8/14/2019 Corp Govn[1]. 14 03 2009

1/27

UDAY TARDALKARHEAD OPERATIONS

TATA SECURITIES LIMITED

8/14/2019 Corp Govn[1]. 14 03 2009

2/27

Introduction

What is Corporate Governance ?

Corporate Governance - Conduct the business

in accordance with shareholders desires, To maximize profit,

Conforming to the Basic rules of the society

embodied in law and customs.

8/14/2019 Corp Govn[1]. 14 03 2009

3/27

Objectives

To promote corporate fairness, transparency andaccountability

To improve relations between companies and

shareholders; To ensure that information needs of all

Shareholders are met

To monitor the executive management in theinterest of shareholders.

8/14/2019 Corp Govn[1]. 14 03 2009

4/27

Historical perspective of Corporate

Governance Investigation : Watergate scandal Boom-to-bust decade of the 1980s

Polly Peck, British & Commonwealth, BCCIExplosive growth in earnings, decade disastrous

manner.Enrons accounting: intelligent gamblingDressing up the loan as an equity holding, without any capitalby bank hence a sham

Internal controls were illusory, Conflict of interestManipulation by SPEs, Concealment of debts.

Major Corporations making illegal politicalcontributions and bribing government

Securities and Exchange Commission proposals formandator re ortin on internal financial controls

8/14/2019 Corp Govn[1]. 14 03 2009

5/27

Indian Perspective Post Liberalisation

Mismanagement : Well-known and SeniorExecutives hauled up for non-performance

and/or non-compliance with legalrequirements.

TATA FINANCE FIASCO

GTB MERGER BRITANIA

8/14/2019 Corp Govn[1]. 14 03 2009

6/27

Domestic/Foreign: Demanding investors having

invested their funds.

Undermined Interests of non-promoter and small

shareholders. Indian companies : Raising funds GDR and in

India, for specific objectives.

Funds diverted elsewhere, without consultingthe Minority shareholders.

8/14/2019 Corp Govn[1]. 14 03 2009

7/27

Is Corporate Governance New to

India?

Nanda and Maurya Dynasties i.e. 198 BC -320BC. Kautilya (Chanakya) Says:

"Praja sukhe sukham ragyam,

Prajanan ca hite hitam,

Naatman priyam hitam ragyam

Parajanan tu priyam hitam

8/14/2019 Corp Govn[1]. 14 03 2009

8/27

Meaning

In the happiness and well being of the subjects,lies the well being of the king, in the welfare of

the subjects, is the welfare of the king, what isdesirable and beneficial to the subjects and nothis personal desires and ambition, is desirableand beneficial for the king

8/14/2019 Corp Govn[1]. 14 03 2009

9/27

Four Fold Duties

"Raksha - protection", "Vriddhi - enhancement", "Palana - maintenance", "Yogakshema - safeguarding". It is the duty of the king to protect the wealth of the

state and its subjects, to enhance the wealth, tomaintain it and safeguard it and the interest of the

subjects. The substitution of the STATE by theCORPORATION, the KING by the CEO or theBOARD OF A DIRECTORS and the SUBJECTS by theSHAREHOLDERS brings out the quintessence ofCorporate Governance

8/14/2019 Corp Govn[1]. 14 03 2009

10/27

Duties of the King toward wealth

ENHANCEMENT

PROPER MAITENANCE

UTILISATION

PREVENT DIVERSION TO UNDESIRABLEVENTURES

SAFEGUARD THE INTEREST OFSHAREHOLDERS.

8/14/2019 Corp Govn[1]. 14 03 2009

11/27

Constituents and Aspects

The three key constituents of CorporateGovernance:

1. Management

2. Board of Directors3. Share Holders

The three key aspects of Corporate Governance:

1. Accountability

2. Transparency

3. Equality of treatment for all Shareholders

8/14/2019 Corp Govn[1]. 14 03 2009

12/27

SEBI Initiatives

Utilization of funds and Variance Directors Report

Cash and funds flow statement in Balance Sheet

Declaration of unaudited quarterly results;

Compliance officer for monitoring the sharetransfer process and compliance with variousrules, regulations;

Timely disclosure of material and price sensitiveinformation

8/14/2019 Corp Govn[1]. 14 03 2009

13/27

SEBI Initiatives

Dispatch of one copy of complete balance sheetto every household and abridged balance sheetto all shareholders.

