S. R. Luthra Institute of Management

Topic: Explain in detail Corporate Governance in India and compare it with Corporate Governance at Global level by taking examples of foreign countries.

Submitted To: Ms. Shehnaz Imam

Submitted By:

Bhatt Khyati 127500592009 Bhoomika Shah 127500592011 Anas Dalal 127500592020 Namrata Italia 127500592032 Kirti Kandoi 127500592045 Nikita Maskara 127500592053

Corporate Governance Corporate governance is the system by which business corporations are

directed and controlled.

Corporate governance is the set of processes, customs, policies, laws,

and institutions affecting the way a corporation or company is directed,

administered or controlled.

The corporate governance structure specifies the distribution of rights

and responsibilities among different participants in the corporation, such

as the board, managers, shareholders and other stakeholders, and

spells out the rules and procedures for making decisions on corporate

affairs.

Importance of corporate governance

Principles of corporate governance Rights and equitable treatment of shareholders:

Organizations can help shareholders exercise their rights by openly and

effectively communicating information and by encouraging shareholders

to participate in general meetings.

Interests of other stakeholders:

Organizations should recognize that they have legal, contractual, social,

and market driven obligations to non-shareholder stakeholders,

including employees, investors, creditors, suppliers, local communities,

customers, and policy makers.

Role and responsibilities of the board:

The board needs sufficient relevant skills and understanding to review and

challenge management performance.

Integrity and ethical behavior:

Integrity should be a fundamental requirement in choosing corporate officers

and board members.

Disclosure and transparency: 

Disclosure of material matters concerning the organization should be timely

and balanced to ensure that all investors have access to clear, factual

information.

Corporate Governance in TATA STEEL 1. The Company’s Corporate Governance Philosophy

As a part of its growth strategy, the Company believes in adopting the

‘best practices’ that are followed in the area of Corporate Governance

across various geographies.

2. Corporate governance in accordance to board of directors

The Company has a Non-Executive Chairman and the number of

Independent Directors is more than fifty percent of the total number of

Directors in compliance with the Clause 49 of the listing Agreement.

None of the Directors on the Board is a Member on more than 10

Committees and Chairman of more than 5 Committees across all the

companies in which he is a Director.

3. Audit Committee:-

a) To review compliance with internal control systems

b) To review the findings of the Internal Auditor relating to various

functions of the Company

c) To hold periodic discussions with the Statutory Auditors and Internal

Auditors of the Company concerning the accounts of the Company,

internal control systems, scope of audit and observations of the

Auditors/Internal Auditors

d) To review the quarterly, half-yearly and annual financial results of the

Company before submission to the Board

e) To make recommendations to the Board on any matter relating to the

financial management of the Company, including Statutory & Internal

Audit Reports

f) Recommending the appointment of cost auditors and statutory

auditors and fixation of their remuneration

g) Review of Cost Audit Report

h) Reviewing the Company’s financial and risk management policies.

4. Whistle Blower Policy

The Whistle Blower Policy is an extension of the Tata Code of

Conduct, which requires every employee to promptly report to the

Management any actual or possible violation of the Code or an event

he becomes aware of that could affect the business or reputation of

the Company.

5. Cost Auditor’s details

The Cost Audit Report was filed by the Cost Auditor M/s

Shome & Banerjee, Cost Accountants, on 4th December, 2012 in

XBRL Mode as mandated by the Ministry of Corporate Affairs vide

their circular no. 8/2012 dated 10th May, 2012.

The Company was felicitated by the Institute of Cost

Accountants of India for being the first company in India to file the

Cost Audit Report in XBRL Mode.

6. Remuneration Committee

a) Review the performance of the Managing Director and the Whole-time

Directors, after considering the Company’s performance.

b) Recommend to the Board remuneration including salary, perquisites and

commission to be paid to the Company’s Managing Director and Whole-time

Directors.

c) Finalize the perquisites package of the Managing Director and Whole-time

Directors within the overall ceiling fixed by the Board.

d) Recommend to the Board, retirement benefits to be paid to the Managing

Director and Whole-time Directors under the Retirement Benefit Guidelines

adopted by the Board.

