Corporate governance in India aims to maximize long-term shareholder value legally and ethically while respecting the rights of all stakeholders. It originated with voluntary codes developed by industry groups in the late 1990s and has since been regulated through listing agreement reforms requiring independent directors, audit committees, and disclosure standards. Various committees have studied corporate governance best practices and made recommendations to regulatory authorities to strengthen oversight, transparency, and protections for investors and the public interest.

1. Corporate
Governance in
India

2. What is corporate governance?
 The primary purpose of corporate leadership is to
create wealth legally and ethically.
 This translates to bringing a high level of satisfaction to
five constituencies --
customers, employees, investors, vendors and the
society-at-large.
 The raison d'être of every corporate body is to ensure
predictability, sustainability and profitability of
revenues year after year.
 - N R Narayana Murthy

3. Investor:
This
organisation
seems to be
beneficial…
Organization
No CG
Management:
It’s in my
control…
(hehehehe)

4. Investor:
This
organisation
seems to be
beneficial…
Organization
CG: Audits
Stake
and checks holders:
I’m happy
with
company’s
transparecy..

5. Fundamental Objective of Corporate
Governance
 Unlike South-East and East Asia, the corporate governance
initiative in India was not triggered by any serious
nationwide financial, banking and economic collapse
 Also, unlike most OECD countries, the initiative in India was
initially driven by an industry association, the Confederation
of Indian Industry
◦ In December 1995, CII set up a task force to design a voluntary code of
corporate governance
◦ The final draft of this code was widely circulated in 1997
◦ In April 1998, the code was released. It was called Desirable Corporate
Governance: A Code
◦ Between 1998 and 2000, over 25 leading companies voluntarily
followed the code: Bajaj Auto, Hindalco, Infosys, Dr. Reddy’s
Laboratories, Nicholas Piramal, Bharat Forge, BSES, HDFC, ICICI and
many others

6. History of Corp Gov in India

7. Corporate Governance in practice in India
 The Ministry of Company Affairs, set up National Foundation for Corporate
Governance (NFCG) in partnership with CII, ICSI and ICAI
 The NFCG has the following Vision and Mission
 VISION: Be a catalyst in making India the best in Corporate Governance practices
 MISSION:
• To foster a culture for promoting good governance, voluntary compliance and facilitate
effective participation of different stakeholders
• To make significant difference to Indian corporate sector by raising the standard of Corporate
Governance towards achieving stability and growth
 The NFCG focuses on the following areas
• Creating awareness on the importance of implementing good CG practices both at the level
of individual corporations and for the economy as a whole. The foundation would provide a
platform for quality discussions and debates among academicians, policy
makers, professionals and corporate leaders through workshops, conferences, meetings and
seminars
• Encouraging research capability in area of CG in the country and providing key inputs in
developing laws and regulations, which meet the twin objectives of maximizing wealth creation
and fair distribution of this wealth.

8. Corporate Governance in practice in
India(Contd)
• Working with regulatory authorities at multiple levels to improve implementation and
enforcement of various laws related to CG
• In close co-ordination with the private sector, work to instill a commitment to CG reforms to
facilitate the development of a CG culture
• Setting up ‘National Centers for Corporate Governance’ across the country, which would
provide quality training to Directors as well as produce quality research and aim to receive
global recognition.

9. CII Code recommendations (1997)
 For A listed company with turnover exceeding Rs 100 crores, if the
chairman is also the MD, at least half of the board should be
independent directors, else at least 30%.
 No single person should hold directorships in more than 10 listed
companies.
 Directors should be paid a commission not exceeding 1% (3%) of
net profits for a company with (out) an MD over and above sitting
fees. Stock options may be considered too.
 Attendance record of directors should be made explicit at the time
of re-appointment. Those with less than 50% attendance shouldn’t
be re-appointed.
 Audit Committee: Listed companies with turnover over Rs. 100
crores or paid-up capital of Rs. 20 crores should have an audit
committee of at least three members, all non-executive, competent
and willing to work more than other non-executive directors, with
clear terms of reference and access to all financial information in
the company and should periodically interact with statutory auditors
and internal auditors and assist the board in corporate accounting
and reporting.
 Reduction in number of nominee directors. FIs should withdraw
nominee directors from companies with individual FI shareholding
below 5% or total FI holding below 10%.

