Annual Report 2001-2002

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CORPORATE GOVERNANCE
Based on the report of the Kumar Mangalam Birla Committee on corporate governance Notes:
set up by the Securities and Exchange Board of India (SEBI), Clause 49 was introduced 1) Figures in ( ) denote listed companies.
in the listing agreement by the Indian Stock Exchanges in the year 2000. This clause
2) Board Meetings held during the year represents the no. of meetings held during
stipulates the norms and disclosure standards that have to be followed on the corporate
the tenure of that director.
governance front by listed Indian companies. This section along with the sections on
management discussion and analysis and additional shareholder information constitute 3) Mr. K.K. Dastur was a Whole-time Director upto April 30, 2002 and is now a
Godrej Industries Limited’s (GIL) compliance report with Clause 49. Non-Executive and Independent Director from May 1, 2002.
The Company’s philosophy of corporate governance stems from its belief that all actions 4) Mr. F.P. Sarkari and Mr. K.N. Petigara have been appointed as an Additional
and strategic plans should be consistent with the welfare of all stakeholders. Director w.e.f. January 30, 2002.
Board of Directors 5) Mr. M.P. Pusalkar has been appointed as an Additional Director w.e.f. April 1,
a) Composition of the Board 2002.

As of March 31, 2002, GIL’s Board consisted of fourteen Directors, five of whom Independent Director means a Director who, apart from receiving sitting fees, does not
are Whole-Time, Executive Directors. The remaining nine are Non-Executive Directors, have any other material/pecuniary relationship or transactions with the company, its
with five of them being Independent Directors. Details are given in Table 1. promoters, its management, or its subsidiaries, which in the judgement of the Board
may affect the independence of judgement of the Director.
b) Number of Board meetings
None of the Directors is a member of more than 10 Board-level committees, or a
The Board of GIL held six meetings during the year. These were on 7th May 2001,
Chairman of more than five such committees, as required under Clause 49 of the listing
28th July 2001, 8th September, 2001, 23 October, 2001, 30th January, 2002
agreement.
and 22nd February, 2002.
d) Information supplied to the Board
c) Directors’ attendance record and directorships held
Among others, this includes:
See Table 1 for details.
l Annual operating plans and budgets, capital budgets, updates,
Table 1: Details about GIL’s Board of Directors during the year
l Quarterly results of the Company along with detailed business analysis,
Name of Director Category Board Meetings Board Meetings Whether Directorships
l Minutes of meeting of audit committee and other committees,
held during the attended during attended held in public
l Information on recruitment and remuneration of senior officers just below
year the year last AGM companies the Board level,
incorporated l Materially important show cause, demand, prosecution and penalty notices,
in India l Fatal or serious accidents or dangerous occurrences,
A.B. Godrej Chairman, Non-Executive 6 5 Yes 14(3) l Any materially significant effluent or pollution problems,
J.N. Godrej Non-Executive 6 3 Yes 12 (5) l Any materially relevant default in financial obligations to and by the Company
Director or substantial non-payment for goods sold by the Company,
N.B. Godrej Managing 6 5 Yes 14 (4) l Any issue which involves possible public or product liability claims of a
Director
substantial nature,

K.N. Naoroji Non-Executive 6 1 No 2(1)

l Details of any joint venture or collaboration agreement,

Director
l Transactions that involve substantial payment towards goodwill, brand equity
or intellectual property,
V.M. Crishna Non-Executive 6 4 No 7(3)
l Significant labour problems and their proposed solutions,
Director
l Significant development in the human resources and industrial relations
S.A. Ahmadullah Non-Executive and 6 6 Yes 1(1)
fronts,
Independent Director
l Sale of material nature, of investments, subsidiaries, assets, which is not in
N.C. Gawankar Non-Executive and 6 6 Yes 2(1) the normal course of business,
Independent Director l Quarterly details of foreign exchange exposure and the steps taken by
V.N. Gogate Non-Executive and 6 5 Yes 3(1) management to limit the risks of adverse exchange rate movement, and

