CHAPTER: 1 INTRODUCTION

1.1 MEANING: Corporate governance while not a new concept, has, in the 1990s, become an issue of global importance. Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the goals for which the corporation is governed. The principal players are the shareholders, management and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large. Corporate governance is typically perceived by academic literature as dealing with problems that results from the separation of ownership and control. From this perspective, corporate governance would focus on: the internal structure and rules of the board of directors; the creation of independent audit committees rules for discl osure of information to shareholders and creditors; and control of the management. In other words,corporate governance is the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It deals with conducting the affairs of a company such that there is fairness to all stakeholders and that its actions benefit the greatest number of stakeholders. In this regard, the management needs to prevent asymmetry of benefits between various sections of shareholders, especially between the ownermanagers and the rest of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal and corporate funds in the management of a company. Ethical dilemmas arise from conflicting interests of the parties involved. In this regard, managers make decisions based on a set of principles influenced by the values, context
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and culture of the organization. Ethical leadership is good for business as the organization is seen to conduct its business in line with the expectations of all stakeholders. The aim of "Good Corporate Governance" is to ensure commitment of the board in managing the company in a transparent manner for maximizing long-term value of the company for its shareholders and all other partners. It integrates all the participants involved in a process, which is economic, and at the same time social. The fundamental objective of corporate governance is to enhance shareholders' value and protect the interests of other stakeholders by improving the corporate performance and accountability. Hence it harmonizes the need for a company to strike a balance at all times between the need to enhance shareholders' wealth whilst not in any way being detrimental to the interests of the other stakeholders in the company. Further, its objective is to generate an environment of trust and confidence amongst those having competing and conflicting interests. It is integral to the very existence of a company and strengthens investor's confidence by ensuring company's commitment to higher growth and profits. Broadly, it seeks to achieve the following objectives: A properly structured board capable of taking independent and objective decisions is in place at the helm of affairs; The board is balance as regards the representation of adequate number of nonexecutive and independent directors who will take care of their interests and well-being of all the stakeholders; The board adopts transparent procedures and practices and arrives at decisions on the strength of adequate information; The board has an effective machinery to subserve the concerns of stakeholders; The board keeps the shareholders informed of relevant developments impacting the company; The board effectively and regularly monitors the functioning of the management team

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1.2 DEFINITION: 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. In other words, 'good corporate governance' is simply 'good business'. It ensures: Adequate disclosures and effective decision making to achieve corporate objectives. Transparency in business transactions. Statutory and legal compliances. Protection of shareholder interests. Commitment to values and ethical conduct of business. Corporate governance can be defined as a set of systems and processes which ensure that a company is managed to the best interests of all stakeholders employees, shareholders, customers, creditors and community. It stipulates parameters of accountability, control and reporting functions of the board of directors and encompasses the relationship among the various participants of a corporation the board, the management team, shareholders and other stakeholders. In the latest survey of the US, the Paris based OECD comprising 28 rich industrial countries, defined corporate governance as the resolution of a conflict between the goals of the corporate and the differing objectives of the various agents who play a role in their operation. It is the need to ensure enlightened corporate behavior rather than the compliance of specific laws that is behind corporate governance. Although there are various attributes of corporate governance, yet some important rules and practices include the concentration of ownership and control and the constitution of boards and their roles, information to shareholders and disclosure obligations to potential shareholders and investors, corporate takeovers, corporate restructuring etc.

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Corporate governance is most often viewed as both the structure and the relationships which determine corporate direction and performance. The board of directors is typically central to corporate governance. Its relationship to the other primary participants, typically shareholders and management, is critical. Additional participants include employees, customers, suppliers, and creditors. The corporate governance framework also depends on the legal, regulatory, institutional and ethical environment of the community. Whereas the 20th century might be viewed as the age of management, the early 21st century is predicted to be more focused on governance. Both terms address control of corporations but governance has always required an examination of underlying purpose and legitimacy. - - James McRitchie Corporate governance is gathering together a group of smart, accomplished people around a board table to make good decisions on behalf of the company and its stakeholders. As We Start Anew, Jim Kristie, editor and associate publisher of Directors & Boards.

