What is a Corporate Governance Policy?

A Corporate Governance policy deals with prevention or mitigation of the conflict of interests of stakeholders. It guarantees that an enterprise is directed and controlled in a responsible, professional, and transparent manner with the purpose of safeguarding its long-term success. It is intended to increase the confidence of shareholders and capital-market investors. An important theme of the policy is the nature and extent of accountability of people in the business, and mechanisms that try to decrease the principalagent problem. The directors, senior management and employees must adhere to the Corporate Governance Policy of the Company.

About Tata Motors

Tata Motors Limited (formerly TELCO) is an Indian multinational automotive corporation headquartered in Mumbai, India. It started its journey in 1945 and is a part of the Tata Group, the company founded by Jamsedji Tata. Tata Motors Limited is India's largest automobile company, with consolidated net sales of $27 billion in 2010-11 and net profit of over $1.7 billion in the year ended March 31, 2011. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company has over 53,100 employees who are guided by the vision to be ''best in the manner in which Tata Motor operates best in the products it delivers and best in its value system and ethics.'' Tata Motors surpassed Reliance to win the coveted title of 'India's most valuable brand' in an annual survey conducted by Brand Finance and The Economic Times in 2010. Tata Motors was ranked as India's 3rd Most Reputed Car manufacturer in the Reputation Benchmark Study - Auto (Cars) Sector, launched in 2012. The company was ranked 359th globally in Fortune Global 500 list in 2011.

Corporate Governance at Tata Motors

Being a part of Tata group, the companys philosophy of corporate governance is founded upon a rich legacy of fair, ethical and transparent governance practices. Through the Governance mechanism in the Company, the Board along with its Committees undertakes its fiduciary responsibilities to all its stakeholders by ensuring transparency, fair play and independence in its decision making. The Corporate Governance philosophy at Tata Motors has been further strengthened with the implementation of the Tata Business Excellence Model as a means to drive excellence, the Balanced Scorecard methodology for tracking progress on long term strategic objectives and the Tata Code of Conduct which articulates the values, ethics and business principles and serves as a guide to the Company, its directors and employees and an appropriate mechanism to report any concern pertaining to non-adherence to the said Code and addressing the same is also in place. The Company is in compliance with the requirements of Corporate Governance under Clause 49 of the Listing Agreement with the Indian Stock Exchanges. Risk management and internal control functions have been geared up to meet the progressive governance standards.

Code of Conduct for Tata Motors:

Tata Motors follows the highest ethical standards complying with the clauses stated under Tata Code of Conduct. The Tata Code of Conduct which articulates the values, ethics and business principles and serves as a guide to the Company, its directors and employees and an appropriate mechanism to report any concern pertaining to non-adherence to the said Code and addressing the same is also in place.

Board of Directors:
The Board at Tata Motors comprises of 13 Directors out of which 11 Directors (84.62%) are NonExecutive Directors. The Company has a Non-Executive chairman and seven are Independent directors comprise more than half the total strength of the Board. None of the Directors on the Company's Board is a Member of more than ten Committees and Chairman of more than five Committees. All the Directors have made necessary disclosures regarding Committee positions held by them in other companies and do not hold the office of Director in more than 15 public companies. None of the Directors of the Company is related to each other.

The Committees of the board:

The board has constituted a set of committees with specific terms of reference and scope to deal effectively on issues and resolve them. The Committees operate as empowered agents of the Board as per their Charter/terms of reference. The Committees set the target in agreement with the management which is reviewed periodically. The Board of Directors and the Committee also take decisions by circular resolutions which are noted in the next meetings. The committees include: The Audit Committee Executive Committee of Board Remuneration Committee Nominations Committee Investors Grievance Committee Ethics and Compliance Committee Special need based Committees.

Stakeholder value
At Tata Motors, stakeholders are considered to be partners in success and hence the company strives towards inclusive growth. It believes that stakeholders play a key role towards ensuring the longevity and sustainability of its business.

