KUMAR MANGALAM REPORT ON CORPORATE GOVERNANCE

CORPORATE GOVERNANCE .
The aim is to align as nearly as possible the interests of individuals, corporations and society. Sir Adrian Cadbury The primary purpose of corporate leadership is to create wealth legally and ethically to ensure predictability, sustainability and profitability of revenues year after year. N R Narayana Murthy .is required when the ends justify the means

CORPORATE FRAUDS LIKE .

1992 2001 2001 2005 Harshad Mehta Ketan Parekh Tata Finance Scandal Vanishing Companies Scam

that led to the emergence of corporate governance in India.

CORPORATE GOVERNANCE IN COMPOSED OF

ACCOUNTABILITY

CORPORATE GOVERNANCE

TRANSPARENCY

CG IN INDIA

1995 : CIIs initiative to devise a code of conduct for corporate. 1998 : Code released Desirable Corporate Governance: A Code 2000 : The Birla Committee Report suggested mandatory and non-mandatory recommendations.

THE BIRLA COMMITTEE REPORT : OBSERVATIONS

POSITIVE ASPECTS OF INDIAN CORPORATE LANDSCAPE Markets reward companies having good governance Many companies voluntarily adopting effective accountability practices Corporate governance covers shareholders and stakeholders Global competition compelling Indian companies to adapt fast Increase in capital inflow NEGATIVES ASPECTS OF INDIAN CORPORATE LANDSCAPE Insider trading

Inadequacy of penal provisions

Investor protection given the main priority

 BOARD OF DIRECTORS CONSTITUENTS MANAGEMENT OF CG SHAREHOLDERS

ACCOUNTABILITY TRANSPARENCY ASPECTS OF CG EQUALITY OF ALL STAKEHOLDERS

CG REPORT COVERS THE FOLLOWING

Board of Directors Audit Committee Remuneration Committee Shareholders Committee General Body Meetings Disclosures Means of Communications General Shareholder Information

CORPORATE GOVERNANCE : OBJECTIVE

The fundamental objective of corporate governance is the "enhancement of shareholder value, keeping in view the interests of other stakeholder. the best results would be achieved when the companies begin to treat the code not as a mere structure, but as a way of life.

APPLICABILITY OF RECOMMENDATIONS
MANDATORY vs NON-MANDATORY APPLICABILITY SCHEDULE OF IMPLEMENTATION

BOARD OF DIRECTORS

Composition of BoD based on Collective Leadership BoD comprise of Executive, Non-Executive ,Independent and Nominee Directors Independent Directors: independence".Independent directors are directors who apart from receiving directors remuneration do not have any other material pecuniary relationship or transactions with the company, its promoters, its management or its subsidiaries, which in the judgement of the board may affect their independence of judgement.Further, all pecuniary relationships or transactions of the non-executive directors should be disclosed in the annual report

AUDIT COMMITTEE
ROLE: 1. It flows directly from the boards oversight function. 2. Comprised of Board, Internal and External auditors Recommendations: The Committee therefore recommends that a qualified and independent audit committee should be set up by the board of a company. This would go a long way in enhancing the credibility of the financial disclosures of a company and promoting transparency. Other recommendations regarding Compostion, Function and Procedures

COMPOSITION

the audit committee should have minimum three members, all being non executive directors, with the majority being independent, and with at least one director having financial and accounting knowledge; the chairman of the committee should be an independent director; the chairman should be present at Annual General Meeting to answer shareholder queries; the audit committee should invite such of the executives, as it considers appropriate (and particularly the head of the finance function) to be present at the meetings of the Committee but on occasions it may also meet without the presence of any executives of the company. Finance director and head of internal audit and when required, a representative of the external auditor should be present as invitees for the meetings of the audit committee; the Company Secretary should act as the secretary to the committee

FREQUENCY OF MEETINGS AND QUORUM

Thrice a year One meeting before finalization of annual acc The quorum should be either two members or one-third of the members of the audit committee, whichever is higher and there should be a minimum of two independent directors.ounts and one necessarily every six months

POWERS OF AUDIT COMMITTEE

To investigate any activity within its terms of reference. To seek information from any employee. To obtain outside legal or other professional advice. To secure attendance of outsiders with relevant expertise, if it considers necessary.

FUNCTIONS OF AUDIT COMMITTEE

Oversight and Disclosure Recommending the appointment and removal of external auditor Reviewing with management the annual financial statements before submission to the board Reviewing with the management, external and internal auditors Reviewing the adequacy of internal audit function Reviewing the companys financial and risk management policies.