Corporate governance system is the combination of mechanisms which ensure that the management (the agent) runs the firm for the benefit of one or several stakeholders (principals). Such stakeholders may cover shareholders, creditors, suppliers, clients, employees and other parties with whom the firm conducts its business. Goergen and Renneboog, 2006

Corporate governance is about how companies are directed and controlled. Good governance is an essential ingredient in corporate success and sustainable economic growth. Research in governance requires an interdisciplinary analysis, drawing above all on economics and law, and a close understanding of modern business practice of the kind which comes from detailed empirical studies in a range of national systems. Simon Deakin, Robert Monks Professor of Corporate Governance

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1.3. NATURE OF CORPORATE GOVERNANCE: Corporate governance is a system which involves the distribution of rights and responsibilities among different participants in the corporation such as the board, management, shareholders and other stakeholders. It spells out the rules and procedures for making decisions about corporate affairs. It also includes structures, processes, cultures and systems through which a company sets its objectives, determines the means of attaining those objectives and monitoring its performance. The following points may, however, help in understanding the nature of Corporate Governance: Corporate governance is not an end in itself. Rather it is an important element in building up international competitiveness. Each nation needs strong boards, strong corporate managements and strong investors all working under a deliberately created environment of creative tension so as to ensure good corporate governance. The purpose of corporate governance is to achieve a responsible, value oriented management and control of a corporation. This will help promote and reinforce the confidence of current and future shareholders, lenders, employees, business associates and general public. Corporate governance is only a part of the larger economic context in which business firms operate. It also depends on the legal, regulatory and institutional environment. In addition, factors such as business ethics and corporations awareness of the environmental and societal interests of the communities in which it operates can also have an impact on the regulation and long- term success of the concerned corporation. Corporate governance is affected by the relationships among participants in the governance system. The controlling shareholders which may comprise of individuals, family holdings, business alliances and other corporations acting through a holding company can significantly influence corporate behavior. Corporate discipline is a commitment by a companys senior management to adhere to behavior that is universally recognized and accepted to be correct and
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proper. This encompasses a companys awareness of, and commitment to, the underlying principles of good governance, particularly at senior management level. Corporate transparency is the ease with which an outsider is able to make meaningful analysis of a companys actions, its economic fundamentals and the non-financial aspects pertinent to that business. This is a measure of how good management is at making necessary information available in a candid, accurate and timely manner not only the audit data but also general reports and press releases. It reflects whether or not investors obtain a true picture of what is happening inside the company. Corporate independence is the extent to which mechanisms have been put in place to minimize or avoid potential conflicts of interest that may exist, such as dominance by a strong chief executive or large share owner. These mechanisms range from the composition of the board, to appointments to committees of the board, and external parties such as the auditors. The decisions made, and internal processes established, should be objective and not allow for undue influences. Corporate individuals or groups in a company, who make decisions and take actions on specific issues, need to be accountable for their decisions and actions. Mechanisms must exist and be effective to allow for accountability. These provide investors with the means to query and assess the actions of the board and its committees. With regard to management, responsibility pertains to behavior that allows for corrective action and for penalizing mismanagement. Responsible management would, when necessary, put in place what it would take to set the company on the right path. While the board is accountable to the company, it must act responsively to and with responsibility towards all stakeholders of the company. The systems that exist within the company must be balanced in taking into account all those that have an interest in the company and its future. The rights of various groups have to be acknowledged and respected. For example, minority share owner interests must receive equal consideration to those of the dominant share owner(s).
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 A well-managed company will be aware of, and respond to, social issues, placing a high priority on ethical standards. A good corporate citizen is increasingly seen as one that is non-discriminatory, non-exploitative, and responsible with regard to environmental and human rights issues. A company is likely to experience indirect economic benefits such as improved productivity and corporate reputation by taking those factors into consideration.

1.4. CHARACTERISTICS OF CORPORATE GOVERNANCE: SEBI defines corporate governance as the acceptance by the management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal and corporate funds in the management of the company. The main characteristics of corporate governance are as follows: 1.Major Stakeholders: The management needs to manage its affairs of the firm in the best interest of its stakeholders. The major stakeholders in the area of corporate governance are: a) Within the Firm: The stakeholders within the organisation include management, shareholders and employees. b) Outside the firm: The stakeholders outside the organisation include lenders such as banks, and other investors such as Debentureholders. It also includes customers, suppliers, and society. 2.Corporate Governance Factors: The corporate governance depends upon two main factors: a) The first is the commitment of the board of directors and management towards integrity and transparency in business operations.
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b) The second is the legal and administrative framework of the government. If public governance is weak, we cannot have good corporate governance.

