The document provides an overview of corporate governance in India. It defines corporate governance as ethics that govern how a company is directed and controlled. The Securities and Exchange Board of India (SEBI) mandates corporate governance requirements for listed companies through a clause in the listing agreement. SEBI introduced corporate governance reforms in the late 1990s in response to several stock market scams to improve transparency, minimize losses to stakeholders and restore investor confidence. Key committees like the Kumaramangalam Birla Committee and Narayana Murthy Committee have reviewed corporate governance standards and made recommendations to further improve practices for boards of directors, audit committees, disclosures and compliance.

1. CORPORATE
GOVERNANCE
By Jayanth Viswanathan
27.08.2013
(total slides 29)
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2. WHAT IS CORPORATE
GOVERNANCE
To understand that, we need to know what
is “Governance”
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3. GOVERNANCE = ETHICS
 Ethics as per Oxford Dictionary is
“moral principles that govern a person’s
behavior or the conducting of an activity ”
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4. Who mandates
“Corporate Governance”
 Securities Exchange Board of India,
known as “SEBI” mandates Corporate
Governance in listing agreement.
4

5. Whom are these “Ethics” applicable to
 Listed Companies.
 Why only listed companies? Why not other
companies?
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6. Why was “Corporate Governance”
mandated

SCAMS in Secondary market
Pre Y2K scams:
 1. Harshad Mehta scam – year 1992
 2. NBFC Companies Scam- year 1995-1998
 3. CRB Finance and Mutual Funds Scam of Year 1995-1997
 4. Plantation’s Company scam- year 1997-1999
 5. Vanishing Company’s Scam year 1995-1999
 6. Name Changing Scam year 1999-2000
 7. Dot Com. Company Scam year 1999 2000
 8. US-64 Disaster “Gadbud” of year 1997-1998
 9. Ketan parekh Scam year 1999 2001
 10. UTI Fiasco “Gadbad” year 1994 2000
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7. Why was “Corporate Governance”
mandated
 After effects of such scams:
Loss to the exchequer
Loss of faith by Stake holders
Loss of faith by Share holders
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8. Why was “Corporate Governance”
mandated
 Thus in order to mitigate further losses,
SEBI came up with “Corporate
Governance” also called “Clause 49”
 Effects of CG:
Transparency in working of the company
Loss to exchequers were “minimized”
Faith of Stake holders and share holders
restored.
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9. Who drafted Corporate Governance
 First Corporate Governance was drafted
by Confederation of Indian Industry (CII) in
the year 1998.
 It was a voluntary code, since it was not
recognized by any statutory authority.
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10. Who drafted Corporate Governance
 Subsequently the Statutory Authorities
felt
that under Indian conditions a statutory
rather than a voluntary code would be
more purposeful, and meaningful.
 First Committee on Corporate Governance
was set:
Kumaramangalam
Birla Committee - 1999
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11. KUMARAMANAGALAM BIRLA COMMITTEE



ROLE OF THE COMMITTEE
to suggest suitable amendments to the listing agreement executed
by the stock exchanges with the companies and any other
measures to improve the standards of corporate governance in the
listed companies, in areas such as continuous disclosure of material
information, both financial and non-financial, manner and frequency
of such disclosures, responsibilities of independent and outside
directors;
to draft a code of corporate best practices; and
to suggest safeguards to be instituted within the companies to deal
with insider information and insider trading
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12. Key objectives of KBC
 enhancement of shareholder value,
keeping in view the interests of other
stakeholder
 Stakeholders: includes suppliers,
customers, creditors, the bankers, the
employees of the company, the
government and the society at large
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13. Narayana Murthy Committee 2003
Purpose: Review of Corporate
Governance Code
Reason: Improve Corporate Governance
standards in India
Perspective: (a) to evaluate the adequacy of
the existing practices
(b) to further improve the existing practices.
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14. Clause 49
 Listing
Agreement as on date has 55
Clauses.
 Clause
49 deals with Corporate
Governance.
Corporate Governance
Mandatory
Disclosures
Non Mandatory
Disclosures
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15. Mandatory Disclosure
Board of Directors
II. Audit Committee
III. Subsidiary Companies
IV. Disclosures
V. CEO/CFO Certification
VI. Report of Corporate Governance
VII. Compliance
I.
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16. I. Board of Directors
Board of Directors
Executive
Non Executive
Independent
Non Independent
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17. Non Executive Director
 Criteria
No
to be an Independent Director
pecuniary material relationship with Company,
Promoters, Directors, Senior Management,
Holding, subsidiary or associate Company
Is not a relative of any of the Directors
Is/was not an employee of the company or was
partner of audit firm or legal firm which has
pecuniary interest in the past 3 years
Is not a substantial shareholder, i.e. not more than
2% shareholding
Is not less than 21 years old
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18. Board of Directors
 Strength
of Board
If
Chairman is Non - Executive Director, then 1/3 of
Directors should be Independent Directors.
If Chairman is Executive Director, then ½ the
Directors should be Independent Directors.
If Chairman is Non - Executive promoter Director,
then also ½ the Directors of the Board should be
Independent Directors.
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19. Board of Directors
 Board
Meeting Frequency:
 Four
times a year
 Maximum gap of Four Months only

