CORPORATE GOVERNANCE

IN INDIAN PRESPECTIVE
Presented by
George V James

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Contents
Meaning & Definition of Corporate
Governance
Principles Players of Corporate Governance
Features of Good Corporate Governance
Indias Journey of Corporate Governance
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Corporate Governance Committees in India

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Meaning
Meaning of Corporate Governance can be split up
as follows: Rights and equitable treatment of shareholders
Interests of other stakeholders
Role and responsibilities of the board
Integrity and ethical behaviour

PRINCIPL
ES

Disclosure and transparency

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Definition
Corporate Governance is the acceptance by management of
the inalienable rights of the 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.
By N. R. Narayana Murthy, Committee on
Corporate Governance (SEBI)

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Principles Players of Corporate Governance

Board of Directors
Management
Banks and lenders

Customers

Shareholders

Employees

Environment &
the community at large

Regulators

Suppliers

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Features of Good Corporate

Governance
1. Clear Strategy

5. Accountability

2. Effective Risk
Management

6. Transparency
7. Social Responsibility

3. Discipline
8. Self-Evaluation
4. Fairness
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Indias Journey of Corporate

Governance
Base of Governance- Kautilyas Arthashstra
In the happiness of the subject lies the benefit of the
king, and in what is beneficial to the subjects is his own
benefit.
Scams- Harshad Mehta, Ketan Parekh , Ramalingam Raju
New Economic Policy of 1991 (accountability factor)
Reforms in Corporate Law.
Development of Codes & Best Practices.
Empowering & Developing Regulatory Authority.
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CORPORATE GOVERNANCE
COMMITTEES IN INDIA

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Confederation of Indian
Industries Code (1997)
National Task Force Chaired by Rahul Bajaj.
Desirable Code of Corporate Governance

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Recommendations
1. No need for German style two-tiered board.
2.
In case of listed company with turnover exceeding Rs.100
crores, independent directors should consist of:30% if Chairman is non-executive director.
50% if Chairman & MD is the same person.
3. No single person should hold directorships in more than 10
listed companies.
4. Non-executive directors should be competent and active.
5. Commission not exceeding 1% (3%) of net profits for a
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company with (out) a MD.

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6. Attendance record of directors should be made explicit at the

time of reappointment; less than 50% no re-appointment.
7. Key information that must be reported to and placed before the
board .
8. Listed companies with turnover over Rs. 100 crores or paid-up
capital of Rs. 20 crores should have an audit committee.
9. Additional Shareholders Information of Listed Companies.
10. Compliance certificate signed12by CEO & CFO.

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11. Credit Rating.

12. Companies that default on fixed deposits should not be
permitted to:.accept further deposits and make inter-corporate loans
or investments until the default is made good; and
.declare dividends until the default is made good.
13. Reduction in number of nominee directors. FIs should withdraw
nominee directors from companies with individual FI
shareholding below 5% or total FI holding below 10%.
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Kumar Mangalam Birla

Committee Report (2000)
Set up by SEBI (for investors).
Identified 3 major constituents: Shareholders, BOD &
Management.
3 key aspects: accountability,
transparency, and
equal treatment of all stakeholders.
Introduction of Clause 49.
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Recommendations
1. At least 50% non-executive members.
2. At least 1/2 of the board should be independent directors (executive
Chairman) ,else at least 1/3.
3. Non-executive Chairman should have an office and be paid for job related
expenses.
4. Maximum of 10 directorships and 5 chairmanships per person.
5.

Audit Committee:

Minimum 3 members, all non-executive.

Chairman should attend AGM.

Should meet at least thrice a year.

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Act as bridge between Board, Statutory Auditors & Internal Auditors

6. Remuneration Committee (at least 3 directors, all

non-executive and be chaired by an
independent director).
7. Disclosure of remuneration information in the AR.
8. Board Meetings
.4 board meetings a year with a maximum gap of 4
months between any 2 meetings.
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Naresh Chandra Committee

Report (2002)
High Level Committee appointed by MCA.
A pale shadow of SOX.
Also known as the Committee on Corporate Audit and
Governance.
Concentrated on 3 main aspects:1. The auditor- company relationship.
2. Role of Statutory Auditors.
3. Independent Directors-role, remuneration &
training.
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Recommendations
1. Disqualifications of Audit Assignments.
2. List of Prohibited Non-Audit Services.
3.

Compulsory Audit Partner Rotation.

4. Auditors disclosure of Contingent Liabilities.

5. Managements certification in the event of auditors
replacement.
6. Auditors annual certification of independence.
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7. CEO and CFO certification of annual audited accounts.

8. Setting up Independent Quality Review Board, QRB-(ICAI,
ICSI, ICWAI)
9. Defining an Independent Director & their percentage.
10. Minimum Board Size of listed companies.
11. Training of independent directors.
12. Corporate Serious Fraud Office.
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N R Narayana Murthy Committee

Report (2003)
2nd Committee constituted by SEBI.
To review the existing corporate governance
practices and codes.
Committee consisted of members from
various walks of public and professional life.

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Recommendations
1. Training of board members.
2. There shall be no nominee directors.
3. Non-Executive Director compensation to be fixed by Board
of Directors and approved by shareholders in the GM.
Independent directors should be treated the same way as
non-executive directors.
4. The Board should be informed every quarter of business
risk and risk management strategies.
5. Boards of subsidiaries should follow similar composition
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rules as that of parent and should
have at least one
independent directors of the parent company.

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6. Proceeds from Initial Public Offerings (IPO)

7. Performance evaluation of non-executive directors should be
done by a peer group comprising the entire Board of
Directors, excluding the director being evaluated.
8. Code of conduct for Board members and Senior Management.
9. Whistle Blower Policy.

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GUESS
WHO ??...

SATYENDRA DUBEY
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Naresh Chandra Committee

Report (2009)
2nd National Task Force by CII.
Satyam-Maytas Infra-Maytas Properties scams.
Improving corporate governance standards and
practices both in letter and spirit.

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Recommendations
1. Nomination Committee.
2. Letter of Appointment to Directors.
3. Remuneration of NEDs & Independent Directors.
4. Remuneration Committee.
5. Audit Committee.
6. Separation of Offices of Chairman & Chief Executive Officer
7. Board Meetings through Tele-conferencing
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8. Liability of Directors & Employees

9. Shareholder Activism
10.Media as a stakeholder

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ANY QUESTIONS ??......

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