CORPORATE GOVERNANCE RATING

CORPORATE GOVERNANCE RATING

Corporate governance rating means to evaluate the quality of CG in an organisation. The quality is measured on the basis of certain parameters of CG and for the each parameter points are awarded to the given organisation. And thus an overall rating is developed for each organisation. Two major agencies in India provide CG ratings:

Credit Rating Information Services of India Limited (CRISIL) Investment Information and Credit Rating Agency of India (ICRA)

ICRA-RATINGS ON CORPORATE GOVERNANCE

ICRA gives two forms of CG ratings:

CGR (Corporate Governance Rating) SVG (Stakeholder Value and Governance)

CGR is meant to indicate the relative level to which an organisation accepts and follows the codes and guidelines of corporate governance practices. The emphasis of CGR is on a corporates business practices and quality of disclosure standards that are fair and transparent for its financial stakeholders.

ICRA-RATINGS ON CORPORATE GOVERNANCE

The emphasis of Stakeholder Value and Governance (SVG) Rating, on the other hand, is on value creation and value management for all stakeholders of a company. An SVG Rating considers a companys actual performance and the accrual of the benefits of such performance among all its stakeholders. ICRAs CGR and SVG Ratings may help the Rated corporate entity: in raising funds; listing on the stock exchange; dealing with third parties like creditors; providing comfort to regulators; improving image/credibility; improving valuation; and bettering corporate governance practices through benchmarking.

ICRA-RATINGS ON CORPORATE GOVERNANCE

The rating scale of ICRA is a six level rating scale both for CGR and SVG. That is CGR 1, CGR 2.CGR 6 and similarly SVG 1 SVG 2..SVG 6. These ratings evaluate:

Shareholding Structure Governance structure Management Processes Board Structure and Working Stakeholder Relationships Financial Discipline Transparency and Disclosures

CRISIL - RATING

CRISIL rating is called GVC Rating (Corporate Governance and Value Creation Rating). It provides independent assessment of companys performance, future expectations and sound governance practices. It considers value creation to stakeholders like shareholders, debt-holders, customers, suppliers, employees and society.

CRISIL - RATING

Criteria for Crisil rating:

Equitable treatment of shareholders Ownership rights of shareholders Transparency & disclosure Composition of Board Functioning of Board Management assessment Value creation for various stakeholders

CRISIL - RATING

Stakeholder - Key parameters

Shareholder- Return on invested capital compared to the weighted average cost of capital, dividend track record, and payout ratio Debt holder - Debt protection measures, credit ratings Customer - Market share, assessment of customer satisfaction Employee - Absolute salary levels, adjusted growth in average annual salaries, stock option programmes, attrition rates, and intangible factors like work environment and facilities provided by employer Supplier - Credit terms, support provided, and transparent dealings Society - Social projects taken up by the company, care for the environment, taxes paid to Government

CRISIL - RATING

The rating Scale is of eight levels:

CRISIL GVC Level-1 - Corporate governance and value creation for all stakeholders is the Highest. CRISIL GVC Level-2 - Very High. CRISIL GVC Level-3 - High. CRISIL GVC Level-4 - Above Average. CRISIL GVC Level-5 - Average. CRISIL GVC Level-6 - Below Average CRISIL GVC Level-7 - Low. CRISIL GVC Level-8 - the Lowest.

COMPANIES WITH HIGHEST CG RATINGS IN

INDIA

Corporate Governance Rating is not mandatory in India. Very few companies have opted for getting corporate governance ratings in India.

Some of those companies that have got rated and got high ratings are:

Bharti Airtel Limited HDFC Bank Ltd. Infosys Ltd. Mahindra & Mahindra Limited Hero Motocorp Limited Wipro