No. of Directorships/Chairmanships:
 Member
of not more than 10 Committees and cannot be
Chairman of more than 5 committees

Code of Conduct:
 Board
shall draft a Code of Conduct and shall be applicable
to all Board Members and Senior Management.
 It shall be posted on the Website of the Company.
 Information
 As
to be made available to the Board
per Annexure I A given to you.
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20. II. Audit Committee
A
Sub Committee of the Board
 Members should be Financially Literate
 Chairman of Audit Committee to be
Independent
 Company Secretary to be the Secretary to
the Committee
 Audit Committee Meeting Frequency:
Four
times a year, with maximum gap of Four
Months
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21. Powers and Role of Audit Committee
 Overview
Financials Statements –
Quarterly and Annual.
 Review performance of the company
 Appoint & re-appoint Statutory and
Internal Auditors
 Approval of appointment of CFO
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22. III. Subsidiary Companies
 “Material
Non-Listed Indian Subsidiary”
 Atleast one independent director of
Holding company to be in subsidiary
company.
 Audit Committee of Holding company to
review financials of Subsidiary company.
 Minutes of Subsidiary to be placed before
Board of Holding Listed company.
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23. IV. Disclosures
A. Basis of Related Party Transactions
B. Disclosure of Accounting Treatment
C. Board Disclosure – Risk Management
D. Proceeds from Public, Rights,
Preferential
Issues
E. Remuneration of Directors
F. Management
G. Shareholder
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24. V. CEO/CFO Certification
 CEO-
Managing Director and CFO –
Director/Head Finance shall submit a
certificate to the Board on following:
Reviewed
financials statement and it contains
no untrue or misleading statements.
Financial Statements present true and fair
view.
They accept responsibility for establishing and
maintaining Internal control for financial report
and rectifying deficiencies, if any.
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25. VI. Report on Corporate Governance
 Annual
Report should contain a separate
section on Corporate Governance with
detailed compliance report. Format as per
Annexure I-C given to you.
 Quarterly
Compliance certificate should be
submitted to Stock Exchange. Format as
per Annexure I-B given to you.
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26. VII. Compliance
A
Certificate from either the Auditor or a
Practicing Company Secretary on
compliance of conditions of corporate
Governance should form part of Directors
Report.
26

27. Non Mandatory Compliance
 There
are certain Non- mandatory
provisions in this clause, which can be
implemented at the discretion of the
Company.
 Details
of which are available in Annexure
I D as given to you.
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28. Latest update

SEBI has vide it PR 4/2013 dated January 04, 2013
issued a consultative paper to review the norms of
Corporate Governance.

Main Objective:
 To bring in line with the principles and text of
Companies Bill, 2012.

Suggestions shall be made and the Committee set up
for the purpose will review the suggestions and bring
ammendments to Clause 49.
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29. THE END
 O,
what a goodly outside falsehood hath!
William Shakespeare
Email: jayanthviswanathan@gmail.com
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