unit-7 committee reports

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UNIT-7

International approaches to Corporate Governance

"A poorly conceived [corporate governance] system can wreak havoc on the economy by

misallocating resources or failing to check opportunistic behaviours.

But does corporate governance operate the same way in any economy? That has been a point of

contention among academics and economists. Guillen writes that proponents of the so-called

globalization thesis argue that cross-national patterns of corporate governance are converging or will

converge on either the Anglo-Saxon shareholder-centered model found in the U.S. and the U.K., or

some hybrid between the shareholder or stakeholder models typically found in Japan and Germany.

The shareholder-centered model used in America includes dispersed ownership, strong legal protection for

shareholders and indifference to other stakeholders. The hybrid model combines features from both the

shareholder and stakeholder models, defined by a less clear separation between dispersed ownership and

managerial control. In other words, stakeholders have more influence over the operation of the company.

The Anglo-US Model/ Anglo American Model

The Anglo-US model is characterized by share ownership of individual, and increasingly institutional,

investors not affiliated with the corporation (known as outside shareholders or outsiders); a well-

developed legal framework defining the rights and responsibilities of three key players, namely

management, directors and shareholders; and a comparatively uncomplicated procedure for interactionbetween shareholder and corporation as well as among shareholders during or outside the AGM.

The Anglo-US model, developed within the context of the free market economy, assumes theseparation of ownership and control in most publicly-held corporations. This important legaldistinction serves a valuable business and social purpose: investors contribute capital andmaintain ownership in the enterprise, while generally avoiding legal liability for the acts of thecorporation. Investors avoid legal liability by ceding to management control of the corporation, andpaying management for acting as their agent by undertaking the affairs of the corporation. Thecost of this separation of ownership and control is defined as agency costs.

The board of directors of most corporations that follow the Anglo-US model includes both insiders and

outsiders. An insider is as a person who is either employed by the corporation (an executive, manager

or employee) or who has significant personal or business relationships with corporate management. An

outsider is a person or institution which has no direct relationship with the corporation or corporate

management.

The Japanese Model

The Japanese model is characterized by a high level of stock ownership by affiliated banks and companies;

a banking system characterized by strong, long-term links between bank and corporation; a legal, public

policy and industrial policy framework designed to support and promote keiretsu (industrial groups


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linked by trading relationships as well as cross-shareholdings of debt and equity); boards of directors

composed almost solely of insiders; and a comparatively low (in some corporations, non-existent) level of

input of outside shareholders, caused and exacerbated by complicated procedures for exercising

shareholders votes.

The Japanese system of Corporate governance is many sided, centering around a main bank and a

financial/industrial network or keiretsu. The system of corporate governance heavily relies on trust and

relationship oriented approach to corporate governance. Now CG isuues have become conspicuous in

japan, which is becoming fully integrtade with international financial world.

German Model

German model describes two boards with separate members. General CG system is generally regarded as

standard example of an insider controlled ans stake holder oriented system. In this model of CG,

shareholders elect 50% of the members of the supervisory board while the other 50% are appointed by the

labour unions.

UK model

It follows a single tier system (unitary board model) of CG based on individualism, competition and a belief

in market oriented capitalism. Key players in this model are institutional investors, particularly the big

insurance companies and pension funds.

Indian Model

It is amalgam of Anglo-American and German models. In the indian model the pattern of companies is

mostly that of closely held or dominated by a family and associates. In respect of public enterprises, the

central/state govt forms the board, and the hold of the govt continues to be dominant.


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Employee Representation

Employee representation may be defined as the right of employees to seek a union or individual to

represent them for the purpose of negotiating with management on such issues as wages, hours, benefits

and working conditions. In the workplace, workers may be represented by trade union or other

representatives:

on disciplinary and grievance matters; on works councils or other consultative bodies;

for the collective bargaining of terms and conditions;

for making workforce agreements;


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on joint working groups.

