A STUDY ON THE EVALUATION OF CORPORATE GOVERNANCE STANDARDS & PRACTICES<br /> Done for<br />Project report submitted in partial fulfillment of the requirement of Pondicherry University for the award of the degree of<br />MASTER OF BUSINESS ADMINISTRATION<br />Submitted By<br />AMRESH KUMAR PANDEY<br />(Reg: No.1105503)<br />Under the guidance of<br />Dr. B. CHARUMATHI<br />Associate Professor,<br />Faculty Advisor – Corporate Relations and Placements,<br />Department of Management Studies.<br />DEPARTMENT OF MANAGEMENT STUDIES<br />SCHOOL OF MANAGEMENT<br />PONDICHERRY UNIVERSITY<br />PUDUCHERRY- 605 014<br />MAY-JUNE 2011<br />DEPARTMENT OF MANAGEMENT STUDIES<br />SCHOOL OF MANAGEMENT<br />PONDICHERRY UNIVERSITY<br />PUDUCHERRY-605014<br />CERTIFICATE<br />This is to certify that this project entitled “A STUDY ON THE EVALUATION OF CORPORATE GOVERNANCE STANDARDS & PRACTICES.” done for ADITYA BIRLA CHEMICALS(INDIA) LIMITED Rehla, Jharkhand is submitted by AMRESH KUMAR PANDEY II year MBA (Reg NO. 1105503) to the Department of Management Studies, School of Management, Pondicherry University in partial fulfillment of the degree requirement for the award of degree Master of Business Administration and is certified to be an original and bonafide work.<br />DR.R.PRABHAKARA RAYA DR.B.CHARUMATHI<br />Professor & Head of the Department Associate Professor,<br />Department of Management Studies, Department of Management Studies,<br />School of Management, School of Management,<br />Pondicherry University. Pondicherry University.<br />Place: Puducherry<br />Date: 10.07.2011<br />DECLARATION<br />I, Amresh Kumar Pandey, Student of Department of Management Studies, Pondicherry University, hereby declare that this project report titled “A STUDY ON THE EVALUATION OF CORPORATE GOVERNANCE STANDARDS & PRACTICES OF ADITYA BIRLA CHEMICALS(INDIA) LIMITED” is an original work done by me and submitted to the Department of Management Studies, for the award of Degree of Master of Business Administration. I further declare that any part this project itself has not been submitted elsewhere for award of any degree. <br />Place:Pondicherry<br />Date: 10.07.2011 <br />Amresh Kr. Pandey<br />Signature of th candidate<br />ACKNOWLEDGEMENT<br />I am indebted to the all powerful Almighty God for all the blessings he showered on me and for being with me throughout the study. It is not possible to prepare a project report without the assistance & encouragement of other people. This one is certainly no exception.<br />I place on record my sincere gratitude and appreciation to internal guide Dr. B. CHARUMATHI, Associate Professor, Department of Management Studies, Pondicherry University for meticulously reviewing my work, making corrections and offering suggestions without which the project would have been incomplete. <br />I express my sincere thanks to Dr. R. P. RAYA, HOD, Department of Management Studies, School of Management, Pondicherry University, who provided me an opportunity to do this project.<br />I express my deep sense of gratitude to (CA)Brijesh Kumar AGM (ACCOUNTS& FINANCE), and my Project coordinator Astt. Manager (CA)Rajesh Rathi of ADITYA BIRLA CHEMICALS (INDIA) LTD for offering me this project and for taking the role as my external guide and guiding and supporting continuously in shaping my project, correcting errors, clearing doubts throughout the project. I would also like to thank entire ADITYA BIRLA CHEMICALS(INDIA) LIMITED,REHLA Team for their constant guidance and support. <br />I take this opportunity to dedicate this project to my parents who were a constant source of motivation and I express my deep gratitude for their never ending support and encouragement during this project.<br />Finally I thank each and everyone who helped me to complete this project.<br />EXECUTIVE SUMMARY<br />Rules and norms of corporate governance are important components of the framework for successful market economies. Although corporate governance can be defined in a variety of ways, generally it involves the mechanisms by which a business enterprise, organised in a limited liability corporate form, is directed and controlled. It usually concerns mechanisms by which corporate managers are held accountable for corporate conduct and performance. Poor corporate governance is widely viewed as one of the structural weaknesses that were responsible for the outbreak of the 1997 Asian crisis. In companies controlled by family owners, these owners could pursue their private interests relatively easily and often at the expense of minority shareholders and firms' profits.Aditya birla chemicals (India) limited one of the premier company for the chlor-alkali.Study on Corporate Disclosure of Aditya Birla chemicals(India) Ltd. with reference of mandatory disclosure described by SEBI for Indian listed companies.<br />The objective of the project is to analyze corporate governance practice of Aditya Birla chemicals(India) Ltd. with reference of mandatory disclosure described by SEBI for Indian companies. The corporate governance report of the company pertaining to 5 years, viz., 2005-06 to 2009-10 were analysed to know whether the company has followed the regulations relating to mandatory disclosures of SEBI’s clause 49 listing agreement. It is found that the company has followed the mandatory disclosures but yet to do voluntary disclosures. This project would help Aditya Birla chemicals(India) Ltd. to reach good corporate governance prescribed by SEBI.<br />CONTENT<br />ChapterDescriptionPage no.LETTER FROM THE ORGANIZATIONCERTIFICATEDECLARATIONACKNOWLEDGEMENTEXECUTIVE SUMMARYLIST OF TABLES1INTRODUCTION1.1 INTRODUCTION TO THE TOPIC1.2 NEED FOR THE STUDY1.3 STATEMENT OF THE PROBLEM1.4 OBJECTIVES OF THE STUDY1.5 RESEARCH METHODOLOGY1.6 LIMITATIONS OF THE STUDY1.7 CHAPTERIZATION01-032PROFILE OF THE INDUSTRY2.1 ORGANIZATIONAL OVERVIEW2.2 ADITYA BIRLA CHEMICALS (INDIA) LIMITED04-093CORPORATE GOVERNANCE IN & REGULATORY FRAMEWORK IN INDIA11-284ANALYSIS AND INTERPRETATION29-535SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION54-56BIBILOGRAPHY57<br /> LIST OF TABLES<br />TABLE NO.TITLEPAGE NO.4.1Board of Directors304.2Board meetings314.3Audit committee334.4Shareholders’ Grievance Committee344.5Remuneration Committee344.6Non Executive Directors & fees354.7salary and perquisites paid354.8number of requests / complaints364.9number of requests/complaint for 2005-06 to 2009-10374.10General Shareholder Information384.11Market Price Data394.12Investors – Shareholding patterns404.13Annual general meeting414.14Disclosures424.15Dematerialisation of equity shares474.16Investors-financials484.17Evaluation of status of CG during 2005-06 to 2009-1050<br />CHAPTER 1<br />INTRODUCTION<br />INTRODUCTION <br /><ul><li>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. In simpler terms it means the extent to which companies are run in an open & honest manner.</li></ul>NEED FOR THE STUDY<br />The corporate governance practices concentrates on stakeholders protection specially investors protection.Good corporate governance citizenship evidents through good corporate governance practices.Good corporate governance enhances the financial position of the company through ethical means knowing the corporate governance issues in chemical companies is need of ours.<br />STATEMENT OF THE PROBLEM<br /> In view of corporate scandals witnessed during the recent past,the implementation of corporate governance in listed companies as become significant.Hence the present study has been taken upto evaluate whether Aditya Birla Chemicals(India) Limited has followed the corporate governance standards prescribed by SEBI’s clause-49 of listing agreement.<br />1.4 OBJECTIVES OF THE STUDY<br />To analyze corporate governance practice of Aditya Birla chemicals(India) Ltd. with reference of mandatory disclosure described by SEBI for Indian companies.<br />To offer suggestions based on the findings.<br />1.5 RESEARCH METHODOLOGY <br />This is an discriptive research study.It has taken Aditya Birla Chemicals (India) Limited as a case study. It used only Primary & Secondary Data. The primary data were collected from secreterial department of Compny by interview. The secondary data were collected from company’s annual report,website.The data are analysed discriptive by using cross tabulation and percentage analysis.<br />1.6 PERIOD OF STUDY<br />It includes 2005-06 to 2009-10<br />1.6 LIMITATIONS OF THE STUDY<br />Non availability of certain data with the department, like statutory compliance and shareholders compliances.<br />1.7 CHAPTERIZATION<br />Following is the plan of present study:<br />Chapter I deals with the meaning introduction to the topic, need for the study, statement of problem, objective of the study, period of study, research methodology,limitations of the study. <br />Chapter II presents the profile of the industry<br />Chapter III presents the conceptual framework of the topic<br />Chapter IV analyses and interprets the collected secondary data.<br />Chapter V concludes the findings derived from the present study and the suggestions based on the findings were presented. <br />CHAPTER 2<br />PROFILE OF THE INDUSTRY <br />2.1 ORGANIZATIONAL OVERVIEW<br />Aditya Birla Chemicals (India) Ltd, is a unit of Aditya Birla Group and one of the leading Chlor Alkali Company in India. The plant has been commissioned in 1984 and located at Garhwa Road, Distt. PALAMAU, State JHARKHAND, India. Company’s detail product range & Installed Capacity:<br />Caustic Soda lye109,500 TPA<br />Liquid Chlorine91,250 TPA<br />Hydrochloric Acid45,625 TPA<br />Sodium Hypo Chlorite1,460 TPA<br />Aluminium Chloride11,680 TPA<br />Stable Bleaching Powder17,520 TPA<br />The manufacturing process of the plant is the latest energy efficient and environment friendly state-of-art Membrane Cell Technology. To meet the requirement of uninterrupted power supply, company has a state-of-art 30 MW Captive Power Plant. Company has implemented SAP R/3 and People Soft System.<br />To meet the heterogeneous business challenges, company has adopted WCM (World Class Management) work culture. Further organization has adopted 40 villages under community development to improve the quality of life in nearby vicinity of the factory.<br />International Applauds<br />ISO 9001:2000:For quality management System<br />ISO 14001:2004:For environment management System<br />SA 8000:2001:For social Accountability<br />OHSAS 18001:1999:For Occupational Health & Safety Assessment Management<br />National Applauds<br />IMC Ramkrishna Bajaj National Quality Certificate of merit<br />Best Responsible care Committed Company Award<br />RC logo<br />FICCI award<br />Planet Award 2005-06<br />Greentech Environment Excellent Gold Award<br />Membership of IONAL Associates<br />Alkali Manufacturers Association Of India (AMAI)<br />Indian Chemical Council(ICC)<br />American Chemistry Council<br /><ul><li>2.2 ADITYA BIRLA CHEMICALS (INDIA) LIMITED
Aditya Birla Chemicals (India) Limited (formerly Bihar Caustic and Chemicals Limited) was incorporated as a joint venture of the Aditya Birla Group and the Bihar State Industrial Development Corporation. The unit was set up with the objective of catering to the caustic soda requirements of Hindalco Industries Limited, and to contribute towards the economic development of the backward region of Palamau district in Jharkhand.
