Corporate Governance Project

Corporate Governance Project

Table of Contents
Company Profile: ............................................................................................................................ 3 Vision .......................................................................................................................................... 4 Mission........................................................................................................................................ 4 Quality Policy ............................................................................................................................. 5 Organizational Chart ................................................................................................................... 5 Board of Directors........................................................................................................................... 5 Human Resource of Atlas Honda: .................................................................................................. 6 Merit, Equality and Diversity ................................................................................................. 6 Job Security and Sustainability ............................................................................................... 6 Management Trainee Program ................................................................................................ 6 Training and Development ..................................................................................................... 6 Quality Circles ........................................................................................................................ 6 Uniformity and ease to all employees ..................................................................................... 6 Relationship with financial institutions .......................................................................................... 7 Debt management ratio analysis ................................................................................................. 7 Disclosure of information ............................................................................................................... 7 Market Price Data ................................................................................................................... 8 Corporate Social Responsibility ..................................................................................................... 9 Issues in athl .................................................................................................................................. 10 Recommendations ......................................................................................................................... 10 Benefits of good corporate governance ........................................................................................ 11 References ..................................................................................................................................... 11

Corporate Governance Project

Honda Atlas
COMPANY PROFILE:i
Atlas Honda Limited (AHL) is a joint venture between the Atlas Group and Honda Motor Co. Ltd., Japan. The company was created by the merger of Panjdarya Limited and Atlas Autos Ltd. in 1988. Both these motorcycle manufacturing concerns were established by the Atlas Group. In addition, a third concern, Atlas Epak Ltd. was taken over by the Government of Bangladesh in 1971 after the fall of Dhaka. AHL manufactures and markets Honda motorcycles in collaboration with Honda Motor Company. The Company also manufactures various hi-tech components inhouse in collaboration with leading parts manufacturers like Showa Atsumitech, Nippon Denso and Toyo Denso. Honda motorcycles are by far the largest selling motorcycles in the country with an unmatched reputation for high quality, reliability and after-sales-service. AHL has undertaken to develop local manufacturing capabilities to the highest, economically feasible level. While a major role in localization has been assigned to vendor industries, Atlas has the countrys largest in-house manufacturing capability at its Karachi and Sheikhupura plants. To support the production facilities, the company has established an R&D wing and tool making facilities through CAD/CAM which are growing rapidly in size and function as the company expands. Atlas has managed to execute 12 Joint Venture/Technical Assistance Agreements between local vendors and foreign manufacturers for transfer of technology. Besides, Atlas has directly executed 9 Joint Venture/Technical Assistance Agreements other than Honda. AHL management is striving to modernize company operations by adapting applicable aspects of research and theory and more specifically, Hondas unique philosophy of hard/soft technologies to the realities of Pakistani conditions. Company management structure, systems and processes are changed according to the demands of the customer, growth and new technology. Efforts are being made to develop participation at all levels of personnel in decision-making and a substantial and effective delegation has been established at levels where applicable. Various participation programs such as Ala Mayar Quality Circles movement, launched in 1985, are strongly encouraged to allow constructive self-expression and teamwork. The Company training

Corporate Governance Project and development programs encourage all members to develop themselves and contribute to their full potential. AHL is playing a pioneering role in creating conditions for easy and confident use of motorcycles all over the country. A vast and growing network of over 1600 sales service and spare parts dealers has been established. In order to back up this system, Atlas has set up Warranty & Training Centers (WTC) in Karachi and Lahore which provide several courses of varying duration and complexity for motorcycle mechanics and users each year. Mobile training facilities take the latest know-how, technology and maintenance of motorcycles to major rural and urban centers around the country. Annual Production Capacity 600,000 Authorized Capital 1 Billion (Rupees) Paid Up Capital 625.52 Million

VISION
Focusing on satisfaction (customers, associates and shareholders) with challenging spirit and flexibility, we are dedicated to supplying latest generation cars with advanced technology, greater fuel efficiency and competitive prices, along with friendly and efficient after sales back up, maintaining quality as core of all activities.