Employee representation is rooted in the Member States labour laws ontrade unionsand the

representation of workers at workplace and enterprise levels. It may encompass a range of issues

concerning, for example,terms and conditions of employment,working practices, conduct at work,health

and safety,and many others. It is most closely associated with trade unions, both at the macro-level of

consultation/dialogue, which influences major issues of social and economic policy, and in collective

bargaining, which determines pay and other terms and conditions of employment. It is also found invarious forms ofparticipationby workers, including works councils and enterprise committees.

Collective employee representation was first made mandatory under certain conditions, but this

requirement has broadened and deepened over time to arguably become an important principle of the

national social model.

Employee representation or participation arises when employees are part of a formal

structure for involving them in the decision-making process of an organisation.

Of course all businesses communicate with their employees in some way everyday.

However, there are some situations when the law requires this communication to take

place. The law requires a business to consult with employees on things such as:

Redundancy programmes

When employees are transferred from one employer to another (e.g. the sale of the

business)

On changes to pension arrangements

Proposed changes to working time arrangements

In additional to the mandatory requirements for employee representation, there are

several strong reasons why a business should have a formal system of employee

representation. For example, to:

Make employees' views known to management

Help strengthen both management's and employees' understanding of workplaceissues and other matters affecting the business

Help create an atmosphere of mutual trust between employees and management

and therefore improve workplace relations

The main benefits and drawbacks of employee representation to a business include the

follows:

Advantages Disadvantages

Increased empowerment andmotivation of the workforce

Time-consuming potentially slowsdecision-making
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Employees become more committedto the objectives and strategy of the

business

Conflicts between employer andemployee interests may be a block to

essential change

Better decision-making becauseemployee experience and insights

taken into account

Managers may feel their authority isbeing undermined

Lower risk of industrial disputes

INTEREST GROUPS

An interest groupis an organization of people with similar policy goalsthat tries to influence the political

process to try to achieve those goals. In so doing, interest groups try to influence every branch and every

level of government. This multiplicity of policy arenashelps distinguish interest groups from politicalparties. Interest groups may also support candidates for office, but American interest groups do not run

their own slate of candidates. Interest groups are oftenpolicy specialists, whereas parties are policy

generalists. Thus, interest groups do not face the constraint imposed by trying to appeal to everyone

(unlike political parties).

Despite their importance to democratic government, interest groups traditionally have had a negative

image in America. Even Madison's term factionwas general enough to include both parties and groups.

There is little doubt that honest lobbying outpaces dishonest lobbying by a wide margin. Ironically, many

political scientists now believe that honest lobbying poses greater problems for democracythan dishonest

lobbying.

THEORIES OF INTEREST GROUP POLITICS

Understanding the debate over whether honest lobbying creates problems requires an examination of

three important theories: (1) pluralist theoryargues that interest group activity brings representation to all

as groups compete and counterbalance one another; (2) elite theoryargues that a few groups (mostly the

wealthy) have most of the power; (3) hyperpluralist theoryasserts that too many groups are getting too

much of what they want, resulting in a government policy that is often contradictory and lacking in

direction.

According to pluralist theory, groups win some and lose some, but no group wins or loses all the time.Pluralists do not deny that some groups are stronger than others or that competing interests do not always

get an equal hearing, but they argue that lobbying is open to alland should not be regarded as a problem.

No one group is likely to become too dominant, andall legitimate groups are able to affect public policy.

Elite theorists maintain thatreal power is held by relatively few people, key groups, and institutions.

Government is run by a few big interestslooking out for themselves. Interest groups are extremely unequal

in power; thus the preponderance of power held by elites means thatpluralist theory does not accurately

describe the reality of American politics.

This chapter also explores hyperpluralism and interest group liberalism. Theodore Lowi coined the phraseinterest group liberalismto refer to the government's excessive deference to groups. Interest group

liberalism holds that virtually all pressure group demands are legitimate and that the job of the


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government is to advance them all. In an effort to appease every interest, government agencies

proliferate, conflicting regulations expand, programs multiply, and the budget skyrockets.

