Total No. of Questions SEAT No.

:
: 5]
PA-4946 [Total No. of Pages :
2
[5946]-3009
M.B.A.
GE - UL - 17 - 310 : CORPORATE GOVERNANCE
- By Pratik Patil

Time : 2 Hours ] [Max. Marks :

50
Instructions to the candidates:
1) All questions are compulsory.
2) All questions carry equal marks.

Q1) Answer any 5 out of 8 (2 marks each):

a) Define stakeholders.
b) Enlist the pillars of corporate Governance.
c) What do you mean by Audit committee.
d) Define corporate Governance.
e) What is Enterprise Risk Management.
f) Define Related party transactions.
g) List the types of directors.
h) Define ESG stand for in corporate Governance.

a) Define stakeholders.

Stakeholders are individuals or groups who have an interest in the success or

failure of a company. They can include shareholders, employees, customers,
suppliers, creditors, government regulators, and the community at large.

b) Enlist the pillars of corporate Governance.

The pillars of corporate governance are the key principles that guide how a
company is managed. They include:

• Accountability: Companies must be accountable to their stakeholders for

their actions. This means that they must be transparent about their financial
performance and decision-making process.
 • Fairness: Companies must treat all stakeholders fairly, regardless of their
size or influence. This includes providing equal opportunities for
employment and ensuring that all stakeholders are protected from harm.
• Transparency: Companies must be transparent about their operations and
financial performance. This means that they must disclose all relevant
information to their stakeholders in a timely and accurate manner.
• Responsibility: Companies must be responsible for their actions. This means
that they must take steps to mitigate risks and manage their impacts on
society and the environment.
• Efficiency: Companies must be efficient in their use of resources. This
means that they must minimize costs and maximize profits while still
meeting the needs of their stakeholders.
c) What do you mean by Audit committee.

An audit committee is a group of directors who are responsible for overseeing the
financial reporting and internal controls of a company. The audit committee is
typically made up of independent directors who are not involved in the day-to-day
operations of the company.

The audit committee's responsibilities include:

• Selecting and appointing the external auditor

• Reviewing the auditor's work
• Overseeing the company's internal controls
• Ensuring that the company's financial reporting is accurate and reliable
• Investigating any allegations of financial misconduct
d) Define corporate Governance.

Corporate governance is the system by which companies are managed and

controlled. It is the set of rules, processes, and practices that ensure that companies
are run in the interests of their stakeholders.

Corporate governance is important because it helps to ensure that companies are

managed in a fair, transparent, and responsible manner. It also helps to protect the
interests of stakeholders, such as shareholders, employees, customers, and
creditors.

e) What is Enterprise Risk Management.

Enterprise risk management (ERM) is a process for identifying, assessing, and

managing risks that can impact an organization. ERM is designed to help
organizations achieve their objectives by identifying and mitigating risks that
could prevent them from achieving those objectives.

ERM is a holistic approach to risk management that considers all of the risks that
an organization faces, both internal and external. It is also a proactive approach to
risk management that seeks to prevent risks from occurring, rather than simply
reacting to them after they have occurred.

f) Define Related party transactions.

Related party transactions are transactions between a company and a party that is
related to the company, such as a subsidiary, a parent company, or a major
shareholder. Related party transactions can be risky because they can be used to
benefit related parties at the expense of the company.

To mitigate the risks of related party transactions, companies should have policies
and procedures in place to ensure that these transactions are fair and reasonable.
These policies and procedures should also be reviewed regularly to ensure that
they are effective.

g) List the types of directors.

There are three main types of directors:

• Executive directors: Executive directors are also employees of the company.

They are responsible for the day-to-day operations of the company.
• Non-executive directors: Non-executive directors are not employees of the
company. They are responsible for providing oversight to the company's
management.
• Independent directors: Independent directors are non-executive directors
who have no financial or other ties to the company. They are responsible for
providing independent oversight to the company's management.
h) Define ESG stand for in corporate Governance.

