This document discusses corporate governance, including its objectives, global initiatives, and implementation in India. It outlines committees established to promote corporate governance in the UK, Singapore, US, and India. Key recommendations include establishing audit committees, defining roles of directors and boards, and increasing transparency through disclosure requirements. The goal of corporate governance is to direct companies in a transparent manner to maximize stakeholder value.

1. CORPORATE
GOVERNANCE

2. CREATED BY-

3. CORPORATE GOVERNANCE
 WHAT IS CORPORATE GOVERNANCE –
PROCESSES AND STRUCTURE BY WHICH
BUSINESS AND AFFAIRS OF CORPORATE SECTOR
IS DIRECTED AND MANAGED
 OBJECTIVE OF CORPORATE GOVERNANCE a)
TO BUILD UP AN ENVIRONMENT OF TRUST AND
CONFIDENCE AMONGST THOSE HAVING
COMPETING AND CONFLICTING INTEREST
b) TO ENHANCE SHAREHOLDERS’ VALUE AND
PROTECT THE INTEREST OF OTHER
STAKEHOLDERS BY ENHANCING THE CORPORATE
PERFORMANCE AND ACCOUNTABILITY

4. GLOBAL INITIATIVES TO IMPOSE
CORPORATE GOVERNANCE
 SIR ADRIAN CADBURY COMMITTEE
– TO ADDRESS THE ISSUES RELATED TO
CORPORATE GOVERNANCE IN UNITED KINGDOM
 CORPORATE GOVERNANCE REPORT OF
SINGAPORE GOVERNMENT
 SARBANES-OXLEY ACT, 2002 BY THE AMERICAN
CONGRESS WHICH CAME INTO EFFECT IN JULY
2002 – TO ADDRESS ALL THE ISSUES
ASSOCIATED WITH CORPORATE FAILURES TO
ACHIEVE QUALITY GOVERNANCE AND TO
RESTORE INVESTORS’ CONFIDENCE

5. IMPLEMENTATION OF CORPORATE
GOVERNANCE IN INDIA
 SHRI KUMAR MANGALAM COMMITTEE
– CONSTITUTED IN MAY 1999 TO PROMOTE AND RAISE
THE STANDARD OF CORPORATE GOVERNANCE IN INDIA
MANDATORY RECOMMENDATIONS OF BIRLA
COMMITTEE:
 APPLIES TO LISTED COMPANIES WITH PAID UP CAPITAL
OF Rs.3 CRORE AND ABOVE
 COMPOSITION OF BOARD OF DIRECTORS – OPTIMUM
COMBINATION OF EXECUTIVE & NON-EXECUTIVE
DIRECTORS
 AUDIT COMMITTEE – WITH 3 INDEPENDENT DIRECTORS
WITH ONE HAVING FINANCIAL AND ACCOUNTING
KNOWLEDGE.

6. MANDATORY RECOMMENDATIONS
OF BIRLA COMMITTEE
 REMUNERATION COMMITTEE
 BOARD PROCEDURES – ATLEAST 4 MEETINGS OF THE
BOARD IN A YEAR WITH MAXIMUM GAP OF 4 MONTHS
BETWEEN 2 MEETINGS. TO REVIEW OPERATIONAL
PLANS, CAPITAL BUDGETS, QUARTERLY RESULTS,
MINUTES OF COMMITTEE’S MEETING.
 DIRECTOR SHALL NOT BE A MEMBER OF MORE THAN 10
COMMITTEE AND SHALL NOT ACT AS CHAIRMAN OF
MORE THAN 5 COMMITTEES ACROSS ALL COMPANIES
 MANAGEMENT DISCUSSION AND ANALYSIS REPORT
COVERING INDUSTRY STRUCTURE, OPPORTUNITIES,
THREATS, RISKS, OUTLOOK, INTERNAL CONTROL SYSTEM
 INFORMATION SHARING WITH SHAREHOLDERS

7. NON-MANDATORY RECOMMENDATIONS
OF BIRLA COMMITTEE
 ROLE OF CHAIRMAN
 REMUNERATION COMMITTEE OF BOARD
 SHAREHOLDERS’ RIGHT FOR RECEIVING HALF YEARLY
FINANCIAL PERFORMANCE
 POSTAL BALLOT COVERING CRITICAL MATTERS LIKE
ALTERATION IN MEMORANDUM ETC
 SALE OF WHOLE OR SUBSTANTIAL PART OF THE
UNDERTAKING
 CORPORATE RESTRUCTURING
 FURTHER ISSUE OF CAPITAL
 VENTURING INTO NEW BUSINESSES

8. IMPLEMENTATION OF RECOMMENDATIONS
OF BIRLA COMMITTEE
 BY INTRODUCTION OF CLAUSE 49 IN THE LISTING
AGREEMENT WITH STOCK EXCHANGES
PROVISIONS OF CLAUSE 49
 COMPOSITION OF BOARD - IN CASE OF FULL TIME
CHAIRMAN, 50% NON-EXECUTIVE DIRECTORS AND 50%
EXECUTIVE DIRECTORS
 CONSTITUTION OF AUDIT COMMITTEE – WITH 3
INDEPENDENT DIRECTORS WITH CHAIRMAN HAVING SOUND
FINANCIAL BACKGROUND. FINANCE DIRECTOR AND
INTERNAL AUDIT HEAD TO BE SPECIAL INVITEES AND
MINIMUM 3 MEETINGS TO BE CONVENED.
RESPONSIBLE FOR REVIEW OF FINANCIAL PERFORMANCE 0N
HALF YEARLY/ANNUALLY BASIS; APPOINTMENT/
REMOVAL/REMUNERATION OF AUDITORS; REVIEW OF
INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY

