Corporate

Corporate Governance
Governance
Roles
Roles and
and Responsibility
Responsibility
PRESENTED BY-
Rahul Singh
Ravindra Singh
Sajjan Singh
Nitin bansal
sandeep
Ravi Kumar
Rohitass

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 Overview
Overview of
of Corporate
Corporate
Governance
Governance

Corporate governance structures are established to ensure

that corporations can be accountable to their owners — the
shareholders. 
However, Merck’s corporate governance is more than the
Company’s relationship to our shareholders, it is our
relationship to society, because issues that matter to our key
stakeholders can very quickly become important issues for our
shareholders.
 As such, our corporate governance objective is to balance
fiduciary duty and accountability to generate long–term
shareholder value, while also considering in a transparent
manner the feedback from other stakeholders.
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 Some Definitions
• ““Corporate governance involves a set of
relationships between a company’s management, its
board, its shareholders and other stakeholders ..also
the structure through which objectives of the
company are set, and the means of attaining those
objectives and monitoring performance are
determined.”

• “…fundamental objective of corporate governance is

the ‘enhancement of the long-term shareholder value
while at the same time protecting the interests of
other stakeholders.”

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 What is corporate governance?
Corporate governance is the system by which
companies are directed and managed.

It influences how the objectives of the company

are set and achieved, how risk is monitored and
assessed, and how performance is optimized.

Good corporate governance structures

encourage companies to create value (through
entrepreneurs, innovation, development and
exploration) and provide accountability and control
systems commensurate with the risks involved.

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 Issues in Corporate
Governance
• Asymmetry of power
• Asymmetry of information
• Interests of shareholders as
residual owners
• Role of owner management
• Theory of separation of powers
• Division of corporate pie among
stakeholders

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 Governance and
Performance measurement -
issues
• Is governance behavior motivated by legislation?
• Do standards vary with jurisdictions or do you adopt the best
option?
• Do you choose the right thing to do irrespective of whether
it’s mandatory or not?
• Is performance evaluation limited to valuation metrics?
• Is it only ROE, Net margin, growth, shareholder wealth
creation?
• Do performance measures need to be holistic?
• We need to encompass all stakeholders
• Governance is an enabler for holistic performance
• How do managers better understand governance requirements?
• Do we need market research for governance requirements?

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 Does performance depend
on governance
• Medium to long term performance requires
governance
• Most companies which have grown in the last 25
years have outstanding performance and have
good governance structure
• A good governance structure treats all
stakeholders fairly
• Governance alone cannot ensure performance

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Governance and performance

• Good governance leads to good performance

• It creates an open and transparent system
• It improves communication and breaks down
systematic barriers to flow of information
• Good governance allows decision making
based on data. It reduces risk
• Good governance helps in creating a brand
and creates comfort for all stakeholders and
society

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 Current status on corporate
governance
Comparison of Board structure – Indian top 50 Vs U.S. top 50 – Key Findings
Parameter India (Nifty Fifty companies)
Ownership pattern 48% of Indian companies have largest
shareholder holding over 50%
Board size Largest board size – 17. smallest – 5
44% of the top 50 companies have more than
12 directors
Board independence 58% of companies have a board majority of
independent directors
12% have less than 1/3rd of their directors
independent
Executive directors in In 35 companies 50% of the directors – or more
board – are executive directors
Chairman and CEO 60% have separate Chairman and CEO
Lead independent director 3 companies have lead independent directors
Board committees All companies have audit committees – 54%
have fully independent Audit Committees
33 companies have remuneration committees –
of these 14 fully independent and 16 have
majority independent committees
9 companies have nomination committees – 6
12/08/21 are fully independent and 3 have majority
independent committees
Source: Crisil Report on Corporate Governance
US (top 50 out of NYSE 100 index)
Largest shareholder holds less than
10% in all cases
Largest board size 18. smallest –
10
66% of the top 50 companies have
more than 12 directors
All companies have a board majority
of independent directors
Boards of 49 companies out of 50
have less than 25% executive
directors
Only 20% have separate Chairman
and CEO
20 companies have lead independent
directors
All companies have fully independent
audit remuneration and nomination
committees
9
 The Corporate Board

• Central to Corporate Governance

– Juxtaposed between Shareholders on the
one hand, and on the other, Managers of
the Entity
– Follows Distancing between Ownership and
Control
– Trustee for All Shareholders
– Loyalty & Commitment – Always to Company

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 Board Role &
Responsibility
• Provide/ Exercise
– Leadership and Strategic Guidance
– Objective Judgment Independent of Management
– Control over the Company

• Direct and Control the Management of the

Company
• Be Accountable at all times to All
Shareholders

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 Risk management

• Corporate Audit and Assurance Services

group is accountable to the Audit
Committee of the Merck Board to assess
the adequacy and effectiveness of the
Company's control environment relating to
financial reporting and operating processes
and ensuring appropriate management and
oversight of key Company risks, in
accordance with our corporate policy on
audit, control and risk manage me

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 REGULATION &
LEGISLATION
Regulators Government Stock Exchanges
(SEBI/RBI) Legislation Listing Agreements

Lenders
(Banks/ Shareholders/
Listed Corporations Stakeholders
Depositors)
(The Board & the Executive)

Market Operators Institutional Investors Press/Media

(Rewards) (Pension Funds/Insce Cos) (Opinion Makers)

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 An Enterprise’s Triple Effect on Society

Sustainable Development Equal Opportunities

Waste Control Education &

Culture

n t Soc
e
Emissions
n m ial Community
ir o Regeneration
nv Business
E Impact

Energy Use Human Rights

Economic
Product Employee
Life-cycle Volunteers
Product Wealth Productive Ethical
Value Generation Employment Trading

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 The Triple-Bottom-line
Impact
economics

Business Impact

environment
society

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Governance Orientation
& Sustainable Profits

A
G
E
N
C SUSTAINABLE
PROFIT LINE
Y

STEWARDSHIP
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 Safety Monitoring

• efficient global system of pharmacovigilance to

compile, assess and understand adverse experiences
related to our products. Our global pharmacovigilance
teams within Merck Research Laboratories are
responsible for the safety evaluation of our
medicines and vaccines. In parallel, at the country
level, local pharmacovigilance teams at our
subsidiaries worldwide are responsible for ensuring
that safety information is collected and reported to
our Headquarters pharmacovigilance staff and to
local regulatory authorities. For more information

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Governance Orientation
Matrix

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 Corporate Governance Performance Data
Summary 2005–2008

Performance Indicators 2008 2007 2006 2005

Number of independent directors on the 13 12 11 11

Merck Board (%)* (93% (92% (92%
(92%

Separate Chairman of the Board and CEO No No N/A N/A

Lead Independent Director Yes Yes NO No

Yes Yes Yes Yes
Independent Audit Committee
Independent Compensation Committee Yes Yes Yes Yes
Independent Committee on Public Policy Yes Yes Yes Yes
and Social Responsibility
Number of Board meetings held or 13 13 8 11
scheduled**
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 Thanks
Thanks for
for Your
Your Attention
Attention

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