ESG stands for environmental, social, and governance. ESG factors are
increasingly being considered by investors and other stakeholders when making
decisions about whether to invest in a company. Environmental factors include the
company's impact on the environment, such as its greenhouse gas emissions and
its use of natural resources. Social factors include the company's impact on
society, such as its labor practices and its commitment to diversity and inclusion.
Governance factors include the company's corporate governance practices, such as
its board structure and its commitment to transparency. Companies that are
committed to ESG factors are seen as being more sustainable and responsible,
which can make them more attractive to investors and other stakeholders.

Q2) Answer any 2 out of 3 (5 marks each):

a) Examine the role of Board of Directors in Internal control.
The board of directors plays a vital role in internal control. They are responsible
for:

• Overseeing the company's internal control system: The board of directors is

responsible for ensuring that the company has an effective internal control
system in place. This system should be designed to prevent fraud and errors,
and to ensure that the company's financial statements are accurate and
reliable.
• Appointing and overseeing the audit committee: The board of directors is
responsible for appointing and overseeing the audit committee. The audit
committee is responsible for reviewing the company's internal controls and
financial statements, and for ensuring that the company is in compliance
with applicable laws and regulations.
• Receiving reports from management on internal control: The board of
directors should receive regular reports from management on the company's
internal control system. These reports should assess the effectiveness of the
system and identify any areas that need improvement.
• Taking corrective action: If the board of directors finds that the company's
internal control system is not effective, they should take corrective action.
This may involve appointing a new auditor, or implementing new controls.

The board of directors plays a critical role in ensuring that the company has an
effective internal control system in place. By overseeing the system, appointing
and overseeing the audit committee, and receiving reports from management, the
board of directors can help to prevent fraud and errors, and to ensure that the
company's financial statements are accurate and reliable.

Here are some additional points about the role of the board of directors in internal
control:

• The board of directors should be composed of independent directors who

have no financial or other ties to the company. This will help to ensure that
the board is able to provide objective oversight of the company's internal
control system.
 • The board of directors should meet regularly to discuss the company's
internal control system. This will help to ensure that the board is aware of
any changes to the system, and that they are able to take corrective action if
necessary.
• The board of directors should have access to all relevant information about
the company's internal control system. This will help them to make
informed decisions about the system, and to ensure that it is effective.

By fulfilling their role in internal control, the board of directors can help to protect
the company from fraud and errors, and to ensure that its financial statements are
accurate and reliable. This can help to improve the company's reputation, and to
attract investors and other stakeholders.

b) Explain the concept of Whistle Blower.

A whistleblower is a person who reports wrongdoing to authorities, usually in the
context of corporate, government, or institutional misconduct. Whistleblowers
may make their disclosures internally (to an employer or supervisor) or externally
(to regulators, law enforcement, or the media).

Whistleblowing is protected by law in many countries, including the United States,

the United Kingdom, and Australia. These laws typically provide whistleblowers
with protection from retaliation, such as being fired or demoted.

Whistleblowers play an important role in holding organizations accountable for

their actions. They can expose wrongdoing that would otherwise go unnoticed, and
they can help to protect the public from harm.

Here are some of the benefits of whistleblowing:

• It can help to prevent fraud and corruption: Whistleblowers can expose

wrongdoing that would otherwise go unnoticed. This can help to prevent
fraud and corruption, which can cost businesses and governments billions of
dollars each year.
• It can protect the public from harm: Whistleblowers can expose dangerous
products or practices that could harm the public. This can help to prevent
injuries and deaths.
• It can promote accountability: Whistleblowers can help to hold
organizations accountable for their actions. This can help to improve the
quality of products and services, and it can protect the rights of employees
and consumers.
However, there are also some risks associated with whistleblowing:

• Retaliation: Whistleblowers may face retaliation from their employers or

colleagues. This can include being fired, demoted, or harassed.
• Legal challenges: Whistleblowers may face legal challenges from the
organizations they are reporting. This can include lawsuits for defamation or
breach of contract.
• Personal safety: Whistleblowers may face threats to their personal safety.
This can include physical violence or threats of violence.