3.Corporate Governance -- the objective: The main objective of corporate governance is the enhancement of shareholder value, keeping in view the interests of other stakeholders. Therefore, a company needs to strike a balance at all times between the need to enhance shareholders wealth and the need to protect the interests of other stakeholders.

4.Aspects of corporate governance: The three main aspects of corporate governance (as include in the draft report on Corporate Governance released by Confederation of Indian industry) are as under: First, there is no unique structure of corporate governance in the developed world. The corporate governance code of each country has to be designed keeping in view the peculiarities of the country. Mr. Adrian Cadbury who had framed the Cadbury Committee Report echoed this idea. Second, Indian companies, banks and financial institutions can no longer afford to ignore better corporate practices. With integration on India into the world market ( due to WTO membership), companies will have to give greater disclosures, more transparent explanation for major decisions and better corporate value. Third, corporate governance extends beyond corporate law. The quantity, quality and frequency of financial and management disclosure, the extent to which the board of directors exercise their fiduciary responsibilities towards shareholders, the quality of information that the management share with their boards, and the commitment to run transparent companies that maximize long-term shareholder value evolve due to catalytic role played by the more progressive elements within the corporate sector.
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5.Reasons for Corporate Governance: The reasons for growing interest in corporate governance are as under: The assertion of rights by the shareholders. The new growth opportunities brought about by changes in the business environment resulting from globalisation. The significant presence of foreign financial investors, who have high expectations about the quality of management. The greater accountability on the part of the financial institutions. The international standards of disclosure and practices. The strategic alliances with global players to become more market driven. The need to comply with the statutory authorities such as SEBI in India.

6.Corporate Governance Report: As per Clause 49 of the listing agreement, all listed companies (on the stock exchanges) must submit a report on corporate governance along with their annual report. The items to be included in corporate governance report are: A brief statement on companys philosophy on code of governance. Composition and category of Board of Directors. Role of audit committee. Role of Shareholders committee. Details of general board meetings. Disclosures relating to promoters and directors interests that may conflict with the interest of the company at large. General shareholders information such as pattern of shareholding, registrar and transfer agents, book closure data, dividend payment data, etc.

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1.5. IMPORTANCE OF CORPORATE GOVERNANCE: Corporate governance is now a topic of considerable interest to a large and expanding cross- section of the community. It is of interest to the Reserve Bank, in its capacity as supervisor of the banking system. Until fairly recently, corporate governance was not a topic that attracted much public attention. It was a topic reserved for discussion in the Board room or in academic environments. However, recent events, such as the Enron scandal and other corporate governance failures, have put corporate governance on the front pages of our main newspapers. Although none of us welcomes this kind of adverse publicity, it has nonetheless had beneficial effects. In particular, it has highlighted the important role that corporate governance plays in a modern economy and the consequences of getting it wrong. And it has strengthened the incentives for directors and policy-makers alike to reassess the structures needed to produce high quality corporate governance. The Importance Of Corporate Governance Is As Follows: 1. Changing Ownership Structure: In recent years, the ownership structure of companies has changed a lot. Public financial institutions, mutual funds, etc. are the single largest shareholder in most of the large companies. So, they have effective control on the management of the companies. They force the management to use corporate governance. That is, they put pressure on the management to become more efficient, transparent, accountable, etc. The also ask the management to make consumer-friendly policies, to protect all social groups and to protect the environment. So, the changing ownership structure has resulted in corporate governance. 2. Importance of Social Responsibility: Today, social responsibility is given a lot of importance. The Board of Directors have to protect the rights of the customers, employees, shareholders, suppliers, local communities, etc. This is possible only if they use corporate governance.

