Corporate Governance

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  • In Ayodhya Kand of Ramayana, Lord Rama explains the concept of Governance as “ to provide the maximum happiness for the maximum number of people for the maximum period, based as it is on the principles of Dharma –righteousness and moral values.”
  • OECD-Organisation for Economic Co-operation and Development.
  • Examples: Collusion is when two employees work together to defraud the system. Perhaps each by themselves do not have permissions, but together they do. Conflict of Interest : In government we see this: Industry lobbyists head up a government department that enforces government policy. In business, a person hires his relative without comparing against other vendors. Corporate espionage : Example: It has been reported that one ivy-league college hacked in to determine what another was doing relative to offering incoming freshman acceptances. Financial Statement Fraud: Accounts are often modified to make income look high (for stock prices) or low (for tax purposes). These modifications can occur via account ‘adjustments’, input or requested at a high managerial level. Does anyone see what a computer scientist can do about this? Not yet? Keep thinking…
  • Lapping : An employee steals money from an account A, then moves money from account B to A, then moves money from C to B, and continually does this to hide stolen money. Shell Company : An employee creates a company DFloss with a postal code and simply charges money to the account on a regular basis. What can be done from a CS (programming) perspective for any of these?
  • No one person can deliver service and take money with the potential of stealing or falsifying sales. Consider a Movie Theater: Origination: The person who sells you the ticket Distribution: The person who lets you into the theater. Authorization: Ticket sales of a certain unusually large amount may require manager approval Verification: Was this done correctly? Authorization: Someone charges on VISA. VISA validates that yes, this VISA account is good.
  • The picture shows job rotation
  • Corporate Governance

    1. 1. ROLL NO.ROLL NO. NAME OF STUDENTNAME OF STUDENT COURSECOURSE 1313 Mr. Pratik ThakkarMr. Pratik Thakkar MMMMMM BUSINESS ENVIORNMENTBUSINESS ENVIORNMENT Project Name:Project Name: PRESENTED BY
    2. 2. TOPICS COVEREDTOPICS COVERED  DEFINITION & OVERVIEWDEFINITION & OVERVIEW  ROLES & RESPONSIBILITIES OF DIRECTOR,ROLES & RESPONSIBILITIES OF DIRECTOR, DISCLOSURES & TRANSPERANCYDISCLOSURES & TRANSPERANCY  MISCONDUCTS & SCAMSMISCONDUCTS & SCAMS  COMPANIES THAT SET AN EXAMPLE OFCOMPANIES THAT SET AN EXAMPLE OF BEST CORPORATE GOVERNANCEBEST CORPORATE GOVERNANCE
    3. 3. 11STST PARTPART  DEENITION , MEANING & OVER VIEWDEENITION , MEANING & OVER VIEW
    4. 4. About Corporate GovernanceAbout Corporate Governance Governance Concept in ‘Ramayana’Governance Concept in ‘Ramayana’ To provideTo provide “the maximum happiness for the“the maximum happiness for the maximum number of people for the maximummaximum number of people for the maximum period, based on the principles of Dharma –period, based on the principles of Dharma – righteousness and moral values.”righteousness and moral values.” - Ayodhya Kand
    5. 5. Corporate GovernanceCorporate Governance What is Governance?What is Governance? ““Corporate governance is the system by whichCorporate governance is the system by which companies are directed and controlled”companies are directed and controlled”      Cadbury Code 1992  Cadbury Code 1992 “Corporate Governance is the application of best management practices, Compliance of law in true letter and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders”. -The Institute of Company Secretaries of India
    6. 6. Driving Forces of CG in IndiaDriving Forces of CG in India 1)1) Unethical Business PracticesUnethical Business Practices Unethical Business Practices is theUnethical Business Practices is the Quickest Way to Your DownfallQuickest Way to Your Downfall  Security Scams ---Harshad MehthaSecurity Scams ---Harshad Mehtha Security ScamSecurity Scam  Equity allotments at discount rates to theEquity allotments at discount rates to the controlling groupscontrolling groups  Disappearance of Companies (1993-94)Disappearance of Companies (1993-94) - around 4,000- around 4,000  companies with 25,000 crores withoutcompanies with 25,000 crores without starting businessstarting business  Misdeed of CompaniesMisdeed of Companies  Plantation, Sheep rearing, etc.Plantation, Sheep rearing, etc.
