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Corporate governance

System by which companies are run and the means by which they are accountable to their shareholders, employees and the regulatory authorities. Directors are expected to run companies soundly and prudently. See COMBINED CODE OF CORPORATE GOVERNANCE; TURNBULL REPORT.
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A system specifying the division of duties, rights, and responsibilities among various participants in a corporation, such as the board of directors, the various committees within the board of directors, operating managers, and shareholders. Corporate governance enumerates the rules, guidelines, and procedures for making decisions affecting corporate affairs. The term has received particular attention in recent years because of massive lawsuits against the directors and officers of a number of high-profile corporations that filed for bankruptcy. Many business commentators, as well as insurance industry observers, believe that a breakdown of corporate governance, especially in the area of financial and accounting controls, was largely responsible for such failures.

Corporate governance at Lloyd’s

Core Principles Byelaw (no. 34/96) requires honesty, transparency and integrity from managing and members’ agents. The agencies are also subject to the FSA’s Principles of Business that correlate closely with Lloyd’s Core Principles. The board of a managing or members’ agent must ensure that the business is accountable to the FSA and follows the Lloyd’s Core Principles. Principle 9 emphasises the need for adequate management controls. The Lloyd’s Code for Sound and Prudent Management requires that each agent is directed and managed by a sufficient number of persons who are fit and proper for the positions they hold. Sound and prudent management embraces direction and management; staffing; supervision and accountability; and compliance.

Corporate Governance in Insurance Companies

Corporate Governance may be defined as a set of systems, processes and principles which ensure that a company is governed in the best interest of all stakeholders. It is the system by which companies are directed and controlled. It is about promoting corporate fairness, transparency and accountability. Corporate Governance involves regulatory and market mechanisms and the roles and relationships between a company’s management, its board, its shareholders and other stakeholders and the goals for which the Company is governed. IRDAI’s Corporate Governance are applicable to Insurance Companies in addition to the applicable provisions of Companies Act.

Corporate integrity agreement

Agreed settlement between a provider and the Office of the Inspector General (OIG) as a result of an investigation for health care fraud and abuse violations of the False Claims Act. The provider must meet certain government-imposed requirements (such as annual audits) and follow the guidelines of this government-mandated compliance program.

Corporate member

an underwriting member of Lloyd’s that is not an individual member; under Lloyd’s rules a corporate member may be a company, a Scottish limited partnership or a limited liability partnership.
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Company admitted to membership of Lloyd’s.

Corporate Social Responsibility (CSR)

In the Indian context it has been mandatory that a Company having a reasonable size shall contribute not less than 2% of their average net profits during the immediately preceding financial years towards CSR activities. The threshold limit for attaining reasonable size has been fixed as one of the (a) net worth of Rs. 500 crores or (b) turnover of Rs. 1,000 crores or (c) Net profit of Rs. 5 crores. This is in order to give back to the Society in which the Company has grown and made profits.

Corporation

A business whose articles of incorporation have been approved in some state. For insurance purposes, the type of business structure helps to determine who is insured on the policy.
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US: An “artificial person,” created under the laws of a given state. A corporation has an identity and an existence distinct and independent from that of its individual owners. Corporations have the power to (1) act; (2) contract; (3) sue and be sued; and (4) own, manage, and buy/sell property. The profits (and losses) of the corporation are distributed according to the ownership interest (i.e., the percentage of total shares) held by each shareholder. The defining feature of a corporation is its legal independence from the people who create it. This means that if a corporation fails, shareholders only stand to lose their investment in the company (i.e., the amount of money they paid for shares of stock in the company) but will not be liable for any remaining debts owed to the corporation’s creditors. Corporations are chartered by all 50 of the United States and by the federal government in certain instances (e.g., national banks and savings and loan institutions).
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MEDICAL,USA: An entity or group of individuals who obtain a state charter that gives certain legal rights to conduct business.