Despite the risks, whistleblowing is an important tool for holding organizations

accountable. Whistleblowers play a vital role in protecting the public from harm
and promoting accountability.

Here are some tips for whistleblowers:

• Do your research: Before you blow the whistle, make sure you have
gathered all of the relevant information. This will help you to make a strong
case and to protect yourself from retaliation.
• Document everything: Keep a record of all of your communications,
including emails, phone calls, and meetings. This documentation will be
important if you need to take legal action.
• Find a lawyer: If you are considering blowing the whistle, it is important to
speak to a lawyer. A lawyer can help you to protect your rights and to
navigate the legal process.
• Be prepared for retaliation: Whistleblowers often face retaliation from their
employers or colleagues. Be prepared for this and have a plan for how you
will deal with it.
• Stay strong: Blowing the whistle can be a difficult and isolating experience.
It is important to stay strong and to remember that you are doing the right
thing.

c) What are the objectives of corporate Governance.

The objectives of corporate governance are to:

• Protect the interests of shareholders: Corporate governance is designed to

protect the interests of shareholders by ensuring that the company is
managed in their best interests. This includes ensuring that the company is
profitable, that its assets are protected, and that its financial statements are
accurate.
• Promote transparency: Corporate governance is also designed to promote
transparency by ensuring that the company is open and accountable to its
 shareholders and other stakeholders. This includes disclosing information
about the company's finances, operations, and risks.
• Enhance accountability: Corporate governance is also designed to enhance
accountability by ensuring that the company's management is held
responsible for their actions. This includes having a board of directors that
is independent of management and that is responsible for overseeing the
company's operations.
• Minimize risk: Corporate governance is also designed to minimize risk by
ensuring that the company has a system in place to identify and manage
risks. This includes having a risk management framework that is regularly
reviewed and updated.
• Achieve sustainable success: Corporate governance is also designed to help
companies achieve sustainable success by ensuring that they are managed in
a way that is ethical, responsible, and in the long-term interests of the
company and its stakeholders.

In short, corporate governance is designed to ensure that companies are managed

in a way that is fair, transparent, accountable, and responsible. This can help
companies to achieve sustainable success and to build trust with their shareholders
and other stakeholders.

Q3) Answer any one:

a) Describe the various ways in which Risk can be managed.
here are some of the ways in which risk can be managed:

• Avoiding risk: This is the most effective way to manage risk, but it is not
always possible. For example, a company cannot avoid the risk of natural
disasters, but it can avoid the risk of financial losses by not investing in
risky assets.
• Reducing risk: This can be done by taking steps to mitigate the impact of a
risk. For example, a company can reduce the risk of fire by installing fire
alarms and sprinkler systems.
• Transferring risk: This can be done by buying insurance. For example, a
company can transfer the risk of product liability by buying product liability
insurance.
• Accepting risk: This is the least effective way to manage risk, but it is
sometimes the only option. For example, a company may have to accept the
risk of product recalls if it is selling a product that is known to be defective.

In addition to these general approaches, there are a number of specific techniques

that can be used to manage risk. These techniques include:
 • Risk assessment: This involves identifying and assessing the risks that a
company faces. This is the first step in any risk management process.
• Risk mitigation: This involves taking steps to reduce the impact of a risk.
This can be done by implementing controls, such as training employees on
safety procedures or installing security measures.
• Risk monitoring: This involves regularly reviewing the risks that a company
faces and making changes to the risk management plan as needed.
• Risk reporting: This involves reporting on the risks that a company faces to
stakeholders, such as shareholders and regulators.

By using a combination of these techniques, companies can effectively manage

risk and protect themselves from loss.

