Business Ethics &
Corporate Governance
MODULE 7
Rohan Patwardhan,
Advocate
[Link], LLM (V.U. Pune) LLM (K.C.L., U.K.)
Founding & Managing Partner, LexRobe Legal®
Founder, The Juris Chronicles
Corporate Governance and the stakeholders:
Corporate governance is the system of rules, practices, and processes by which a
company is directed and controlled. Establishing and implementing these practices
involves balancing the interests of a company's many stakeholders, including:
•Employees
•Shareholders
•Senior management
•Customers
•Suppliers
•Lenders
•Local, state, and federal governments
•Community members and groups
Corporate governance in:
Business scene and profit:
Corporate governance is a system of rules, practices, and processes that guide how a
company is run and its relationships with stakeholders. It's a set of tools that helps
management and the board run the company more efficiently and effectively. The goal of
corporate governance is to maximize long-term value while safeguarding the interests of all
stakeholders. Good corporate governance can help create an environment of trust which will
increase the profitability by the work delivery within the company. This can promote long-
term patient capital and support economic growth and profit stability.
The Bottom Line – Corporate Styles:
Corporate governance consists of the guiding principles that a company puts in place to
direct all of its operations, from compensation, risk management, and employee treatment to
reporting unfair practices, dealing with the impact on the climate, and more. Corporate
governance that calls for upstanding, transparent behavior can lead a company to make
ethical decisions that will benefit all of its stakeholders, including investors. Bad corporate
governance can lead to the breakdown of a company, sometimes to the point of scandal and
bankruptcy.
• Leadership in Corporate Governance:
1. Styles of Leadership in corporates:
• Authoritative: leader guiding a team towards a shared vision and carries
authority over that team and vision.
• Democratic: The leader has the final say, but involves the team in the decision-
making process.
• Transformational: The leader inspires and motivates the team to create a shared
sense of purpose and passion.
• Autocratic: The leader makes all the decisions and gives all the orders. This style
is often used when quick decisions and clear direction are needed.
2. Essential components in Leadership and understanding the team work :
1. Disclosure practices.
2. Executive compensation structure (whether it's tied only to performance or also to
other metrics)
3. Risk management (the checks and balances on decision-making)
4. Policies and procedures for reconciling conflicts of interest (how the company
approaches business decisions that might conflict with its mission statement)
5. The members of the board of directors (their stake in profits or conflicting
interests)
6. Contractual and social obligations (how a company approaches issues such as
climate change)
7. Relationships with vendors
8. Complaints received from shareholders, employees, and community members, and how
they were addressed.
9. Audits (the frequency of internal and external audits and how any issues that those audits
raised have been handled)
LEADERS USED THESE BAD PRACTISES:
1. Auditing: Companies that do not cooperate sufficiently with auditors or do not
select auditors with the appropriate scale, resulting in the publication of
spurious or noncompliant financial documents.
2. Compensation: Executive compensation packages that fail to create an optimal
incentive for corporate officers.
3. Board makeup: Poorly structured boards that make it too difficult for
shareholders to oust ineffective incumbents.
• Suggestive Readings:
1. Opinions of Professional Cases discussed in class.
2. Reading material as prescribed in the Course Outline