7. Remuneration Policy

The Company while deciding the remuneration package of the senior

management members takes into consideration the following items:

(a) Employment scenario

(b) Remuneration package of the industry and

(c) Remuneration package of the managerial talent of other industries.

TATA STEEL have also formed following committees:

8. Shareholders’ Committee

9. Ethics and Compliance Committee

10. Safety health and environment committee.

11. Committee of investments and projects.

12.Compulsory disclosures and means of disclosure.

13. Means of communication for different purposes.

Satyam Scandal Raju resigned from the Satyam board after admitting to falsifying revenues,

margins and over Rs 50 billion of cash balances as the company.

Raju indicated that Satyam's accounts had been falsified over a number of

years.

Satyam was purchased by Tech Mahindra in April 2009 and renamed

Mahindra Satyam.

Raju described how an initial cover-up for a poor quarterly performance

escalated: "It was like riding a tiger, not knowing how to get off without

being eaten.".

Raju and his brother, B Rama Raju, were then arrested by the CID Andhra

Pradesh police headed by Mr. V S K Kaumudi, IPS on charges of breach of

trust, conspiracy, cheating, and falsification of records.

The Andhra Pradesh government attached 44 properties belonging to the

family members of the promoters of Satyam Computers in the case against

Raju.

Investigation by the authorities revealed that Raju led a lavish lifestyle including

321 pairs of shoes, 310 belts, 13 cars including Mercedes and BMWs.

In November 2010, Raju surrendered after the Supreme Court in August

cancelled the bail granted to him by a lower court in Hyderabad, where Satyam

is based.

The Supreme Court on 4 November 2011 granted bail to Raju since the

Central Bureau of Investigation (CBI) failed to file charges on time.

Ramalinga Raju's wife Nandini Raju, sons Teja and Rama, and the wives

of Ramalinga Raju's younger brothers were among those convicted for

evading paying income tax of around Rs 30 crore relating to the Maytas

Hill County housing project.

The 19 companies had declared they had generated income through the

sale of 90 acres of land and apartments.

All of them paid the penalty and furnished the sureties after the

pronouncement of the order.

Key Observations –

Corporate governance issues are not unique in the Indian context, but as

Indian companies acquire or establish operations outside India or access the

international financial markets, its issues are increasing for India companies.

Companies need to consider the corporate governance norms that apply to

them in different jurisdictions and adopt a standard that can meet the

differing requirements of each jurisdiction, even if that means voluntarily

adopting higher standards in certain jurisdictions. .

While the development of these norms is an evolutionary process, expansion

by Indian companies outside India can provide impetus for implementation of

norms that result in good governance and transparency, ultimately leading to

the successful growth of corporate India.

Corporate Governance In Toyota Motors

TMC created sound corporate climate based on the “Guiding Principles at Toyota” and the “Toyota Code of Conduct.”

1) System to ensure that the Directors execute their responsibilities in compliance with relevant laws and regulations and the Articles of Incorporation.

2) System to retain and manage information relating to performance of duties by Directors Information relating to exercising duties by Directors shall be appropriately retained and managed by each division in charge pursuant to the relevant internal rules and laws and regulations.

3) System to ensure that Directors exercise their duties efficiently .

TMC will manage consistent policies by specifying the policies at

each level of the organization.

The Directors will supervise the execution of duties by the

responsible officers.

TMC, from time to time, will make opportunities to listen to the

opinions of various stakeholders.

4) System to ensure that employees conduct business in compliance

with relevant laws and regulations and the Articles of Incorporation.

5) System to ensure the appropriateness of business operations of the

corporation and the business group consisting of the parent company and

subsidiaries.

6) System concerning employees who assist the Audit & Supervisory Board

Members when required TMC has established the Audit & Supervisory

Board Office and has assigned a number of full-time staff to support this

function.

7) System for Directors and employees to report to Audit & Supervisory Board

Members, and other related systems .