    7. 7. 2)2) Impact ofImpact of GlobalizationGlobalization  Integration with Foreign MarketIntegration with Foreign Market  Foreign Investors expectationsForeign Investors expectations  New Business Opportunities ---New Business Opportunities --- IT & ITES, BPO etc.,IT & ITES, BPO etc.,  New Capital formation – FII, FDINew Capital formation – FII, FDI 3)3) Impact ofImpact of PrivatisationPrivatisation  New structure of ownershipNew structure of ownership  Multinational CompaniesMultinational Companies
    8. 8.  The initiative in India was initially driven byThe initiative in India was initially driven by an industry association, the Confederationan industry association, the Confederation of Indian Industry (CII)of Indian Industry (CII)  In December 1995, CII set up a taskIn December 1995, CII set up a task force to design a voluntary code offorce to design a voluntary code of corporate governance.corporate governance.  The final draft of this code was widelyThe final draft of this code was widely circulated in 1997.circulated in 1997.  In April 1998, the code was released. ItIn April 1998, the code was released. It was calledwas called Desirable CorporateDesirable Corporate Governance: A Code.Governance: A Code.  Between 1998 and 2000, over 25 leadingBetween 1998 and 2000, over 25 leading companies voluntarily followed the code:companies voluntarily followed the code: Bajaj Auto, Hindalco, Infosys, Dr.Bajaj Auto, Hindalco, Infosys, Dr. Reddy’s Laboratories, Nicholas Piramal,Reddy’s Laboratories, Nicholas Piramal, Bharat Forge, BSES, HDFC, ICICI andBharat Forge, BSES, HDFC, ICICI and many othersmany others Brief history of Corporate Governance in India
    9. 9.  Following CII’s initiative, the Securities and Exchange Board of IndiaFollowing CII’s initiative, the Securities and Exchange Board of India (SEBI) set up a committee under Kumar Mangalam Birla to design a(SEBI) set up a committee under Kumar Mangalam Birla to design a mandatory-cum-recommendatory code for listed companiesmandatory-cum-recommendatory code for listed companies  The Birla Committee Report was approved by SEBI in December 2000The Birla Committee Report was approved by SEBI in December 2000  Became mandatory for listed companies through the listingBecame mandatory for listed companies through the listing agreement, and implemented according to a rollout plan:agreement, and implemented according to a rollout plan:  2000-01: All Group A companies of the BSE or those in the S&P2000-01: All Group A companies of the BSE or those in the S&P CNX Nifty index… 80% of market cap.CNX Nifty index… 80% of market cap.  2001-02: All companies with paid-up capital of Rs.100 million or2001-02: All companies with paid-up capital of Rs.100 million or more or net worth of Rs.250 million or more.more or net worth of Rs.250 million or more.  2002-03: All companies with paid-up capital of Rs.30 million or2002-03: All companies with paid-up capital of Rs.30 million or moremore Brief history of Corporate Governance in India
    10. 10.  Following CII and SEBI, the Department of CompanyFollowing CII and SEBI, the Department of Company Affairs (DCA) modified the Companies Act, 1956 toAffairs (DCA) modified the Companies Act, 1956 to incorporate specific corporate governance provisionsincorporate specific corporate governance provisions regarding independent directors and auditregarding independent directors and audit committees.committees.  In 2001-02, certain accounting standards wereIn 2001-02, certain accounting standards were modified to further improve financial disclosures.modified to further improve financial disclosures. These were:These were:  Disclosure of related party transactions.Disclosure of related party transactions.  Disclosure of segment income: revenues, profitsDisclosure of segment income: revenues, profits and capital employed.and capital employed.  Deferred tax liabilities or assets.Deferred tax liabilities or assets.  Consolidation of accounts.Consolidation of accounts.  Initiatives are being taken to (i) account for ESOPs,Initiatives are being taken to (i) account for ESOPs, (ii) further increase disclosures, and (iii) put in place(ii) further increase disclosures, and (iii) put in place systems that can further strengthen auditors’systems that can further strengthen auditors’ independence.independence. Brief history of Corporate Governance in India
    11. 11. Scope of CorporateScope of Corporate GovernanceGovernance ““Corporate Governance is concerned with holding theCorporate Governance is concerned with holding the balance between economic and social goals andbalance between economic and social goals and between individual and communal goals. The aim is tobetween individual and communal goals. The aim is to align as nearly as possible the interest of individuals,align as nearly as possible the interest of individuals, corporations and society.corporations and society.  The foundation of any structure of corporate governanceThe foundation of any structure of corporate governance is disclosure. Openness is the basis of public confidenceis disclosure. Openness is the basis of public confidence in the corporate system and funds will flow to centers ofin the corporate system and funds will flow to centers of economic activity that inspire trust.”economic activity that inspire trust.” -Sir Adrian Cadbury.-Sir Adrian Cadbury.