MISSION
A dynamic growth oriented company through market leadership, excellence in quality and service and maximizing export, ensuring attractive returns to equity holders, rewarding associates according to their ability and performance, fostering a network of engineers and researchers ensuing unique contribution to the development of the industry, customer satisfaction and protection of the environment by producing emission friendly green products as a good corporate citizen fulfilling its social responsibilities in all respects. 4

Corporate Governance Project

QUALITY POLICY
Commitment to provide high quality motorcycles & parts Right work in first attempt and on time Maintain and continuously improve quality Training of manpower and acquisition of latest technology Safe, clean and healthy environment Market leadership and prosperity for all

ORGANIZATIONAL CHART

President/CEO Vice President

Abid

Yama zaki Miyagi

HR & Admin

Logis tics Maqs ood

Finan ce Asad

Mark eting Ayaz

EDB Ishtia q

After Sales Sami

Manufacturing Control Ashraf

Produ ction Sohai l

General Manager

Imran

BOARD OF DIRECTORS
Chairman Chief Executive Officer Directors Yusuf H. Shirazi Saqib H. Shirazi Masahiro Takedagawa Nurul Hoda Sanaullah Qureshi Sherali Mundrawala Hisao Kobayashi Koji Takamatsu Rashid Amin

Company Secretary

Corporate Governance Project

HUMAN RESOURCE OF ATLAS HONDA:

Honda Atlas is following the code of corporate governance issued by SECP. The number of employees is 857 in 2010. While in 2009 it was 955. MERIT, EQUALITY AND DIVERSITY In Atlas Honda, employees are recruited on equal employment opportunity basis. There is no gender discrimination and they call themselves Mini Pakistanii JOB SECURITY AND SUSTAINABILITY AHL history tells that its employment turnover is very low and there are opportunities for employees who are loyal with the company. Once they enter the company as a trainee there are opportunities for continuous promotion MANAGEMENT TRAINEE PROGRAM This program is offered to fresh graduates. They can learn and perform what they have learnt. TRAINING AND DEVELOPMENT They send their key executives for training abroad. They also send their graduate employees for MBA in LUMS. QUALITY CIRCLES In order to maintain continuous improvement in good management and manufacturing techniques, company operates Quality Circles; which has local translation "AALA MAYAR". There is a special quality policy on website of AHL. UNIFORMITY AND EASE TO ALL EMPLOYEES Company provides white uniform to employees for onsite visits. This creates homogenous dress code. All necessary equipments are provided to employees to work safely. Other Benefits Company arranges a free picnic for all employees. Furthermore, an Annual Family day is arranged for employees.

Corporate Governance Project

RELATIONSHIP WITH FINANCIAL INSTITUTIONS

Atlas Honda limited Pakistans long term liabilities with financial institutions were of 512.5 million rupees in 2010 which in 36.7% more than the last year and deferred liabilities are 600.015 million rupees increase by 4.2% relatively last year, and on this loan its total financial cost for the year ended 2010, 112.613 million rupees. As you know debts or loan provide financial leverage to the business because business only have to pay the interest which is fixed and associated with the proportion of loans, so its basically magnified the returns on owners equity

DEBT MANAGEMENT RATIO ANALYSIS

Debt ratio
The ratio of total debt to total assets

Debt ratio= 1112515/8522276= 13.054% The investors want this ratio high because it provides the financial leverage but the creditor prefer the less ratio holder business. In this case atlas Honda limited Pakistan should has to increase its loans which will be available to them on less cost.

Time interest earned ratio

The ratio of earnings before interest and taxes (EBIT) to interest charges TIE ratio= EBIT/ interest charges TIE ratio= 1189844m/112613m= 10.56 times This ratio is actually measures of the firms ability to meet its annual interest payments. Higher the ratio, higher the ability to pay the interest payment. Last year it was 2.40% because of the less sales due to only nine months operations

DISCLOSURE OF INFORMATION
Atlas Honda limited Pakistan is listed at Lahore stock exchange LSE and Karachi stock exchange KSE under the code of ATHL provided by the stock exchange authorities and the 7

Corporate Governance Project annual general meeting was held for the year 2010 at companys registered office at McLeod road, Lahore It also operates the website www.atlashonda.com.pk which provides updated information to its stockholder and stakeholder, containing the financial information, companys information, about its operations and its philosophy and its products. MARKET PRICE DATAiii
KARACHI STOCK EXCHANGE Months high low 2009-10 Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar 95.00 111.20 135.14 101.32 94.45 104.00 139.96 120.00 145.30 154.14 152.00 150.17 61.76 57.00 85.00 89.00 81.50 89.00 99.25 110.00 113.50 138.00 132.00 137.00 high low 2008-09 237.00 228.90 215.00 211.80 189.99 184.99 184.99 184.99 184.99 169.57 161.10 145.40 200.00 187.00 192.81 172.90 169.67 184.99 184.99 184.99 184.99 169.54 153.05 87.40 95.00 111.10 128.71 98.80 91.00 103.00 134.45 119.49 142.43 151.10 149.75 148.80 high LAHORE STOCK EXCHANGE low 2009-10 61.76 56.86 87.74 87.66 84.10 90.00 102.50 113.60 116.01 138.83 136.97 140.01 high low 2008-09 232.05 220.90 214.00 211.80 185.00 184.99 184.99 184.99 184.99 184.99 169.57 153.05 205.00 187.00 194.75 180.00 171.00 184.99 184.99 184.99 184.99 169.57 153.05 90.33