Guidelines for preferential allotment at marketrelated prices;

A Platform for a fair and transparent framework

for takeovers and substantial acquisitions. Strengthening of disclosure norms for IPOs

following the recommendations of the MalegamCommittee

8/14/2019 Corp Govn[1]. 14 03 2009

14/27

KEY Implementations

Independent directors

Independent directors have no material pecuniaryrelationship or transactions with the company, its

promoters, its management or its subsidiaries, whichin the judgment of the board may affect their

independence of judgment.

8/14/2019 Corp Govn[1]. 14 03 2009

15/27

CHAIRMANS Role

Effective participation of all directors, executiveand non-executive

Maintain a balance of power in the board, Receipt of advance and adequate information

Directors participation beyond their executive

duties and strive for governance..

8/14/2019 Corp Govn[1]. 14 03 2009

16/27

Audit Committee

Relationships of accountability between theprincipal actors of sound financial reporting

Board -Management and the Auditor.

Management accountable to the Board and theBoard accountable to the Shareholders. The AuditCommittee acts as a catalyst for effective financialreporting.

8/14/2019 Corp Govn[1]. 14 03 2009

17/27

Audit committee : Independent and

Expert Member Minimum three non Executive Directors, majority being

independent, with at least one director having financial andaccounting knowledge;

The chairman to be an independent director; The chairman to be present at AGM to answer shareholder

queries;

The finance director, head of Internal Audit and arepresentative of External Auditor to be present as inviteesand The Company Secretary to act as the secretary of thecommittee.

8/14/2019 Corp Govn[1]. 14 03 2009

18/27

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

8/14/2019 Corp Govn[1]. 14 03 2009

19/27

Role of Audit Committee 1

A bridge between the Board, the Statutory andInternal Auditors,

Oversight the reporting process and the disclosure ofits financial information

To ensure that the financial statement is correct,sufficient and credible.

Recommending the appointment and removal ofexternal auditor, fixation of audit fee and also approvepayment for any other services.

8/14/2019 Corp Govn[1]. 14 03 2009

20/27

Role of Audit Committee 2

FOCUS ON Changes in accounting policies and practices.

Major accounting entries based on exercise of judgmentby management.

Qualifications in draft audit report.

Adjustments arising out of audit.

Compliance with accounting standards and stock

exchange Related party transactions

Adequacy of internal control systems.

Discuss :Significant findings and follow-up thereon

8/14/2019 Corp Govn[1]. 14 03 2009

21/27

Role of Audit Committee 3

Review : The findings of investigations by the internalauditors

Matters of suspected fraud or irregularity

A failure of internal control systems. To decide the nature and scope of Internal audit.

Reviewing the companys financial and risk managementpolicies.

To probe the reasons for defaults in the payments to thedepositors, debenture holders, share holders (declareddividends) and creditors.

8/14/2019 Corp Govn[1]. 14 03 2009

22/27

Remuneration Committee

Brief description of terms of reference

Remuneration policy

Details of remuneration to all the directors, as per

format in main report.Shareholders Committee

Non-executive director heading the committee

Name and designation of compliance officer Monitoring of Shareholders complaints.

8/14/2019 Corp Govn[1]. 14 03 2009

23/27

General Body meetings

Location and time, where last three AGMs held.

Whether special resolutions were put throughpostal ballot last year

Details of voting pattern

Details of Person who conducted the postal ballotexercise

Procedure for postal ballot

8/14/2019 Corp Govn[1]. 14 03 2009

24/27

Disclosures

Disclosures on materially significant related partytransactions

Details of non-compliance by the company.

Penalties, strictures imposed on the company byStock Exchange or SEBI or any statutory authority,on any matter related to capital markets, during thelast three years

8/14/2019 Corp Govn[1]. 14 03 2009

25/27

Means of communication

Half-yearly report sent to each household ofshareholders.

Quarterly results

Name of the newspapers normally published in.

Any website, where displayed

Whether it also displays official news releases; and

The presentations made to institutional investorsor to the analysts.

Whether MD&A is a part of annual report or not.

8/14/2019 Corp Govn[1]. 14 03 2009

26/27

Conclusion

The primary goal:

The OPTIMISATION of the performance ofcorporate entities within the LIMITATIONS of

Regulations and ASPIRATIONS of Shareholderson one hand and the compulsions of PUBLICINTREST on the other.

Corporate governance :A working tool for

improving the overall effectiveness of corporateenterprises.

A time tested pragmatic approach towards thetackling of almost all long term as well as short

term crisis situations.

8/14/2019 Corp Govn[1]. 14 03 2009

27/27

THE END