Corporate Governance: Principles and Objectives

Corporate Governance provides the fundamental value framework for the culture of an organisation which ensures efficient functioning of enterprises on sound ethical values and principles. Corporate governance has become a necessity, especially since 1991, when India made a U-turn in its economic policy and the revised policy of the government was aimed at attracting funds from foreign financial institutions. The primary resonsibiity of good corporate governance is that of the Board of Directors. For better corporate governance the boards should perform the role of monitoring the functioning of an organisation, without at the same time reducing the effectiveness of the management by interfering with their day-to-day matters. One of the impediments in the way of good corporate governance is corruption. The three factors within any system which generate corruption are: scarcity, lack of transparency and delay. If these three problems are tackled effectively, corruption can be checked to a great extent. As far as public sector undertakings are concerned, the “Code of Conduct and Ethics†should facilitate the redesigning of the PSEs.