Independent Director l Non-compliance of any regulatory, statutory nature or listing requirements

as well as shareholder services such as non-payment of dividend and delays
K.K. Dastur Whole-time Director 6 6 Yes 5(1)
in share transfer.
T.A. Dubash Whole-time Director 6 6 Yes 5(1)
The Board of GIL is regularly presented with all information under the above
M. Eipe Whole-time Director 6 5 No 3(1) heads, whenever applicable. These are submitted either as part of the agenda
C.K. Vaidya Whole-time Director 6 5 Yes 5(1) papers well in advance of the Board meetings or are tabled in the course of the
F.P. Sarkari Non-Executive and 2 2 - 2(1)
Board meetings.

Independent Director
K.N. Petigara Non-Executive and
Independent Director
2 2
e) Directors with materially significant related party transactions, pecuniary or
business relationship with the company
- 5(1)
The Directors, apart from drawing Directors remuneration, have no other materially
significant related party transactions, pecuniary or business relationship with the
Company.

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Godrej Industries Limited
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f) Remuneration of Directors: sitting fees, salary, perquisites and commissions audit department, staffing and seniority of the official heading the department,
Table 2 gives the details of the remuneration package of Directors and their reporting structure coverage and frequency of internal audit.
relationships with each other. l Discussing with internal auditors any significant findings and following it up.
Table 2: Remuneration paid or payable to Directors for the year ended l Reviewing the findings of any internal investigations by the internal auditors into
March 31, 2002 (Rs.) matters where there is suspected fraud or irregularity or failure of internal control
systems of a material nature and reporting the matter to the Board.
Name of Relationship with Sitting Commission Salary Perquisites Total
l Discussing with external auditors before the audit commences, nature and scope
Director other Directors fees on profits
of audit as well as conducting post-audit discussion to ascertain any area of
A.B. Godrej Brother of N.B. Godrej Nil Nil Nil Nil Nil concern.
J.N. Godrej None Nil NA NA NA Nil
l Reviewing the Company’s financial and risk management policies.
N.B. Godrej Brother of A.B. Godrej Nil NA 3328000 1133442 4461442
K.N. Naoroji None Nil NA NA NA Nil l Looking into the reasons for substantial defaults in payment to depositors, debenture
holders, shareholders (in case of non-payment of declared dividend) and creditors.
V.M. Crishna None 15000 NA NA NA 15000
GIL’s audit committee was constituted with one Executive Director and two Non-
S.A. Ahmadullah None 50000 NA NA NA 50000
Executive Directors. They were Mr. V.N. Gogate (Chairman of the Committee and
N.C. Gawankar None 30000 NA NA NA 30000 Independent Director); Mr.S.A. Ahmadullah (Independent Director) and Mr. N.B. Godrej
V.N. Gogate None 50000 NA NA NA 50000 (Managing Director). Subsequently the composition was changed to comply with the
K.K. Dastur None Nil Nil 2577300 223337 2800637
provisions of the listing agreement as well as the Companies Act, 1956 and in place of
Mr. N.B. Godrej, Mr. J.N. Godrej (Non-Executive Director) was appointed with effect
T.A. Dubash Daugher of A.B.Godrej Nil Nil 1624000 524202 2148202
from May 7, 2001. Later Mr. F.P. Sarkari (Independent Director) was appointed with
M. Eipe None Nil Nil 2732200 564140 3296340 effect from March 5, 2002 in place of Mr. J.N. Godrej who resigned from the Audit
C.K. Vaidya None Nil Nil 2484300 253913 2738213 Committee. Thus the composition of the audit committee as on March 31, 2002 is as
follows: Mr. V.N. Gogate (Chairman), Mr. S.A. Ahmadullah and Mr. F.P. Sarkari, all three
F.P. Sarkari None 10000 NA NA NA 10000
Independent and Non-Executive Directors. Mr. V.N. Gogate, the Chairman of the audit
K.N. Petigara None 10000 NA NA NA 10000 committee is a qualified Chartered Accountant and Company Secretary and is knowledgeable
Notes: in finance, accounts and company law. All the members of the committee are eminent
Salary paid to Mr. K.K. Dastur, Mr. M. Eipe and Mr. C.K. Vaidya includes a performance professionals and draw upon their experience and expertise across a wide spectrum of
linked bonus of Rs. 624300, Rs. 655800 and Rs.624300 respectively for the previous functional areas such as finance and corporate strategy. Minutes of each of the audit
year, i.e. the year ended March 31, 2001. committee meetings are placed before, and discussed in the Board meetings. The
Company Secretary acts as secretary to the audit committee.
Performance linked variable remuneration based on Economic Value Added in the business
and other relevant factors for Mr. N.B. Godrej, Ms. T.A. Dubash, Mr. K.K. Dastur, Mr. The audit committee met four times during the year: May 3, 2001; July 28, 2001,
M. Eipe and Mr. C.K. Vaidya for 2001-02, is payable in 2002-03 based on the Company’s October 23, 2001 and January 30, 2002. Table 3 gives the attendance record.
performance in 2001-02, for which necessary applications have been made to Central Table 3: Attendance record of audit committee members
Government for approval. The service contracts of the Whole-Time Directors are for a
Name of Director No. of meetings held Meetings attended
period of three years with a notice period of three months.
Mr. V.N. Gogate 4 4
g) Committees of the Board
Mr. S.A. Ahmadullah 4 4
Audit Committee
Mr. F.P. Sarkari Nil Nil
The audit committee of GIL performs the following functions:
Mr. N.B. Godrej 1 1
l Overview of the Company’s financial report process and the disclosure of its
financial information to ensure that the financial statement is correct, sufficient and Mr. J.N. Godrej 3 2