Commissioned in 1984 with an initial caustic soda capacity of 33,000tpa, the company has since grown to become the leading caustic soda producer in the eastern region of the country. The company had commissioned a 30mw captive power plant in the year 2000 and simultaneously, the caustic plant capacity was enhanced to 51,048tpa. In the year 2006, the capacity was increased to 78,750tpa by converting the mercury cell technology to the more environment-friendly membrane cell technology supplied by world-renowned technology supplier UHDENORA, Germany. Presently, the installed capacity stands at 105,000tpa.
For value addition and effective utilization of chlorine, the company has commissioned a 12,000tpa aluminium chloride plant in the year 2007 and a 17,500tpa stable bleaching powder (SBP) plant in 2008. SBP is marketed under the brand name Shaktiman. Aluminium chloride is the principal catalyst used in the Friedel Craft reaction and widely used in pharmaceuticals, chemical intermediates, agrochemicals, dyestuffs and pigments, hydrocarbon resins, flavours and fragrances. SBP is used in textile mills for bleaching, sanitation, sewage systems, tanning process, organic synthesis and other applications.</li></ul>Our Key People<br />Mr. Kumar Mangalam BirlaChairman, Aditya Birla Group<br />Mrs. Rajshree BirlaChairperson, Aditya Birla Centre for community Initiatives and Rural Development<br />Mr. Ajay SrinivasanFinancial Services<br />Mr. Askaran Agarwal Birla Group Trusts & Special Community Projects<br />Dr. Bharat SinghBusiness Review Council(Services Business)<br />Mr. D.D. RathiBusiness Review Council (Services Business)<br />Mr. Debu BhattacharyaMetals<br />Mr. K.K. MaheswariPulp and fibre<br />Mr. Pranab BaruaTextiles and Apparels<br />Mr. Rajiv DubeGroup Corporate Services<br />Mr. Rakesh JainAditya Birla Nuvo<br />Mr. Ravi KastiaTrading, Port and power projects<br />Mr. Himanshu KapaniaTelecom<br />Dr. Santrupt B. MisraCarbon Black Business and Group HR<br />Mr. Shailendra jainChairman, Business Review Council<br />Mr. Thomas VargheseRetail<br />Mr. Lalit NaikChemicals<br />Mr. Tuhin MukherjeeMining and Mineral Resources Development<br />Mr. O.P. PuranmalkaCement<br />Mr. Vikram RaoAcrylic Fibre and Overseas Spinning Business <br />Some global facts about Aditya Birla Group<br />It is the world’s largest aluminium rolling company.<br />It is the world leader in viscose staple fibre.<br />It is one of the three biggest producers of primary aluminium in Asia.<br />It is one of the leading cement producers in India and eighth largest globally.<br />It is the fourth largest producer of carbon black in the world.<br />It is the fourth largest producer of insulators in the world.<br />It is the fifth largest producer of acrylic fibre in the world.<br />Some Indian facts<br />It is the largest premium branded apparel company.<br />It is the second largest producer of viscose filament yarn.<br />It is the second largest in the chlor-alkali sector.<br />It is among the top five cellular operators.<br />It is among the top 10 Indian BPO companies by revenue size.<br />It is among the top 5 asset management and private sector life insurance companies.<br />2.4 VISION, MISSION & VALUES<br />OurVisionTo be a premium global conglomerate with a clear focus on each business.<br />OurMissionTo deliver superior value to our customers, shareholders, employees and society at large.Our Values<br />IntegrityCommitmentPassionSeamlessnessSpeed<br />2.5 Our Valued Customers<br />2.6 Our Products<br />Caustic Soda<br />It is also known as lye and Sodium Hydroxide (NaOH), which is a caustic metallic base. It is used in many industries, mostly as a strong chemical base in the manufacture of pulp and paper, textile, drinking water, soap, and detergents and as a drain cleaner.<br />Liquid Chlorine<br />Chlorine is used in the purification of drinking water, as bleaching agent in pulp, paper and textile industries.<br /> It is also used as raw material / intermediate chemical in the manufacture of PVC plastics, paraffin waxes, synthetic rubbers, pesticides / insecticides, inorganic / organic chemicals, pharmaceuticals etc.<br />Hydrochloric Acid<br />Hydrochloric acid is a solution of hydrogen chloride (HCl) in water that is a highly corrosive, strong mineral acid with many industrial uses. It is found naturally in gastric acid.<br />Sodium Hypochlorite<br />Sodium hypochlorite is a chemical compound with the formula NaClO. Sodium hypochlorite solution, commonly known as bleach, is frequently used as disinfectant or a bleaching agent<br /> 4.Aluminium Chloride<br />Aluminium chloride (AlCl3) is the main compound of aluminium and chlorine. It is white, but samples are often contaminated with iron trichloride, giving it a yellow color. The solid has a low melting and boiling point. It is mainly produced and consumed in the production of aluminium metal, but large amounts are also used in other areas of chemical industry. The compound is often cited as a Lewis acid. It is an example of an inorganic compound that "cracks" at mild temperature, reversibly changing from a polymer to a molecule.<br />Stable Bleaching Powder<br />Calcium hypochlorite is a chemical compound with formula Ca(ClO)2. It is widely used for water treatment and as a bleaching agent (bleaching powder).Calcium hypochlorite is used for the disinfection of drinking water or swimming pool water. It is used as a sanitizer in outdoor swimming pools in combination with a cyanuric acid stabilizer, which reduces the loss of chlorine due to ultraviolet radiation. The calcium content hardens the water and tends to clog up some filters; hence, some products containing calcium hypochlorite also contain anti-scaling agents. Calcium hypochlorite is also an ingredient in bleaching powder, used for bleaching cotton and linen. It is also used in bathroom cleaners, household disinfectant sprays, moss and algae removers, and weed killers.<br />CHAPTER 3<br />CORPORATE GOVERNANCE & REGULATORY FRMEWORK IN INDIA<br />3.1 INTRODUCTION<br />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. In simpler terms it means the extent to which companies are run in an open & honest manner.<br />Corporate governance has three key constituents namely: the Shareholders, the Board of Directors & the Management. Other stakeholders include employees, customers, creditors, suppliers, regulators, and the community at large. The concept of corporate governance identifies their roles & responsibilities as well as their rights in the context of the company. It emphasises accountability, transparency & fairness in the management of a company by its Board, so as to achieve sustained prosperity for all the stakeholders. <br />Corporate governance is a synonym for sound management, transparency & disclosure. Transparency refers to creation of an environment whereby decisions & actions of the corporate are made visible, accessible & understandable. Disclosure refers to the process of providing information as well as its timely dissemination. <br />In A Board Culture of Corporate Governance, business author Gabrielle O'Donovan defines corporate governance as “An internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity, accountability and integrity”. Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes.<br />Issues involving corporate governance principles include:<br />Internal controls and internal auditors <br />The independence of the entity's external auditors and the quality of their audits<br />Oversight of the preparation of the entity's financial statements <br />Review of the compensation arrangements for the chief executive officer and other senior executives<br />3.2 BACKGROUND<br />As mentioned earlier, the term ‘corporate governance’ is related to the extent to which the companies are transparent & accountable about their business. Corporate governance today has become a major issue of interest in most of the corporate boardrooms, academic circles & even governments around the globe. <br />In the 19th century, state corporation laws enhanced the rights of corporate boards to govern without unanimous consent of shareholders in exchange for statutory benefits like appraisal rights, to make corporate governance more efficient. Since that time and because most large publicly traded corporations in the US are incorporated under corporate administration-friendly Delaware law and because the US's wealth has been increasingly securitized into various corporate entities and institutions, the rights of individual owners and shareholders have become increasingly derivative and dissipated. The concerns of shareholders over administration pay and stock losses periodically has led to more frequent calls for corporate governance reforms.<br /> In the 20th century, in the immediate aftermath of the Wall Street Crash of 1929, legal scholars such as Adolf Augustus Berle, Edwin Dodd, and Gardiner C. Means pondered on the changing role of the modern corporation in society. From the Chicago school of economics, Ronald Coase's "The Nature of the Firm" (1937) introduced the notion of transaction costs into the understanding of why firms are founded and how they continue to behave. Fifty years later, Eugene Fama and Michael Jensen's "The Separation of Ownership and Control" (1983, Journal of Law and Economics) firmly established agency theory as a way of understanding corporate governance: the firm is seen as a series of contracts. Agency theory's dominance was highlighted in a 1989 article by Kathleen Eisenhardt ("Agency theory: an assessment and review", Academy of Management Review).<br />The expansion of US after World War II through the emergence of multinational corporations saw the establishment of the managerial class. Accordingly, the following Harvard Business School management professors published influential monographs studying their prominence: Myles Mace (entrepreneurship), Alfred D. Chandler, Jr. (business history), Jay Lorsch (organizational behavior) and Elizabeth MacIver (organizational behaviour). According to Lorsch and MacIver "Many large corporations have dominant control over business affairs without sufficient accountability or monitoring by their board of directors."<br />Since the late 1970’s, corporate governance has been the subject of significant debate in the U.S. and around the globe. Bold, broad efforts to reform corporate governance have been driven, in part, by the needs and desires of shareowners to exercise their rights of corporate ownership and to increase the value of their shares and, therefore, wealth. Over the past three decades, corporate directors’ duties have expanded greatly beyond their traditional legal responsibility of duty of loyalty to the corporation and its shareowners. <br />In the first half of the 1990s, the issue of corporate governance in the U.S. received considerable press attention due to the wave of CEO dismissals (e.g.: IBM, Kodak, Honeywell) by their boards. The California Public Employees' Retirement System (CalPERS) led a wave of institutional shareholder activism (something only very rarely seen before), as a way of ensuring that corporate value would not be destroyed by the now traditionally cozy relationships between the CEO and the board of directors (e.g., by the unrestrained issuance of stock options, not infrequently back dated).