Interest group liberalism is promoted by the network of sub governments(also known as iron triangles).

These sub governments are composed of key interest groups interested in a particular policy, the

government agency in charge of administering the policy, and the members of congressional committees

and subcommittees handling the policy. Relations between groups and the government become too cozy.

Hard choices about national policy rarely get made as the government tries to favor all groups, leading topolicy paralysis. Hyperpluralist theorists often point to the government's contradictory tobacco-related

policies as an example of interest group liberalism.

WHAT MAKES AN INTEREST GROUP SUCCESSFUL?

Many factors affect the success of an interest group, including the size of the group, the intensity, and its

financial resources. Small groups actually have organizational advantages over large groups. A potential

groupis composed of all people who might be group members because they share some common interest.

An actual groupis composed of those in the potential group who choose to join. Groups vary enormously

in the degree to which they enroll their potential membership.

A collective goodis something of value (such as clean air or a higher minimum wage) that cannot be

withheld from a potential group member. Members of the potential group share in benefits that members

of the actual group work to secure. The free-rider problemoccurs when potential members decide not to

join but to sit back and let other people do the work (from which they will nevertheless benefit). According

to Olson's law of large groups, the bigger the group, the more serious the free-rider problem.

The primary way for large potential groups to overcome Olson's law is to provide attractive benefits for

only those who join the organization. Selective benefits are goods that a group can restrict to those who

pay their yearly dues, such as information publications, travel discounts, and group insurance rates.

One way a large potential group may be mobilized is through an issue thatpeople feel intenselyabout,

such as abortion. Both small and large groups enjoy a psychological advantage when intensity is involved.

Politicians are more likely to listen when a group shows that it cares deeply about an issue, and many votes

may be won or lost on a single issue. One of the biggest indictments of the interest group system is that it

is biased toward the wealthy.

HOW GROUPS TRY TO SHAPE POLICY

The three traditional strategiesof interest groups are lobbying, electioneering, and litigation. In addition,

groups have recently developed a variety of sophisticated techniquesto appeal to the public for

widespread support.

Lobbyistsare political persuaders who are the representatives of organized groups. They normally work in

Washington, handling groups' legislative business. Although lobbyists primarily try to influencemembers of

Congress, they can also be of helpto them. For example, lobbyists are an important source of specialized

information.

Political scientists are not in agreementabout the effectiveness of lobbying. Much evidence suggests thatlobbyists' power over policy is often exaggerated, but plenty of evidence to the contrary suggests that

lobbying can sometimes persuade legislators to support a certain policy. It is difficult to evaluate the

specific effects of lobbying because it is hard to isolate its effects from other influences. Like campaigning,

lobbying is directed primarily toward activating and reinforcingone's supporters.


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Getting the right people into office or keeping them there is another key strategy of interest groups. Many

groups therefore get involved in electioneering-aiding candidates financially and getting their members to

support them. Political Action Committees (PACs)have provided a means for groups to participate in

electioneering more than ever before.

Today, litigationis often used if an interest group fails in Congress or gets only a vague piece of legislation.

Environmental legislation, such as the Clean Air Act, typically includes written provisions allowing ordinary

citizens to sue for enforcement. Possibly the most famous interest group victories in court were by civilrights groups in the 1950s. These groups won major victories in court cases concerning school

desegregation, equal housing, and labor market equality. Consumer groups have also used suits against

businesses and federal agencies as a means of enforcing consumer regulations.

One tactic that lawyers employ to make the views of interest groups heard by the judiciary is the filing of

amicus curiae ("friend of the court") briefs. A more direct judicial strategy employed by interest groups is

the filing of class action lawsuits, which enable a group of people in a similar situation to combine their

common grievances into a single suit.

The practice of interest groups appealing to the public for supporthas a long tradition in American politics.

Public opinion ultimately makes its way to policymakers, so interest groups carefully cultivate their public

image.