    12. 12.  ““Shareholders role in governance is to appoint theShareholders role in governance is to appoint the directors and the auditors. Poor corporatedirectors and the auditors. Poor corporate governance has ruined companies, sent directors togovernance has ruined companies, sent directors to jail, and destroyed a global accounting firm andjail, and destroyed a global accounting firm and threatened economies and governments.”threatened economies and governments.”
    13. 13. Cadbury Report (1992)Cadbury Report (1992)  Wider use of INDEPENDENT DIRECTORWider use of INDEPENDENT DIRECTOR  Introduction of AUDIT COMMITTEEIntroduction of AUDIT COMMITTEE  Separation between CHAIRMAN and CEOSeparation between CHAIRMAN and CEO  Adherence to detailed code of BESTAdherence to detailed code of BEST PRACTICES.PRACTICES.
    14. 14. 2 ND PART2 ND PART  DISCLOSURES ,DISCLOSURES , ROLES &ROLES & RESPONSIBILITIESRESPONSIBILITIES OF DIRECTOR, &OF DIRECTOR, & TRANSPERANCYTRANSPERANCY
    15. 15. Board of Directors: frequency of meetings andBoard of Directors: frequency of meetings and compositioncomposition  Board must meet at least four times a year,Board must meet at least four times a year, with a maximum time gap of four monthswith a maximum time gap of four months between two successive meetings.between two successive meetings.  If the chairman of the Company is a non-If the chairman of the Company is a non- executive then one-third of the boardexecutive then one-third of the board should consist of independent directors,should consist of independent directors, and 50% otherwise.and 50% otherwise.  ‘‘Independent’ defined as those directorsIndependent’ defined as those directors who, apart from receiving director’swho, apart from receiving director’s remuneration do not have any otherremuneration do not have any other monetary relationship or transactions withmonetary relationship or transactions with the company, its promoters, managementthe company, its promoters, management or subsidiaries, which in the view of theor subsidiaries, which in the view of the board may affect independence ofboard may affect independence of judgment.judgment. Mandated CG Guidelines and Disclosures
    16. 16. Scope of Code of Corporate Governance,Scope of Code of Corporate Governance, 20022002 The code provides a framework for efficientThe code provides a framework for efficient and transparent running of listedand transparent running of listed companies to enhance shareholder value.companies to enhance shareholder value. The regulators need to be vigilant toThe regulators need to be vigilant to enforce the code in its true spirit.enforce the code in its true spirit.   
    17. 17. The Code of CorporateThe Code of Corporate GovernanceGovernance  Non Executive DirectorNon Executive Director  Qualification of a DirectorQualification of a Director  Tenure of DirectorTenure of Director  Governance Policies of theGovernance Policies of the DirectorsDirectors  Information to DirectorsInformation to Directors  Orientation CoursesOrientation Courses  CFO/ Co. SecCFO/ Co. Sec  Corporate and FinancialCorporate and Financial ReportingReporting  Audit CommitteesAudit Committees
    18. 18. Qualification and Eligibility to Act as a DirectorQualification and Eligibility to Act as a Director  Director, not to be a director in more thanDirector, not to be a director in more than ten other listed companies.ten other listed companies.  ii. Director needs:ii. Director needs: a. to be registered as a National Tax Payera. to be registered as a National Tax Payer b. Not to a defaulter as convicted by courtb. Not to a defaulter as convicted by court of a banking company, developmentof a banking company, development financial institution, or a non-bankingfinancial institution, or a non-banking financial institution or as a member by thefinancial institution or as a member by the Stock Exchange.Stock Exchange.  iii Not to be director if spouse isiii Not to be director if spouse is engaged in the business of Stock Brokerageengaged in the business of Stock Brokerage (voluntary)(voluntary) TENURE OF OFFICE OFTENURE OF OFFICE OF DIRECTORDIRECTOR    iv. Three years, vacancy to be filled iniv. Three years, vacancy to be filled in 30 days30 days
    19. 19. Responsibilities, Powers andResponsibilities, Powers and Functions of Board of DirectorsFunctions of Board of Directors Every listed company shall ensureEvery listed company shall ensure a. Statement of Ethics and Business practices is prepareda. Statement of Ethics and Business practices is prepared b. Board of directors to adopt vision statement, and overallb. Board of directors to adopt vision statement, and overall corporate strategy; formulate significant policies (for thecorporate strategy; formulate significant policies (for the purpose of risk management, marketing, etc.)purpose of risk management, marketing, etc.) c. Establish internal controlc. Establish internal control d. Documentation by resolutions passed in meetings on alld. Documentation by resolutions passed in meetings on all serious issues. i.e. investment and dis-investment of funds,serious issues. i.e. investment and dis-investment of funds, loans, write-off of bad debts etc.loans, write-off of bad debts etc.
