Jagannath International Management School

Kalkaji, New Delhi

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY

Assignment

Submitted to: Submitted By:

Dr. Vandana Mehta Student Name: Lakshay Sethi

Roll No.: 26

Batch: 2017-2019
Q1. Explain the concept of corporate governance with its philosophy and principles.

Corporate governance is the system of rules, practices and processes by which a firm is directed
and controlled. Corporate governance essentially involves balancing the interests of a company's
many stakeholders, such as shareholders, management, customers, suppliers, financiers,
government and the community. Since corporate governance also provides the framework for
attaining a company's objectives, it encompasses practically every sphere of management, from
action plans and internal controls to performance measurement and corporate disclosure. It is
about promoting corporate fairness, transparency and accountability. In other words, 'good
corporate governance' is simply 'good business'. It ensures:

 Adequate disclosures and effective decision making to achieve corporate objectives;

 Transparency in business transactions;
 Statutory and legal compliances;
 Protection of shareholder interests;
 Commitment to values and ethical conduct of business.

The aim of "Good Corporate Governance" is to ensure commitment of the board in managing the
company in a transparent manner for maximizing long-term value of the company for its
shareholders and all other partners. It integrates all the participants involved in a process, which
is economic, and at the same time social. The purpose of corporate governance is to facilitate
effective, entrepreneurial and prudent management that can deliver the long-term success of
the company. Boards of directors are responsible for the governance of their companies.

Philosophies and Principles of Corporate Governance

A company which applies the principles of corporate governance; fairness, accountability,

responsibility and transparency, usually will outperform other companies and will be able to
attract investors, whose support can help to finance further growth.

1. Fairness
Fairness refers to equal treatment, for example, all shareholders should receive equal
consideration for whatever shareholdings they hold. In addition to shareholders, there should
also be fairness in the treatment of all stakeholders including employees, communities and public
officials.

2. Accountability
Corporate accountability refers to the obligation and responsibility to give an explanation or
reason for the company’s actions and conduct. For example, The board should present a
balanced and understandable assessment of the company’s position and prospect.
3. Responsibility
The Board of Directors is given authority to act on behalf of the company. They should therefore
accept full responsibility for the powers that it is given and the authority that it exercises. The
Board of Directors is responsible for overseeing the management of the business, affairs of the
company, appointing the chief executive and monitoring the performance of the company. In
doing so, it is required to act in the best interests of the company.

4. Transparency
A principle of good governance is that stakeholders should be informed about the company’s
activities, what it plans to do in the future and any risks involved in its business strategies.
Transparency means openness, a willingness by the company to provide clear information to
shareholders and other stakeholders. For example, transparency refers to the openness and
willingness to disclose financial performance figures which are truthful and accurate.

Q2. What is the board's role in corporate governance and how does that differ from
management role?

Good corporate governance relies on distinct differences in the roles between board directors
and managers. It was never intended for board directors to be directly involved in the daily
operations of a corporation, and they certainly shouldn’t engage in micromanaging the
management. The main role of board directors is oversight and planning. Despite the differences,
board directors may delegate certain powers to the CEO or CFO under certain circumstances.

The board of directors is directly hired by the stockholders. The inside directors are the directors
that have been hired from the inside of the company, whereas the outside directors are directors
that have been brought on from the outside. The inside directors have an advantage as they are
more intimately familiar with the company, how it works, its departments, and its people. The
outside directors instead focus on keeping the company commercially viable and market
competitive, as well as providing unbiased and impartial opinions for the matters at hand.

Among the Board of Directors core roles are to:

 Select individuals for Board membership and evaluate the performance of the Board,
Board committees and individual directors.
 Select, monitor, evaluate and compensate senior management.
 Assure that management succession planning is adequate.
 Review and approve significant corporate actions.
 Review and monitor implementation of management’s strategic plans.
 Review and approve the Company’s annual operating plans and budgets.
 Monitor corporate performance and evaluate results compared to the strategic plans and
other long-range goals.
  Review the Company’s financial controls and reporting systems.
 Review and approve the Company’s financial statements and financial reporting.
 Review the Company’s ethical standards and legal compliance programs and procedures.
 Oversee the Company’s management of enterprise risk.
 Monitor relations with shareholders, employees, and the communities in which the
Company operates.

