles, which were first published in 2003, as a statement on shareholder stewardship responsibilities both of which are implemented by:
- Influence policy by providing a reliable source of investor opinion on governance and stewardship.
- Connect peers at global events to enhance dialogue between companies and investors around long term value creation.
- Inform dialogue through education to enhance the professionalism of governance and stewardship practices. It has four primary purposes:
- To provide an investor-led network for the exchange of views and information about corporate governance issues internationally;
- To examine corporate governance principles and practices;
- To develop and encourage adherence to corporate governance standards and guidelines; and
- To generally promote good corporate governance.
Question 16.
Prepare a brief note on National Foundation for Corporate Governance (NFCG) and Board of Trustees of NFCG. (Dec 2019, 3 marks)
Answer:
With the goal of promoting better corporate governance practices in India, the Ministry of Corporate Affairs, Government of India, has set up National Foundation for Corporate Governance (NFCG) along with Confederation of Indian Industry (CII), Institute of Company Secretaries of India (ICSI) and Institute of Chartered Accountants of India (ICA1). In the year 2010, stakeholders in NFCG have been expanded with the inclusion of Institute of Cost Accountants of India and the National Stock Exchange of India Ltd. The Vision of NFCG is “Be the Key Facilitator and Reference Point for highest standards of Corporate Governance in India.”
The internal governance structure of NFCG consists of Governing Council, Board of Trustees and Executive Directorate.
Board of Trustees:
Board of Trustees deal with the implementation of policies and programmes and lay down the procedure for the smooth functioning. It is chaired by Secretary, Ministry of Corporate Affairs, Government of India.
The members of the Board of Trustees are:
- Director General, Confederation of Indian Industry (CII)
- Secretary, Institute of Chartered Accountants of India (ICAI)
- Secretary, Institute of Company Secretaries of India (ICSI) and
- Secretary, The Institute of Cost Accountants of India (ICAI-CMA)
- Representative, National Stock Exchange (NSE)
- Director General & CEO, Indian Institute of Corporate Affairs (IICA)
Question 17.
Prepare a brief note on Corporate Secretaries International Association Limited. (Aug 2021, 3 marks)
Answer:
Corporate Secretaries International Association Limited (CSIA) was established on February 10, 2017 as a Company limited by Guarantee in Hong Kong. It is an international federation of governance professional bodies for corporate secretaries & governance professional and represents those who work as frontline practitioners of governance throughout the world. CSIA is governed by a council consisting of the honorary members (President, Vice-President, Secretary and Treasurer as elected from the member bodies), past presidents, co-opted members and representatives of each national member organisation.
CSIA is an international association of 14 national professional bodies, representing more than 1,00,000 corporate secretaries and governance professionals in more than 70 countries throughout the world. CSIA has 10 full members which include Institute of Chartered Secretaries from South Africa, Hong Kong, Kenya, Nigeria, Zimbabwe, UK, Bangladesh, India, Malaysia and Singapore.
Objectives of CSIA are:
- To promote the professional status of suitably qualified chartered secretaries, Corporate Secretaries, Company Secretaries, board secretaries and other governance professionals.
- To establish and maintain good relations and exchanges between organisations dedicated to the promotion and practice of secretaryship and/or the promotion of good governance.
- To develop and improve their services and professionalism of their members.
- To assist in the creation of such organisations in countries or regions in which they do not currently exist.
- To promote the growth, development, study and practice of secretaryship and assist their members develop and improve their services and professional standards.
- To advocate for good governance through carrying out research, developing standards and raising awareness.
- To promote the recognition and influence in respect of secretaryship and its professional practitioners to national governments and their supplementary/sponsored organisations, international organisations and the global business community.
Question 18.
Prepare a detailed note on Institute of Directors for promoting good corporate governance for UK business. (Dec 2021, 5 marks)
Answer:
The Institute of Directors (IOD) is a non-party-political business organisation established in United Kingdom in 1903. The IOD is charged with promoting good corporate governance for UK business. The board of IOD is responsible for the overall leadership of the Institute of Directors (IOD) and setting its values, standards, aims and objectives and delivering them in line with the objects of the Royal Charter. The board is composed of the chair, a majority of non-executive directors, and the director general and executive directors. It acts as a unitary board and has the following powers and responsibilities:
- to manage the affairs and long-term success of the Institute
- to approve the strategy of the Institute, business and financial planning, to hold the executive to account and ensure financial and risk stewardship
- to approve the annual report and accounts
- to appoint, reappoint and remove (acting by the non-executive directors only) the director general and other executive directors, as the board permits
- to ensure open and transparent engagement with all stakeholders when carrying out its duties .
