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8/13/2019 CSR Corporate Governance
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CorporateGovernance
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Meaning
Corporate Governance may be
defined as the set of rules,
regulations, procedures andpractices to be adopted by a
firms management to manage
its affairs in the best interest of
its stakeholders.
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Factors of Corporate Governance
The Commitment of the Board of Directors
and Management towards Integrityand
Transparency in business operations
The Legaland Administrativeframework of
the Government
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The Objective of Corporate
Governance
The enhancement of shareholder value,
keeping in view the interests of other
stakeholders
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Aspects of Corporate Governance
The Corporate Governance code of each country
has to be designed keeping in view the
peculiarities of the country
With the integration of India into the world market(WTO), companies will have to give greater
disclosures, more transparent explanation for
major decisions and better corporate value Corporate Governance extends beyond Corporate
Law
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Reasons for Growing Interest
The assertion of rights by the shareholders
Growth opportunities resulting from
Globalization
Presence of Foreign Financial Investors
Greater Accountability
International standards of disclosures and
practices
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Reasons for Growing Interest
Strategic alliances with global players
Need to comply with the statutory authorities
such as SEBI in India
Business Combinations (to protect the
interest of concerned parties)
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Board of Directors
andCorporate
Governance
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Composition of the Board
Board shall have optimum combination of executiveand non-executive directors with not less than 50%
of the directors comprising of non-executive
directors.
The number of Independent Directors would dependupon whether the Chairman in executive or non-
executive.
In case of a non-executive chairmanat least one-
third of boardIndependent Directors
In case of an executive chairmanat least half of
boardIndependent Directors
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Remuneration of Directors
The Remuneration of non-executive directors shall
be decided by the Board.
Disclosures of remuneration in Corporate
Governance Report: All elements of remuneration packagesalary,
benefits, bonuses, pensions etc.
Fixed and performance linked incentives with criteria
Service contracts, notice period, separation fees etc.
Stock option details
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Board procedure
At least four meetings with maximum timegap of four months
The director of a company shall not be a
member in more than 10 committees or actas chairman of more than 5 committeesacross all companies.
Mandatory to inform about positions
For limits only Public Ltd companies andthree committeesAudit, ShareholdersGrievance and Remuneration Committee
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Role of the BoardAreas of Monitoring
Strategic Planning
Capital Allocation
Manpower Planning
Performance Appraisal
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Information to Shareholders
Appointment of New Director or
Reappointment
Brief resume
Nature of his expertise in specific functional
areas
Name of companies in which he holds
directorship and the membership ofcommittees of the board
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Information to Shareholders
Quarterly results, presentation made by
companies to analysts should be put on
companys web-site or should be sent in such
a form so as to enable the stock exchange onwhich the company is listed to put it on its
own web-site
Formation of Shareholders/InvestorsGrievance Committee under the
Chairmanship of non-executive director
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Tests of Corporate Governance
Whether the funds of the company have beendeployed for pursuing the main objects of thecompany as enshrined in the Memorandum
Whether the funds raised form financialinstitutions and the capital market have beenutilized for the purpose for which they wereintended.
Whether the company has the corecompetence to effectively manage itsdiversifications
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Tests of Corporate Governance
Whether there has been diversion of funds by
way of loans and advances or investments to
subsidiary or investment companies
Whether the personal property of thedirectors have been let out at exorbitant rent
to the company
Whether the provisions of the CompaniesAct, FEMA, the Factories Act and other
statues are complied with in letter and spirit
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Tests of Corporate Governance
Whether the funds of the company have beendiverted to the promoters through shellcompanies to permit the promoters to shore
up their stake in the company for privategains of the promoters
Whether the practices adopted by thecompany and its management towards its
shareholders, customers, suppliers,employees and the public at large are ethicaland fair
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Tests of Corporate Governance
Whether the directors are provided with information
on the working of the company and whether the
institutional and non-executive directors play an
active role in the functioning of the companies
Whether the internal controls in place are effective
Whether there is transparent financial reporting and
audit practices and the accounting practicesadopted by the company are in accordance with
ICAI accounting standards
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Corporate Governance Report
(Under Clause 49 of Listing Agreement)
A brief statement on company's philosophy
on code of governance
Board of Directors:
Composition and categorypromoter,
executive, independent, nominee etc.
Attendance of each director ( BOD meetings
and last AGM)
Member of other Boards and committees
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Corporate Governance Report
(Under Clause 49 of Listing Agreement)
Audit Committee:
Brief description of terms of reference (role)
Composition, name of members and
Chairperson
Meetings and attendance during the year
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Corporate Governance Report
(Under Clause 49 of Listing Agreement)
Remuneration Committee
Brief description of terms of reference
Composition, name of members and
chairperson
Attendance during the year
Remuneration policy
Details of remuneration to all the directors
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Corporate Governance Report
(Under Clause 49 of Listing Agreement)
Shareholders Committee
Name and non-executive director heading thecommittee
Name and designation of compliance officer Number of shareholders complaints received
so far
Number not solved to the satisfaction ofshareholders
Number of pending share transfers
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Corporate Governance Report
(Under Clause 49 of Listing Agreement)
General Body Meetings
Location and time, where last three AGMs
were held
Whether special resolutions were put through
postal ballot last year, details of voting
pattern
Procedure for postal ballot
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Corporate Governance Report
(Under Clause 49 of Listing Agreement)
Disclosures
Disclosures on materially significant related
party transactions
Details of non-compliance by the company,
penalties, strictures imposed on company by
SEBI, stock exchange or any other authority
or any matter related to capital market duringthe last three years
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Corporate Governance Report
(Under Clause 49 of Listing Agreement)
Means of Communication
Half-yearly report sent to each household
shareholders
Quarterly results
Newspapers
Website
The presentations made to institutional
investors and/or the analysts
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Corporate Governance Report
(Under Clause 49 of Listing Agreement)
General Shareholder Information
AGM: Date, time and venue
Financial Calendar
Dividend payment date
Listing on Stock Exchanges
Stock Code Number
Market Price Data: High, Low during each
month in the year
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Corporate Governance Report
(Under Clause 49 of Listing Agreement)
General Shareholder Information
Performance in comparison to broad-basedindices such as BSE, Sensex etc.
Registrar and Transfer Agents Share Transfer System
Distribution of Shareholding
Outstanding GDRs/ADRs/Warrants Plant locations
Address for correspondence
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Concept in Nut Shell
Transparency in disclosure of information and
decision making
Accountability, which follows transparency
because responsibilities could be fixed easilyfor actions taken or not taken
Equity of treatment to all shareholders,
whether large or small