Roll No.

12115B0041 12115B0043 12115B0044 12115B0045

Team Members
Prathamesh Vernekar Md. Muzaffar Shaikh Khushbu Chheda Ekta Uparkar

12115B0046 12115B0050
12115B0051 12115B0053 12115B0055 12115B0060

Chirag Gohil Subhan Dabir

Sheldon Fernandes Jay Patel Pritam Mundarkar Kiran Gawade

INTRODUCTION

Corporate governance refers to the system by which corporations are directed and controlled. The governance structure specifies the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and specifies the rules and procedures for making decisions in corporate affairs.

Definition of Corporate Governance

Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals The aim is to align as nearly as possible the interests of individuals, corporations and society.
Sir Adrian Cadbury Corporate Governance Overview, 1999 [World Bank Report]

Corporate Governance is a mechanism through which boards and directors are able to direct, monitor and supervise the conduct and operation of the corporation and its management in a manner that ensures appropriate levels of authority, accountability, stewardship, leadership, direction and control.

PRINCIPLES OF CORPORATE GOVERNANCE

Rights and equitable treatment of shareholders Interests of other stakeholders

Role and responsibilities of the board

Integrity and ethical behavior Disclosure and transparency

Main Themes of Corporate Governance

TRANSPARENCY

ACCOUNTABILITY
CONTROL TRUSTEESHIP ETHICS

Developments in India

Voluntary code of Corporate Governance for listed companies - CII - 1998 Kumar Mangalam Birla committee by SEBI 2000

Companies (Amendment Act), 2000 & Clause 49 of listing agreement -2000

Naresh Chandra Committee by SEBI - 2002

N.R.Narayana Murthy Committee -2003

CONFEDERATION OF INDIAN INDUSTRY (CII)

A National Task Force was set up in April 1997 .

Its member was Rahul Bajaj as a chairman and other head members was drawn from the big industry , legal profession , media and academia. This task force draft the guidelines at the National Conference and Annual Session of CII. TWO ASPECTS OF TASK FORCE :-

Integration of Indian industry with World

Industry Fiduciary responsibilities toward shareholders

Any listed companies with a turnover of Rs.100 crores and above should have professionally competent, independent, non-executive directors Companies should have a choice between paying a commission on profits or paying fixed contractual remuneration. Setting up a "well-informed and independent" board and an audit committee for companies.

Instituting a mechanism that allows employees to report concerns about unethical behavior or fraud.

The task force also urged the government and the capital market regulator, Securities and Exchange Board of India (SEBI), to work hand-in-hand to ensure corporate governance. A person should not hold directorship in more than 10 listed companies.
The board should meet at least six times in a year, preferably at intervals of 2 months.

Kumar Mangalam Birla Report

In 1999 SEBI constituted- under the chairmanship of Shri Kumarmangalam Birla

Committee submitted its report in year 2000 Based on these recommendations Clause 49 was incorporated in the Listing Agreement

KUMAR MANGALAM BIRLA COMMITTEE REPORT (2000)

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A brief statement on companys philosophy on code of governance Board of Directors

Audit Committee
Remuneration Committee Shareholders Committee General Body meetings Disclosures Means of communication

CLAUSE 49 OF LISTING AGREEMENT

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Mandatory Requirement
Non-mandatory Requirement

RECOMMENDATIONS OF THE NARESH CHANDRA COMMITTEE REPORT

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Recommendation : Auditors Company Relationship List Of Prohibition Non-Audit Services Compulsory Audit Partner Rotation Disclosure Of Contingent Liabilities Auditors Disclosure Of Qualification And Consequent Actions. Managements Certification In The Event Of Auditors Replacement.

RECOMMENDATIONS OF THE NARESH CHANDRA COMMITTEE REPORT

CEO

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/ CFO Certification Defining An Independent Director Percentage Of Independent Directors Minimum board size of listed companies Disclosure on duration of board meetings / Committee meetings Tele-conferencing and video conferencing Independent directors on Audit Committees of listed companies

RECOMMENDATIONS OF THE NARYANA MURTHY COMMITTEE ON CORPORATE GOVERNANCE

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Audit Committee Proceeds from initial public offerings (IPO) Risk management Code of conduct Nominee directors Non-executive director compensation Whistle blower policy

Cadbury Committee Report (1992)

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The report was mainly divided into three parts:

Reviewing the structure and responsibilities of Boards of Directors and recommending a Code of Best Practice : Considering the role of Auditors and addressing a number of recommendations to the Accountancy Profession Dealing with the Rights and Responsibilities of Shareholders

Greenbury Report 1995

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The Greenbury Report released in 1995 was the product of a committee established by the United Kingdom Confederation of Business and Industry on corporate governance. It

followed in the tradition of the Cadbury

Report and addressed a growing concern about the level of director remuneration.