TYPES OF INTEREST GROUPS

Political scientists loosely categorize interest groupsinto four main policy areas: some deal primarily with

economic issues, others with issues of the environment, others with equalityissues, and still others with

the interests of all consumers. Economic groupsare ultimately concerned with wages, prices, and profits.

In the American economy, government does not directly determine these factors. More commonly, public

policy in America has economic effectsthrough regulations, tax advantages, subsidies and contracts, and

international trade policy. Business, labor, and farmers all worry about government regulations. Every

economic group wants to get its share of direct aid and government contracts.

Environmental interestshave exerted a great deal of influence on Congress and state legislatures. Group

politics intensifies when two public interests clash, such as environmental protection and an ensured

supply of energy.

Equality interestsare those groups representing minorities and women who make equal rightstheir main

policy goal. Equality at the polls, in housing, on the job, in education, and in all other facets of American life

has long been the dominant goal of African-American groups, the oldest of which is the National

Association for the Advancement of Colored People (NAACP). The Nineteenth Amendment (1920)guaranteed women the right to vote, but other guarantees of equal protection for women remain absent

from the Constitution. More recently, women's rights groups, such as the National Organization for

Women (NOW), have lobbied for an end to sexual discrimination.

Consumers and public interest lobbies(representing groups that champion causes or ideas "in the public

interest") are organizations that seek a "collective good," by which everyone should be better off-

regardless of whether they joined in the lobbying. Consumer groups have won many legislative victories in

recent years, including the creation in 1973 of the Consumer Product Safety Commission (authorized to

regulate all consumer products and to ban particularly dangerous ones). Other public interest groups

include groups that speak for those who cannot speak for themselves, such as children, animals, and thementally ill; good-government groups such as Common Cause; religious groups; and environmental groups.


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Political and Power Theories

Network Analysis: how relationships influence behaviour

Social network analysis(SNA) is the methodical analysis ofsocial networks.Social network analysis views

social relationshipsin terms ofnetwork theory,consisting of nodes(representing individual actors within

the network) and ties(which represent relationships between the individuals, such as friendship,kinship,

organizational position,sexual relationships,etc.). These networks are often depicted in a socialnetwork

diagram,where nodes are represented as points and ties are represented as lines.

Organizational network analysis is a method for studying communication[1] and socio-technical

networks within a formal organization. It is a quantitative descriptive technique for creating statistical

and graphical models of the people, tasks, groups, knowledge and resources of organizational systems.

It is based onsocial network theory[2]

and more specifically,dynamic network analysis.Core Assumptions and Statements

Core: Network analysis (social network theory) is the study of how the social structure of

relationships around a person, group, or organization affects beliefs or behaviors. Causal

pressures are inherent in social structure. Network analysis is a set of methods for detecting

and measuring the magnitude of the pressures. The axiom of every network approach is that

reality should be primarily conceived and investigated from the view of the properties of

relations between and within units instead of the properties of these units themselves. It is a

relational approach. In social and communication science these units are social units:

individuals, groups/ organizations and societies.

Statements: Rogers characterizes a communication network as consisting of interconnectedindividuals who are linked by patterned communication flows (1986). A communication

network analysis studies the interpersonal linkages created by the shearing of information
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in the interpersonal communication structure (1986), that is, the network.

Network analysis within organizations

Scope:

In general, network analysis focuses on the relationships between people, instead of on

characteristics of people. These relationships may comprise the feelings people have for

each other, the exchange of information, or more tangible exchanges such as goods and

money. By mapping these relationships, network analysis helps to uncover the emergent and

informal communication patterns present in an organization, which may then be compared

to the formal communication structures. These emergent patterns can be used to explain

several organizational phenomena. For instance the place employees have in the

communication network (as described by their relationships), influences their exposure to

and control over information (Burt, 1992; Haythornthwaite, 1996). Since the patterns of

relationships bring employees into contact with the attitudes and behaviors of other

organizational members, these relationships may also help to explain why employees

develop certain attitudes toward organizational events or job-related matters (theories thatdeal with these matters are called contagion theories, cf. Ibarra & Andrews, 1993;Burkhardt, 1994; Meyer, 1994; Feeley & Barnett, 1996; Pollock, Whitbred & Contractor,