<br />In 1997, the East Asian Financial Crisis saw the economies of Thailand, Indonesia, South Korea, Malaysia and The Philippines severely affected by the exit of foreign capital after property assets collapsed. The lack of corporate governance mechanisms in these countries highlighted the weaknesses of the institutions in their economies.<br />In the early 2000s, the massive bankruptcies (and criminal malfeasance) of Enron and WorldCom, as well as lesser corporate debacles, such as Adelphia Communications, AOL, Qwest, Arthur Andersen, Global Crossing, Tyco, etc. led to increased shareholder and governmental interest in corporate governance. Because these triggered some of the largest insolvencies, the public confidence in the corporate sector was sapped. The popular perception was that corporate leadership was fraught with greed & excess. Inadequacies & failure of the existing systems, brought to the fore, the need for norms & codes to remedy them. This resulted in the passage of the Sarbanes-Oxley Act of 2002, (popularly known as Sox) by the United States.<br />In India however, only when the Securities Exchange Board of India (SEBI), introduced Clause 49 in the Listing Agreement, for the first time in the financial year 2000-2001, that the listed companies started embracing the concept of corporate governance. This clause was based on the Kumara Mangalam Birla Committee constituted by SEBI. After these recommendations were in place for about four years, SEBI, in order to evaluate & improve the existing practices, set up a committee under the Chairmanship of Mr. N.R. Narayana Murthy during 2002-2003.At the same time, the Ministry of Corporate Affairs set up a committee under the Chairmanship of Shri. Naresh Chandra to examine the various corporate governance issues. The recommendations of the committee however, faced widespread protests & representations from the industry, forcing SEBI to revise them. <br />Finally, on the 29th October, 2004, SEBI announced the revised Clause 49, which was implemented by the end of the financial year 2004-2005. Apart from Clause 49 of the Listing Agreement, corporate governance is also regulated through the provisions of the Companies Act, 1956. The respective provisions have been introduced in the Companies Act by Companies Amendment Act, 2000.<br />3.3 SCOPE & IMPORTANCE OF CORPORATE GOVERNANCE<br />Corporate governance is all about ethics in business. It is about transparency, openness & fair play in all aspects of business operations. The key aspects to corporate governance include:<br />Accountability of Board of Directors & their constituent responsibilities to the ultimate owners- the shareholders.<br />Transparency, i.e. right to information, timeliness & integrity of the information produced.<br />Clarity in responsibilities to enhance accountability.<br />Quality & competence of Directors and their track record.<br />Checks & balances in the process of governance.<br />Adherence to the rules, laws & spirit of codes.<br /> An active & involved board consisting of professional & truly independent directors plays an important role in creating trust between a company & its’ investors and is the best guarantor of good corporate governance.<br />Good corporate governance is integral to the very existence of a company. It is important for the following reasons:<br />Corporate governance ensures that a properly structured Board, capable of taking independent & objective decisions is at the helm of affairs of the company. This lays down the framework for creating long-term trust between the company & external providers of capital.<br />It improves strategic thinking at the top by inducting independent directors who bring a wealth of experience & a host of new ideas.<br />It rationalizes the management & monitoring of risk that a corporation faces globally.<br />Corporate governance emphasises the adoption of transparent procedures & practices by the Board, thereby ensuring integrity in financial reports.<br />It limits the liability of top management & directors, by carefully articulating the decision making process.<br />It inspires & strengthens investors’ confidence by ensuring that there are adequate number of non-executive & independent directors on the Board, to look after the interests & well-being of all the stakeholders.<br />Corporate governance helps provide a degree of confidence that is necessary for the proper functioning of a market economy, as it contemplates adherence to ethical business standards.<br />Finally, globalization of the market place has ushered in an era wherein the quality of corporate governance has become a crucial determinant of survival of corporate. Compatibility of corporate governance practices with global standards has also become an important constituent of corporate success. Thus, good corporate governance is a necessary pre-requisite for the success of Indian corporate.<br />3.4 CLAUSE 49 – MANDATORY REQUIREMENTS<br /><ul><li>BOARD OF DIRECTORS
The Board of directors of the company shall have an optimum combination of executive and non-executive directors with not less than fifty percent of the board of directors comprising of non- executive directors .
Where the Chairman of the Board is non- executive directors, at least one third of the Board should comprise of independent directors and in case he is an executive directors, at least half of the Board should comprise of independent directors.
For the purpose of sub – clause (ii) the expression ‘independent director’ shall mean a non executive director of the company who:
Apart from receiving director’s remuneration , does not have any material pecuniary relationships or transactions with the company, its promoters, its directors its senior management or its holding company, its subsidiaries and associated which many affects independence of the director.
Is not related to promoters or persons occupying managements positions at the board level or at one level below the board;
It not been executive or was not partner or an executive during the preceding three years, of any of the following:
Is not a partner or an executive or was not partner or an executive during the preceding three years, of any of the following:
The statutory audit firm or the internal audit firm that is associated with the company, and ;
The legal firm(s) and consulting firm(s) that have a material association with the company
Is not a material supplier, service provider or customer or a lessor or lessee of the company, which may affect independence of the directors; and
is not a substantial shareholder of the company i.e. owning two percent or more of the block of voting shares.
Nominee directors appointed by an institution which has invested in or lent to the company shall be deemed to be independent directors. However if the Dr. J.J. irani Committee recommendations on the proposed new company law are accepted, then directors, nominated by financial institutions and the government will not be considered independent.
Non executive directors compensation and disclosures: all fees/ compensation and disclosures: all fees/ compensation , if any paid to non executive directors, including independent directors, shall be fixed by the Board of Directors and shall require previous approval of shareholders in general meeting. The shareholders’ resolution shall specify the limits for the maximum number of stock options that can be granted to non- executive directors, including independent directors, in any financial year and aggregate. However as per SEBI amendment made vide circular SEBI/ CFD/DIL/CG dated 12/1/06 sitting fees paid to non-executive directors as authorized by the Companies Act 1956, would not require the previous approval of shareholders.
The board shall meet at least four times a year, with a maximum time gap of three months between any two meetings. However SEBI has amended the clause 40 of the listing agreement vide circular SEBI/CFD/DIL/CG dated 12-1-06 as per which the maximum gap between two board meetings has been increased again to 4 months.
A director shall not be a member in more than 10 Audit and / or Shareholders grievance Committee or act as chairman of more than five Audit Shareholders Grievance committee across all companies in which he is a director. Furthermore it should e mandatory annual requirement for every director to inform the company about the committee positions he occupies in other companies and notify changes as and when they take place.
Qualified and Independent Audit Committee: A qualified and independent audit committee shall be set up, giving the terms of reference subject to the following:
The audit committee shall have minimum three directors as members. Two thirds of the members of audit committee shall be independent directors.
All members of audit committee shall be financially literate an at least one member shall have accounting or related financial management expertise.
The chairman of the Audit Committee shall be an independent director.
The chairman of the Audit Committee shall be present at annual General Meeting to answer shareholder queries;
The audit committee may invite such of the executives, as it considers appropriate (and particularly the head of the finance function) to the present at the meetings of the committee. The finance director, head of internal audit and representative of the statutory auditor may be present as invitees for the meeting of the audit committee;
The Company Secretary shall act as the secretary to the committee.
Meeting of Audit Committee: the audit committee should meet at least four times in a year and not more than four months shall elapse between two meetings. The quorum shall be either tow members or one third of the members of the audit committee whichever is greater, but there should be minimum of two independent members present.
Powers of Audit Committee: the audit committee shall have powers:
To investigate any activity within the terms of reference;
To obtain outside legal or other professional advice;
To secure attendance of outsiders with relevant experts, if any.
Role of audit committee: the role for the audit committee shall include the following:
Oversight of the company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.
Recommending to the Board, the appointment re- appointment and if required the replacement or removal of the statutory auditor and the fixation of audit fees.
Approval of payment too statutory auditors for any other services rendered by the statutory auditors.
Reviewing, with the management the quarterly and annual financial statements before submission to the board for approval with reference to Director’s Responsibility statement under section 217 (2AA)k, significant adjustments made in financial statements, compliance with listing requirements, disclosure of any related pending transaction etc.