Here are some additional points about managing risk:

• Risk management is an ongoing process. It is important to regularly review

the risks that a company faces and to make changes to the risk management
plan as needed.
• Risk management should be integrated into all aspects of a company's
operations. This means that risk management should be considered when
making decisions about everything from product development to marketing.
• Risk management should be a collaborative effort. It is important to involve
all stakeholders in the risk management process, including employees,
management, and shareholders.

By following these principles, companies can effectively manage risk and protect
themselves from loss.

b) Discuss the need to separate the role of chairman and managing director.
The separation of the roles of chairman and managing director (MD) is a corporate
governance best practice that is increasingly being adopted by companies around
the world. This is because it is seen as a way to improve corporate governance and
to protect the interests of shareholders.

There are a number of reasons why it is important to separate the roles of chairman
and MD. First, it helps to avoid conflicts of interest. When the same person holds
both roles, they may be tempted to put their own interests ahead of the interests of
the company. For example, they may make decisions that benefit themselves or
their close associates, even if these decisions are not in the best interests of the
company.
Second, it helps to improve accountability. When the roles of chairman and MD
are separated, there is a clear separation of responsibilities. The chairman is
responsible for overseeing the board of directors and ensuring that it is fulfilling its
duties. The MD is responsible for managing the day-to-day operations of the
company. This separation of responsibilities helps to ensure that everyone is held
accountable for their actions.

Third, it helps to improve decision-making. When the roles of chairman and MD

are separated, there are two different perspectives on decision-making. The
chairman brings a strategic perspective to the table, while the MD brings a more
operational perspective. This can lead to better decision-making, as the company is
able to consider both the long-term and short-term implications of its decisions.

Finally, it helps to improve corporate governance. The separation of the roles of

chairman and MD is seen as a way to improve corporate governance and to protect
the interests of shareholders. This is because it helps to avoid conflicts of interest,
improve accountability, and improve decision-making.

There are some arguments against separating the roles of chairman and MD. Some
people argue that it can lead to a lack of coordination between the board of
directors and management. Others argue that it can make it more difficult for the
company to respond quickly to changes in the market.

However, the benefits of separating the roles of chairman and MD generally

outweigh the drawbacks. This is why it is increasingly being adopted by
companies around the world as a corporate governance best practice.

P.T.O.
 Q4) Answer any one:
a) Discuss about the disclosure that are required to be made in terms of
clause 49 of the Listing Agreement.
Clause 49 of the Listing Agreement of the Securities and Exchange Board of India
(SEBI) lays down the requirements for disclosure by listed companies. These
disclosures are aimed at ensuring that investors have access to timely and accurate
information about the companies they invest in.

The disclosures required under clause 49 are divided into three categories:

• Continuous disclosures: These disclosures are required to be made on a

regular basis, such as on a quarterly or annual basis. They include
disclosures about the company's financial performance, its operations, and
its risk factors.
• Ad hoc disclosures: These disclosures are required to be made when there is
a material event that may affect the company's financial performance or
operations. Examples of material events include changes in the company's
management, changes in its business plans, and changes in its financial
results.
• Sensitive disclosures: These disclosures are required to be made when there
is a risk of market manipulation. Examples of sensitive disclosures include
information about the company's takeovers and mergers, and information
about its financial results that is not yet public.

The disclosures required under clause 49 are made to the stock exchanges where
the company's shares are listed. The stock exchanges are then responsible for
making this information available to investors.

In addition to the disclosures required under clause 49, listed companies are also
required to make disclosures under other regulations of SEBI. For example, listed
companies are required to make disclosures under the Insider Trading Regulations
and the Prohibition of Fraudulent and Unfair Trade Practices Regulations.

The disclosures required under clause 49 and other regulations of SEBI are an
important part of corporate governance. They help to ensure that investors have
access to timely and accurate information about the companies they invest in. This
information can help investors to make informed investment decisions and to
protect their interests.

