Presented by: Santosh Rajput Sweeti Nayak Mohit Rijwani Amrish Dolas Deepak Vanjara Subhdeep Devbaramann

the process and structure..to direct and manage the business and affairs of the corporation with the objective of enhancing shareholder value, which includes ensuring the financial viability of the business.

System Objectives of the company Good corporate governance structures Accountability and control systems

Key objectives
Role of owners in electing the Board Protection of minorities

Role of other stakeholders in management

Board structure and objectivity of the Board System of reporting and accountability Audit and internal control Effective supervision and enforcement by

regulators To encourage Sustainable Development of the Company and its stakeholders

A basic design of existing corporate governance systems Independent

Executive directors Owner directors Directors Board of Directors Management

Supervisory & enforcement authorities

Corporate

Shareholders

Stakeholders

Creditors

Separation of ownership and management Opinion of small shareholders

Large shareholders can effectively voice their opinions

The existence of large shareholders can be a built-in corporate governance mechanism

If managers pursue only their personal interests, and ignore shareholders interest, stock prices may decrease. This make the company a target for takeover. To avoid the possibility of a takeover, the management would work in the interest of shareholders. Market forces, such as the possibility of takeover, may work as corporate governance mechanisms.

One way to align the interest of management and of shareholders is to tie managerial compensation to the firm performance. Increasing salary with firm performance, and the provision of stock option compensation

PROVISIONS OF SARBANES OXLEY ACT

CEO and CFO to certify appropriateness of financial

statements

Forfeiture of bonuses and profits in certain

circumstances

Prohibition on personal loans to executives Disclosure of transactions involving management and

principal stockholders

Annual report

 Issuers must comply

IMPLICATIONS OF SARBANES OXLEY ACT

Directors and officer must certify annual and

periodic reports (including financial statements)

Employees shielded by whistle-blower

protections

Attorneys

 Auditors subject to oversight and discipline by a newly

created independent board

additional restrictions and limitations

Investment banks and research analysts

The Act also created a number of new federal crimes

NEW YORK STOCK EXCHANGE REGULATIONS

Majority of Board to comprise of independent

directors

Non-executive directors to meet at regular intervals

without the management

Listed companies to compulsorily establish following

committees consisting of independent directors only Corporate Governance Committee Compensation Committee Audit Committee

Listed companies to have an internal audit function

 Listed companies to frame and disclose corporate

governance guidelines Qualification standards Responsibilities Access to management Compensation Management succession Annual performance evaluation Business Conduct and Ethics violations

Listed companies to compulsorily adopt a Code of CEO to certify annually that no listing agreement

Current status on corporate governance

Comparison of Board structure Indian top 50 Vs U.S. top 50 Key Findings
Parameter India (Nifty Fifty companies) US (top 50 out of NYSE 100 index)

Ownership pattern
Board size

48% of Indian companies have largest shareholder holding over 50%

Largest 44%

Largest shareholder holds less than 10% in all cases

Largest 66%

board size 17. smallest 5

board size 18. smallest 10

of the top 50 companies have more than 12 directors Board independence

58%

of the top 50 companies have more than 12 directors

All

of companies have a board majority of independent directors have less than 1/3rd of their directors independent
12%

companies have a board majority of independent directors

Executive directors in board Chairman and CEO Lead independent director Board committees

In 35 companies 50% of the directors or more are executive directors 60% have separate Chairman and CEO 3 companies have lead independent directors companies have audit committees 54% have fully independent Audit Committees
All

Boards of 49 companies out of 50 have less than 25% executive directors Only 20% have separate Chairman and CEO 20 companies have lead independent directors
All

companies have remuneration committees of these 14 fully independent and 16 have majority independent committees
33

companies have fully independent audit remuneration and nomination committees

companies have nomination committees 6 are fully independent and 3 have majority independent committees
9

Source: Crisil Report on Corporate Governance