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3. Growing Number of Scams: In recent years, many scams, frauds and corrupt practices have taken place. Misuse and misappropriation of public money are happening everyday in India and worldwide. It is happening in the stock market, banks, financial institutions, companies and government offices. In order to avoid these scams and financial irregularities, many companies have started corporate governance. 4. Indifference on the part of Shareholders: In general, shareholders are inactive in the management of their companies. They only attend the Annual general meeting. Postal ballot is still absent in India. Proxies are not allowed to speak in the meetings. Shareholders associations are not strong. Therefore, directors misuse their power for their own benefits. So, there is a need for corporate governance to protect all the stakeholders of the company. 5. Globalisation: Today most big companies are selling their goods in the global market. So, they have to attract foreign investor and foreign customers. They also have to follow foreign rules and regulations. All this requires corporate governance. Without Corporate governance, it is impossible to enter, survive and succeed the global market. 6. Takeovers and Mergers: Today, there are many takeovers and mergers in the business world. Corporate governance is required to protect the interest of all the parties during takeovers and mergers. 7. SEBI: SEBI has made corporate governance compulsory for certain companies. This is done to protect the interest of the investors and other stakeholders.

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1.6. BENEFITS OF CORPORATE GOVERNANCE: With corporate responsibility and the need for governance high in the public and medias eye there has been much discussion regarding how the management of the corporate resource and skills pool needs to reflect, accurately, contemporary business needs and to deliver the services required to support line of business activities including key projects. With this in mind business need to credibly provide evidence that their management of resources, business capability, programs and projects is in line with regulatory and corporate governance requirements. A good corporate governance framework has the potential for these benefits: Enhancing overall company performance. Preparing a small enterprise for growth, and so helping to secure new business opportunities when they arise. Increasing attractiveness to investors and lenders, which enables faster growth. (According to a global investor opinion survey in 2002, investors opinion survey in 2002, investors are ready to pay a premium of as much as 25% for companies exhibiting high governance standards in Asia.) Increasing the companys ability to identify and mitigate risks, manage crises and respond to changing market trends. Increasing market confidence as a whole. All companies suffer from corporate scandals, which scare potential investors away from the market. Reducing conflicts of interest, especially between managers and stockholders. Verifying that the firms assets are used efficiently and productively and in the shareholders best interest. A clear delineation of shareholder rights. An outline of manager and director responsibilities to shareholders. Clearly defined standards against which performance of responsibilities can be measured. Fair and equitable treatment in relationships between managers, directors and shareholders.
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 Accuracy and transparency in disclosures regarding operations, performance, risk and financial position. Improving access to capital and financial markets. Adopting good corporate governance practices leading to better internal control systems, greater accountability, and better profit margins. Reducing the costs of elevating investors confidence. Organizations seeking new funds often find themselves obliged to undertake serious corporate governance reforms at a high cost and upon the demand of outsiders, often in a time of crisis. When the foundations are already in place investors and potential partners will have more confidence in investing in or expanding the companys operations. Good corporate governance can provide proper incentives for the Board and management to pursue objectives that are in the interest of the company and shareholders, as well as facilitate effective monitoring. Better corporate governance can also provide Shareholders with greater security on their investment. Better corporate governance also ensures that shareholders are sufficiently informed on decisions concerning fundamental issues like amendments of statutes or articles of incorporation, sale of assets, etc. The adoption of corporate governance principles can play a significant role in increasing the corporate value of a company.

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1.7. REPORTS OF CORPORATE GOVERNANCE: 1.7.1 Report of the committee (Kumar Mangalam Birla) on corporate governance Strong corporate governance is indispensable to resilient and vibrant capital markets and is an important instrument of investor protection. An important aspect of corporate governance relates to issues of insider trading. It is important that insiders do not use their position of knowledge and access to insider information about the company and take unfair advantage of the resulting information asymmetry. To prevent this from happening, corporate are expected to disseminate the material price sensitive information in a timely and proper manner and also ensure that till such information is made public, insiders abstain from transacting in the securities of the company. The principle should be disclose or desist. This therefore calls for companies to devise an internal procedure for adequate and timely disclosures, reporting requirements, confidentiality norms, code of conduct and specific rules for the conduct of its directors and employees and other insiders. However, the need for such procedures, reporting requirements and rules also goes beyond corporates to other entities in the financial markets such as Stock Exchanges, Intermediaries, Financial Institutions, Mutual Funds and concerned professionals who may have access to inside information. This has been dealt with in a comprehensive manner, by a separate group appointed by SEBI, under the chairmanship of Shri Kumar Mangalam Birla. The issue of corporate governance involves, besides shareholders, all other stakeholders. The Committees recommendations have looked at corporate governance at the point of view of the stake holders and in particular that of the shareholders and investors, because they are the raison deetre for corporate governance and also the prime constituency of SEBI. The control and reporting functions of boards, the roles of the various committees of the board, the role of management, all assume special significance when viewed from this perspective. The other way of looking at corporate governance is from the contribution that good corporate governance makes to the efficiency of a business enterprise, to the creation of wealth and to the countrys economy.