    20. 20. ee. Appointment etc. of Chief Executive to be. Appointment etc. of Chief Executive to be determined by the board.determined by the board. f. Investment policy of modaraba institution to bef. Investment policy of modaraba institution to be approved and reported in annual report.approved and reported in annual report.  Significant issues to be placed for decision by theSignificant issues to be placed for decision by the board of directors (i.e. annual business plan,board of directors (i.e. annual business plan, budgets, joint ventures etc.) budgets, joint ventures etc.)   Orientation courses for directorsOrientation courses for directors.. Responsibilities, Powers andResponsibilities, Powers and Functions of Board of DirectorsFunctions of Board of Directors
    21. 21. Qualification of CFO and CSQualification of CFO and CS CFO has to be:CFO has to be: a. professional accountant ; ora. professional accountant ; or b.   graduate with 5 yrs experience in handling financialb.   graduate with 5 yrs experience in handling financial affairs in a listed company or a bank.affairs in a listed company or a bank. CS has to be:CS has to be: a. professional accountant ; ora. professional accountant ; or b.   member of a recognized body of corporate/charteredb.   member of a recognized body of corporate/chartered secretaries orsecretaries or c.  lawyer ;c.  lawyer ; oror d.  a graduate with 5 yrs experience of handling corporated.  a graduate with 5 yrs experience of handling corporate affairs.affairs.
    22. 22. Financial ReportingFinancial Reporting CORPORATE AND FINANCIAL REPORTINGCORPORATE AND FINANCIAL REPORTING FRAMEWORKFRAMEWORK Directors report to shareholders. Give complete and candidDirectors report to shareholders. Give complete and candid position of the company.position of the company. RESPONSIBILITY FOR FINANCIAL REPORTINGRESPONSIBILITY FOR FINANCIAL REPORTING i.i. Financial statements to be duly endorsed by CEO and CFOFinancial statements to be duly endorsed by CEO and CFO ii.ii. Secretarial compliance certificate required with annualSecretarial compliance certificate required with annual returnsreturns DISCLOSURE OF INTEREST BY A DIRECTOR.DISCLOSURE OF INTEREST BY A DIRECTOR.
    23. 23. AuditorsAuditors AUDITORS NOT TO HOLD SHARESAUDITORS NOT TO HOLD SHARES  External Auditors and their spouseExternal Auditors and their spouse restricted to purchase shares in therestricted to purchase shares in the company they are auditing.company they are auditing.    AUDIT COMMITTEEAUDIT COMMITTEE i.i. not less than three member committeenot less than three member committee preferably from non-executive directors. preferably from non-executive directors.  ii. Committee to meet at least once everyii. Committee to meet at least once every quarter.quarter. iii. CFO to attend meetings of Audit committeeiii. CFO to attend meetings of Audit committee..
    24. 24. Enforcement issues of the CodeEnforcement issues of the Code  INTERNAL DISCIPLINEINTERNAL DISCIPLINE  Restricted to listed companiesRestricted to listed companies  Regulation under section 34(4) of theRegulation under section 34(4) of the Securities Exchange Ordinance, 1969 -Securities Exchange Ordinance, 1969 - structurally flawedstructurally flawed  Penalty- section 9(4) of the S.E. Ord, 1969Penalty- section 9(4) of the S.E. Ord, 1969  Soft lawSoft law  Voluntary in natureVoluntary in nature
    25. 25.  Based on self regulationBased on self regulation  Drivers:Drivers:  Incentive for better performanceIncentive for better performance  higher profits for the shareholdershigher profits for the shareholders  attracts more investmentattracts more investment  Shareholders (minority rights under theShareholders (minority rights under the Companies Ordinance, 1984 - sectionsCompanies Ordinance, 1984 - sections 263, 265, 290, 305)263, 265, 290, 305)  Institutional investors- eg.Institutional investors- eg. Mutual funds,Mutual funds, financial institutions, insurance companiesfinancial institutions, insurance companies (Calpers, etc)(Calpers, etc)
    26. 26. External DisciplineExternal Discipline  DriversDrivers  Stakeholders (financial and community)Stakeholders (financial and community)  Regulators (SECP Act, 1997/ CO Ord, 1984)Regulators (SECP Act, 1997/ CO Ord, 1984)  Institutional shareholdersInstitutional shareholders  environmental lawenvironmental law  labour and taxation laws.labour and taxation laws.  Stock exchangesStock exchanges  International credit rating firmsInternational credit rating firms  MediaMedia  NGOsNGOs
    27. 27. Key Areas to ConsiderKey Areas to Consider  Shareholders rightsShareholders rights  Stakeholders rights (financialStakeholders rights (financial institutions, employees, Community)institutions, employees, Community)  Corporate Social Responsibility (CSR)Corporate Social Responsibility (CSR)