Here are some specific examples of the disclosures that are required under clause
49:
 • Financial results: Listed companies are required to disclose their financial
results on a quarterly and annual basis. This includes disclosures about the
company's income statement, balance sheet, and cash flow statement.
• Operations: Listed companies are required to disclose information about
their operations, such as their product offerings, their marketing strategies,
and their competitive landscape.
• Risk factors: Listed companies are required to disclose information about
the risks that they face, such as financial risks, operational risks, and legal
risks.
• Material events: Listed companies are required to disclose information
about material events that may affect their financial performance or
operations, such as changes in their management, changes in their business
plans, and changes in their financial results.
• Sensitive disclosures: Listed companies are required to disclose information
about sensitive matters, such as information about their takeovers and
mergers, and information about their financial results that is not yet public.

The disclosures required under clause 49 are an important part of corporate

governance. They help to ensure that investors have access to timely and accurate
information about the companies they invest in. This information can help
investors to make informed investment decisions and to protect their interests.

b) Analyse the Role of corporate Governance in the modern organisation

and discuss the ways to improve the corporate Governance in such
organisations.
Corporate governance is the system by which companies are managed and
controlled. It is the set of rules, processes, and practices that ensure that companies
are run in the interests of their stakeholders.

In modern organizations, corporate governance plays an increasingly important

role. This is because modern organizations are more complex and face more risks
than ever before. Corporate governance helps to ensure that these organizations
are managed in a way that is fair, transparent, and accountable.

There are a number of ways to improve corporate governance in modern

organizations. These include:

• Having a strong board of directors: The board of directors is responsible for

overseeing the management of the company. It is important to have a board
that is independent of management and that is composed of directors who
have the skills and experience necessary to oversee the company effectively.
 • Having clear and transparent disclosure policies: Companies should have
clear and transparent disclosure policies that ensure that investors and other
stakeholders have access to timely and accurate information about the
company.
• Having effective risk management processes: Companies should have
effective risk management processes in place to identify and manage the
risks that they face.
• Encouraging whistleblowing: Companies should encourage whistleblowing
so that employees can report wrongdoing without fear of retaliation.
• Providing training for directors and management: Companies should
provide training for directors and management on corporate governance so
that they understand their responsibilities and how to comply with corporate
governance best practices.

By implementing these measures, companies can improve their corporate

governance and protect the interests of their stakeholders.

Here are some additional points about the role of corporate governance in modern
organizations:

• Corporate governance is important for ensuring the long-term sustainability

of organizations. By ensuring that organizations are managed in a fair,
transparent, and accountable manner, corporate governance can help to
protect the interests of stakeholders, such as shareholders, employees, and
customers. This can lead to increased trust and confidence in the
organization, which can make it more successful in the long term.
• Corporate governance is important for attracting and retaining investors.
Investors are increasingly looking for organizations with strong corporate
governance practices. This is because they want to be confident that their
investments are being managed in a responsible and ethical manner. By
improving their corporate governance, organizations can make themselves
more attractive to investors.
• Corporate governance is important for complying with regulations. Many
organizations are subject to a variety of regulations, such as those governing
financial reporting, environmental protection, and workplace safety. By
implementing strong corporate governance practices, organizations can help
to ensure that they are complying with these regulations. This can help to
protect the organization from legal liability and financial penalties.

In conclusion, corporate governance is an important part of modern organizations.

By implementing strong corporate governance practices, organizations can protect
the interests of their stakeholders, attract and retain investors, and comply with
regulations.

Q5) Answer any one:

a) Explain corporate social responsibility and suggest the best corporate
social responsibility practices that could be adopted by the corporates.
Corporate social responsibility (CSR) is a concept whereby businesses consider
the interests of society by taking responsibility for the impact of their activities on
customers, employees, shareholders, communities and the environment. CSR is
not just about doing good, but also about doing well—by operating in a way that is
sustainable and responsible, businesses can improve their long-term performance
and create shared value for all stakeholders.