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At the heart of the committees report is the set of recommendations which distinguishes the responsibilities and obligations of the boards and the management in instituting the systems for good corporate governance and emphasizes the rights of shareholders in demanding corporate governance. Many of the recommendations are mandatory. For reasons stated in the report, these recommendations are expected to be enforced on the listed companies for initial and continuing disclosures in a phased manner within specified dates, through the listing agreement. The companies will also be required to disclose separately in their annual reports, a report on corporate governance delineating the steps they have taken to comply with the recommendations of the committee. This will enable shareholders to know, where the companies, in which they have invested, stand with respect to specific initiatives taken to ensure robust corporate governance. 1.7.2 Report of the SEBI committee (N.R. Narayanan Murthy) on corporate governance: CORPORATIONS pool capital from a large investor base both in the domestic and in the international capital markets. In this context, investment is ultimately an act of faith in the ability of a corporations management. When an investor invests money in a corporation, he expects the board and the management to act as trustees and ensure the safety of the capital and also earn a rate of return that is higher than the cost of capital. In this regard, investors expect management to act in their best interests at all times and adopt good corporate governance practices. Corporate governance is the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal and corporate funds in the management of a company. It was the belief of the Securities and Exchange Board of India (SEBI) that efforts to improve corporate governance standards in India must continue. This is because these standards themselves were evolving in keeping with market dynamics. Accordingly, the
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committee on Corporate Governance (the Committee) was constituted by SEBI, to evaluate the adequacy of existing corporate governance practices and further improve these practices. The committee comprised members from various walks of public and professional life. This includes captains of industry, academicians, public accountants and people from financial press and from industry forums. The issues discussed by the committee primarily related to audit committees, audit reports, independent directors, related parties, risk management, directorships and director compensation, codes of conduct and financial disclosures. The Committees recommendations in the final report were selected based on parameters including their relative importance, fairness, accountability, transparency, ease of implementation, verifiability and enforceability. The key mandatory recommendations focus on strengthening the responsibilities of audit committees; improving the quality of financial disclosures, including those related to party transactions and proceeds from initial public offerings; requiring corporate executive boards to assess and disclose business risks in the annual reports of companies; introducing responsibilities on boards to adopt formal codes of conduct, the position of nominee directors; and stock holders approval and improved disclosures relating to compensation paid to non-executive directors. Non-mandatory recommendations include moving to regime where corporate financial statements are not qualified; instituting a system of training of board members; and the evaluation of performance of board members. The Committee believes that these recommendation codify certain standards of good governance into specific requirements, since certain corporate responsibilities are too important to be left to loose concepts of fiduciary responsibility. When implemented through SEBIs regulatory framework, they will strengthen existing governance practices and also provide a strong incentive to avoid corporate failures. Some people have legitimately asked whether the costs of governance reforms are too high. In this context, it should be noted that the failure to implement good governance procedures has a cost beyond mere regulatory problems. Companies that do not employ
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meaningful governance procedures will have to pay a significant risk premium when competing for scarce capital in todays public markets. The Committee would like to thank Mr. G.N. Bajpai, Chairman of SEBI and Mr. Pratip Kar, Executive Director, SEBI for their support. In addition, the Committee would like to thank Mr. P.K. Bindlish, General Manager, Mr. Manoj Kumar, Assistant General Manager and other staff at SEBI along with Mr. Sumanth Cidambi of Progeon Limited, who assisted in the preparation of this report.