    28. 28.  Public sector corporations – newPublic sector corporations – new legislations provide better governancelegislations provide better governance structure.structure.  Other corporate vehicles: cooperativeOther corporate vehicles: cooperative societies ?societies ?  Other vehicles of business: Partnerships –Other vehicles of business: Partnerships – no mention – doing big businessno mention – doing big business Corporate Governance:Corporate Governance: not limited to Companiesnot limited to Companies
    29. 29. 3 RD PART3 RD PART Misconducts & ScamsMisconducts & Scams
    30. 30. Incredible India - The Land of ScamsIncredible India - The Land of Scams
    31. 31. Internal or Occupational FraudInternal or Occupational Fraud DefinitionDefinition  Violates the employee’s responsibility toViolates the employee’s responsibility to employeremployer  Is done secretly and is concealedIs done secretly and is concealed  Is done to achieve a direct or indirectIs done to achieve a direct or indirect benefitbenefit  Costs the organization assets, revenue, orCosts the organization assets, revenue, or opportunityopportunity
    32. 32. Fraud CategoriesFraud Categories CategoriesCategories ExamplesExamples Asset Misap-Asset Misap- propriationpropriation TheftTheft of checks, cash, money orders, inventory, equipment, supplies, infoof checks, cash, money orders, inventory, equipment, supplies, info Bribery &Bribery & CorruptionCorruption BribeBribe to accept contractor bid orto accept contractor bid or Kickback, Collusion, Bid riggingKickback, Collusion, Bid rigging .. ExtortionExtortion: threat of harm if demand not met;: threat of harm if demand not met; False BillingFalse Billing: Providing lower quality, overcharging: Providing lower quality, overcharging Conflict of interestConflict of interest in power decisionin power decision Corporate espionageCorporate espionage: Sell secrets: Sell secrets FinancialFinancial StatementStatement FraudFraud Revenue OverstatementRevenue Overstatement: False sales: False sales Understating ExpensesUnderstating Expenses : Delayed or capitalization of expenses: Delayed or capitalization of expenses Overstating AssetsOverstating Assets: No write down of uncollectable accounts, obsolete: No write down of uncollectable accounts, obsolete inventory, …inventory, … Understating LiabilitiesUnderstating Liabilities: Not recording owed amounts: Not recording owed amounts Misapplication of Accounting RulesMisapplication of Accounting Rules , etc., etc.
    33. 33. VocabularyVocabulary SkimmingSkimming: Taking funds before they are recorded into company records.: Taking funds before they are recorded into company records. Check TamperingCheck Tampering : Forged or altered check for gain.: Forged or altered check for gain. Shell CompanyShell Company : Payments made to fake company.: Payments made to fake company. Payroll ManipulationPayroll Manipulation : Ghost employees, falsified hours, understated: Ghost employees, falsified hours, understated leave/vacation time.leave/vacation time. Fraudulent Write-offFraudulent Write-off : Useful assets written off as junk.: Useful assets written off as junk. CollusionCollusion : Two or more employees or employee & vendor defraud: Two or more employees or employee & vendor defraud together.together. False Shipping OrdersFalse Shipping Orders oror Missing/Defective Receiving RecordMissing/Defective Receiving Record :: Inventory theftInventory theft
    34. 34. How Fraud is DiscoveredHow Fraud is Discovered  Some fraud is discovered via multiple reporting methods,  Thus results do not sum to 100%  Tips come from Employee 64%, Anonymous 18%, Customer 11%, Vendor 7% How Fraud is Discovered 0 5 10 15 20 25 30 35 40 Tip ByAccident Internal Audit Internal Controls External Audit Notified by Police %
    35. 35. After Fraud DiscoveredAfter Fraud Discovered WhyFraud not Reported to Law Enforcement 0 10 20 30 40 50 Fear of bad publicity Internal discipline sufficient Private settlement Too costlyto pursue % Discipline - May include repayment Termination of Employment Civil or Criminal legal action
    36. 36.  Greed, graft, politics,Greed, graft, politics, bribery, dirty money.bribery, dirty money. Just another day inJust another day in the life of a nationthe life of a nation still rated among thestill rated among the most corrupt in themost corrupt in the world. Scan theworld. Scan the scams that havescams that have grabbed headlines,grabbed headlines, destroyeddestroyed reputations and leftreputations and left many people poorer.many people poorer.
