Governance
Structure of
a Business
You might have come across terms like corporate governance issues or corporate
structure in the news.
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What is Corporate Governance?
Corporate Governance
The system of rules,
A company or organisation.
practices, and decisions.
Corporate governance is about how companies are managed, how
decisions are made, and who is responsible for those decisions.
It ensures a company runs ethically, treats stakeholders fairly, and
avoids misuse of power.
For example, The Tata Group is one of the most trusted companies
in India because of its strong corporate governance.
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Why is corporate governance important?
Corporate Governance
Build Trust and Better Decision Protect shareholders
Prevent Fraud
Reputation Making Interest
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Companies like Reliance, Infosys, and the
Tata Group have consistently created
long-term wealth for their shareholders.
Whereas, companies like Satyam
Computer and Kingfisher Airlines faced
major failures, which is mainly due to poor
corporate governance structures.
What is corporate governance structure?
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What is corporate governance structure?
Corporate structure refers to the
organization and hierarchy within a
company.
It defines how roles, responsibilities,
and authority are distributed among
different people and departments.
In short, it’s the backbone of how a
company functions.
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Now, there are broadly three pillars of a companies
corporate structure
BOARD OF
MANAGEMENT SHAREHOLDERS
DIRECTORS
Let’s understand
each of them in detail
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Management
The management team is a group of individuals within an organisation tasked
with planning, organising, leading, and controlling resources to achieve the
company’s objectives.
They oversee the company’s day-to-day
operations and ensure smooth functioning
across different departments.
Led by the Chief Executive Officer (CEO) or
Managing Director (MD), the management
team includes key executives such as the
CFO, COO , CTO, and others.
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Board of Director
The Board of Directors (BOD) act as the governing body of the company,
ensuring it operates in the best interest of its shareholders while following
laws, regulations, and ethical standards
In simple terms, the BOD ensures that the
company’s management runs the
business efficiently and ethically.
They make high-level decisions and
provide oversight, leaving the day-to-day
operations to the management team.
Let’s understand the BOD structure
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Board of Director
Board of Directors
Non- Executive Directors Executive Directors Independent Directors
Members who are part of Not involved in daily Completely independent of
company management (CEO, operations, provide guidance company
CFO, etc) from external perspective. Ensure unbiased decision
Involved in daily operations making
Committee
Nomination and Audit Committee Risk Management Stakeholder Relations
Remuneration Committee Committee Committee
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Shareholder/Promoter
A shareholder is someone who has invested money into a company by purchasing
its shares, giving them certain rights, such as receiving a portion of the profits
(dividends) and voting on important company decisions.
Categories of Shareholders
Majority Shareholder Institutional Shareholder Individual shareholder
Like Founder/ Promoter Like DIIs/ FIIs Like Retail investor or HNIs
of the company
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There are some companies where institutional investors hold the majority of shares,
while the founder has either sold their stake or now holds a smaller percentage
compared to other shareholders.
Example: Zomato, L&T and major Private banks
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How a Company's Governance Structure Works?
1 Shareholders/Promoters
2 3 4
Pick the Board of Directors Management Team Handles
The Board of Directors Selects
(BoD) Day-to-Day Operations
the Management Team
Majority shareholders (often Focused on running the
promoters) usually become Key roles like CEO, CFO, and other business efficiently and
part of the BoD. executives are chosen by the Board. achieving company goals.
7 6 5
Financial Results are Board of Directors & Committees Preparation of Financial
Presented to Shareholders Review Financial Results Results
After approval, the results are The BoD and specialized committees The management prepares
shared with shareholders (the (like audit committees) check these detailed financial results
real owners of the company). results for accuracy and compliance. every quarter.
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