CG With Mythological Example

Embed Size (px)

Citation preview

  • 7/23/2019 CG With Mythological Example

    1/26

    CorporateGovernance

    Satyam Vada

    Dharmam Chara

    - TaittariyaUpanishad

    Forever speak the

    truth and follow the

    dharma

  • 7/23/2019 CG With Mythological Example

    2/26

    Governance Concept in Ramayana

    To provide the maximum happiness for the

    maximum number of people for the maximum

    period, based on the principles of Dharma

    righteousness and moral values

    - Ayodhya Kand

  • 7/23/2019 CG With Mythological Example

    3/26

    Corporate GovernanceWhat is Governance?

    Purpose of corporate governance is to have a demonstrable

    IMPACT on a corporations I!A!CIA" P#R$RMA!C#%

    &Corporate Governance is the application of best managementpractices' Compliance of la( in true letter and spirit andadherence to ethical standards for effective management and

    distribution of (ealth and discharge of social responsibility forsustainable development of all sta)eholders*%

    -The Institute of Company Secretaries of India

  • 7/23/2019 CG With Mythological Example

    4/26

    +riving orces of CG in India

    ,-,- .nethical /usiness Practices.nethical /usiness Practices 0ecurity 0cams 1112arshad Mehtha 0ecurity 0cam0ecurity 0cams 1112arshad Mehtha 0ecurity 0cam

    #3uity allotments at discount rates to the controlling groups#3uity allotments at discount rates to the controlling groups

    +isappearance of Companies 4,556157- 1 around 7'888+isappearance of Companies 4,556157- 1 around 7'888

    companies (ith 9:'888 crores (ithout starting businesscompanies (ith 9:'888 crores (ithout starting business

    Misdeed of CompaniesMisdeed of Companies

    Plantation' 0heep rearing' etc%Plantation' 0heep rearing' etc%

    9-9- Impact of Globali;ationImpact of Globali;ation Integration (ith oreign Mar)etIntegration (ith oreign Mar)et

    oreign Investors e

  • 7/23/2019 CG With Mythological Example

    5/26

    .nli)e 0outh1#ast and #ast Asia' the corporate governance initiativein India (as not triggered by any serious nation(ide financial'ban)ing and economic collapse

    The initiative in India (as initially driven by an industry association'

    the Confederation of Indian Industry

    In +ecember ,55:' CII set up a tas) force to design a voluntarycode of corporate governance%

    The final draft of this code (as (idely circulated in ,55?%

    In April ,55@' the code (as released% It (as called DesirableCorporate Governance: A Code.

    /et(een ,55@ and 9888' over 9: leading companies voluntarilyfollo(ed the code /aBaB Auto' 2indalco' Infosys' +r% Reddys"aboratories' !icholas Piramal' /harat orge' /0#0' 2+C' ICICI

    and many others

    /rief history of corporate governancein India

  • 7/23/2019 CG With Mythological Example

    6/26

    ollo(ing CIIs initiative' the 0ecurities and #

  • 7/23/2019 CG With Mythological Example

    7/26

    ollo(ing CII and 0#/I' the +epartment of Company Affairs 4+CA-modified the Companies Act' ,5: to incorporate specific corporategovernance provisions regarding independent directors and auditcommittees%

    In 988,189' certain accounting standards (ere modified to furtherimprove financial disclosures% These (ere

    +isclosure of related party transactions%

    +isclosure of segment income revenues' profits and capitalemployed%

    +eferred ta< liabilities or assets%

    Consolidation of accounts%

    Initiatives are being ta)en to 4i- account for #0$Ps' 4ii- furtherincrease disclosures' and 4iii- put in place systems that can furtherstrengthen auditors independence%

    /rief history of corporate governancein India

  • 7/23/2019 CG With Mythological Example

    8/26

    /oard of +irectors fre3uency of meetings and composition

    /oard must meet at least four times a year' (ith a ma

  • 7/23/2019 CG With Mythological Example

    9/26

    /oard of +irectors fre3uency of meetings and composition

    The fre3uency of board meetings and board committee meetings'(ith their dates' must be fully disclosed to shareholders in theannual report of the company%

    The attendance record of all directors in board meetings and boardcommittee meetings must be fully disclosed to shareholders in theannual report of the company%

    ull and detailed remuneration of each director 4salary' sitting

    fees' commissions' stoc) options and per3uisites- must be fullydisclosed to shareholders in the annual report of the company%