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CHAPTER: 2 ANALYSIS OF CORPORATE GOVERNANCE 2.1 Introduction : Shoppers Stop is an Indian department store chain promoted by the K Raheja Corp Group (Chandru L Raheja Group), started in the year 1991 with its first store in Andheri, Mumbai Shoppers Stop Ltd has been awarded "the Hall of Fame" and won "the Emerging Market Retailer of the Year Award", by World Retail Congress at Barcelona, on April 10, 2008.Shoppers Stop is listed on the BSE. In 2013, Shoppers Stop has 61 stores in India. Shoppers Stop is one of the leading retail stores in India. Shoppers Stop began by operating a chain of department stores under the name Shoppers Stop in India. Shoppers Stop has 65 stores in 28 cities. Shoppers Stop retails a range of branded apparel and private label under the following categories of apparel, footwear, fashion jewellery, leather products, accessories and home products. These are complemented by cafe, food, entertainment, personal care and various beauty related services. Shoppers Stop launched its e-store with delivery across major cities in India in 2008. The website retails all the products available at Shoppers Stop stores, including apparel, cosmetics and accessories. Shoppers Stop opened stores in Amritsar, Bhopal and Aurangabad. Shoppers Stop retails products of domestic and international brands such as Louis Philippe, Pepe, Arrow, BIBA, Gini & Jony, Carbon, Corelle, Magppie, Nike, Reebok, LEGO, and Mattel. Shoppers Stop retails merchandise under its own labels, such as STOP, Kashish, LIFE and Vettorio Fratini, Elliza Donatein, Acropolis etc. In April 2008, Shoppers Stop changed its logo and adopted the mantra "Start Something New" and introduced international brands like CK Jeans, Tommy Hilfiger, FCUK, Mustang, Dior across the stores. The focus of the reposition was on the service, ambience upgradation and customer connect. Shoppers Stop connects with the youth audience through adopting the communication routes relevant to youth, up the fashion quotient through merchandising, and create ambience that connects with the mindset. The brand campaign addresses environment-related issues in a youthful, tongue-in-cheek manner.
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Shoppers Stop as a brand active on social media marketing platforms with Facebook and Twitter to connect with this audience. Shoppers Stops has a loyalty program called First Citizen. They also offer a co-branded credit card with Citibank called the First Citizen Citibank Titanium Credit Card for their members. 2.1 Code of Conduct Code of Conduct for Members of the Board & the Employees in the Grade of Manager & Above

I. PREAMBLE: Integrity, transparency and trust form part of the core beliefs of all activities of the Company. Our corporate values include, We will not take what is not ours. The obligation to dissent We will have an environment conducive to openness. We will have an environment for innovation. We will have an environment for development. We have a willingness to apologies and forgive. We will respect our customers rights. Value of Trust We will be fair. We will contribute to society. The said beliefs have been the basis of our growth and development. While the company has adopted a separate code of conduct for all its employees, it is important that there be a separate code of conduct for members of the Board and the Management, as they shape the growth of the organisation.

II. APPLICABILITY: This Code of Conduct (Code) is formally adopted and is effective from 1st December, 2005. The Code is modified w.e.f. 28th October 2006 to include Employees in the grade

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of Manager & above and is applicable to the following persons collectively referred to as Management. 1. Members of the Board of Directors. 2. Manager and above. 3. Functional Heads / Department Heads / Business Heads.

Each Member of the Management undertakes to abide by this Code and shall submit a declaration within ten days from the enforcement of this Code and thereafter annually to be provided at the beginning of every financial year, confirming that he has not violated this Code and other policies framed by the Company.

III. THE CODE: 1) To Lead by Example Managers are the guidance force in the Company. It shall be the responsibility of the Management to lead by example. Heading by example would mean and include:-

a) An appropriate and decent dress code. b) Humility in discussing matters with junior employees. c) Respectful restraint in use of abusive language during conversations with junior employees. d) The obligation to guide and motivate the complete organisation. e) To lead by self commitment and self motivation and thereby showing a fitting example to the junior employees. f) To exercise powers conferred with reasonable discretion and after weighing consequences of such use prior to such use. g) To induce a feeling of loyalty towards the organisation. h) To work selflessly and with due nobility to achieve the principles of the organisation. i) To be humane.

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2) Honest and Ethical Conduct To act in accordance with the highest standards of personal and professional integrity, honesty and ethical conduct, whilst discharging the obligations cast upon him.

3) Principles of Compliance a) Adhere to all laws, rules and regulations applicable to the business of the Company in all geographies where our business is situated. b) If any, violations of laws, rules and regulations would subject the Company and its officers to prosecution and as such entitles it to pursue remedies to defend itself and to recover or make good any loss/damage suffered by it.

4) Harassment and Discrimination Conduct yourself in a professional manner and treat others with respect, fairness, and dignity. The Company does not tolerate harassment or discrimination. In addition, applicable laws and ordinances prohibit discrimination in employment based on race, colour, religion, age, sex, national origin, ancestry, physical or mental disability, medical condition, veteran status, marital status, or sexual orientation. The Company is committed to providing a work environment that is fair and nondiscriminatory.