    37. 37. Who Does Fraud?Who Does Fraud?  Most internal frauds committed by longer-Most internal frauds committed by longer- tenured, older, and more educated stafftenured, older, and more educated staff  Executives commit most expensive fraudExecutives commit most expensive fraud  4-5 times more expensive than managers4-5 times more expensive than managers  Men & women commit fraud in nearly equalMen & women commit fraud in nearly equal proportions, but men’s are more expensiveproportions, but men’s are more expensive  92% have no criminal convictions related to92% have no criminal convictions related to fraudfraud  To steal a lot of money, you must have aTo steal a lot of money, you must have a position of power and access: highly degreedposition of power and access: highly degreed olderolder
    38. 38. CISA Review Manual 2009 Segregation of DutiesSegregation of Duties Origination Verification Authorization Distribution Double-checks Approves Acts on
    39. 39. Red flags software can detectRed flags software can detect  Out-of-sequence checksOut-of-sequence checks  Large number of voids or refunds made byLarge number of voids or refunds made by employee or customeremployee or customer  Manually prepared checks from large companyManually prepared checks from large company  Payments sent to nonstandard (unofficial)Payments sent to nonstandard (unofficial) addressaddress  Unexplained changes in vendor activityUnexplained changes in vendor activity  Vendors with similar names or addressesVendors with similar names or addresses  Unapproved vendor or new vendor with highUnapproved vendor or new vendor with high activityactivity
    40. 40. Encourage Security in ITEncourage Security in IT DepartmentsDepartments  Physical securityPhysical security  Segregation of dutiesSegregation of duties  Employee monitoringEmployee monitoring  Surprise auditsSurprise audits  Job rotationJob rotation  Examination ofExamination of DocumentationDocumentation Quality Assurance Programmer Analyst Business Analyst
    41. 41. 44THTH PARTPART Companies that set an example of bestCompanies that set an example of best Corporate GovernanceCorporate Governance
    42. 42. TATA SteelTATA Steel Corporate GovernanceCorporate Governance
    43. 43. IntroductionIntroduction  Jamshetji Tata, the founder of the Tata Group (1839-Jamshetji Tata, the founder of the Tata Group (1839- 1904) and his son, Sir Dorab Tata were belief that1904) and his son, Sir Dorab Tata were belief that business enterprises are createdbusiness enterprises are created to serve people andto serve people and share their wealth as equitably as possibleshare their wealth as equitably as possible..  It manufactures products includingIt manufactures products including rods, pipes, tubesrods, pipes, tubes and ringsand rings. However it also provides. However it also provides servicesservices such assuch as personnel and technical trainingpersonnel and technical training,, IT and Design andIT and Design and Engineering.Engineering.  These products areThese products are exportsexports primarily toprimarily to Japan, USA,Japan, USA, Middle East and South East AsianMiddle East and South East Asian countries.countries.
    44. 44. The Company’s CorporateThe Company’s Corporate Governance PhilosophyGovernance Philosophy  It introduced theIt introduced the 8 hour working day in 19128 hour working day in 1912 an amazingan amazing 36 years before the Indian government.36 years before the Indian government.  Welfare Department was introduced in 1917 and enforcedWelfare Department was introduced in 1917 and enforced by law in 1948 andby law in 1948 and Maternity Benefit was introduced inMaternity Benefit was introduced in 19281928 and enforced by law in 1946. Apart from Maternityand enforced by law in 1946. Apart from Maternity benefits there arebenefits there are schooling facilities and leave with payschooling facilities and leave with pay..  The CompanyThe Company emphasises the need for full transparencyemphasises the need for full transparency and accountabilityand accountability in all its transactions, in orderin all its transactions, in order to protectto protect the interests of its stakeholdersthe interests of its stakeholders..