Corporate Governance Project

CORPORATE SOCIAL RESPONSIBILITY

Atlas Honda ltd does a good corporate social responsibility in Pakistan in many ways. There are some examples of social responsibility of Atlas Honda ltd.iv Healthy environment Good corporate governance itself corporate social responsibility. Woman traffic warden development in Pakistan By focusing on human elements

Healthy environment By producing low consumption vehicles, Atlas Honda fulfills his corporate social responsibility. Company makes beneficial engine for the consumers and as well as society environment. It means low consumption and beneficial engine creates less pollution and less pollution means healthy environment, which is an integral part of corporate social responsibility. Good corporate governance itself corporate social responsibility It is no doubt that if a company has a strong management and in result good corporate governance takes place. It also follows the Code of Corporate Governance issued by the SECP. Once good corporate governance established then corporate social responsibility occurs. Same situation here in atlas Honda, company focus on the following properties of corporate governance. 1. 2. 3. 4. Transparent openness check and balance accountability

Woman traffic warden development in Pakistan Atlas Honda has trained women traffic wardens for motorcycles riding and safety

Corporate Governance Project By focusing on human elements Atlas Honda also focuses on 1. Improving quality of work life, 2. Reducing hazard in the work place and etc.

ISSUES IN ATHL
Focus is much on major stakeholders i.e., customers, associates and shareholders, thus ignoring society in its vision statement. Low turnover is a good thing but in ATHL, because of low turnover the human resource lacks young blood. BOD represents major shareholders but minority shareholders have no representation. Downsizing in 2010 due to global economic recession There is an amendment in ISA 23 that requires an entity to capitalize the borrowing cost (w.e.f January 1, 2009). But it was not applied in ATHL fiscal year March 2009-10. After sales customer service not up to the level actually expected by the customer. Less of a proactive approach to different matters, reactive approach applied more Limited investment in high technology equipment Price higher than prevailing competition in market, which gives customer thoughts about nearest substitutes available No safety measures installed in bikes against snatching dilemma.

RECOMMENDATIONS
Some issues are at global level and ATHL is unable to resolve them and avoid being effected from them. However, following are the suggestions by our group to resolve many of the issues: 1. As China has invaded the motorbike market by offering lower price bikes, ATHL should also produce cost effective bikes or advertise its high quality product 2. Start promotions for easy availability of spare parts as compared to competitors. 3. ATHL should revise its vision statement by keeping other stake holders and society in view as vision statement builds the image of company for investors.

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Corporate Governance Project 4. ATHL should revise its retirement policies so that employees feel it beneficial to get early retirement. This will speed up the induction of young and well educated employees 5. Minority shareholders have equal right to redress so a resolution should be passed in shareholders meeting to encourage the participation of minority shareholders. 6. Bike snatching is increasing day by day so there should be built in anti-theft protection locks. 7. Give better after sales service to get competitive edge. 8. Change its slogan from Ma tay Honda E Leh saan to Honda, bike chalanay walon ki shaan

BENEFITS OF GOOD CORPORATE GOVERNANCE

Atlas Honda got several benefits by applying Code of corporate governance by SECP. Some of these are following. 1. 2. 3. 4. 5. Competitive advantage over the local firms. Enhancing the valuation of its own enterprise. Less guarantee claims of spare parts rather than other local motor cycles companies. Ensuring compliance of laws and regulations. High volumes of sales.

REFERENCES

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http://www.atlashonda.com.pk/company.php visited at 10.20p.m. on 26th April 2011 http://www.atlashonda.com.pk/ahl_culture.php cited at 2.30p.m. on 10th May 2011 Annual report 2010 download from www.atlashonda.com http://www.hondacsr.com/en/safety_detail.php?id=35 viewed at 1 p.m. on 6th May 2011

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