As a good corporate citizen the Company is committed to a gender friendly workplace. This is in order to enhance equal opportunities for men and women; to prevent/stop/redress sexual harassment at the workplace and to guarantee good employment practices. Sexual harassment includes unwelcome sexually determined behavior such as unwelcome physical contact; a demand or request for sexual favours; sexually coloured remarks; showing pornography and any other unwelcome physical, verbal or nonverbal conduct of a sexual nature. The Company maintains an open door for reportees; encourages employees to report any harassment concerns and is responsive to employee complaints about harassment or other unwelcome and offensive conduct. A committee has been constituted to inquire into complaints and to recommend appropriate action, wherever required. The Company demands, demonstrates and promotes professional behaviour and respectful treatment of all employees.
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5) Conflict of Interest Management shall avoid conflict of interest. In case there is likely to be a conflict of interest, he/she should make full disclosure of all facts and circumstances thereof to the Board of Directors or any Committee / officer nominated for this purpose by the Board including the Audit Committee and a prior written approval should be obtained. Some of the situations wherein a conflict of interest may arise are elucidated below:a) Employment Devote full time, attention and energy to achieve the stated business objectives of the Company and also towards enhancing shareholder value.

b) Outside Directorship Not to accept any appointment as Director/Partner in any company, firm or body Corporate engaged in similar line of business or that of its subsidiary companies, Without prior consent of the Company.

c) Proprietary of Information/ Confidentiality: Respect the confidentiality of information acquired during the course of ones work, except when authorised or is legally obliged to disclose. No Member of the Management and his or her immediate family shall, directly or indirectly, derive any benefit or assist others to derive any benefit from the access to and possession of price sensitive information about the Company or its group companies, which is not in the public domain and thus constitutes insider information. No Member of the Management shall use or proliferate information which is not available to the public and which may constitute price sensitive or insider information for making or giving advice on investment decisions on the securities of the Company or any of its subsidiary/ affiliate companies or for any other purpose on which such unpublished price sensitive insider information has been obtained.

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d) Related Party Transactions: Not to enter into any material transactions/arrangements, directly or indirectly, through ones relatives with firms, companies etc. associated with the Company or any of its associate/subsidiary companies without prior written consent of the Company or whom the Board has resolved in favour of such transaction.

e) Payments, receipt of gifts/favours from others: Not to, accept any payment, or promise to pay or authorise payment of any money, gift or anything of value that may be construed to be intended, directly or indirectly, to influence a business decision or to commit any fraud or for any personal gain or reference.

f) Corporate Opportunities: Not to exploit any information, property or position, for personal gain. Resources and amenities provided by or belonging to the Company shall be used with proper care, responsibility and diligence.

6) Protection and Proper Use of Companys Assets: No employee shall misuse Companys facilities for personal gain or benefit. Even in their use for the Companys purposes, every member of the Management shall exercise care to ensure that costs are reasonable and there is no wastage. Every member shall avoid ostentation in the Companys expenditure. 7) Transparency: All members of the Management shall ensure that their actions in the conduct of business are totally transparent except where the needs of business security dictate otherwise. Such transparency shall be brought about through appropriate policies, systems and processes, including as appropriate, involvement of more than one officer of the Company in recording decision logic and maintaining supporting records. All managers shall ensure that all the areas of operation are open to audit and their conduct is submitted to audit.

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8) Use of Alcohol, Illegal Drugs, or Medication: The Company is committed to a drug-free and alcohol-free workplace. Any Member of the Management who consumes or is under the influence of alcohol in the workplace shall be deemed to be in violation of this Code and shall entitle the Company to initiate such action as deemed fit.

IV. VIOLATION OF THE CODE: Any violation of this code can result in sanctions up to and including termination of service and/or thereafter withholding of options and/or terminating/ withholding any other benefits that the designated member may be entitled to.