GREENBURY COMMITTEE (1995)

Greenbury Recommendations:

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The Remuneration committee

Compensation commitments Reports to Shareholders

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Meaning

Implementation of whistleblowing
Association of certified fraud examiner Best Practice NACUBO (National Association of College Business Officer)

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Clear definition of individual covered by policy

Non-Retaliation Provision

Confidentiality
Process

Communication

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Satyam was established in 1987 founded by Mr. Ramalinga Raju. 4th largest IT company in India.

9% market share
53,000 employees Revenue $2.1billion

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Maytas Infra Ltd., Company owned by Two sons of Raju were investing in the real estate business and recently their real estate business was not in good shape. Four main shareholders of Satyam Company were horrified by the changing behavior of Raju.
With Satyam's management focused elsewhere, business suffered. Clients complained about lack of attention, and many professional managers began to leave.

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Employees were shown with a inflated figure. The excess of employees in the organization were kept under VIRTUAL POOL who received just 60% of their salaries and several were removed. As per the case with Satyam, the company did not pay advance tax for the financial year 2009. As per the rule, the advance tax is to be paid 4 times a year; such was not fulfilled by them Despite the shareholders not being taken into confidence, the directors went ahead with the management decision.

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Raising fictitious bills for services that were never rendered to increase the Cash & bank balance correspondingly.

Operating profits were artificially boosted from the actual Rs 61 crore to Rs 649 crore

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False financial statements

Never had Rs 5064 crores (US$ 1.05 Billion) shown as cash several years.
Its liability was understated by $ 1.23 Billions. The Debtors were overstated by 400 million plus.

for

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Govt. orders CBI to probe fraud ( concerned about 52000 employees)
Serious fraud investigation office(SFIO) conducted investigation

Market regulation SEBI started investigation

Andhra police pull them in court.

NASSCOM (National Association of Software and Services Companies) sets up panel to avoid satyam like case in futureformed a corporate Governance & ethics committee, chaired by N.R.Narayana Murthy (chairman and chief mentor of Infosys.)

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Background Companies Affected by This Act Requirement of This Act Sarbanes-Oxley Act in Practice Penalties

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Sooth Operation Confidence of Investor Confidence of Employee

COMPARISON OF VARIOUS COMPANIES ON 29 CORPORATE GOVERNANCE

ONGC Ltd Audit & Ethics Committee

UNION BANK OF INDIA Board Committee DR. REDDYS Means of communication LABORATORIES LIMITED

TATA CONSUTANCY SERVICES

Remuneration Policy

HINDUSTAN UNLIVER LIMITED BANK OF BARODA

Stakeholders Relationship Committee

MANDATORY AND NON-MANDATORY REQUIREMENTS

The Institute of Company Secretaries of India (ICSI) is all set to launch its corporate governance rating model soon. 30

Announcing this at a press conference here, S. N. Ananthasubramanian, President, ICSI, said the institute has set up a 6-member committee to strategize and develop the model.
The committee has also come out two rankings India Mandatory and ICSI Desirable.

While India Mandatory ranking can be given to those corporates which report 100 per cent compliance with mandatory requirements, ICSI Desirable can be awarded for those who go a notch above and set up a new benchmark in corporate governance, he explained.

The market regulator SEBI has released a draft consultative paper on the issue, wherein it said only credit rating agencies may be permitted to do the rating.

Conclusion

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Corporate governance philosophies differ around the world. However, with a few relatively minor exceptions, there exists a broad consensus on the elements of good corporate governance. It is widely understood that the most effective aspects of good corporate governance include: A strong board of directors, independent of management and with sufficient expertise to oversee corporate management on behalf of the companys shareholders; Management compensation oversight, such as a compensation committee comprised of

independent directors, to prevent opportunistic behavior by management and help link management compensation to corporate performance;

ACKNOWLEDGEMENT

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PROFESSOR. ANANT AMDEKAR

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