    45. 45. Board of DirectorsBoard of Directors  Ratan Tata has carried forward theRatan Tata has carried forward the legacy of his forefathers in maintaininglegacy of his forefathers in maintaining higher degree ofhigher degree of transparency,transparency, accountability and corporate socialaccountability and corporate social responsibilityresponsibility..  Apart from him there are several BoardApart from him there are several Board of director Mr. B. Muthuraman, Mr.of director Mr. B. Muthuraman, Mr. Nusli N. Wadia (well-known IndianNusli N. Wadia (well-known Indian Industrialist), Mr. S. M. Palia, Mr.Industrialist), Mr. S. M. Palia, Mr. Suresh Krishna, Mr. Ishaat Hussain, Dr.Suresh Krishna, Mr. Ishaat Hussain, Dr. Jamshed J. Irani, Mr. SubodhJamshed J. Irani, Mr. Subodh Bhargava, Mr. Jacobus Schraven, Mr.Bhargava, Mr. Jacobus Schraven, Mr. Andrew Robb, Mr. Hemant M. Nerurkar,Andrew Robb, Mr. Hemant M. Nerurkar, Dr. Karl-Ulrich KoehlerDr. Karl-Ulrich Koehler
    46. 46. Corporate GovernanceCorporate Governance As per SEBI’s guideline, the Company has adoptedAs per SEBI’s guideline, the Company has adopted  Tata Code of Conduct,Tata Code of Conduct,  Tata Business Excellence Model,Tata Business Excellence Model,  Global Reporting Initiatives,Global Reporting Initiatives,  Core valuesCore values
    47. 47. The Corporate Governance ModelThe Corporate Governance Model at the Tata Groupat the Tata Group  CG Model is based on the 3 importantCG Model is based on the 3 important foundations viz.foundations viz.  The Baldrige modelThe Baldrige model, from which the, from which the Tata Business Excellence ModelTata Business Excellence Model (TBEM) is evolved,(TBEM) is evolved,  Tata ValuesTata Values, which are followed by, which are followed by the Tata group companiesthe Tata group companies  The Indian Management PracticesThe Indian Management Practices Corporate Governance Baldrige Model Tata Values The Indian Management Practices Tata Steel Baldrige model
    48. 48. Five Core ValuesFive Core Values  ExcellenceExcellence : To achieve the: To achieve the highesthighest standards in workstandards in work and in the quality of theand in the quality of the goods and servicesgoods and services.. Core Values Integrity Understanding ExcellenceUnity Responsibility  Integrity : Believe that conduct the business with: Believe that conduct the business with honesty andhonesty and transparencytransparency..  UnderstandingUnderstanding : Believe in showing: Believe in showing care, respect, compassion andcare, respect, compassion and humanity for its colleagues and customershumanity for its colleagues and customers  UnityUnity : Work with customers and partners, building strong relationships: Work with customers and partners, building strong relationships based on tolerance, understanding and mutual cooperation.based on tolerance, understanding and mutual cooperation.  ResponsibilityResponsibility : Responsible, sensitive to the countries, communities and: Responsible, sensitive to the countries, communities and environmentenvironment
    49. 49. CommitteeCommittee The Company had constitutedThe Company had constituted  Audit Committee,Audit Committee,  Remuneration Committee,Remuneration Committee,  Investors’ Grievance Committee (for Shareholders)Investors’ Grievance Committee (for Shareholders)  Executive Committee of the Board,Executive Committee of the Board,  Nomination Committee,Nomination Committee,  Committee of Directors,Committee of Directors,  Ethics and Compliance Committee andEthics and Compliance Committee and  Safety, Health and Environment CommitteeSafety, Health and Environment Committee
    50. 50. General Shareholder InformationGeneral Shareholder Information Performance of TATA Steel share price to BSE Sensex 2010-11Performance of TATA Steel share price to BSE Sensex 2010-11  Unclaimed DividendUnclaimed Dividend  Global Depository Receipts (GDRs)Global Depository Receipts (GDRs)  Market Information (2010-2011)Market Information (2010-2011)  Registrar and Transfer AgentsRegistrar and Transfer Agents  Distribution of Shareholding – Ordinary sharesDistribution of Shareholding – Ordinary shares  Categories of Shareholders – Ordinary SharesCategories of Shareholders – Ordinary Shares
    51. 51.  Company’s shares are regularlyCompany’s shares are regularly traded on Bombay Stocktraded on Bombay Stock Exchange Limited and NationalExchange Limited and National Stock Exchange of India LimitedStock Exchange of India Limited..  More information of shareholdersMore information of shareholders are also available on webare also available on web General Shareholder InformationGeneral Shareholder Information
    52. 52. Means of CommunicationMeans of Communication The quarterly/half-yearly results of the Company are publishedThe quarterly/half-yearly results of the Company are published  Indian Express,Indian Express,  Financial Express,Financial Express,  Nav Shakti,Nav Shakti,  Free Press JournalFree Press Journal  Displayed on the website of the Company.Displayed on the website of the Company.  Also quarterly results are sent by email to ShareholdersAlso quarterly results are sent by email to Shareholders whosewhose email ids are registeredemail ids are registered Presentation to Institutional Investors or to analysts –Presentation to Institutional Investors or to analysts –  Official news releases and presentations madeOfficial news releases and presentations made  Analysts are posted on the Company’s website.Analysts are posted on the Company’s website.
