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Industrial policy means rules, regulations, principles, policies and

procedures laid down by the government for regulating, developing and controlling industrial undertakings in the country.

It prescribes the respective roles of the public, private, joint and co-

operative sectors for the development of industries. It also indicates the role of the large, medium and small-scale sector.

It incorporates fiscal and monetary policies, tariff policy, labour policy

and the governments attitude towards foreign capital and the role to be played by MNCs in the development of the industrial sector.

Liberalization and Planning

Indias adoption of liberalization came after more than six months of negotiations with the World Bank, starting January 1991. However, the series of reforms that were initiated in the country did not evolve through discussion or dialogue in any forum within India. The reforms were announced as a package in July 1991 by the new government headed by P.V.Narasimha Rao. They consisted a two pronged economic policy:
The IMF-inspired macro-economic stabilization that would focus on reducing the deficits in balance of payments.

A comprehensive program for structural changes of the economy in the fields of trade, industry, foreign investment, public sector among others, which was inspired by the World Bank.

Meaning of Liberalisation
The term economic liberalization means and includes mainly:

Dismantling of industrial licensing system built over the previous four decades. Reduction in physical restrictions on imports, reduction also in the rate of import duties. Reduction in controls on foreign exchange, both current and capital account. Reform of the financial system. Reduction in the levels of personal and corporate taxation. Reduction in restrictions on foreign investments (direct and portfolio). Opening up of areas reserved for public sector (power, transport, banking etc). Partial privatization of PSUs (with or without passing on majority control to private shareholders).

Softening of MRTP regulations.

Making various sectors of the Indian economy competitive on the global economic platform by making them produce quality goods in a cost-effective manner.

Corporate Governance

Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally for the accountability of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society. This is a system by which companies are run and the means by which they are responsive to their shareholders, employees and society. Corporate governance is also concerned with the ethics, values and morals of a company and its directors. The role of corporate governance is to ensure that the directors of a company are subject to their duties, obligations and responsibilities to act in the best interest of their company, to give direction and to remain accountable to their shareholders and other beneficiaries. Corporate governance is the relationship among managers, directors and providers of equity, people and institutions who save and invest their capital to earn a return.

Corporate Governance

A set of procedures and policies by which corporations are directed and

As per OECD, Corporate Governance deals with the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out rules and procedures for making decisions on corporate affairs .

Corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment.Journal

of Finance, Shleifer and Vishny.

Corporate governance is about promoting corporate fairness, transparency and accountability.


Why Corporate Governance?

Corporate Governance is essential to the development of

robust, well-regulated capital markets.

Emerging Markets need good Corporate Governance to


Emerging Markets need Corporate Governance principles

using OECD (Organization for Economic Cooperation and Development) principles as a benchmark.

The Board Key to Good Corporate Governance

In India, a board of directors generally comprise of promoters,

directors, professional directors and institutionally nominated


The core responsibility of the board of directors is to monitor and

evaluate corporate performance.

What is Good Corporate Governance?

Systems and procedures adopted and followed that ensure that

all shareholders share equally in the success (or failure) of a


The Foundation of any structure of Corporate Governance is

disclosure. Openness is the basis of public confidence in the corporate system, and funds will flow to the centers of economic

activity that inspire trust. Sir Adrian Cadbury

Responsibility of the Board

Approve a core philosophy and mission.

Monitor and evaluate corporate performance.

Monitor and evaluate corporate strategy. Review and approve material transactions not in the course of

ordinary business.
Determine executive compensation. Evaluate senior management performance. Manage executive director/CEO succession. Communicate with shareholders. Evaluate board performance.

Why do Investors care about Corporate Governance ?

Financial reports and other disclosures can be trusted.

Well governed companies mitigate non-business risks.

Believe that corporate performance in the long run is correlated

with Corporate Governance.


Principle Areas of Risks for Board of Directors

Changes in business trends Lack of changes in business trends Bank examination reports Comparisons with competitors Reserves and other estimates Changes in methodologies Adequacy of financial disclosure Aggressive accounting

Friction with auditors Related party transactions Code of conduct waivers Internal audit reports Period-end transactions Adequacy of compensation disclosure Regulatory compliance