9. CLAUSE 49 REQUIREMENTS
 REMUNERATION OF DIRECTORS – REMUNERATION OF
NON-EXECUTIVE DIRECTORS TO BE DECIDED BY THE
BOARD. DETAILS OF REMUNERATION PACKAGE, STOCK
OPTIONS, PERFORMANCE INCENTIVES OF DIRECTORS
TO BE DISCLOSED
 BOARD PROCEDURES – ATLEAST 4 MEETINGS IN A
YEAR. DIRECTOR NOT TO BE MEMBER OF MORE THAN
10 COMMITTEES AND CHAIRMAN OF MORE THAN 5
COMMITTEES ACROSS ALL COMPANIES
 MANAGEMENT DISCUSSION & ANALYSIS REPORT –
SHOULD INCLUDE:
 INDUSTRY STRUCTURE & DEVELOPMENTS
 OPPORTUNITIES & THREATS
 SEGMENT WISE OR PRODUCT WISE PERFORMANCE

10. CLAUSE 49 REQUIREMENTS
 MANAGEMENT DISCUSSION & ANALYSIS REPORT – TO
INCLUDE:
 OUTLOOK
 RISKS & CONCERNS
 INTERNAL CONTROL SYSTEMS & ITS ADEQUACY
 DISCUSSION ON FINANCIAL PERFORMANCE
 DISCLOSURE BY DIRECTORS ON MATERIAL FINANCIAL AND
COMMERCIAL TRANSACTIONS WITH THE COMPANY
 SHAREHOLDERS INFORMATION - BRIEF RESUME OF
NEW/RE-APPOINTED DIRECTORS, QUARTERLY RESULTS TO
BE SUBMITTED TO STOCK EXCHANGES AND TO BE PLACED
ON WEB-SITE, PRESENTATION TO ANALYSTS

11. CLAUSE 49 REQUIREMENTS
 SHAREHOLDERS’/INVESTORS GRIEVANCE
COMMITTEE UNDER THE CHAIRMANSHIP OF
INDEPENDENT DIRECTOR. MINIMUM 2
MEETINGS IN A YEAR
 REPORT ON CORPORATE GOVERNANCE AND
CERTIFICATE FROM AUDITORS ON
COMPLIANCE OF PROVISIONS OF
CORPORATE GOVERNANCE AS PER CLAUSE
49 IN THE LISTING AGREEMENT

12. RECENT DEVELOPMENTS
 COMMITTEE HEADED BY SHRI NARESH CHANDRA
CONSTITUTED IN AUGUST 2002 TO EXAMINE
CORPORATE AUDIT, ROLE OF AUDITORS,
RELATIONSHIP OF COMPANY & AUDITOR
 RECOMMENDATION OF NARESH CHANDRA
COMMITTEE:
 RECOMMENDED A LIST OF DISQUALIFICATIONS FOR AUDIT
ASSIGNMENTS LIKE DIRECT RELATIONSHIP WITH
COMPANY, ANY BUSINESS RELATIONSHIP WITH CLIENT,
PERSONAL RELATIONSHIP WITH DIRECTOR
 AUDIT FIRMS NOT TO PROVIDE SERVICES SUCH AS
ACCOUNTING, INTERNAL AUDIT ASSIGNMENTS ETC. TO
AUDIT CLIENTS
 AUDITOR TO DISCLOSE CONTINGENT LIABILITIES &
HIGHLIGHT SIGNIFICANT ACCOUNTING POLICIES

13. RECENT DEVELOPMENTS
 RECOMMENDATION OF NARESH CHANDRA
COMMITTEE:
 AUDIT COMMITTEE TO BE FIRST POINT OF REFERENCE
FOR APPOINTMENT OF AUDITORS
 CEO & CFO OF LISTED COMPANY TO CERTIFY ON
FAIRNESS, CORRECTNESS OF ANNUAL AUDITED
ACCOUNTS
 REDEFINITION OF INDEPENDENT DIRECTORS – DOES NOT
HAVE ANY MATERIAL, PECUNIARY RELATIONSHIP OR
TRANSACTION WITH THE COMPANY
 COMPOSITION OF BOARD OF DIRECTORS
 STATUTORY LIMIT ON THE SITTING FEE TO NON-
EXECUTIVE DIRECTORS TO BE REVIEWED
 RECOMMENDATIONS HAVE FORMED PART OF COMPANIES
(AMENDMENT) BILL, 2003 (YET TO BE PASSED)

14. RECENT DEVELOPMENTS
 SEBI CONSTITUTED A COMMITTEE HEADED BY SHRI
N. R. NARAYANA MURTHY TO REVIEW EXISTING CODE
OF CORPORATE GOVERNANCE
 RECOMMENDATIONS:
 STRENGHTENING THE RESPONSIBILITIES OF AUDIT
COMMITTEE
 IMPROVING QUALITY OF FINANCIAL DISCLOSURES
 UTILISATION OF PROCEEDS FROM IPO
 TO ASSESS & DISCLOSE BUSINESS RISKS
 FORMAL CODE OF CONDUCT FOR BOARD
 WHISTLE BLOWER POLICY TO BE PALCE IN A COMPANY
PROVIDING FREEDOM TO APPROACH THE AUDIT
COMMITTEE
 SUBSIDIARIES TO BE REVIEWED BY AUDIT COMMITTEE OF
HOLDING COMPANY

15. CORPORATE GOVERNANCE -
ULTIMATE OBJECTIVE
TO ATTAIN HIGHEST STANDARD OF
PROCEDURES AND PRACTICES FOLLOWED
BY THE CORPORATE WORLD SO AS TO
HAVE TRANSPARENCY IN ITS
FUNCTIONING WITH AN ULTIMATE AIM TO
MAXIMISE THE VALUE OF VARIOUS
STAKEHOLDERS.