    53. 53. Corporate GovernanceCorporate Governance
    54. 54. IntroductionIntroduction  Infosys had accepted theInfosys had accepted the recommendationsrecommendations of both theof both the CII and Kumar Mangalam Birla committeeCII and Kumar Mangalam Birla committee  Infosys provided details on high or lowInfosys provided details on high or low monthly averagesmonthly averages of share pricesof share prices inin all the stock exchangesall the stock exchanges on which theon which the companies share were listedcompanies share were listed  As per the Credit Lyonnais Securities Analysis (CLSA),As per the Credit Lyonnais Securities Analysis (CLSA), the corporate governance ratings of thethe corporate governance ratings of the Software firmsSoftware firms are higher than those of other Indian firmsare higher than those of other Indian firms and rankedand ranked second in corporate governancesecond in corporate governance among 495 emergingamong 495 emerging companiescompanies as per the surveyas per the survey
    55. 55. Infosys Technologies: The Best amongInfosys Technologies: The Best among Indian CorporateIndian Corporate  Infosys, based inInfosys, based in BangaloreBangalore, is a publicly held,, is a publicly held, ISO 9001 certified company offeringISO 9001 certified company offering informationinformation technology consulting & software servicestechnology consulting & software services  RespectedRespected across the country, with very strongacross the country, with very strong systems,systems, high ethical values & a nurturinghigh ethical values & a nurturing working atmosphereworking atmosphere..  Net income of USD 349 million and revenue ofNet income of USD 349 million and revenue of USD 1.3 billion .USD 1.3 billion .  Market capitalization (June 30, 2011)Market capitalization (June 30, 2011) Rs.159,429 CroreRs.159,429 Crore
    56. 56. AchievementsAchievements  Voted as theVoted as the Best Managed CompanyBest Managed Company in Asiain Asia  Biggest exporters of SoftwareBiggest exporters of Software  First to follow the US Generally AcceptedFirst to follow the US Generally Accepted Accounting Principles before going for NasdaqAccounting Principles before going for Nasdaq listing in 1991listing in 1991  Championed Corporate Governance in IndiaChampioned Corporate Governance in India
    57. 57. Narayana Murthy’s Global StrategyNarayana Murthy’s Global Strategy  Global Delivery ModelGlobal Delivery Model –– Producing where it is most costProducing where it is most cost effective to produce & sellingeffective to produce & selling where it is most profitable to sell.where it is most profitable to sell.  Moving up the Value ChainMoving up the Value Chain –– Getting involved in a softwareGetting involved in a software development project at thedevelopment project at the earliest stage of its life cycle.earliest stage of its life cycle.  PSPD ModelPSPD Model – Predictability of– Predictability of Revenues, Sustainability ofRevenues, Sustainability of Revenues, Profitability, De-Revenues, Profitability, De- risking.risking.
    58. 58. `Some Companies who have won`Some Companies who have won “Institute of Company Secretaries of India's”“Institute of Company Secretaries of India's” (ICSI)ICSI) National Award for Excellence in Corporate GovernanceNational Award for Excellence in Corporate Governance  Dr. Reddy’s Lab. Ltd. (2010)Dr. Reddy’s Lab. Ltd. (2010)  BSESBSES  Larsen & Toubro Ltd. (2010)Larsen & Toubro Ltd. (2010)  Maruti Suzuki India Ltd.Maruti Suzuki India Ltd. (2009)(2009)  Mahindra & Mahindra LtdMahindra & Mahindra Ltd (2008)(2008)  Tata Consultancy ServicesTata Consultancy Services (TCS) (2007)(TCS) (2007)  Trident Group (2006)Trident Group (2006)  Dabur India Ltd.(2005)Dabur India Ltd.(2005)  Infosys Technologies Ltd.Infosys Technologies Ltd. (2005)(2005)  Hero Honda Motors LtdHero Honda Motors Ltd (2004)(2004)  Wipro Ltd (2004)Wipro Ltd (2004)  HDFC (2003)HDFC (2003)  Tata Iron and SteelTata Iron and Steel Company Ltd (TISCO)Company Ltd (TISCO) (2002)(2002)
    59. 59. ConclusionConclusion  From this project we get to learn what is basically CorporateFrom this project we get to learn what is basically Corporate Governance and why is it actually needed in companies. We alsoGovernance and why is it actually needed in companies. We also learnt about the guidelines set by SEBI for Corporate Governance.learnt about the guidelines set by SEBI for Corporate Governance. We studied a company Tata Steel and Infosys especially the sectionWe studied a company Tata Steel and Infosys especially the section on Corporate Governance and tried to understand as to howon Corporate Governance and tried to understand as to how compliant they are in following the SEBI guidelines.compliant they are in following the SEBI guidelines.

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