- to establish and dissolve committees and groups of the board
The council is the guardian of the IOD constitution, ensuring that the objects of the lOD’s Royal Charter are delivered. It comprises 11 members of geographical areas, 13 elected members and the IOD chairman. The council carries out the following responsibilities:
- to appoint, reappoint and remove the non-executive directors and to determine their independence, having considered any recommendations of the nomination Committee
- to hold the board to account for the delivery of the charter objects and adherence to the laws of the institute
- to provide critique and opinion to the board on the overall progress of the institute to monitor the board’s engagement with membership and stakeholders
- to appoint and remove senior independent council member who will act as deputy chair of the council The IOD seeks to provide an environment conducive to business success.
Question 19.
Explain the areas briefly in which Asian Corporate Governance Association (ACGA) works. (Dec 2021, 3 marks)
Answer:
The Asian Corporate Governance Association (ACGA) is an independent, non-profit membership organisation dedicated to working with investors, companies and regulators in the implementation of effective corporate governance practices throughout Asia.
ACGA’s scope of work covers three areas:
- Research: Tracking corporate governance developments across 12 markets in Asia Pacific and producing independent analysis of new laws and regulations, investor activism and corporate practices.
- Advocacy: Engaging in a constructive dialogue with financial regulators, stock exchanges, institutional investors and companies on practical issues affecting the regulatory environment and the implementation of better corporate governance practices in Asia.
- Education: Organising conferences and seminars that foster a deeper understanding of the competitive benefits of sound corporate governance and ways to implement it effectively.
Question 20.
Corporate Secretaries international Association Limited (CSIA), a body for Corporate Secretaries & Governance Professionals was established in the year 2017 as a company limited by guarantee in Hong Kong with certain objectives. Discuss the main objectives of CSIA. (June 2022, 5 marks)
Question 21.
2014 – Dec [4] (a) In pursuit of excellence and to identify, foster and reward the culture of evolving globally acceptable standards of Corporate Governance among Indian companies, the ICSI National Award for Excellence in Corporate Governance was instituted by ICSI in the year 2001. You being the Company Secretary of Adherence India Ltd., are asked by the Board to prepare a note on the attributes which the Institute annually looks for, before it bestows upon the corporate leader the “ICSl Lifetime Achievement Award for Translating Excellence in Corporate Governance into Reality.” (Dec 2014, 4 marks)
Answer:
The Board of Directors
Adherence India Limited.
Sub: Attributes for obtaining “ICSI Lifetime Achievement Award for Excellence in Corporate Governance”
Respected Sires,
As desired by you to prepare a note on the captioned subject, please be informed that the following are the major attributes a corporate leader should posses for acquiring “ICSI Lifetime Achievement Award for Excellence in Corporate Governance”.
- Outstanding contribution to social upliftment and institution building;
- Exemplary contribution in enhancement of stakeholders’ value;
- A visionary with innovative ideas;
- Long tradition of trusteeship, transparency and accountability;
- Qualities of leadership, team spirit, integrity and accountability;
Corporate Governance Forums Notes
ACGA’s scope of work covers three areas
- Research
- Advocacy
- Education
International Corporate Governance Network(“ICGN”):
The International Corporate Governance Network (“ICGN”) is a not-for-profit company limited by guarantee and not having share capi’.al under the laws of England and Wales founded in 1995.
The Common wealth Association of Corporate Governance (CACG):
The Commonwealth Association of Corporate Governance (CACG) was established in 1998 with the objective of promoting the best international standards germane to a country on corporate governance through education, consultation and information throughout the Commonwealth as a means to achieve global standards of business efficiency, commercial probity and effective economic and social development.
The CACG had two primary objectives:
- to promote good standards in corporate governance and business practice throughout the Commonwealth; and
- to facilitate the development of appropriate institutions which will be able to advance, teach and disseminate such standards.
IoD:
The IoD is a non party-political business organisation established in United Kingdom in 1903. The IoD seeks to provide 40 environment conducive to business success.