Tata Motors follows the Stakeholder Engagement Model which involves: Engaging with Stakeholders Identifying issues and concerns Prioritizing the issues and concerns Addressing the issues and concerns Setting goals and targets Implementing strategic initiatives and review Reporting back to stakeholders Learnings and feedback

Tata Motors Triple Bottom Line

Economic Performance
Turnover Rs. 1,23,133 crores EBITDA Rs. 23,488 crores PAT Rs. 9,221 crores

Environmental Performance
Tata Motors has taken measures to reduce its packaging footprint by either using sustainable packaging (replacing wood with metal) or reusing existing packaging (recycling wood). It recycles close to 69% of the wood packaging thus eliminating use of fresh wood. Tata Motors is heavily investing in the research and development in order to develop low Carbon, fuels saving technologies which will help reduce greenhouse gas emissions. The company has been actively partnering with NGOs on regional resource agency basis in order to organize programs for creating environmental awareness followed by field action at the local, regional and national level. The company continues to increase water use efficiency through implementation of advanced technology such as rain water harvesting and generation of awareness amongst employees. The efforts have resulted into total water withdrawal of close to 19% in the past 2 years. Tata Motors has made significant investments to effectively monitor air emissions from its production facilities including an on-line monitoring and alarm system for incinerator emissions.

Social Performance
Tata Motors being a socially conscious company develops programs for the benefit of the communities. Their contributions have been in the fields of health, education and employability across the societies. Health: Healthcare provided to nearly 300,000 people annually. Over 300 low cost toilets built per annum. Sanitation drives conducted with participation of over 40,000 villagers in over 50 villages. Amritdhura Project implemented to provide safe drinking water to 100 villages in next three years. Smoke efficient chullahs installed in over 200 village households to curb respiratory problems. 5,000 women treated in anemia treatment camps.

Education Infrastructure and facility up-gradation benefitting 50,000 students annually. Teachers training for more than 2,000 primary school teachers. Extra-curricular activities for nearly 7,000 students. Nearly 500 students supported through scholarships annually.

Employability Technical and vocational training provided to nearly 7,000 people. Adopted 21 ITIs under public-private partnership schemes. Over 1,500 women benefited through SHGs and over 150 SHGs formed and sustained.

Awards and Accolades

Tata Motors has received Golden Peacock Award for excellence in Corporate Governance for the year 2011. The Company, in 2011 won the Srishti G-Cube Awards for Good Green Governance in Manufacturing - Engineering category, CVBU Pune was the winner, Jamshedpur Plant was declared ''runner up'', and Pantnagar Plant received a ''certificate of commendation''. Tata Motors won Sword of Honour for Pant Nagar Plant which is reflection of high standards of health and safety, performance and demonstration of safety leadership, in all phases of operations of the plant. Tata Motors won the Greentech Environment Silver Award for outstanding achievement in Environment Management.

Measurement of Governance
Based on the Qualitative Aspects
Per my observations about Tata Motors High importance is given to code of conduct, core values, stakeholder aspirations and societal expectations. The Board comprises of 13 Directors out of which 11 Directors (84.62%) are Non-Executive Directors. The Company has a Non-Executive Chairman and seven are Independent directors comprise more than 50% of the total strength of the Board. They Board works in a transparent manner and has different committees with specific terms of reference and scope to deal effectively on issues and resolve them. Stakeholders of the company are considered to be partners in success and hence the company strives towards inclusive growth. They also have a Whistle Blower Policy in place. Shareholders have been suitably rewarded for the money they have put in the Company.

My rating will be 10 out of 10.

Based on Quantitative Aspects

Per my observations about Tata Motors, Operating Margin and Net Profit Margin is in-line with the other peers in the industry. Current Ratio is good at 1.09:1. Also, it is higher compared to most other players in the industry. The Companys Stock Beta of 1.54 is higher when compared to that of its peers in the industry. The P/E ratio is higher when compared to industry and sector averages and has fluctuated a lot in the past. Current P/E is 58.4. Net Debt to Equity ratio is 1.14:1 is slightly on the higher side but has improved versus last year. Dividend yield ratio at present is 1.76% which is on the lower side when compared to the sector averages. Return on Equity is 48.10% is seen to have improved over the past year and is higher than most of the industry peers.

My rating will be 7 out of 10.