Reviewing with the management performance of statutory and internal auditor and adequacy of the internal control systems.
Discussion with internal auditors regarding any significant findings including suspected frauds or irregularities and follow up thereon.
Reviewing the findings of any internal investigation by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control system of a material nature and reporting the matter to the board.
Discussion with statutory auditors before the audit commence, about the nature and scope of audit as well as post- audit discussion to ascertain any area of concern.
To look into the reason of substantial defaults in the payments to the depositors, debenture holders, shareholders (in case of nonpayment of declared dividends) and creditors.
To review the functioning of the Whistle Blower mechanism, in case the same is existing.
Carrying out any other function as it mentioned in the terms of reference of the Audit Committee.
At least one independent director on the Board of Director of the holding company shall be a director on the Board of Directors of a material non listed Indian subsidiary company.
The audit committee of the listed holding company shall also review the financial statements, in particular, the investment made by the unlisted subsidiary company.
The minutes of the Board meeting of the unlisted subsidiary company shall be placed at the Board meeting of the listed holding company, the management should periodically bring to the attention of the Board of Directors of the listed holding company, a statement of all significant transaction and arrangements entered into by the unlisted subsidiary company.
A statement in summary form of transactions with related parties shall be placed periodically before the audit committee.
Details of material individual transactions with related parties which are not in the normal course of business shall be placed before the audit committee.
Disclosure of Accounting Treatment: where in the preparation of financial statements, a treatment different from that prescribed in an Accounting Standard has been followed, the fact shall be disclosed in the financial statements, together with the management’s explanation as to why it believes such alternative treatment is more representative of the true and fair view of the underlying business transaction in the Corporate Governance Report.
Board Disclosure- Risk Management: the company shall lay down procedures to inform Board members about the risk assessment and minimization procedures.
Proceeds from public issues, rights issues , preferential issues etc. : When money is raised through an issue (public issues rights issues, preferential issues etc.), it shall disclose to the Audit committee, the uses/ applications of funds by major category (capital expenditure,, sales and marketing, working capital, etc.), on a quarterly and annual basis.
All pecuniary relationship or transactions of the non- executive directors vis-à-vis the company shall be disclosed in the Annual Report.
Further, certain prescribed disclosures on the remuneration of directors shall be made in the section on the corporation governance of the Annual Report;
The company shall disclose the number of shares and convertible instruments held by non-executive directors in the annual report.
Non executive directors shall be required to disclose their shareholding (both own or held by/ for other persons on a (beneficial basis) in the listed company in which they proposed to be appointed as directors, prior to their appointment. These details should be disclosed in the notice to the general meeting called for appointment of such directors.
Management: As part of the directors’ report or as an addition there to a Management Discussion and Analysis report, the following should form part of the Annual Report to the shareholders. This includes discussion on:
A board committee under the chairmanship of a non- executive director shall be formed to specifically look into the redressal of shareholder and investor complaints like transfer of shares, non receipt of declared dividends etc. this committee shall be designated as ‘Shareholders/Investors Grievance Committee’.
To expedite the process of share transfer, Board of the company shall delegate the power of share transfer to an officer or a committee or to the registrar and share transfer agents. There delegated authority shall attend to share transfer formalities and least once in a fortnight.
Through the amendment made by SEBI vide circular SEBI /CFD/DIL CG DATED 12-1-06, in Clause 49 of the Listing Agreement, certification of internal controls and internal control system
CFO/CEO would be for the purpose of financial reporting. Thus the CEO, i.e. the Managing Director or Manager appointed in terms of the Companies Act, 1956 and the CFO i.e. the whole – time Finance Director or any other Person heading the finance function discharging that function shall certify to the Board that:
They have reviewed financial statements and the cash flow statement for the year and that to the best of their knowledge and belief:
These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;
These statements together present a true and fair view of the company’s affairs and are in compliance within existing accounting standards, applicable laws and regulations.
There are, to the best of their knowledge and belief, no transactions entered into by the company during the year which fraudulent, illegal or volatile of the company’s code of conduct.
They accept responsibility for establishing and maintaining internal controls and they have evaluated the effectiveness of the internal control system of the company pertaining to financial reporting and they have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if an, of which they are aware and the steps they have taken or propose to take to rectify these deficiencies
They have indicated to the auditors and the Audit Committee significant changes in internal control over financial reporting during the year, significant fraud of which they have become aware and the involvement there in if any, of the management or an employee having a significant role in the company’s internal control system over financial reporting.
There shall be separate section on Corporate Governance in Annual Reports of Company with a detailed compliance report on Corporate Governance. Non compliance of any mandatory requirement of this clause with reason there of and the extent to which the non- mandatory requirements have been adopted should be specifically highlighted.
The companies shall submit a quarterly compliance report to the stock exchange within 15 days from the close of quarter as per the format given in
Annexure IB. the report shall be signed either by the Compliance Officer or the Chief Executive Officer of the company.
The company shall obtain a certificate from either the auditor or practicing company secretaries regarding compliance of conditions of corporate governance as stipulated in this clause and annex the certificate with the directors’ report, which is sent annually to all the shareholders of the company. The same certificate shall also be sent to the Stock Exchanges along with the annual report filed by the company.</li></ul>The non- mandatory requirements may be implemented as per the discretion of the company. However, the disclosures of the compliance with mandatory requirements and adoption / non- adoption of the non mandatory requirements shall be made in the section on corporate governance of the Annual Report.<br />3.5 Indian model of governance<br />Indian corporate is governed by the Company’s Act 1956 which follows more or less the UK model. The pattern of private companies is mostly that of closely held or dominated by a founder, his family and associates. India has adopted the key tenets of Anglo-American external and internal control mechanisms after economic liberalization.<br />Obligation to society at large<br />A corporation is a creation of law as an association of persons forming part of a society in which it operates. Its activities are bound to impact the society as the society’s value would have an impact on the corporation. Therefore, they have mutual rights and obligations to discharge for the benefit of each other.<br />National interest: A company (and its management) should ne committed in all its actions to benefit the economic development of the countries in which it operates and should not engage in any activity that would militate against such an objective.<br />Political non-alignment: A company should be committed to and support a functioning democratic constitution and system with a transparent and fair electoral system and should not support directly or indirectly any specific political party or candidate for political office.<br />Legal compliances: The management of a company should comply with all applicable government laws, rules and regulations. Legal compliance will also mean that corporations should abide by the tax laws of the nations in which they operate and these should be paid on time and as per the required amount.<br />Rule of law: Good governance requires fair, legal frameworks that are enforced impartially. It also requires full protection of rights, particularly those of minority shareholders. Impartial enforcement of laws requires an independent judiciary and regulatory authorities.<br />Honest and ethical conduct: Every officer of the company including its directors, executives and non executive directors, managing director, CEO, CFO and CCO should deal on behalf of the company with professionalism, honesty, commitment and sincerity as well as high moral and ethical standards.<br />Corporate citizenship: A corporate should be committed to be a good corporate citizen not only in compliance with all relevant laws and regulations but also by actively assisting in the improvement of the quality of life of the people in the communities in which it operates with the objective of making them self reliant and enjoy a better quality of life.<br />Ethical behaviour: Corporations have a responsibility to set exemplary standards of ethical behaviour, both internally within the organizations, as well as in their external relationships.<br />Social concern: The Company should have concerns towards the society. It can help the needy people & show its concern by not polluting the water, air & land. The waste disposal should not affect any human or other living creatures.<br />Healthy and safe working environment: A company should be able to provide a safe and healthy working environment and comply with the conduct of its business affairs with all regulations regarding the preservations of environment of the territory it operates in.<br />Competition: A company should market its products & services on its own merits & should not resort to unethical advertisements or include unfair & misleading pronouncements on competitors’ products & services.<br />Timely responsiveness: Good governance requires that institutions & processes try to serve all stakeholders within a reasonable time frame.<br />Obligation to investors<br />The investors as shareholders and providers of capital are of paramount importance to a corporation. A company has following obligations to investors:<br />Towards shareholders: <br />Measures promoting transparency and informed shareholder participation:<br />Financial reporting and records: <br />Obligation to employees<br />In the context of enhanced awareness of better governance practices, managements should realize that they have their obligations towards their workers too.<br />Fair employment practices <br />Equal opportunities<br />Humane treatment<br />Participation <br /><ul><li>Empowermen
Equity and inclusiveness </li></ul>Participative and collaborative environment<br />Obligation to customers<br />A company’s existence cannot be justified without its catering to he needs of its customers. The companies have an obligation to its employees, without whose assistance they cannot realize their objectives.<br />1.Quality of products and services: <br />2. Products at affordable prices:<br />3. Unwavering commitment to customer satisfaction: <br />Managerial obligations<br />Protecting company’s assets: <br />Behaviour toward government agencies: <br />Control: <br />Gifts and donations:<br />3.6 Landmarks in emergence of corporate governance<br />OECD Principles<br />The Organization for Economic Co-operation and Development (OECD) was one of the earliest non-governmental organizations to work on and spell out principles and practices that should govern corporate in their goal to attain long-term shareholder value. The OECD Principles were oft-quoted and have won universal acclaim, especially of the authorities on the subject of corporate governance. Because of the ubiquitous approval, the OECD Principles are as much trendsetters as the Codes of Best Practices associated to the Cadbury Report. A useful first step in creating or reforming the corporate governance system is to look at the principles laid out by the OECD and adopted by its member governments. They include the following elements:<br /><ul><li>The rights of shareholders: The rights of shareholders include a set of rights to secure ownership of their shares, the right to full disclosure of information, voting rights, participation in decisions on sales or modification of corporate assets, merger and new share issues. The guidelines go on to specify a host of other issues connected to the basic concern of protecting the value of the corporation.