The Company’s business is managed under the direction of the Board of Directors. The Board
delegates to the Chief Executive Officer, and through that individual to other senior
management, the authority and responsibility for managing the Company’s business. The Board’s
role is to oversee the management and governance of the Company and to monitor senior
management’s performance.

Management’s role includes:

 Implementation and driving strategic plan

 Basically implement the decisions made by board of directors.
 Managers must enact the ethics, taking their direction from the board.
 Purchasing below a certain agreed limit within board approved budget.
 Reporting to board on risk, actual and potential, developing risk management plan.

Q3. Explain the key codes of conduct for execution of corporate governance.

The key codes of conduct for execution of corporate governance are as follows:

1. Corporate conduct practice should provide shareholders with a real opportunity to exercise
their rights in relation to the company

1.1 Shareholders should be provided with reliable and effective methods to register ownership
of shares and an opportunity to freely and quickly dispose of their shares.

1.2. Shareholders may participate in the management of a joint stock company by making
decisions at a general shareholders meeting on the most important issues of a company's
business. It is advisable that the following be provided to guarantee this right:

1.3. Shareholders should be provided with an opportunity to share in the profits of the company.
To enable shareholders to exercise this right it is recommended that the company:

1.4. Shareholders should have the right to the regular and timely receipt of complete and
accurate information on the company.
1.5. Shareholders should not misuse the rights conferred upon them.

2. Corporate governance practice should provide for equal treatment of shareholders owning
an equal number of shares of the same type (category). All shareholders should have access to
effective protection in the event of a violation of their rights

Confidence in a company is largely based on the equal treatment by the company of equal
shareholders. For the purposes of this Code, equal shareholders mean shareholders that own the
same number of shares of the same type (category). This principle should be observed by means
of the following:

(1) the established procedure for holding general shareholders meetings should provide all
persons attending the meeting with a reasonably equal opportunity to express their
opinion and ask questions;

(2) important corporate actions should be taken in such a way that shareholders have full
information about such actions, and their rights are observed;

(3) operations based on inside and confidential information should be prohibited;

(4) members of the board of directors and the company’s executive bodies, and the director
general should be elected in accordance with a transparent procedure which provides
shareholders with full information on such persons;

3. Corporate governance practice should provide for the strategic management of the
company's business by the board of directors, for effective control by the board over the
executive bodies of the company, and for the accountability of the board of directors to
shareholders

3.1. The board of directors should determine the company's development strategy and
effectively control the financial and business activities of the company.

3.2. The composition of the board of directors of the company should provide for the most
efficient performance of the functions entrusted to the board of directors.

4. Corporate governance practice should provide executive bodies of the company with the
ability to manage the day-to-day activities of the company reasonably, in good faith and solely
in the interests of the company, and ensure that executive bodies report to the board of
directors and the shareholders

4.1. It is recommended that companies create a collegiate executive body (hereinafter

“managerial board”), which should be competent to resolve complicated issues relating to the
management of the day-to-day activity of the company.
4.2. The composition of the executive bodies of the company should provide for the most
efficient performance of the functions entrusted to them.

5. Corporate governance practice should provide for timely disclosure of full and accurate
information about the company, including information about its financial position, economic
parameters, ownership and management structure, to enable shareholders and investors to
make informed decisions

5.1. Shareholders should have equal opportunities in terms of access to the same information.

5.2. The information policy of the company should provide for free and unhindered access to
information about the company.

6. Corporate governance practice should take into account the statutory rights of interested
persons, including employees of the company, and encourage active cooperation between the
company and interested persons with a view to increasing the assets of the company and the
value of its shares and other securities, and to creating new jobs

To provide for the efficient operation of the company, its executive bodies should take into
account the interests of third persons, including creditors of the company and state and
municipal bodies of the territory where the company or its structural subdivisions are located.

