Group 7 - MIM

What is Corporate Governance

 Corporate governance is the set of processes, customs,
policies, laws, and institutions affecting the way a
corporation (or company) is directed, administered or
controlled. Corporate governance also includes the
relationships among the many stakeholders involved and
the goals for which the corporation is governed

 Corporate governance is essentially about leadership

 leadership for efficiency
 leadership for probity
 leadership with responsibility
 leadership which is transparent and which is accountable
Stakeholders and their role in an
Organization
Central Issues in Corporate Governance
 Separation of Ownership and Control
 Information asymmetry
 Principal – Agent problem
 Moral Hazard
 Conflict of Interest

Governance in India
 Family Business
 Banks & Investment Institutions
 Corruption in PSU’s
 Implementation – BIG ?
Regulators and the Capital Markets
 Companies Act
 Protection of minority shareholder
 Special majority
 Information disclosure and audit

 Securities Law
Securities and Exchange Board of India (SEBI) – 1992
 Information disclosure
 Promoters’ contribution and lock in
 Insider trading
 Discipline of the capital market
Special Amendments by SEBI
Introduction of Clause 49 in Listing Agreement
 Kumar Mangalam Birla Committee on CG: 1999

 Naresh Chandra Committee - 2002

 N. R. Narayana Murthy committee -2003

Some Latest amendments - The Companies Bill, 2009

 AUDIT COMMITTEE
 Qualified and independent audit committee
 Meeting of audit committee
 Powers of audit committee
 Role of audit committee
 Review of information by
audit committee
Board of Directors

 Structure & Composition

 Min 50% board should be Non-Executive Directors
 At least 1/3rd Directors should be Independent
 No Nominee Directors
 Max 10 directorships and 5 chairmanships per person

Reasons :
 Avoid dominance by Promoters or Majority Shareholders
 Prevent Tunneling of Funds
 Recommendations relating to Responsibilities

 Decide the Remuneration for Senior Management and Non-

Executive Directors

 Define the Code of Conduct

 Review Business risk and Risk Management strategy reports

 Make Decisions relating to Major Capital Expenditures,

Acquisitions and Payment of dividends
Benefits of Compliance to Corporate
Governance

 Economic growth

 External Financing

 Shareholders Trust
Corporate Social Responsibility

 Philanthropy in response to appeals for help from society

and social investment in projects of long-term
importance to the company

WHY CSR ?

 Responsible impact on society

 Stakeholder engagement
 Reputation & risk management
 Socially responsible investment
Case Study – Employment for Physically
Challenged
 Godrej outsourced the
hardware packet
making for chairs to
National Association for
Disabled Enterprises
(NADE)

 Source of Continuous
Employment. Average
of 10,000 packets made
every month
Case of Disappearing Mangroves
 Case Study – Rural Development

 SUJAL - Safe drinking water

for rural India

 A partnership between the

research lab of software
giant Tata Consultancy
Services (TCS) and a range
of local NGOs

 Clean and safe drinking

water is available for the
first time for thousands of
households in rural
Maharashtra.
 Case Study – Women Empowerment
 Tejaswini
 Tata Steel’s remarkable
women empowerment
project
 50 ordinary women
become operators and
drivers of heavy-duty
machinery and
vehicles.
Need for being Socially Responsible
 Fiscal Benefits
 Contributions to registered Non Profit Organizations eligible for IT
exemption (Sections 80G, 35AC)
 100% deduction if NGO promotes social and economic welfare
 125% deduction if NGO engaged in research in sciences/social
sciences and statistical research

 Soft Benefits of CSR

 Positive Public Image
 Retaining staff, Enhancing employee morale
 Positive engagement with Government and other NGOs

 Corporate Social Responsibility: a necessity not a choice

Many Thanks