credible.
l Recommending the appointment and removal of external auditor, fixation of audit
fee and approval for payment for any other services.
l Reviewing with management the annual financial statements before submission to
the board, focusing primarily on
Ø Any changes in accounting policies and practices.
Ø Major accounting entries based on exercise of judgement by the management.
Ø Qualifications in draft audit report.
Ø Significant adjustments arising out of audit.
Ø The going concern assumption.
Ø Compliance with accounting standards.
Ø Compliance with stock exchanges and legal requirements concerning financial
statements.
Ø Any related party transactions, i.e. transactions of the Company of material
nature, with promoters or the management, their subsidiaries or relatives,
etc. that may have potential conflict with the interests of Company at large.
l Reviewing with the management, external and internal auditors, the adequacy of
internal control systems.
l Reviewing the adequacy of internal audit function including the structure of internal
Note: No. of meetings held represents the no. of meetings held during the tenure of
the Director as a member of the Audit Committee.
Remuneration Committee
Setting up of a remuneration committee for determining a company’s policy on
remuneration packages for Executive Directors constitutes a non-mandatory provision of
Clause 49. GIL set up its remuneration committee on February 22, 2002 to review the
human resources policies and practices of the Company and, in particular, policies
regarding remuneration of Whole-Time Directors and senior managers. The committee
discusses human resources policies such as compensation and performance management.
GIL has made detailed presentation to the committee on matters such as competency
management, performance management, compensation management and the Economic
Value Added (EVA) initiative.
GIL has adopted EVA as a tool for driving performance, and has linked improvements in
EVA to performance linked variable remuneration (PLVR) for Whole-Time Directors,
managers and officers of the company.
GIL’s remuneration committee consists of the following directors: Mr. S.A. Ahmadullah
(Chairman and Independent Director); Mr. N.B. Godrej (Managing Director); Mr. V.N.
Gogate (Independent Director) and Mr. K.N. Petigara (Independent Director). During the
year ended March 31, 2002, the committee met once on February 22, 2002 where all the
members of the Committee attended.

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