2000). Recently there is a growing interest into why communication networks emerge and

the effects of communication networks (Monge & Contractor, 2003). Also, there is a

substantial amount of literature available on how networkdata gathered within

organizations, can be analyzed (cf. Rice & Richards, 1985; Freeman, White & Romney, 1992;

Wasserman & Faust, 1994; Scott, 2000).

Applications:

Network analysis techniques focus on the communication structure of an organization, which canbe operationalized into various aspects. Structural features that can be distinguished and

analyzed through the use of network analysis techniques are for example the (formal and

informal) communication patterns in an organization or the identification of groupswithin

an organization (cliques or functional groups). Also communication-related roles of

employees can be determined (e.g., stars, gatekeepers, and isolates). Special attention may

be given to specific aspects of communication patterns: communication channels and media

used by employees, the relationship between information types and the resulting

communication networks, and the amount and possibilities of bottom-up communication.

Additional characteristics that could, in principle, be investigated using network analysis

techniques are the communication loadas perceived by employees, the communication styles

used, and the effectiveness of the information flows.

Conceptual Model (of a network society)


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Stewardship theory and Stakeholder Theory


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Tread way Commission

Blue Ribbon Committee

Blue Ribbon Committee was set up by the Securities and Exchange Commission (SEC), US, in 1998. In

February 1999, the Committee published the Report on Improving the Effectiveness of Corporate Audit

Committees (the Blue Ribbon Report). The recommendations of the Blue Ribbon Committee were adopted

and declared to be mandatory by the NYSE, the American Stock Exchange (Amex), Nasdaq and theAmerican Institute of Certified Public Accountants (AICPA). The recommendations are not mandatory for

foreign issuers: these are subject to their own national laws. In February 1999, the Blue Ribbon Committee

on Improving the Effectiveness of Corporate Auditing Committees released its Report which advances

practical recommendations for enhancing audit committee oversight of corporate financial reporting. Since

Generally Accepted Accounting Principles leave wide areas of discretion, "quality" financial reporting

cannot be dictated by precise accounting rules and strictures. Therefore the recommendations focus on

ways to improve the process by which the audit committee monitors how this unavoidable discretion is

exercised by management and viewed and reviewed by the independent auditors.

10 recommendations made by Blue Ribbon Committee are:

Members of the audit committee to be independent of the company

Audit committee to be composed exclusively of non-executive directors

Audit committee to consist of at least 3 members with specialist expertise in field of finance &

accounting

Audit committee to have a written charter

Charter to be published at least every 3 years in a proxy statement

External auditors to be accountable to board of directors & particularly to audit committee

External auditors to report annually on their independence from the company Audit committee to discuss the quality of accounting principles with the external auditors

Audit committee to produce a report on its activities

Quarterly financial statements to undergo a crical review by external auditors.


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Indian Experience- Corporate Governance and India (also refer hardcopy notes for details)


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Imperatives of Corporate Governance in India

There have been several major corporate governance initiatives launched in India since the mid-1990s. The first was by the Confederation of Indian Industry (CII), Indiaslargest industry andbusiness association, which came up with the first voluntary code of corporate governance in1998. The second was by the SEBI, now enshrined as Clause 49 of the listing agreement. The

third was the Naresh Chandra Committee, which submitted its report in 2002. The fourth wasagain by SEBI the Narayana Murthy Committee, which also submitted its report in 2002. Basedon some of the recommendation of this committee, SEBI revised Clause 49 of the listingagreement in August 2003. Subsequently, SEBI withdrew the revised Clause 49 in December2003, and currently, the original Clause 49 is in force


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Recommendations of various committees on Corporate Governance in India

CII Code recommendations (1997)

1. No need for German style two-tiered board.

2. For a listed company with turnover exceeding Rs 100 crores, if the chairman is also the MD, at least

half of the board

should be independent directors, else at least 30%.

