OVERVIEW OF THE PREVIOUS CLASS (01:10 PM)

CHALLENGES CONCERNING THE CORPORATE GOVERNANCE IN INDIA (01:17 PM)

• 1) Most of the business continued to be controlled by the families despite going public as a result, it is a common practice for the families and friends of the promoters to continue to be appointed as board members.
• RESOLUTION
• We may adopt the rankings system to rank the diversity of corporate boards and publish them for the investors and the other stakeholders.
• The founders, irrespective of their legal position, continue to influence key business decisions significantly, and the corporate entities have failed to realise the importance of a succession plan.
• It is in the best interest of such organizations to evolve a succession plan and implement it effectively.
• 2) Often corporate entities have been found to work in the interest of a few powerful people compromising the interest of other stakeholders. For example, No alarm was raised by the board of directors over the faulty management practices prevalent at IL&FS, The head of ICICI bank approved loans to videocons without following the due diligence measures as she had an indirect interest in videocon.
• RESOLUTION
• Corporate entities must adhere to strict principles of transparency and accountability in letter as well as spirit.
• 3)Despite the presence of independent directors the functioning of the board has been compromised time and again.
• The independence of such promoters' appointed directors is questionable.
• Not only that some independent directors have been removed merely because they did not comply with the decisions of certain promoters.
• RESOLUTIONS
• The powers provided to the promoters with respect to the removal of directors should be limited.
• SEBI has proposed the adoption of stricter transparency norms as well as an independent mechanism for the removal of independent directors.
• 4)Corporate entities stand exposed to different risks due to faulty investments often made due to vested interest, thereby exposing even retail investors to significant risk.
• RESOLUTION
• Corporate entities must evolve robust risk management policies to minimise such risk in the future.
• Corporate entities have been guilty of exorbitant competition to senior executives even at the cost of other stakeholders.
• Companies must consider framing fair remuneration policies that should also require the approval of shareholders.
• 5)Corporate entities often fail to comply with disclosure and accountability norms. In certain cases, violation of basic guidelines has been flouted which have remained unpunished and even the independence of the auditors has been compromised.
• RESOLUTION
• To improve the accountability standards the entire board of directors must be present at the general meetings to give the stakeholders an opportunity to interact with them as well as to pose or to ask questions.

RECOMMENDATION OF KOTAK COMMITTEE WRT CORPORATE GOVERNANCE (01:50 PM)

• The Kotak committee has extensively examined the current state of affairs and recommended sweeping changes that will help improve governance and enhance
  investor confidence. Emphasis has been laid on strengthening the three gatekeepers—the board, the auditors and the regulator.
• Please refer to the handout as suggested by the faculty.

CORPORATE SOCIAL RESPONSIBILITY (02:00 PM)

• CSR when investing money in philanthropic activities is a general perception, But CSR must look beyond this and it should include some other things like a particular corporate entity to promote business ethics, and follow compliance, and legal rules.
• CSR should also mean that a corporation should also play an important role in promoting the work-life balance of the employee.
• CSR role must influence various players in the supply chain to adopt ethical and sustainable business practices.
• They must go beyond legal compliance concerning environmental and sustainable solutions.
• They must make a positive impact on the life of a local community and support community Empowerment.
• They must invest in the upliftment of the local community.
• Legal provisions related to CSR under the Companies Act 2013:
• Companies have a net worth of 500 crores or more (or)
• Companies having an annual turnover of 1000 crores or more (or)
• Companies having a net profit of 5 crores or more. 
• According to the act,
• Companies must constitute a CSR committee of the board comprising 3 or more directors, out of which at least 1 must be an independent director.
• The board should report the composition of the committee in its annual report.
• Any such company must spend at least 2% of its average annual profit of the last 3 years.

ADVANTAGES OF THE CSR ACTIVITIES (02:21 PM)

• Corporate social responsibility is based on the premise that a business can only thrive if it operates within a thriving society. In that way, the business depends on the
  community it operates within, and as such, has an ethical and moral responsibility towards that community.
• Companies can play a great role in nation-building by way of similar activities like CSR.

CHALLENGES ASSOCIATED WITH CSR IN INDIA (02:28 PM)

• 85% of the CSR spending is focused on specific sectors such as health, education and livelihood development leaving little or no resources for the other sectors.
• CSR spending is lopsided in geographical terms as well. A large part is focused on the western and the southern parts of India resulting in unequal development.
• Corporate entities are often focused on merely spending the CSR funds and fulfilling the legal requirements instead of achieving the desired social objectives.
• Often the local communities are not involved in the CSR projects which are primarily driven by the priorities of the corporate sector.
• Companies often end up channelling CSR funds to their NGOs and foundations therefore defeating the entire purpose of the CSR.

PROBITY IN GOVERNANCE (03:04 PM)

• Probity in governance is a quality of having strong moral principles such as honesty, transparency, accountability, and objectivity in the functioning of an organization.
• It is an essential element in governance and is an important requirement for an efficient and effective governance system.
• An important aspect of ensuring probity in governance is the absence of corruption.
• Some of the other requirements include rigorous standards of transparency and accountability, effective implementation of rules and regulations and adherence to the highest standards of objectivity.
• IMPORTANCE
• 1)Ensures the effective utilisation of the resources.
• 2)To develop trust, credibility and social capital.
• 3)To fulfil the expectations of society.
• 4)To ensure the well-being of the marginalised strata of the society.
• 5)Help in establishing the model institution of governance.
• 6)To ensure citizen-centricity of the governance process.
• 7)Can help in attracting the best talent to the public sector 
• MEASURES TO INCULCATE PROBITY IN GOVERNANCE
• 1)Effective implementation of RTI as well as suo motu disclosure to ensure openness and transparency.
• 2)Civil servants must be trained to identify conflicts of interest and find effective solutions to them keeping the public interest as a priority.
• 3)Social audit.
• 4)Autonomy of the investigative agency.
• 5)Deployment of technology.

ETHICS IN INTERNATIONAL RELATION (03:19 PM)

• Ethics in IR refers to the application of morality and principles in solving the various ethical dilemmas that a country faces in the conduct of its International relations with various countries. 
• IMPORTANCE OR NEED FOR ETHICS IN IR
• 1)Absence of a common global authority to enforce ethical values and principles.
• 2)Emerging global issues such as terrorism, refugee crisis, and climate change require effective participation with ethical considerations by various countries.
• 3) Problems such as organised crime, drug trafficking, and alleviation of poverty and hunger require a coordinated approach by various nations and only an ethical approach can help in finding peaceful resolutions to such issues.
• 4)IR and diplomacy can have wide ramifications on faraway lands and therefore require careful ethical analysis.
• VARIOUS MAJOR APPROACHES TO SOLVE ETHICAL DILEMMAS IN IR (03:39 PM)
• Realism: Most common approach in International Politics. It assumes IR is guided by national self-interest. According to this approach, morality is not an important
  consideration in a nation's actions. What motivates or guides a nation's actions is its self-interest.
• Idealism: Ideals such as peace, human rights, and global justice. According to such people, the goals and means of foreign policy should be based on morality.
• Principled Realism: Based on a combination of the first two approaches. According to this approach, Foreign policy involves the pursuit of interests based on power as
  well as fundamental moral values. 
• Apart from the above content, Please refer to the handouts, Material and PYQ as suggested by the faculty.

The ethics syllabus(Theory part) stands completed with this class.