10. Birla Committee (SEBI) recommendations
(2000)
 At least 50% non-executive members.
 For a company with an executive Chairman, at least half of the board should be
independent directors, else at least one-third.
 Non-executive Chairman should have an office and be paid for job related
expenses.
 Maximum of 10 directorships and 5 chairmanships per person.
 Audit Committee: A board must have a qualified and independent audit
committee, of minimum 3 members, all non-executive, majority and chair
independent with at least one having financial and accounting knowledge. Its
chairman should attend AGM to answer shareholder queries.
 The committee should confer with key executives as necessary and the company
secretary should be he secretary of the committee. The committee should meet at
least thrice a year -- one before finalization of annual accounts and one
necessarily every six months with the quorum being the higher of two members or
one-third of members with at least two independent directors.
 It should have access to information from any employee and can investigate any
matter within its TOR, can seek outside legal/professional service as well as secure
attendance of outside experts in meetings. It should act as the bridge between the
board, statutory auditors and internal auditors with arranging powers and
responsibilities.
 Remuneration Committee: The remuneration committee should decide
remuneration packages for executive directors. It should have at least 3
directors, all Nonexecutive and be chaired by an independent director.
 The board should decide on the remuneration of non-executive directors and all
remuneration information should be disclosed in annual report.
 At least 4 board meetings a year with a maximum gap of 4 months between any 2
meetings. Minimum information available to boards stipulated.

11. Narayana Murthy committee (SEBI)
recommendations (2003)
 Training of board members suggested.
 There shall be no nominee directors. All directors to be elected by shareholders
with same responsibilities and accountabilities.
 Non-executive director compensation to be fixed by board and ratified by
shareholders and reported. Stock options should be vested at least a year after
their retirement. Independent directors should be treated the same way as non-
executive directors.
 The board should be informed every quarter of business risk and risk management
strategies.
 Boards of subsidiaries should follow similar composition rules as that of parent and
should have at least one independent directors of the parent company.
 The Board report of a parent company should have access to minutes of board
meeting in subsidiaries and should affirm reviewing its affairs.
 Performance evaluation of non-executive directors by all his fellow Board members
should inform a re-appointment decision.
 While independent and non-executive directors should enjoy some protection from
civil and criminal litigation, they may be held responsible of the legal compliance
in the company’s affairs.
 Code of conduct for Board members and senior management and annual
affirmation of compliance to it.

12. SEBI constituted a committee on CG under the chairmanship
of N.R. Narayana Murthy whose report was presented on 8th
February 2003
The issue discussed by the committee (2003) presented are related to
 Audit committee
 Audit report
 Independent directors
 Related parties
 Risk management
 Directorship and director’s compensation
 Codes of conduct
 Financial disclosure
This report has also set out the recommendations of Naresh Chandra Committee (2003) on
corporate audit and governance set up by Department of Company Affairs. These relate
to
 Contingent liabilities
 CEO / CFO certification
 Definition of independent directors
 Independence of audit committee
 Exemption of independent directors from civil and criminal liabilities under certain
circumstances.

