STRUCTURE AND POWERS OF BOARD OF DIRECTORS OF PUBLIC AND PRIVATE COMPANIES- HOW FAR SIGNIFICANT FOR CORPORATE GOVERNANCE COMPARISON BETWEEN INDIA AND OTHER COMMON LAW COUNTRIES
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Abstract
In order to understand and appreciate the power and structure of the Board of Directors, it is necessary to have some understanding of the concept of corporate governance. It is interesting to note that there is no single definition of corporate governance that can be applied to all situations and jurisdictions. The term ‘Corporate Governance’ has been defined in various ways depending on the institution or author, country or legal tradition.Corporate governance has been defined as;
...the system of checks and balances, both internal and external to companies, which ensures that companies discharge their accountability to all their stakeholders and act in a socially responsible way in all areas of their business activity.
It also establishes relationship amongst manager, directors, shareholders and other creditors, who save and invest their capita to earn money in form of dividend.Since, the company is separate from its shareholders and BOD carries its own identity which consists of two organs: the general body of shareholders and the board of directors. Additionally, it should be noted that the governing power has been given to board of directors and should remain within the reach of shareholders to appoint and to remove. Also, Political accountability is assured by guaranteeing that the representatives of the people come back to the electorate periodically.It is a very established phenomenon that company being an artificial entity is not able to function itself: the person of a company is manifested through its board of directors.For the first time in India, BOD has been defined in 2013.This definition recognises the common law concept to say that the board of directors can act only collectively.
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