Equitable treatment of shareholders: The OECD is concerned with protecting minority shareholders’ rights by setting up systems that keep insiders, including managers and directors, from taking advantage of their roles. Insider trading, for example, is explicitly prohibited and directors should disclose any material interest regarding transactions.
The role of stakeholders in corporate governance: the OECD recognizes that there are other stakeholders in companies’ ion addition to shareholders. Banks, bondholders and workers, for example, are important stakeholders in the way in which companies perform and make decision. The OECD guidelines lay out several general provisions for protecting stake holder’s interests.
Disclosure and transparency; The OECD lays down a number of provisions for the disclosure and communication of key facts about the company ranging from financial details to governance structures including the board of directors and their remuneration. The guidelines also specify that independent auditors in accordance with high quality standards should perform annual audits.
The responsibilities of the board: The OECD guideline provides a great deal of details about the functions of the board in protecting the company and its shareholders. These include concerns about corporate strategy, risk, executive compensation and performance as well as accounting and reporting systems.</li></ul>3.7 Corporate governance: The Indian scenario<br />In India the real history of corporate governance dates back to the year 1992, following efforts made in many countries of the world to put in place a system suggested by the Cadbury Committee. The Confederation of Indian Industry framed a voluntary code of corporate governance for listed companies in 1998. This was followed by the recommendations of the Kumar Mangalam Birla Committee set up in 1999 by SEBI culminating in the introduction of Clause 49 of the standard Listing Agreement to be complied with all the listed companies in stipulated phases. The Kumar Mangalam Birla committee divided its recommendations into mandatory and non-mandatory. Mandatory recommendations included such issues as the composition of board, appointment and structure of audit committees, remuneration of directors, board procedures, and additional information regarding management, discussion and analysis as a part of annual report. Its non-mandatory recommendations included issues concerning the chairman of the board, setting up of remuneration committee, half yearly information to shareholders and appointment of nominee directors.<br /><ul><li> Efforts to initiate corporate governance in country
The Companies Amendment Act, 2000</li></ul>Many provisions relating to corporate governance such as additional ground of disqualification of directors in certain cases, setting up of audit committees, directors’ responsibility statement in directors’ reports, etc. were introduced by the Companies (Amendment) Act, 2000. Corporate governance was also introspected in 2001 by the advisory group constituted by the standing committee of International Finance Standards and Codes of the Reserve Bank of India under chairmanship of Dr. Y.V. Reddy, the then deputy governor.<br />Naresh Chandra Committee, 2002<br />In the year 2002, the committee was asked to examine various corporate governance issues and to recommend changes in diverse areas such as:<br />the statutory auditor company relationship so as to further strengthen the professional nature of the interface<br />the need for rotation of statutory audit firms or partners<br />the procedure for appointment of auditors and determination of audit fees<br />restrictions, if any, on non-audit functions<br />independence of auditing functions<br />the need to consider measures such as certification of accounts and financial statements by managements and directors<br />the necessity of having transparent system of random scrutiny of audited accounts<br />Narayan Murthy Committee, 2003<br />The Company Law Amendment Bill, 2003 envisaged many amendments on the basis of reports of the Naresh Chandra Committee and the subsequently appointed N R Narayan Murthy committee. Both the committees have done an excellent job to promote corporate governance practice in India.<br /><ul><li>Implementation of the recommendations of Birla Committee Report
Clause 49 of the Listing Agreement to the Indian stock exchange comes into effect from 31 December 2005. It has been formulated for the improvement of corporate governance in all listed companies.</li></ul>In corporate hierarchy two types of managements are envisaged: i) companies managed by [board of directors]; and ii) those by a [managing director], whole-time director or manager subject to the control and guidance of the board of directors.<br />As per Clause 49, for a company with an Executive Chairman, at least 50 per cent of the board should comprise independent directors. In the case of a company with a non-executive Chairman, at least one-third of the board should be independent directors.<br />It would be necessary for chief executives and chief financial officers to establish and maintain internal controls and implement remediation and risk mitigation towards deficiencies in internal controls, among others.<br />Clause VI (ii) of Clause 49 requires all companies to submit a quarterly compliance report to stock exchange in the prescribed form. The clause also requires that there be a separate section on corporate governance in the annual report with a detailed compliance report.<br />A company is also required to obtain a certificate either from auditors or practicing company secretaries regarding compliance of conditions as stipulated, and annex the same to the director's report.<br />The clause mandates composition of an audit committee; one of the directors is required to be "financially literate". It is mandatory for all listed companies to comply with the clause by December 31, 2005.<br />Clause 49, when it was first added, was intended to introduce some basic corporate governance practices in Indian companies and brought in a number of key changes in governance and disclosures (many of which we take for granted today). It specified the minimum number of independent directors required on the board of a company. The setting up of an Audit committee, and a Shareholders’ Grievance committee, among others, were made mandatory as were the Management’s Discussion and Analysis (MD&A) section and the Report on Corporate Governance in the Annual Report, and disclosures of fees paid to non-executive directors. A limit was placed on the number of committees that a director could serve on.<br />In late 2002, SEBI constituted the Narayana Murthy Committee to assess the adequacy of current corporate governance practices and to suggest improvements. Based on the recommendations of this committee, SEBI issued a modified Clause 49 on October 29, 2004 (the ‘revised Clause 49’) which came into operation on January 1, 2006.<br />The revised Clause 49 has suitably pushed forward the original intent of protecting the interests of investors through enhanced governance practices and disclosures. Five broad themes predominate. The independence criteria for directors have been clarified. The roles and responsibilities of the board have been enhanced. The quality and quantity of disclosures have improved. The roles and responsibilities of the audit committee in all matters relating to internal controls and financial reporting have been consolidated, and the accountability of top management—specifically the CEO and CFO—has been enhanced. Within each of these areas, the revised Clause 49 moves further into the realm of global best practices (and sometimes, even beyond.<br />CHAPTER 4<br />ANALYSIS AND INTERPRETATION<br />4.1 Company’s Philosophy on Corporate Governance<br />The companies believes that sound Corporate Governance is critical to enhance and retain investor’s trust. The company seeks to attain its performance with integrity and fairness. It’s philosophy based on Accountability, Ethical conduct, Compliance with status, Interest of all stakeholders, Transparency & Timely disclosure. The objective is to instutionalize Corporate Governance practices that go beyond adherence to that extant of regulatory framework. <br />4.2 Board of Directors<br />As on 31st march 2010,comprises Eight directors out of which Seven are non executives Directors. Since the company does not have a Chairman, Directors present in the meeting elect one of them to take the chair and non-executive Director is appointed as chairman of the meeting.The composition of the board as on 31st March 2010,attendance at board meetings held during the financial year under review and at the last Annual General Meeting And no. of Directorship and Membership/Chairmanship in public companies held by directors as on 31st March 2010(including the company) are given below:<br /> Table:4.1 Board of DirectorsSl. No.Name of DirectorsNature of DirectorshipNo. of Board meetings heldNo. of Board meetingsAttendedNo. of other DirectorshipCommittee MembershipAttendance at last AGMMemberChairman1Shri A.K.AgarwalaNon-Executive promotors444--No2Shri K.K.MaheshwariNon-Executive, promotors43322Yes3Shri K.C.JhanwarNon-Executive, promotors44---Yes4Shri Biswajit ChaudhariNon-Executive,Independent441033Yes5Shri P.P.SharmaNon-Executive,Independent43---No6Shri J.C.ChopraNon-Executive,Independent4431-No7Shri S.S.GuptaManaging Director,Promotor44-1-Yes8Shri Subrajit Bhowmick(upto 4th April 2010)Non-Executive Nominee Independent43-1-No9Shri S.C.Mathur(w.e.f.5th April 2010Non-Executive Nominee IndependentN.A.N.A.-1-N.A.10Shri L.S.NaikNon-Executive,PromoterN.A.N.A.---N.A.<br />Source:Company’s Annual Report<br />During the year 2009-10, Four (4) Board meetings held,the details of which are given here in-below:<br /> Table 4.2 Board meetings Sl. No.DateBoard StrengthNo.Of Directors Present129.04.200988222.07.200987326.10.200988420.01.201086<br />Source:Company’s Annual Report<br />During the year under review,Shri Lalitkumar Shantaram Naik has been appointed as Additional Director in the Board w.e.f. 1st April 2010,Shri S.S. Gupta has been re-appointed as Managing Director of the company w.e.f. 24th october 2009 And Shri S.C. Mathur has been appointed in the Board in place of Shri Subrajit Bhowmick w.e.f.5th April 2010.<br />In accordance with the provisions of Companies Act,1956 and Company’s Articles of Association, Shri A.K. Agarwala and Shri J. C. Chopra,Directors retire by rotation in the ensuing Annual general meeting of the Company and being eligible.offer themselves for re-appointement.<br />As required by Clause 49 of the Listing Agreement, the brief details of Directors seeking appointment and reappointment is appended to the notice convening the 34th Annual General Meeting of the Company.<br />The Code of Conduct, laid down by the Company, binds all the Board Members and Senior Management of the Company. A declaration by the Managing Director to this effect is appended to this report.