3. No single person should hold directorships in more than 10 listed companies.

4. Non-executive directors should be competent and active and have clearly defined responsibilities

like in the Audit committee.

5. Directors should be paid a commission not exceeding 1% (3%) of net profits for a company

with(out) an MD over and above sitting fees. Stock options may be considered too.

6. Attendance record of directors should be made explicit at the time of re-appointment. Those with

less than 50% attendance shouldnt be re-appointed.

7. Key information that must be presented to the board is listed in the code.8. Audit Committee: Listed companies with turnover over Rs. 100 crores or paid-up capital of Rs. 20

crores should have an audit committee of at least three members, all non-executive, competent and

willing to work more than other non-executive directors, with clear terms of reference and access to


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all financial information in the company and should periodically interact with statutory auditors and

internal auditors and assist the board in corporate accounting and reporting.

9. Reduction in number of nominee directors. FIs should withdraw nominee directors from companies

with individual FI shareholding below 5% or total FI holding below 10%.

Kumar Manglam Birla Committee (SEBI) recommendations (2000)

1. At least 50% non-executive members.

2. For a company with an executive Chairman, at least half of the board should be independent

directors, else at least one-third.

3. Non-executive Chairman should have an office and be paid for job related expenses.

4. Maximum of 10 directorships and 5 chairmanships per person.

5. Audit Committee: A board must have an qualified and independent audit committee, of minimum 3

members, all non-executive, majority and chair independent with at least one having financial and

accounting knowledge. Its chairman should attend AGM to answer shareholder queries. The

committee should confer with key executives as necessary and the company secretary should be he

seceretary of the committee. The committee should meet at least thrice a year -- one before

finalization of annual accounts and one necessarily every six months with the quorum being the

higher of two members or one-third of members with at least two independent directors. It should

have access to information from any employee and can investigate any matter within its TOR, can seek

outside legal/professional service as well as secure attendance of outside experts in meetings. It

should act as the bridge between the board, statutory auditors and internal auditors with arranging

powers and responsibilities.

6. Remuneration Committee: The remuneration committee should decide remuneration packages for

executive directors. It should have at least 3 directors, all Nonexecutive and be chaired by an

independent director.7. The board should decide on the remuneration of non-executive directors and all remuneration

information should be disclosed in annual report.

8. At least 4 board meetings a year with a maximum gap of 4 months between any 2 meetings.

Minimum information available to boards stipulated.

Narayan Murthy committee (SEBI) recommendations (2003)

1. Training of board members suggested.2. There shall be no nominee directors. All directors to be elected by shareholders with same

responsibilities and accountabilities.

3. Non-executive director compensation to be fixed by board and ratified by shareholders and

reported. Stock options should be vested at least a year after their retirement. Independent directors

should be treated the same way as non-executive directors.

4. The board should be informed every quarter of business risk and risk management strategies.

5. Boards of subsidiaries should follow similar composition rules as that of parent and should have at

least one independent directors of the parent company.

6. The Board report of a parent company should have access to minutes of board meeting insubsidiaries and should affirm reviewing its affairs.

7. Performance evaluation of non-executive directors by all his fellow Board members should inform a

re-appointment decision.


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8. While independent and non-executive directors should enjoy some protection from civil and

criminal litigation, they may be held responsible of the legal compliance in the companys affairs.

9. Code of conduct for Board members and senior management and annual affirmation of compliance

to it.

Naresh Chandra Committee Recommendations (refer hard copy for details)

The Naresh Chandra committee was appointed in August 2002 by the Department ofCompany Affairs (DCA) under the Ministry of Finance and Company Affairs to examine variouscorporate governance issues. The Committee submitted its report in December 2002. It maderecommendations in two key aspects of corporate governance: financial and non-financialdisclosures: and independent auditing and board oversight of management.

