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Corporate Governance-

Corporate Governance and Cooperatives :


global issues
CorporateGOVERNANCE
Governance-

Quality of Management
CorporateCOOPERATIVE
Governance-
GOVERNANCE

COOPERATIVE GOVERNANCE REPRESENTS


A DEMOCRATIC SYSTEM OF MANAGEMENT,
WHEN THE
EXERCISE OF AUTHORITY I S DERIVED
FROM ITS MEMBERSHIP
Corporate Governance-

Characteristics of SUCCESSFUL COOPERATIVES

• PROFESSIONAL GOVERNANCE

• COOP VALUES AND PRINCIPLES

• STRONG CAPITAL BASE

• IT INTERVENTIONS
Corporate Governance-
GOVERNANCE REQUISITES

TRANSPARENCY PARTICIPATION

ACCOUNTABILITY PREDICTABILITY
Corporate Governance-

Governance 1
Models
ELECT
MGT
Elected
Management

EXECT
MGT Exect. Mgt
Corporate Governance-

Governance Elected
Management
1A
ELECT Models
MGT

EXECT Executive. Mgt


MGT
Corporate Governance-

2
Elected Executive
Governance
Models
Corporate Governance-

A global context

•Recent scandals helping to drive up standards in Public,


Private and Cooperative sector eg. Enron, Lehman Brothers,
Madhopur

•Growing recognition of the diversity of business models

•Need to develop corporate governance standards for them


Corporate Governance-

Where do co-operatives fit in ?

A well governed cooperative and mutual sector of the


economy is not just good for its members, it is good for public as well.

Co-operatives now on the radar of the World Bank Global Corporate


Governance Forum

It commissioned a paper on CG issues for Co-operatives


in Developing Countries
Corporate Governance-

Research Findings

•Reflects general lack of interest and research into Co-operative sector

•However achieving better corporate standard for Co-operatives


increasingly being viewed as important in the developing world.

•Driven in part by impact of Fair Trade and wider Development agenda


eg Transparency and Governance initiative.
Corporate Governance-

Cooperative Conflicts

•Members v Boards
•Members/Directors v managers
•Cooperatives v Governments
•Men v women
Corporate Governance-

Member participation

•General consensus on the need for more and better member participation

•Empower co-operatives and reduce the Controlling hand of governments

•Need the development of an enabling governance environment

•Together with a massive culture change


Corporate Governance-

Is a single governance model appropriate ?

Great diversity in size and shape of co-operatives

Different co-operative traditions

No real consensus/benchmark on what is a co-operative

Need to be careful not to view co-operatives as Government


Corporate Governance-

Agenda for the Future

•If good corporate governance of co-operatives is a common good, who is


responsible ?

•Can education prevent agency conflicts ?

•How to promote women's empowerment?

•Can the growing convergence of co-operatives globally offer a common


governance paradigm

•The need for further research, knowledge sharing and Good (and bad)
practice case studies

•Should we be aiming for a Co-operative Corporate Governance Standard at


international level ?
Corporate Governance-

•Transparency For Stakeholders

•Ethical Conduct Of Business

•Growth Through Stakeholders Need For


CG
•Improving economic efficiency (Murthy Report )

•Avoid financial Disasters

•Strengthening Credibility
Corporate Governance-

COMPANIES COOPERATIVES

2. Role Of The Board


3. Role Of The Committees
4. Gaps In Governance
5. Suggestive Action
Corporate Governance-

1/A
COMPANIES

Role Of Board
Corporate Governance-

THE BOARD DIRECTS

Formulate &review policies/strategies


Major plans of action
Risk policy
Annual budgets & business plans
Setting performance objectives
Monitoring corporate performance
Overseeing major cap. Exp.
Acquisitions & divestitures
Compliance with Applicable laws
Corporate Governance-

•For Shareholders

•Effective Functioning +
Of Bank

Fiduciary Obligations •Safeguarding Interest


Social
Of Board
Of Stakeholders Obligations
Ganguly Report &
•Shaping Strategies
Compliance
•Monitoring Performance
With
Regulatory
Framework
Corporate Governance-

BOARD COMPOSITION

PROMOTERS

NON EXECUTIVE DIRECTORS

EXECUTIVE DIRECTORS

NOMINATED DIRECTORS
Corporate Governance-

1/B
COOPERATIVES

Role Of Board
Corporate Governance-

•Raising Funds
•Advancing Loans
Board Powers •Investments
&
Responsibilities •Transfer Of Shares
•Approve Budget
•Supervision Of Societies
•Managing Assets
•Financial Reporting to Members
•Appointing Committees
•Approving Capital Expenditure
•Framing Regulation
•Framing Policies
Corporate Governance-

Composition
•Elected Members including
Reserved For women etc

•Nominated Members

•Co-opted Members
Corporate Governance-

COMPANIES COOPERATIVES

Role Of Committees

2
Corporate Governance-

COMPANIES COOPERATIVES
 Audit committee Administrative Committee

 Remuneration Committee Loan Committee

 Grievances Committee Recovery Committee


Committees
 Nomination Committee Staff Committee

 Supervision Committee Purchase Committee

 Risk Management Development Committee


Committee
Audit Committee
 ????????
 ??????????/
Corporate Governance-

Nomination
Committee Grievances Committee

To look into the Grievances


To nominate Of Shareholders
Directors

Representing Board
Shareholders Risk Management Committee
Committees
Formation &
Audit Committee Operationalization as per
RBI guidelines
To Strengthen the Internal Control,
Externa lAudit and Take Corrective Action
Corporate Governance-

3 COOPERATIVES

Gaps in Governance
Approach
Corporate Governance-

Code of Governance
Recommendations-mandatory &
non mandatory
Governance Report
Chairman-Executive & non Executive
Gaps In
Independent Directors- pool by RBI
Governance
Type Of Board Committees
Nominated Directors
Disclosure & Transparency
Director’s Qualifications-
(Fit and proper, financial Literacy)
Related Party Transactions-Arm’s Length
Functional Separation-CMD
Corporate Governance-

4 •Directors appointment-fit and proper


•Independent Directors-appointment from pool
•Inducting Professionals
•Importance of Independent Directors in Meetings
•Briefing to Directors about His Role
Suggestive Action •Formulating Policies Relating To Credit Dispensation
•Need Based Training For Directors
Ganguly Report •Long Tenure For Whole time Directors
•RBI to bring Updated charter of Guidelines
•Undertaking From Directors about Their
•Responsibilities
•Remuneration May Match Contemporary Standards
•Separating Role of Chairman & Chief Executive


Corporate Governance-

Organisations That Do Not Employ


Meaningful
Governance Procedures will Have To Pay A
Significant Risk Premium When Competing
For Scarce Capital In Today,s Public
Markets ‘Narayan Murthy Committee-2003’
Corporate Governance-

Thanks