<br />The Board reviews the Compliance Reports to ensure adherence to all applicable provisions of Law, Rules and Guidelines on regular basis. Post meeting follow-up, review and reporting on the actions taken on decisions<br />of the Board and Committees are being regularly carried out.<br />4.3 AUDIT COMMITTEE<br />The Audit Committee of the Board of Directors is constituted in compliance with Corporate Governance requirements. The three members out of total four members of the Committee are Independent Directors and all the members are non-Executive Directors and have relevant finance and audit exposure. The Committee is headed by an Independent Director. The head of Internal Audit and Statutory Auditors attend and participate in the meeting regularly on invitation.<br />The terms of reference and scope of the Committee includes :-<br />to oversee the Company’s financial reporting process and disclosure of its financial information, to recommend the appointment/removal of Statutory/Internal Auditors, fixation of audit fees and approval of payments forany other services, to review and discuss with the Auditors about internal control systems, the scope of audit including the observations of the Auditors, adequacy of the internal audit system, major accounting policies,practices and entries, compliances with accounting standards and listing agreement entered into with the Stock<br />Exchanges and other legal requirements concerning financial statements and related party transactions, if any,to review the Risk Management and Legal matters of the Company, to review the quarterly, half yearly and annual financial statements before submitting to the Board of Directors.<br />Minutes of the Audit Committee meetings are circulated to, discussed and noted by the members of the Board.The Committee held four (4) meetings during the year under review on 29.04.2009, 22.07.2009, 26.10.2009 and 20.01.2010. The attendance of members at the meetings was as follows :<br /> Table 4.3 Audit committeeName of MembersStatusNo.of meeting AttendedShri Biswajit ChoudhuriChairman4Shri K.K.MaheshwariMember3Shri J.C. ChopraMember4Shri Subrajit bhowmickMember3Shri S.S. GuptaPermanent Invitee4<br />Source:Company’s Annual Report<br />4.4 SHAREHOLDERS’ GRIEVANCE COMMITTEE<br />The Shareholders’ Grievance Committee of the Board, inter-alia, approves issue of duplicate share certificates and oversees and reviews all matters connected with the securities transfers. The Committee also looks into redressal of shareholders’ complaints like transfer of shares, non receipt of annual report/dividend warrants etc. and oversees the performance of Registrars & Transfer Agents and recommends measures for overall improvements in the quality of investor services.<br />The Shareholders’ Grievance Committee comprises two Non-Executive Directors and the Managing Director and is headed by a Non-Executive Director. The Committee held four (4) meetings during the year under review on 29.04.2009, 22.07.2009, 26.10.2009 and 20.01.2010. The attendance of members at the meetings was as follows :<br /> Table 4.4: Shareholders’ Grievance CommitteeName of MembersStatusNo.of meeting AttendedShri K.K.MaheshwariChairman3Shri Biswajit ChoudhuriMember4Shri S.S. GuptaMember4<br />Source:Company’s Annual Report<br />Shri Akash Mishra, Company Secretary is the Compliance Officer under the relevant SEBI directions.<br />4.5 REMUNERATION COMMITTEE<br />In continuation of practices of good corporate governance, the Board has constituted the Remuneration Committee of Directors of the Company on 17.10.2006 to recommend/review remuneration of the Managing Director and/ or Whole Time Directors, as per requirement.<br />The Remuneration Committee comprises three non-Executive Directors. The Committee held one (1) meeting during the year under review on 26.10.2009. The attendance of members at the meetings was as follows :<br /> Table 4.5: Remuneration CommitteeName of MembersStatusNo.of meeting AttendedShri J.C. ChopraChairman1Shri K.K.MaheshwariMember1Shri Biswajit ChoudhuriMember1<br />Source:Company’s Annual Report<br />4.6 Non Executive Directors<br />The Non Executive Directors are paid only sitting fees for attending Board/Committee meetings. The amount of sitting fees paid to Non Executive Directors during the year under review are as follows :<br />Table 4.6: Non Executive Directors & feesName of DirectorSitting fee paid (Rs.)Shri A.K. Agarwala80,000/-Shri K. K. Maheshwari160,000/-Shri K. C. Jhanwar80,000/-Shri Biswajit Choudhuri210,000/-Shri P. P. Sharma60,000/-Shri J. C. Chopra170,000/-Shri Subrajit Bhowmick( upto 4th April 2010 )120,000/-Shri L. S. Naik( w.e.f. 1st April 2010 )N.A.Shri S. C. Mathur( w.e.f. 5th April 2010 )N.A.<br /> Source:Company’s Annual Report<br />There was no other pecuniary relationship or transaction of the Non Executive Directors with the Company.The Company has not granted any stock option to any of its Directors. As on 31st March 2010, except Shri A. K. Agarwala and Shri Biswajit Choudhuri, Directors, who hold 11700 and 100 equity shares of the Company respectively, no other Directors of the Company hold any shares in the Company, as reported.<br />The aggregate value of salary and perquisites paid for the year 2009-10 to the Managing Director are as follows :<br />( all fig. in Rs.Lacs)<br /> Table 4.7: salary and perquisites paidSalaryVariable PayAll other elements of the remuneration package*TotalShri S. S. Gupta37.338.869.7555.94<br />*excluding Gratuity and unencashed Earned Leave Salary.<br />Besides this, the Managing Director is also entitled to other facilities as per the rules of the Company and Agreement entered with him.<br />The re-appointment of Shri S. S. Gupta is for a period of two (2) years w.e.f 24.10.2009. In the event of cessation of employment of Shri Gupta for reasons attributable to him during the subsistence of service, he shall not be entitled to any<br />remuneration on and from the date of termination of his employment. Subject to the provisions of Section 318 of the Companies Act 1956, the Company shall, in the event of the termination of the appointment of Shri Gupta as its Managing<br />Director prior to the expiry of the said period, by the Company, pay compensation to Shri Gupta equivalent to six month's basic salary as prevailing immediately preceding the date he ceases to hold office of the Managing Director of the Company.<br />4.7 SHARE TRANSFER<br />The Registrar and Share Transfer Agent of the Company M/s. C. B. Management Services (P) Limited, Kolkata looks after physical as well as electronic transfer of Company's shares.<br />The Board of Directors have delegated the power of approving transfer of securities to the Registrar subject to notification of the same to the Company Secretary on a monthly basis and intimation to the Committee about such transfers in its meeting.<br />The Status of total number of requests / complaints received during the year under review is as follows :<br /> Table 4.8: number of requests / complaints in 2009-10Sl. No.DescriptinNos. receivedTotal ReceivedReplied/AddressdPendingQT1QT2QT3QT4ALetters received fromStatutory bodiesSEBI0000000Stock Exchange0000000BComplaints fromShareholders0000000CQueries/requestsIssue of duplicate certificates/change of address, Bankmandates, Transmission/transfer of Shares query, Dematupdation status/query, Dividendrelated query/revalidation,query on fully paid up etc.316036301571570Total316036301571570<br />Source:Company’s Annual Report<br /> Table:4.9 number of requests/complaint for 2005-06 to 2009-10Description2005-062006-072007-082008-092009-10RAPRAPRAPRAPRAPLetters received fromStatutory bodiesSEBI110110110000000Stock Exchange000000000110000Complaints fromShareholders000000000000000Queries/requestsIssue of duplicate certificates/change of address, Bankmandates, Transmission/transfer of Shares query, Dematupdation status/query, Dividendrelated query/revalidation,query on fully paid up etc.211211016116101581580848401571570Total212212016216201591590858501571570 Where P-Pending A-Addressed R-received<br />Source:Company’s Annual Report<br />General Shareholder Information <br /> Table:4.10 General Shareholder InformationRegistered OfficeAditya Birla Chemicals (India) LimitedGarhwa Road, P.O. Rehla - 822 124Distt. Palamau (Jharkhand)Annual General MeetingDate and Time : 6th August, 2010 at 10:00 A.M.Venue : Aditya Birla Chemicals (India) LimitedGarhwa Road, P.O. Rehla - 822 124Distt. Palamau (Jharkhand)Dividend payment date : within 10th August, 2010Date of Book Closure: 28th July, 2010 to 6th August, 2010.Financial calendar (Tentative)First Quarter’s Results – By mid of August, 2010Second Quarter’s Results – By mid of November, 2010 Third Quarter’s Results – By mid of February, 2011Annual Results – By mid of May, 2011Listing on Stock Exchanges and Stock CodeBombay Stock Exchange Limited, Mumbai(Stock Code : 500057) National Stock Exchange of India Ltd., Mumbai(Symbol - "ABCIL")Annual Listing Fee (as applicable) paid upto 2010-11Demat ISIN in NSDL andCDSL for Equity sharesISIN INE605B01016<br />Source:Company’s Annual Report<br />MARKET PRICE DATA : HIGH, LOW DURING EACH MONTH IN FINANCIAL YEAR 2009-10<br /> Table 4.11: Market Price DataBombay Stock ExchangeNational Stock ExchangeMonthHigh(Rs.)Low(Rs.)High(Rs.)Low(Rs.)April 200950.0035.5049.5035.10May 200968.7043.2568.8042.50June 200976.0055.9076.0055.60July 200971.5050.0074.3550.05August 200974.7561.4074.5061.10September 200981.0071.0080.5071.20October 200995.9071.2596.0071.30November 200983.3073.1583.0072.50December 200989.6076.5089.0075.70January 2010102.5571.00102.7070.70February 201079.9068.0581.0064.20March 201079.6069.6079.3569.80<br />Source:Company’s Annual Report<br />INVESTORS - SHARE HOLDING PATTERNS<br /> Table 4.12: Investors – Shareholding patternsRegistrar and Transfer AgentM/s. C. B. Management Services (P) Ltd.P-22, Bondel Road, Kolkata - 700 019Phone No.(s) : 033 - 4011 6728 / 4011 6717 / 2280 6692-93-94 / 2486Fax No. 033 - 2287 0263Email : email@example.comDistribution of shareholding as on 31st march 2010CategoryNo. of shares% of shareholdingPromoters13,169,98756.31Mutual Funds and UTI1,5000.01Banks/FinancialInstitutions/Central Govt./State Govt.(s) / InsuranceCompanies / Trust2,034,8508.70Corporate Bodies995,8534.26Individuals6,752,26628.88NRI/FII / OCB253,4011.08Clearing Member178,6430.76TOTAL23,386,500100.00Holding of shares as on 31st March 2010i) NSDL : 8,371,343 ii) CDSL : 13,831,196iii) Physical : 1,183,961(5.06% of Company's Equity Shares in physical form)Plant locationGarhwa Road, P.O. Rehla - 822 124Distt. Palamau (Jharkhand)Address for correspondenceGarhwa Road, P.O. Rehla - 822 124Distt. Palamau (Jharkhand)Email : firstname.lastname@example.org@email@example.com<br />Source:Company’s Annual Report<br />ANNUAL GENERAL MEETINGS<br /> Table 4.13: Annual general meetingParticularsFY 2006- 2007FY 2007- 2008FY 2008- 2009Date and Time11.08.2007at 11:30 A.M.21.08.2008at 10:30 A.M.29.06.2009at 10:30 A.M.VenueGarhwa Road,P.O. Rehla - 822 124 Dist.-Palamau(Jharkhand)Garhwa Road,P.O. Rehla - 822 124 Dist.-Palamau(JharkhandGarhwa Road,P.O. Rehla - 822 124 Dist.-Palamau(Jharkhand<br />Source:Company’s Annual Report<br /><ul><li>No Special Resolution was passed in the previous 3 Annual General Meetings of the Company.