13. J.J. Irani Report on Company Law, dated 31st
May 2005
 Management and Board Governance
 Board of Directors
 Minimum and Maximum number of Directors
 Manner of appointment, removal and resignation of Directors
 Age limit of Directors
 Independent Directors
> The concept and numbers of independent Directors
 Definition of independent Directors / Attributes of Independent Directors
 Mode of Appointment of Independent Directors
 ‘Material’ Transactions
 Numbers of Directorships and Alternate Directors
 Directors Remuneration
 Sitting fees to Non-Executive Directors
 Disclosure of Remuneration
 Remuneration of Non- Executive Directors
 Board Committees
 Audit Committee for Accounting and Financial Matters
 Shareholders ‘ Relationship Committee
 Remuneration Committee
 Duties and responsibilities of Directors
 Disqualification of Directors

14. J.J. Irani Report on Company Law, dated 31st
May 2005 (Contd.)
 Vacation of offices by Directors
 Resignation by Directors
 Liabilities of Independent and Non- Executive Directors
 Knowledge Test
 Directors and Officers (D&O) Insurance
 Rights of Independent / Non- Executive Directors
 Meetings of Directors – Related Matters
 Quorum for emergency meetings
 Matters to be discussed at a Board Meeting
 Restrictions of Board’s Powers
 Meetings of Members
 Demand for Poll
 Other recommendations– Higher deposit amount for notice regarding nominating
/ appointing a Director
 Options of buy-back for shareholders of de-listed companies
 Corporate Structure
 Key Managerial Personnel
 Interested Shareholders
 General
 Related Party Transactions
 Director’s duty to disclose interest
 Certain transactions, in which directors are interested, subject to approval

15. Introduction of CG - Clause 49 in the Listing Agreement issued
via circulars dated 21st February, 9th March and 12th Sept 2000
and 22nd January, 16th March and 31st December 2001
Revision of Clause 49 listing agreement with effect from
01.04.2005
1. Board of Directors
a) Composition of Board
b) Non- Executive Director’s compensation and disclosure
c) Other provision to as to Board and Committees
d) Code of conduct
2. Audit committee
a) Qualified and independent audit committee
b) Meeting of audit committee
c) Powers of audit committee
d) Role of audit committee
e) Review of information by audit committee
3. Subsidiary companies
4. Disclosures
a) Basis of related party transactions
b) Disclosure of accounting treatment
c) Board disclosure – Risk management
d) Proceeds form public issues, right issues. Preferential issues etc
e) Remunerations of directors
f) Management
g) Shareholders

16. Some Cases of Corporate
Governance in Indian
History

17.  Raja headed the
Telecommunications and IT
Ministry. CAG holds Raja
personally responsible for the
sale of 2G spectrum at 2001
rates in 2008.
 The 2G spectrum financial
scandal, amounting to
around 200 crore (US$39.9
million) of lost income for
the Government of India.
 In 2011, TIME magazine listed
the 2G spectrum scam, in which
Raja was allegedly involved, as
number two on their “Top 10
Abuses of Power” list.
Former Telecom Minister: Andimuthu Raja

18.  The biggest corporate scam in
India has come from one of the
most respected businessmen.
Satyam founder Byrraju
Ramalinga Raju resigned as its
chairman after admitting to
cooking up the account books.
His efforts to fill the "fictitious
assets with real ones“.
 Through Maytas acquisition
failed, after which he decided to
confess the crime. With a fraud
involving about Rs 8,000 crore
(Rs 80 billion)
Satyam founder Byrraju Ramalinga Raju

19.  H e was known as the 'Big Bull'.
He triggered a rise in the Bombay
Stock Exchange in the year 1992 by
trading in shares at a premium across
many segments.
 However, his bull run did not last too
long.
 Taking advantages of the loopholes in
the banking system, Harshad and his
associates triggered a securities scam
diverting funds to the tune of Rs 4000
crore (Rs 40 billion) from the banks to
stockbrokers between April 1991 to
May 1992.
HARSHAD MEHTA : THE SCAMSTER

20.  Ketan Parekh followed Harshad
Mehta's footsteps to swindle crores
of rupees from banks. A chartered
accountant he used to run a family
business, NH Securities.
 Ketan however had bigger plans in
mind. He targetted smaller
exchanges like the Allahabad Stock
Exchange and the Calcutta Stock
Exchange, and bought shares in
fictitious names.
Ketan Parekh

21. ICSI National Award for Excellence
in Corporate Governance
Best Governed Companies

22. THANK YOU