The Corporate Objective & Mission of the Board of Directors

INDIA - The pivotal role in any system of corporate governance is performed by the

board of directors. It is accountable to the stakeholders and directs and controls the Management.

It stewards the company, sets its strategic aim and financial goals and oversees their implementation, puts in place adequate internal controls and periodically reports the activities and progress of the company in the company in a transparent manner to the stakeholders.

 CHINA - The supervisory board shall supervise the corporate finance, the legitimacy

of directors, managers and other senior management personnel’s performance of duties, and shall protect the company’s and the shareholders’ legal rights and interests.

 BRAZIL – The board of directors should uphold the company’s values, as well as the

owners’ principles and purposes, discussed, approved at board meetings.

Conflicts of Interest and Ethics INDIA –

Non-executive directors help bring an independent judgment to bear on

management of conflicts.

The Committee recommends that to avoid conflicts of interest, the

remuneration committee should [be] comprised of at least three directors, all

of whom should be non-executive directors, the chairman of committee

being an independent director.

 CHINA –

The controlling shareholders of a listed with those of the company shall

strictly comply with laws and regulations while exercising their rights as

investors, and shall be prevented from damaging the listed companies or

other shareholders’ legal rights and interests, through means such as

assets restructuring, or from taking advantage of their privileged position.

 BRAZIL –

There is a conflict of interest whenever a party is not independent vis-à-

vis a particular issue and may influence decisions or make biased

choices.

A few definitions of independence have been given to board members

and independent auditors. Similar criteria apply to directors or any other

company employee or representative.

Election Term, Term Limits & Mandatory Retirement

INDIA –

The tenure of office of the directors will be as prescribed in the Companies Act.

CHINA –

Appointment agreements shall be entered into by a listed company and its directors to clarify

such matters as the term of the directorship and the more compensation from the company in

case of early termination of the appointment agreement for cause by the company.

BRAZIL –

The board member’s term in office should be clearly established. Length of service should be

short, preferably just one year long.

Director Compensation & Stock Ownership

INDIA –

It is important that adequate compensation package[s] be given to the non-

executive independent directors so that these positions become sufficiently

financially attractive to attract talent and that the non-executive directors are

sufficiently compensated for undertaking this work.

The Committee recommends that the board of directors should decide the

remuneration of non-executive directors.

CHINA -

The main duties of the remuneration and appraisal committee are:

1) to study the appraisal standard for directors and management personnel, to

conduct appraisal and to make recommendations.

2) to study and review the remuneration policies and schemes for directors

and senior management personnel. The board of directors shall propose

a scheme for the amount and method of compensation for directors to the

shareholders’ meeting for approval. When the board of directors or the

remuneration and appraisal committee discusses the compensation for a

certain director, such director shall withdraw.

 BRAZIL –

The independent board member’s remuneration rate should be the same

as the CEO’s hourly rate, including bonuses and benefits, compensate

with the time he/she actually devotes to his/her functions.

Board Meetings & Agenda

INDIA –

The Committee recommends that board meetings should be held at least

four times in a year, with a maximum time gap of four months between any

two meetings.

 CHINA –

In order to meet their incumbent obligations, the Board members have to

meet regularly, according to the company’s incorporation document, or

whenever necessary.

Every Board of Directors will establish, by its own regulation and

according to the law and the incorporation document of the company,

the procedure of meeting, of communicating the agenda, of making

decisions, of communicating the decisions, as well as the frequency of

the meetings, according to the specific conditions of each commercial

company.

Bibliographyhttp://www.grantthornton.co.uk/en/Thinking/corporate_governance_in_india_and_the_uk_a_comparative_analysis/

http://www.weil.com/wgm/cwgmhomep.nsf/Files/IntnlCorpGovGuide_Dev_Emerg_Mkts/$file/IntnlCorpGovGuide_Dev_Emerg_Mkts.pdf

http://www.ds.psu.edu/Documents/Academics/HealthSouth_Corporation_Case.pdf

THANK YOU