No Special Resolution was passed through postal ballot at the last Annual General Meeting.
No Special Resolution is proposed through postal ballot at the forthcoming Annual General Meeting.</li></ul>4.8 DISCLOSURES<br />(i) There have been no materially significant related party transactions, pecuniary transactions or relationships between the Company and its Directors, management, relatives except for those disclosed in the Annual Report for the year ended 31st March 2010.<br />(ii) The Company has complied with the requirements of regulatory authorities on capital markets and no penalties/strictures have been imposed against it in the last 3 years.<br />(iii) The Company has complied with mandatory requirements, as reflected in this report and has adopted the non mandatory requirement of constitution of Remuneration Committee.<br />(iv) The Directors' Responsibility Statement has been stated in the Directors' Report.<br />(v) Management Discussion and Analysis Report forms part of Directors' Report.<br />(vi) The Company does not have any Subsidiary Company.<br />(vii) The Certification under Clause 49(V) by Managing Director and Finance-in-charge to the Board is appended to this report.<br />(viii) Notes on the Statement of Accounts referred to in the Auditors' Report are self explanatory, and therefore, do not call for any further comments under Section 217(3) of the Companies Act, 1956.<br /> Table:4.14 DisclosuresItems Availability 2005-06 2006-072007-08 2008-092009-10Compliances CertificatesYesYesYesYesYesDeclaretion for code of conduct as per clause-49YesYesYesYesYescertification in terms of clause-49(V)YesYesYesYesYesAuditor’s certificateYesYesYesYesYes<br />Source:Company’s Annual Report<br />4.9 MEANS OF COMMUNICATION<br />The quarterly/half yearly/yearly financial results were published in Business Standard / Financial Express(all editions) and Ranchi Express.<br />The Annual Report containing all of its required and important information is circulated to Members of the Company and others entitled thereto.<br />Annual Report, Quarterly Results, Shareholding Pattern etc. of the Company are also posted on the<br />website : www.corpfiling.co.in<br />Website of the Company : www.adityabirlachemicalsindia.com<br />4.10 COMPLIANCE CERTIFICATE OF THE AUDITORS<br />The Company has obtained Certificate from the Statutory Auditors regarding compliance of conditions of Corporate Governance as stipulated in Clause 49 and the same is annexed herewith.<br />For and on behalf of the Board of Directors<br />Camp : Mumbai<br />Dated : 30th April, 2010 A.K. Agarwala L. S. Naik<br /> Director Director<br />4.11 DECLARATION FOR CODE OF CONDUCT IN TERMS OF CLAUSE 49 OF THE LISTING AGREEMENT WITH STOCK EXCHANGES.<br />The Board of Directors of Aditya Birla Chemicals ( India ) Limited has laid down a Code of Conduct for all Board Members and Senior Management of the Company, which is posted on the website of the Company.The Board Members and Senior Management have affirmed compliance with the Code of Conduct of the Company.<br />For ADITYA BIRLA CHEMICALS (INDIA) LIMITED<br />S. S. GUPTA<br />[ Managing Director ]<br />4.12 CERTIFICATION IN TERMS OF CLAUSE 49 (V) OF THE LISTING AGREEMENT WITH STOCK EXCHANGES<br />We hereby certify that :<br />a) we have reviewed financial statements and the cash flow statement for the year ending 31st March 2010 and that to the best of our knowledge and belief :<br />i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;<br />ii) these statements together present a true and fair view of the Company's affairs and are in compliance with existing accounting standards, applicable laws and regulations.<br />b) there are, to the best of our knowledge and belief , no transactions entered into by the Company during the year which are fraudulent, illegal or violative of the Company's Code of Conduct.<br />c) we accept responsibility for establishing and maintaining internal controls for financial reporting and that we have evaluated the effectiveness of internal control systems of the Company pertaining to financial reporting and we have disclosed to the Auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.<br />d) we have indicated to the Auditors and the Audit Committee;<br />i) significant changes in internal control over financial reporting during the year;<br />ii) significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and<br />iii) instances of significant fraud of which we have become aware and the involvement therein, if any, of the Management or an Employee having a significant role in the Company's internal control system over financial reporting.<br />Brijesh Kumar S. S. Gupta<br />[Finance In-charge] [Managing Director]<br />4.13 AUDITORS’ CERTIFICATE<br />AUDITORS' CERTIFICATE ON COMPLIANCE OF CONDITIONS OF CORPORATE<br />GOVERNANCE AS STIPULATED IN CLAUSE - 49 OF THE LISTING AGREEMENT<br />AUDITOR'S CERTIFICATE<br />To<br />The Members of Aditya Birla Chemicals (India) Limited<br />1. We have examined the compliance of conditions of Corporate Governance by Aditya Birla Chemical (India) Limited ('the Company') for the year ended March 31, 2010 , as stipulated in clause 49 of the Listing Agreement of the Company with Stock Exchanges.<br />2. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.<br />3. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.<br />4. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. <br />For and on behalf of<br />Khimji Kunverji & Co.<br />Chartered Accountants<br />Firm Registration No. 105146W<br />Dated : 30th April 2010 Hasmukh B Dedhia<br />Place : Mumbai Partner (F-033494)<br />4.14 DEMAT / TRANSFER INFORMATION<br />Depository System (DS) Trading in shares of the company is permitted only in dematerialised form. As such, we wish to advise members to arrange to dematerialise their shareholding in the company as DS weeds out several problems which are otherwise associated with the scrip-based system such as bad deliveries, fraudulent transfers, fake certificates, thefts in postal transit, delay in transfers, long settlement cycles, mutilation of share certificates, etc. At the same time, DS offers several advantages like exemption from stamp duty, elimination of the concept of market lot, elimination of bad deliveries, reduction in transaction costs, improved liquidity, etc.<br />Share transfers<br />Share transfers in physical form are registered normally within two to three days from the date of receipt, provided that the documents are clear in all respects.The Investor Relations and Finance Committee of the Board considers and approves transfers above 5,000 shares and debentures under one transfer deed. Further, certain officers of the company have been authorised to approve transfers up to 5,000 shares and debentures under one transfer deed.<br />ECS facility<br />Shareholders holding shares in physical form and desirous of availing the facility of electronic credit of dividend or recording change in their existing mandate registered with the Company.<br />In respect of electronic share accounts, members are requested to notify / update their ECS details to / with their respective depository participants.<br />Demat<br />Dematerialisation of shares and liquidityThe Equity Shares of the Company are required to by compulsorily traded in the dematerialised form. The Equity Shares of the Company are admitted for trading under both the Depository System in India — NSDL and CDSL. The International Securities Identification Number (ISIN) allotted to the Company’s Equity Shares under the Depository System is INE605B01016. <br />Statement of Physical transfer of shares & electronic transfer of 5000 & above shares during the period Oct.2010 to Dec.2010:-<br />The statement dealing number of shares transferred in physical form during the period from 1st oct. to 31st Dec. 2010 were presented before the committee for its notification.The committee noted that during the aforesaid period,650 physical shares bearing transfer no. from 1227 to 1230 were transferred and timely action was taken in transferring the shares lodged for transfer.The statements detailing no. of shares (more than 5000 shares) purchased & sold in electronic form during the period Oct.2010 to dec 2010 were also presented before the committee for its notification.The committee noted the same.<br />Taking Note of Dematerialisation of equity shares as on 31st March 2011.<br /> Table 4.15: Dematerialisation of equity sharesSl.no.DescriptionAs on 31.12.2010Total no. of sharesAs on 31.03.2011Total no. of shares1.In Demat form1.NSDL2.CDSL90,94,9721,31,24,34791,83,8921,30,43,2132.In physical form11,67,18111,59,395Total2,33,86,5002,33,86,500<br />Source:Company’s Database<br />The committee noted that 95.01% shares had been dematerialized upto 31st dec.2010 and out of total physical holding of 11,67,181 shares,promoters were holding 7,75,000 shares in physical form,thus out of total physical holding of 4.99%,promoters holding in physical form stood at 3.31%.<br />INVESTORS - FINANCIALS <br /> Table 4.16: Investors-financialsPERFORMANCEUNIT2003-042004-052005-062006-072007-082008-092009-10Gross TurnoverRs. In Crores107.84124.83129.05166.31202.51230.91241.08PBDITRs. In Crores37.9650.8855.3171.3085.179.9094.83PBDTRs. In Crores25.7841.9547.5260.5875.8174.3291.26PATRs. In Crores8.6326.4526.1533.7649.2746.0860.74EPSRs. In Crores4.8411.3111.1814.4321.0719.7025.97ROCE%21.0727.3932.0021.2523.0419.6223.15EVARs. In Crores2.9811.9110.236.2012.508.518.27<br />Source:Website(www.moneycontrol.com)<br />4.15 COMMUNITY SERVICES<br /> Beyond the business, the company committed for upliftment of the society and social environment where it operates and transacts businesses. The Company is sincerely working for the various noble causes in the form of promotion to rural education, women empowerment, self reliance and many more as outlined hereunder-<br /> - Medical Camps in every week at Medical Centers of 40 villages adopted by the Company, where 17624 patients were given free treatment.<br /> - Eye Camp, Eye Check up & Operation for 12 days in which 1038 Cataract operations conducted<br /> - Artificial Limb camp conducted, where 59 handicapped persons benefited with Artificial Limbs.