V. AMENDMENT TO THE CODE: The Company may amend this Code to meet the requirements of the statute and the business interest of the Company, subject to the approval of the Board. 2.2 Committee of Board of Directors

2.2.1. Audit committee: Audit Committee was constituted in the year 2001 and reconstituted in the year 2004. The terms of the Audit Committee comply with requirements of section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement entered into with Stock Exchanges. The Committee comprises of Mr. Ravi Raheja, Mr. Deepak Ghaisas, Prof. Nitin Sanghavi and Mr. Shahzaad Dalal. Mr. Deepak Ghaisas is the Chairman of the Committee. The members of the Committee possess the sound knowledge of finance and accounts. The Audit Committee invites such of the executives, as it considers appropriate to be present at the meetings of the Committee. The Managing Director, Vice Chairman, Chief Financial Officer, Company Secretary, representatives of internal Auditors and statutory Auditors are also present at the Audit Committee meetings as invitees.

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The Committee deals with various aspects of financial statements, adequacy of internal controls, various audit reports, compliance with accounting standards and our Company's financial and risk management policies. Mr. Prashant Mehta, Customer Care Associate, Vice President Legal and Company Secretary of our Company acts as the Secretary of the Committee. It reports to the Board of Directors about its findings and recommendations pertaining to above matters. 2.2.2 Role of the Audit Committee: 1) Overseeing our Company's financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. 2) Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the statutory auditor and the fixation of audit fees and also approval for payment of any other services. 3) Reviewing, with the management, the annual financial statements before submission to the Board for approval, with particular reference to

Matters required to be included in the Director's Responsibility Statement to be included in the Board's report in terms of clause (2AA) of Section 217 of the Companies Act 1956

Changes, if any, in accounting policies and practices and reasons for the same Major accounting entries involving estimates based on the exercise of judgment by management

Significant adjustments made in the financial statements arising out of audit findings

Compliance with listing and other legal requirements relating to the financial statements

Disclosure of any related party transactions Qualifications in the draft audit report.

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4) Reviewing, with the Management, the quarterly financial statements before submission to the Board for approval. 5) Reviewing, with the management, performance of statutory and internal auditors, and adequacy of the internal control systems. 6) Reviewing, with the management, the statement of uses/application of funds raised through an issue (public issue, rights issue, preferential issue, etc.) the statement of funds utilised for purposes other than those stated in the offer document or prospectus/ notice and making appropriate recommendations to the Board to take up steps in this matter. 7) Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure, coverage and frequency of internal audit. 8) Discussions with internal auditors on any significant findings and follow up thereon. 9) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. 10) Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern. 11) To look into the reasons for substantial defaults in the payment to the shareholders (in case of non-payment of declared dividends) and creditors. 12) To review the functioning of the whistle blower mechanism. 13) To approve the appointment of CFO (i.e., the whole-time Finance Director or any other person heading the finance function or discharging that function) after assessing the qualifications, experience & background, etc. of the candidate. 14) Carrying out any other function as may be added to the terms of reference of the Audit Committee.

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2.2.3. COMPENSATION OR REMUNERATION COMMITTEE: The Compensation / Remuneration Committee was constituted in 2001 and includes nonexecutive directors. The Committee currently comprises of Mr. Ravi Raheja, Mr. G.L. Mirchandani, Prof. Nitin Sanghavi and Mr. Shahzaad Dalal. Mr. G. L. Mirchandani is the Chairman of the Committee. The scope of the activities of the Compensation / Remuneration Committee is to recommend the remuneration payable to Managing Director of our Company, payment of commission and sitting fees to Non-Executive Directors and formulation and implementation of various Employees Stock Option Plans (ESOP) Schemes in the Company.

2.2.4. SHAREHOLDERS INVESTORS GRIEVANCE & SHARE TRANSFER COMMITTEE: The Investors Grievances & Share Transfer Committee was constituted in the year 2004. The Committee currently comprises of Mr. Ravi Raheja, Mr. Neel Raheja and Mr. B. S. Nagesh. Mr. Ravi Raheja is the Chairman of the Committee. Mr. Prashant Mehta, Vice President - Legal & Company Secretary of the Company is the Compliance Officer.

This Committee looks in to redressal of shareholder and investor complaints, issue of duplicate/split/consolidated share certificates, allotment and listing of shares and review of cases for refusal of transfer/transmission of shares and reference to statutory and regulatory authorities and such other authorities as may be granted by the Board of Directors from time to time.

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BIBLIOGRAPHY

Websites:

www.google.com

www.scribd.com

Books: Business ethics and corporate governance A guide to corporate governance Taxmanns corporate governance Strategic management Anita Bobade N. Gopalsamy Dr.C.L. Bansal Michael Vaz

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