7. Corporate governance practice should provide for the efficient control over the financial and
business operations of the company in order to protect the rights and legal interests of
shareholders

7.1. It is recommended that companies create an efficiently functioning system of daily

supervision of their financial and business operations. For this purpose it is recommended that
the company operate on the basis of a financial and business plan, which should be annually
approved by the board of directors of the company.

7.2. It is recommended that the company should ensure efficient coordination between internal
and external audits.

Q4. List and provide details of companies which are famous for the successful execution of
corporate social responsibility initiatives.

1. Coca-Cola

The beverage behemoth founded its charitable arm, the Coca-Cola Foundation, in 1984, and since
then has donated more than $820 million to causes prioritizing women’s empowerment, access
to clean drinking water, and the development of disadvantaged youth. Each year, the company
aims to give back one percent of its profits to communities around the world, and encourages
employee donations through a matching gifts program. In 2017, Coke gave $250,000 to the
American Indian College Fund for scholarships and community building for young Native
Americans.

2. Tata Motors
Tata Motors is committed to sustainable development, where business goes hand in hand with
societal wellbeing and environmental consciousness.

Aarogya- Health
Through ‘Aarogya’, the health initiative under its CSR programme, TML operates mobile health
clinics for remote tribal community outreach, offering last-mile aid in Pune. Aarogya also focuses
on maternal and child health, with a holistic and balanced approach towards preventive
healthcare and curative healthcare interventions.

Vidyadhanam- Education
TML believes education is the cornerstone of one’s cognitive, psychological and intellectual
faculties. Vidyadhanam, TML’s CSR programme for education, provides support to young
learners by ensuring holistic development in education infrastructure and services.

Kaushalya - Employability or Skilling

Tata Motors skill development programme, Kaushalya, aims to build the capacity of unemployed
youth by providing vocational training in automotive and other industrial trades.

Vasundhara – Environment
Tata Motors, under the environment-related CSR programme – Vasundhara, strives to contribute
to enhanced environmental sustainability by proactively facilitating the protection, conservation,
judicious use and augmentation of natural resources.

Amrutdhara - Drinking Water

Tata Motors, under the Amruthdhara programme, has been working towards providing safe
drinking water across India.

Aadhaar - Community Development

Aadhaar at Tata Motors is aimed at serving the socio-economically backward and disadvantaged
Scheduled Caste (SC) & Schedule Tribe (ST) communities.

3. ITC
The major few CSR interventions of ITC are as follows:
Education
ITC's Primary Education programme is designed to provide children from weaker sections, access
to education with focus on quality and retention. Over 453,000 children have benefitted from
this programme. In the third quarter of 2015-16, 15 more government primary schools (including
Anganwadis) were provided infrastructure support comprising boundary walls, additional
classrooms, sanitation units, furniture and electrical fittings, thus taking the total number of
government primary schools covered till date to 1,242.
Women Empowerment
The women's microenterprise programme is specifically designed for women from economically
weaker sections to provide a range of gainful employment opportunities and support with
financial assistance by way of loans and grants. Over 26,000 women have been covered through
2,332 SelfHelp Groups (SHG) with total savings of over Rs. 4 crores. A major thrust was given to
financial inclusion of women members by opening bank accounts for 1,534 women.
Cumulatively, over 49,900 women were gainfully employed either through microenterprises or
assisted with loans to pursue income generating activities.

Social Forestry
ITC's pioneering initiative of wasteland development through the Social Forestry Programme
cumulatively covers 69,421 hectares in 4,535 villages, impacting over 72,000 poor households.
This is part of the Social and Farm Forestry initiative that has together greened nearly 223,000
hectares to date and generated nearly 100 million person days of employment for rural
households, including poor tribal and marginal farmers. The agro forestry initiative, that ensures
food, fodder and wood security, cumulatively covered above 18,900 hectares till date.