<br /> - Family Planning camp, Mother-child health camp, immunization camp, Dental Check up camp, Homeopathic camp, AIDS awareness camp and other camps conducted, where the beneficiaries were more than 6403.<br /> - NID Pulse Polio Programme organized in 29 booths, where the beneficiaries were more than 23473.<br /> - 2059 blanket & woolen cloths distributed among poor and needy<br /> - Old Age Monthly pension distribution for 31 poor and needy persons<br /> - Scholarships were given to 110 poor girls, bicycle were distributed to 11 poor girls and Tailoring training was given to 40 needy girls.<br /> - 26000 tree saplings distributed among farmers<br /> - Wheat seeds distributed among 585 farmers<br /> - 17809 catties were provided vaccination for the benefit of 5300 villagers.<br /> - 158 hand pumps repaired/ installed in our adopted villages.<br /> - Construction of 2 Hydel Towers and repair of Check Dam to provide water to nearby society.<br />4.16 INDUSTRIAL RELATIONS<br />The industrial relations with the employees and workmen of the company continued to be cordial. The Company continues to improve the manpower productivity.<br />4.17 SAFETY, HEALTH, ENVIRONMENT PROTECTION AND POLLUTION CONTROL<br /> The Company is conscious about safety of the employees vis-a vis all the stakeholders involved directly or indirectly in their activities. The company is pleased to share that year 2009-10 has been a ZERO accident year.<br /> Company has taken various steps for safety, health and pollution control, such as - commissioning of Auto liquid Chlorine filling stations, installation of Auto Control valves (on-off) in liquid Chlorine storage tanks, installation of Chlorine sensors, Pressure gauge and temperature sensors, Continuous monitoring of Mercury bearing hazardous waste earlier disposed in defined lagoon, Centralized control<br /> on emission of ancillaries through Calcium Hypo unit, Safe storage of solid waste of ancillary units in lined lagoon, Change in logic of cell load reduction from the rectifier cubicle directly instead of DCS which takes lesser time as compared to load reduction from DCS, Provision of explosion vent in boiler flue gas path to prevent over pressurization, automated vent in APH of boiler for safety against any entrapped combustible gasses inside; and mistake proofing against operational errors, Fail safe TG trip interlocking for turbine etc.<br /> Table:4.16 Evaluation of status of CG during 2005-06 to 2009-10Items Availability 2005-06 2006-072007-08 2008-092009-10Compny’s philosophy on corporate governanceYesYesYesYesYesBoard of DirectorsYesYesYesYesYesDetails of Board meetings heldYesYesYesYesYesAudit committee prescribed by SEBI’s clause-49YesYesYesYesYesMeeting held for Audit committeeYesYesYesYesYesShareholders’ Grievance committee prescribed by SEBI’s clause-49YesYesYesYesYesMeeting held for Shareholders’ Grievance committeeYesYesYesYesYesRemuneration committee prescribed by SEBI’s clause-49YesYesYesYesYesMeeting held for Remuneration committeeYesYesYesYesYesNon-executive directors and feesYesYesYesYesYesSalary and perquisities to MDYesYesYesYesYesShare transferYesYesYesYesYesNo.of requests/complainsYesYesYesYesYesGeneral shareholders InformationYesYesYesYesYesMarket price dataYesYesYesYesYesInvestors shareholding patternsYesYesYesYesYesAnnual general meetingsYesYesYesYesYesDisclosures1.Registrar And Transfer agent2.Plant location3.Address for correspondence4.Annual general meeting’s Date & time5.Venue for Annual general meeting6.Listing of stock exchange7.Stock code8.Registered Office9.Directors’ responsibility statement10.Directors’ report11.Auditors’ report12.Basis of related party transctions13.Disclosure of accounting treatment14.Board disclosures-Risk management15.Proceeds from public issues,right issues etc.16.CEO/CFO certification17.report on Corporate governance18.Shareholders19.ComplianceYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesCompliances CertificatesYesYesYesYesYesDeclaretion for code of conduct as per clause-49YesYesYesYesYescertification in terms of clause-49(V)YesYesYesYesYesAuditor’s certificateYesYesYesYesYesDemat transfer informationYesYesYesYesYesStatement of physical transfer of shares & electronic transferYesYesYesYesYesInvestors-financialsYesYesYesYesYesPolicies regarding1.Human resource depatment2.Industrial relations3.Corporate social responsibilty4.Safety and health5.Others like IT,Quality,Public Recognition etcYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesYesCode of conductYesYesYesYesYesOther provisions as to Board nad MeetingsYesYesYesYesYes<br />CHAPTER 5<br />SUMMARY OF FINDINGS,<br />SUGGESTIONS AND CONCLUSION<br />5.1 General Finding<br /><ul><li>Clause 49 of the Listing Agreement to the Indian stock exchange comes into effect from 31 December 2005. It has been formulated for the improvement of corporate governance in all listed companies.
As per Clause 49, for a company with an Executive Chairman, at least 50 per cent of the board should comprise independent directors.
In the case of a company with a non-executive Chairman, at least one-third of the board should be independent directors.
It would be necessary for chief executives and chief financial officers to establish and maintain internal controls and implement remediation and risk mitigation towards deficiencies in internal controls, among others.
Clause VI (ii) of Clause 49 requires all companies to submit a quarterly compliance report to stock exchange in the prescribed form. The clause also requires that there be a separate section on corporate governance in the annual report with a detailed compliance report.
A company is also required to obtain a certificate either from auditors or practicing company secretaries regarding compliance of conditions as stipulated, and annex the same to the director's report.
The clause mandates composition of an audit committee; one of the directors is required to be "financially literate".
Clause 49, when it was first added, was intended to introduce some basic corporate governance practices in Indian companies and brought in a number of key changes in governance and disclosures (many of which we take for granted today).
It specified the minimum number of independent directors required on the board of a company.
The setting up of an Audit committee, and a Shareholders’ Grievance committee, among others, were made mandatory as were the Management’s Discussion and Analysis (MD&A) section and the Report on Corporate Governance in the Annual Report, and disclosures of fees paid to non-executive directors.
A limit was placed on the number of committees that a director could serve on.
In late 2002, SEBI constituted the Narayana Murthy Committee to assess the adequacy of current corporate governance practices and to suggest improvements. Based on the recommendations of this committee, SEBI issued a modified Clause 49 on October 29, 2004 (the ‘revised Clause 49’) which came into operation on January 1, 2006.
The revised Clause 49 has suitably pushed forward the original intent of protecting the interests of investors through enhanced governance practices and disclosures.
Five broad themes predominate. The independence criteria for directors have been clarified. The roles and responsibilities of the board have been enhanced. The quality and quantity of disclosures have improved. The roles and responsibilities of the audit committee in all matters relating to internal controls and financial reporting have been consolidated, and the accountability of top management—specifically the CEO and CFO—has been enhanced. Within each of these areas, the revised Clause 49 moves further into the realm of global best practices (and sometimes, even beyond.</li></ul>5.2 Specific Findings<br />1.The company has optimum combination of executives and non-executive directors with not less than fifty percentage of the Board of directors comprising of non-executive directors.<br />2.The Audit committee of the board of directors is constituted in compliance with corporate governance.<br />3.In continuation of practices of good corporate governance,the board has constituted the remuneration committee of Directorsof the company.<br />4.The Shareholders’ Grievance committee of the board,inter-alia,approves issue of duplicate share certificates and oversees.<br />5. The Board of directors have delegated the power of approving transfer of securities to the Registrar subject to notification of the same to the company secretary.<br />6.Company has disclosed the status of total no. of requests/complaints and general shareholders information.<br />7. The financial results were published in business standards/Financila express and also posted on website.<br />8. Company has disclosed Directors’ responsibility statement.<br />9. Company has received proceeds from public issues,right issues,preferential issues etc.<br />10. Details of fixed component and performance linked incentives,along with the performance criteria are disclosed.<br />11.Comapny has separate policy for human resource department,community services,health and safety.<br />5.3 Suggestions to improve overall structure of corporate governance<br />1.Current norms of corporate governance are efficient but at Initial level. There must be improvement in terms of code of conduct of corporate governance. <br />2.More and more development programmes should be conduct to improve the awareness level of Investors. <br />3.Implementation of current norms should be made efficient. <br />4.Company should appoint more internal auditor for audit committee.<br />5.Cross check step should be implemented for betterment of investors.<br />6.Stakeholders value enhancement steps should be considered at large. <br />7.More and More programmes should be arranged to educate shareholder about corporate governance.<br />5.4 CONCLUSION<br />Corporate governance is a way of life and not a set of rules, a way of life that necessitates taking into account the stakeholder’s interest in every business decision.<br />BIBLIOGRAPHY<br /><ul><li>Websites