CORPORATE GOVERNANCEWELCOME
Module for the Topic: Corporate Governance .
Eligibility: Those who have got the Up gradation
to from E2 to E3.
This presentation is last updated on 21-3-2011.
You can also visit the Digital library of BSNL to
see this topic.
AGENDA
Indian companies
MEANING OF CORPORATE GOVERNANCE
customs affecting that directions
the structure of the firm
Comprises the systems and processes
which ensure the efficient functioning of
the firm in a transparent manner for the
benefit of stakeholders
MEANING OF CORPORATE GOVERNANCE
balance between the economic and social
goals and between individual and
community goals”
PROJECTED BENEFITS OF CORPORATE GOVERNANCE
Good governance leads to congruence of
interests of board, management including owner
managers and shareholders
to the company
among investors
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PROJECTED BENEFITS OF CORPORATE
To leverage a competitive advantage in the
financial market
stakeholders’ relationship
PROJECTED BENEFITS OF CORPORATE GOVERNANCE
Good corporate citizen becomes an ethical icon
and enjoys a position of pride in corporate
culture
relationships with enterprises whose governance
credentials are exemplary
FACTORS INFLUENCING CORPORATE GOVERNANCE
Quality of corporate reporting
CADBURY COMMITTEE RECOMMENDATIONS
Board should meet regularly
responsibilities at the head of a company
The board should include non-executive
Directors of sufficient calibre and number
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CADBURY COMMITTEE RECOMMENDATIONS
The board should have a formal schedule of
matters specifically reserved to it for decision
There should be an agreed procedure for
directors in the furtherance of their duties
All directors should have access to the advice
and services of the company Secretary
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CADBURY COMMITTEE RECOMMENDATIONS
independent judgement to bear on issues of
strategy, performance, resources, including key
appointments and standards of conduct
Majority should be independent of the
management and free from any business or other
relationship
CADBURY COMMITTEE RECOMMENDATIONS
All directors should have access to the advice
and services of the company Secretary
Non-Executive Directors should be appointed
for specified terms and reappointment should
not be automatic
through a process
CADBURY COMMITTEE RECOMMENDATIONS
three years without shareholders’ approval
There should be full and clear disclosure of their
total emoluments
recommendations of Remuneration committee
Directors
CADBURY COMMITTEE RECOMMENDATIONS
Reporting and Control – Best Practices:
It is the Board’s duty to present a balanced and
understandable assessment of the company’s
position
professional relationship is maintained with the
Auditors
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CADBURY COMMITTEE RECOMMENDATIONS
The Directors should explain their responsibility
for preparing the accounts
of the company’s system of internal control
The Directors should report that the business is a
going concern, with supporting assumptions or
disqualifications as necessary
CADBURY COMMITTEE RECOMMENDATIONS
Governance principles are embedded in
constitution for administration of Govt. bodies
The executive, legislature and judiciary are
responsible for check & balances of Public Sector
undertakings
rules & regulations laid down in various acts to
regulate management or corporations
CADBURY COMMITTEE RECOMMENDATIONS
flow:
to make disclosures on a continuing basis
The decision on dividend, bonus & right
announcements are required to be disclosed
within 15 minutes of conclusion of board
meetings
CORPORATE GOVERNANCE IN INDIAN COMPANIES
Measures for strengthening the process of
information flow:
party transactions & consolidated balance sheet
Insider trading is a criminal offense
The takeover process has been made
transparent to protect the interest of minority
shareholders
CORPORATE GOVERNANCE IN INDIAN COMPANIES
Independent Director
Not related to promoters or management
Not an executive or the company in the last 3 years
Not a partner or executive in the auditing firm
Not a significant supplier or vendor or customer
Not a shareholder owing 2% or more
Not been a Director for more than 3 terms of 3 years
each
CORPORATE GOVERNANCE IN INDIAN COMPANIES
Board’s Report- items to be disclosed in Directors’
Report:
State of company’s affairs
The amount to carry reserves in the balance
sheet
CORPORATE GOVERNANCE IN INDIAN COMPANIES
The material changes and commitments
affecting the financial position of the company
Efforts taken for conservation energy,
technology absorption and details of foreign
exchange earnings
CORPORATE GOVERNANCE IN INDIAN COMPANIES
Board’s Report- items to be disclosed in
Directors’ Report:
Change in the nature of company’s business
Change in company’s subsidiaries or in the
nature of business carried on
General change in the clauses of business in
which the company has an interest
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CORPORATE GOVERNANCE IN INDIAN COMPANIES
Board’s Report- items to be disclosed in Directors’
Report:
The Director report should also contain a statement
showing the particulars of about certain employees
whose remuneration is not less than Rs.24 lakhs for
the financial year and if employed for a part of the
financial year at Rs.2 lakhs or more per month
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CORPORATE GOVERNANCE IN INDIAN COMPANIES
Board’s Report- items to be disclosed in Directors’
Report:
The Board of Directors are bound to give fullest
information and explanation on every reservation,
qualification and adverse remarks contained in the
Auditors report
CORPORATE GOVERNANCE IN INDIAN COMPANIES
Board’s Report- items to be disclosed in Directors’ Report:
5.Responsibilities of Board of Directors under Sec
217(2AA): In the preparation of annual accounts the applicable account
standards have been followed
applied them consistently
That the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records
That the Directors had prepared the annual accounts on a going
concern basis
REPORT ON CORPORTATE GOVERNANCE
governance
attendance of each director
reference, meetings and attendance
Remuneration committee-composition, terms of
reference, meetings and attendance
Shareholders committee-names of non-executive
directors heading the committee
REPORT ON CORPORTATE GOVERNANCE
3 AGMs held etc.
transactions, penalty and strictures imposed on the
company by stock exchange or SEBI
Means of communication
venue of AGM, financial calendar, date of book
closure, dividend payment date, stock code, market
price data, registrar and transfer agent details,
distribution of shareholding etc.
ROLE OF AUDIT COMMITTEE
process
which would render the role of audit committee
effective and serve useful purpose
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ROLE OF AUDIT COMMITTEE
independent oversight of financial reporting
Ensure appropriateness of company’s
accounting policies and the internal controls
including management controls
quarter and interact with internal and external
auditors