There are many different CSR practices that could be adopted by corporates. Some
of the most common include:

• Environmental protection: Companies can adopt practices that protect the

environment, such as reducing their carbon emissions, using sustainable
materials, and recycling.
• Community development: Companies can invest in their communities by
supporting local schools, providing scholarships, and sponsoring
community events.
• Employee welfare: Companies can provide good working conditions for
their employees, such as safe working environments, fair wages, and
opportunities for training and development.
• Product safety: Companies can ensure that their products are safe for
consumers by conducting rigorous testing and following strict safety
standards.
• Fair trade: Companies can source their products from suppliers who pay
their workers a fair wage and who operate in a sustainable manner.

These are just a few examples of CSR practices that could be adopted by
corporates. The best practices for a particular company will depend on its size,
industry, and location. However, all companies can benefit from adopting some
form of CSR, as it can help to improve their reputation, attract and retain
customers and employees, and reduce their risk of legal liability.

Here are some additional points about CSR:

 • CSR is becoming increasingly important to consumers and investors. More
and more consumers are looking for companies that are socially responsible,
and investors are increasingly considering CSR factors when making
investment decisions. This means that companies that adopt CSR practices
can gain a competitive advantage in the marketplace.
• CSR can help to improve a company's reputation. When companies are seen
as being socially responsible, they are more likely to be trusted and
respected by their stakeholders. This can lead to increased sales, customer
loyalty, and employee morale.
• CSR can help to attract and retain talent. Employees are increasingly
looking for companies that share their values and that are committed to
CSR. This means that companies that adopt CSR practices can attract and
retain top talent.
• CSR can help to reduce risk. By adopting CSR practices, companies can
reduce their risk of legal liability, reputational damage, and financial losses.

In conclusion, CSR is a win-win for businesses and society. By adopting CSR

practices, businesses can improve their bottom line, attract and retain top talent,
and reduce their risk.

b) Evaluate the Role of Chanda Kochhar in the ICICI Bank fraud and suggest
the ways to handle such a kind of frauds in future.

Chanda Kochhar was the CEO of ICICI Bank from 2009 to 2018. During her
tenure, she oversaw a period of rapid growth for the bank. However, she also faced
allegations of wrongdoing, including nepotism and corruption.

In 2018, the Central Bureau of Investigation (CBI) filed a case against Kochhar
and her husband, Deepak Kochhar, for alleged irregularities in the granting of
loans to Videocon Group companies. The CBI alleged that Kochhar had granted
loans to Videocon Group companies at below-market rates and that her husband
had received kickbacks from Videocon in return.

Kochhar was also accused of favoring NuPower Renewables, a company owned

by her daughter, in the allocation of loans. In 2019, the Reserve Bank of India
(RBI) barred Kochhar from being a director or key managerial personnel of any
bank for a period of five years.
In 2022, the CBI filed a charge sheet against Kochhar and her husband for alleged
corruption and money laundering. Kochhar and her husband have denied all the
allegations against them.

The ICICI Bank fraud is a major case of corporate fraud in India. It has raised
questions about the governance of banks and the role of independent directors. It
has also damaged the reputation of ICICI Bank, which is one of the largest banks
in India.

The following are some ways to handle such kind of frauds in the future:

• Strengthen corporate governance: Banks should have strong corporate

governance practices in place to prevent fraud. This includes having an
independent board of directors, a robust risk management system, and a
whistleblowing policy.
• Improve transparency: Banks should be more transparent about their
lending practices. This includes disclosing the names of borrowers, the
amount of loans granted, and the interest rates charged.
• Enforce laws and regulations: Regulators should enforce laws and
regulations that are designed to prevent fraud. This includes investigating
allegations of wrongdoing and taking action against those who are found to
have broken the law.
• Educate employees: Banks should educate employees about corporate fraud
and how to prevent it. This includes training employees on the bank's
policies and procedures, and on how to identify and report suspicious
activity.

By taking these steps, banks can help to prevent fraud and protect their customers
and shareholders.

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