Accounting Standards and Corporate governance (Also Refer Hardcopy notes for further details)

The importance of good Corporate Governance has also been increasingly recognized for improving the

firms competitiveness, better corporate performance and better relationship with all stakeholders,

because of which the Indian Corporates have obliged to reform their principles of Governance . For that

purpose, Indian companies will now be required to make more and more elaborate disclosures than have

been making hitherto, for which they are also required to adhere to the uniform and proper accounting

standards, as the standards reduce discretion, discrepancy and improves the utility of the disclosure.

Thus, the Corporate Governance is a system of accountability primarily directed towards the shareholders

in addition to maximizing the shareholders welfare(2), where the debate on disclosure/ transparencyissues of Corporate Governance eventually centres around the proper accounting standards, their practices

and issues, as the application of accounting standards give a lot of confidence to the corporate

management and the disclosure would be more effective and ensure the good Corporate Governance .

Thus, the study of practices of accounting standards is an important and relevant issue of good Corporate

Governance in the present environment, as the standards are viewed as a technical response to call for

better financial accounting and reporting; or as a reflection of a societys changing expectations of

corporate behavior and a vehicle in social and political monitoring and control of the enterprise

In any country, the awareness and competitiveness among the corporates would be strengthened when

they understand each other and compare their performance, for which the simple, understandable andcomparable disclosure is an important instrument. The main objective of disclosure would be fulfilled and

the utility of the disclosure towards good Corporate Governance would be improved when the disclosure is

done on the basis of uniform and consistent accounting standards. Thus, the development and the practice

of uniform accounting standards is an essential essence of Corporate Governance, for which various bodies

have been thinking to strengthen the standards to make the Corporate Governance more effective in the

context of the changing corporate environment and contributed their wisdom.

The International Accounting Standards Board (lASB) is developing a single set of high-quality,

understandable, and enforceable global accounting standards that require transparent and comparable

information in general-purpose financial statements. In addition, IASB wants to encourage convergence in

accounting standards of individual countries around the world.


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The Institute of Chartered Accountants of India (ICAI), which is an Apex Body for the development of

accountancy in India, has been working for the adoption and improvement of accounting standards. In

order to frame the uniform accounting standards the ICAI became an associate member of International

Accounting Standards Committee (IASC) in April, 1974. Recognizing the need to hormonise the diverse

accounting practices prevalent in India and to integrate them with the global practices, the Accounting

Standards Board (ASB) was constituted in April 1977 by ICAI.


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The Accounting Standards guide the management in preparation and presentation of financial statements

within the permissible assumptions and make disclosures thereof. In short, the Accounting Standards insist

on transparency Say What You Do And Do What You Say and if correctly interpreted and applied it would

go a long way in securing the interests of investors and other stakeholders

CH-8 (additional notes)

Corporate Disclosure and transparency

The corporate governance framework s hould ensure that t imely and accurate

disclo sure is m ade on al l materia l matters regarding the cor porat ion, including th e f inancia l

s i tuat ion, performance, own ership, and g overnance of the company.


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A. Disclosure should include, but not be limited to, material information on:1. The financial and operating results of the company.2. Company objectives.3. Major share ownership and voting rights.4. Remuneration policy for members of the board and key executives, andinformation about board members, including their qualifications, the selectionprocess, other company directorships, and whether they are regarded asindependent by the board5. Related party transactions6. Material foreseeable risk factors.7. Material issues regarding employees and other stakeholders.8. Governance structures and policies, in particular, the content of any corporategovernance code or policy and the process by which it is implemented.

Most of this information is routinely disclosed by the company to its shareholders. The details ofthe disclosures made by listed companies in India is mentioned in the table below :


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Ch-1

Note: Models for CSR implementation has been asked in end term examination

unit-7 committee reports

Documents