Corporate governance in India is a collection of internal controls, policies, and procedures that form the basis of an organization’s activities and its relationships with various stakeholders, such as clients, management, staff, government, and industry bodies. Such ethical corporate governance initiatives should provide a basis for upholding the values of accountability, fairness, ethics, and honesty. Auditing and Corporate governance is an organization’s soul and must be adhered to when engaging in any corporate activity.

The need of Corporate Governance in India is because it is an essential determinant of industrial effectiveness and competitiveness. There are many questions posed today about the way an organization is regulated. Enhanced organizational efficiency and improved economic outcomes are assured by better governance. Corporate governance in India lays the framework for its actions, resource management, creativity in products/services, and overall corporate strategies.

Corporate governance in strategic management describes the Board of Director’s accountability to all shareholders of the company, i.e., stockholders, employees, providers, sellers, consumers, and society in general, towards providing the company fair, effective and transparent management.

SEBI Code of Corporate Governance

Under the chairmanship of Kumar Mangalam Birla, SEBI (Securities and Exchange Board of India) created a committee on corporate governance in India to actualize the need of corporate governance and promote good corporate governance in India.

SEBI has released specific guidelines for auditing and corporate governance in India based on this committee’s recommendations, which are expected to be incorporated into the listing agreement between the company and the stock exchange.

Below, under the relevant heads of the auditing and corporate governance in India, is a summary of SEBI guidelines that have heightened the need of corporate governance in India:

(a) Board of Directors:

The following are some points in this regard:

1. The company’s board of directors shall have an optimal balance of executive and non-executive directors.
2. The number of independent directors will depend on the executive or non-executive nature of the Chairman.

(b) Audit Committee:

Some points in this regard are as follows:

1. The organization shall appoint an independent audit committee, the constitution of which shall be as follows:

1. It shall have at least three members, all of whom shall be non-executive directors, the majority of whom shall be autonomous, and at least one of whom shall possess financial and accounting skills.
2. An independent director will be the Chairman of the committee.
3. The Chairman will be present at the Annual General Meeting to address questions from shareholders.

2. The corporation shall name an independent audit committee, and its constitution shall be as follows:

1. It shall have at least three members, all of whom shall be non-executive directors, the majority of whom shall be independent, and at least one of whom shall have financial and accounting expertise.
2. The Chairman of the committee will be an independent director.
3. At the Annual General Meeting, the Chairman will be present to answer concerns from shareholders.

3. The audit committee’s task should include the following elements:

1. Oversight of the company’s financial reporting process and the disclosure of its financial reports to ensure that the financial statements are accurate, adequate, and reliable.
2. Requesting that an external auditor be appointed and withdrawn.
3. Checking the adequacy of the role of internal audit
4. Updating the financial and risk management practices of the company.

(c) Remuneration of Directors:

In the section on corporate governance of the Annual Report, the following disclosures on the remuneration of directors are made:

1. All managers’ remuneration plan components, i.e., wages, benefits, incentives, stock options, pensions, etc.
2. Descriptions of fixed components and benefits linked to results, along with performance requirements.

(d) Process of the Board Some of the points set out in this Regard are:

1. The board meetings shall be held at least four times a year, with a maximum period of four months between each of the two meetings.
2. A director shall not be a member of more than ten committees, nor shall he serve as Chairman of more than five committees in all the companies of which he is a director.

(e) Administration:

A Management Discussion and Appraisal Report should form part of the shareholders’ annual report, including discussions on the following topics (within limits defined by its competitive position).

1. Risks and opportunities
2. Segment-wise or product-wise performance
3. Risks and Issues
4. Discussion on financial results concerning the performance of operations
5. Front of material growth in human resource / industrial relations.

(f) Shareholders:

In this respect, some points are:

1. In the event of the appointment of a new director or the reappointment of a director, the following details must be given to shareholders:

1. A short resume of the director (summary)

2. Nature of his specialist knowledge

3. Amount of organizations of which he retains the management and membership of the Board’s committees.

2. A Board Committee shall be formed under the chairmanship of a non-executive director to examine the redress of shareholder and investor grievances explicitly.

(g) Corporate Governance report:

A separate section on auditing and corporate governance shall be included in the Company’s Annual Report. It shall consist of a comprehensive report on corporate governance.

(h) Compliance:

The company shall acquire a certificate from the company auditors regarding its auditing and corporate governance compliance conditions. This certificate shall be appropriated with the Directors’ Report sent to stockholders and also forwarded to the stock exchange.

How TRC Helps With Auditing And Corporate Governance in India?

TRC Corporate Consulting offers auditing and corporate governance services in India to help clients deal with various organizational concerns of governance, risk, and compliance management regulations. Our ethical Corporate Governance In Strategic Management experts also deliver auditing and corporate services in India and abroad, including SAP GRC, Internal Audit, and specialized support for business and financial advisory services for reporting, taxation, HR Shared Services, and IBC advisory services. We understand the need of corporate governance and can help you enjoy the benefit of corporate governance in India.

Our governance Solutions’ professionals help companies identify, evaluate, control, administer, and mitigate risks and compliance tasks. Moreover, our professionals also practice overseeing and managing resource utilization, governance risk, compliance facilities, and comprehensive operational transparency to better the organization’s core efficacy of ethical corporate governance and enable cost savings. For any questions about the need of corporate governance, the benefit of corporate governance, or our corporate governance services, contact us!