    "oans given to e

  • 7/23/2019 CG With Mythological Example

    10/26

    /oard of +irectors information that must be supplied

    Annual' 3uarter' half year operating plans' budgets and updates%

    Huarterly results of company and its business segments%

    Minutes of the audit committee and other board committees% Recruitment and remuneration of senior officers%

    Materially important legal notices and claims' as (ell as anyaccidents' ha;ards' pollution issues and labor problems%

    Any actual or e

  • 7/23/2019 CG With Mythological Example

    11/26

    /oard of +irectors Audit Committee

    Audit Committee is mandatory%

    Must have minimum of three members' all non1e

  • 7/23/2019 CG With Mythological Example

    12/26

    /oard of +irectors Audit Committee functions

    $versight of the companys financial reporting process to ensure thatthe financial statement is correct' sufficient and credible

    Appointment removal of e

  • 7/23/2019 CG With Mythological Example

    13/26

    /oard of +irectors Audit Committee functions

    Ade3uacy of internal audit and internal control systems' throughdiscussion (ith internal and statutory auditors as (ell asmanagement%

    0ignificant findings' follo(1up and action ta)en reports%

    +iscussion (ith internal and statutory auditors about scope anddesign of audits%

    Revie(ing financial and legal ris)s and companys ris) management

    policies%

    #

  • 7/23/2019 CG With Mythological Example

    14/26

    +isclosures to shareholders in addition to balance sheet' P="and cash flo( statement

    /oard composition 4e

  • 7/23/2019 CG With Mythological Example

    15/26

    +isclosures to shareholders in addition to balance sheet' P=" andcash flo( statement

    +ates of boo) closure and dividend payment%

    +etails of shareholding pattern%

    !ame' address and contact details of registrars andor sharetransfer agents%

    +etails about the share transfer system%

    0toc) price data over the reporting year' and ho( the companys

    stoc) measured up to the inde

  • 7/23/2019 CG With Mythological Example

    16/26

    +isclosures to shareholders in addition to balance sheet' P=" and

    cash flo( statement

    +etailed chapter on Management +iscussion and Analysis focusingon mar)ets' operations' finances' accounts' ris)s' opportunities and

    threats' internal control systems%

    Consolidated financial statement' incorporating accounts of allsubsidiaries 4over :8F shares held by reporting company-%

    +etails of all significant related party transactions%

    +etailed segment reporting 4revenues' costs' operating profits andcapital employed-%

    +eferred ta< liabilities and assets and debitcredit in the P=" for thereporting year

    Mandated CG guidelines anddisclosures

  • 7/23/2019 CG With Mythological Example

    17/26

    Recent Misconducts The "ist Goes $nE

    Computer Associates Artificially inflated revenue and improperly re(arded top

    e

  • 7/23/2019 CG With Mythological Example

    18/26

    Corporate Mis1Governance

  • 7/23/2019 CG With Mythological Example

    19/26

    Theories of Corporate Governance

    Anglo1American model

    German model of CG

    Oapanese model of CG

  • 7/23/2019 CG With Mythological Example

    20/26

    &

  • 7/23/2019 CG With Mythological Example

    21/26

    Infosys Technologies The /est amongIndian Corporates

    As per the Credit "yonnais 0ecurities Analysis 4C"0A-' thecorporate governance ratings of the 0oft(are firms are higher thanthose of other Indian firms%

    Infosys' based in /angalore' is a publicly held' I0$ 588, certifiedcompany offering information technology consulting = soft(areservices%

    The soft(are offered include application development' #1Commerce = Internet Consulting' 0oft(are Maintenance%

    Respected across the country' (ith very strong systems' highethical values = a nurturing (or)ing atmosphere%

    !et income of .0 ,',:: million and revenue of .0 7',? million%

    At present having .0 98%7 billion mar)et capitalisation%

  • 7/23/2019 CG With Mythological Example

    22/26

    Achievements

    Noted as the /est Managed Company in Asia%

    /iggest e

  • 7/23/2019 CG With Mythological Example

    23/26

    !arayana Murthys Global 0trategy

    ,- Global +elivery Model> Producing (here it is most costeffective to produce = selling (here it is most profitable to sell%

    9- Moving up the Nalue Chain > Getting involved in asoft(are development proBect at the earliest stage of its lifecycle%

    6- P0P+ Model > Predictability of Revenues' 0ustainability ofRevenues' Profitability' +e1ris)ing%

  • 7/23/2019 CG With Mythological Example

    24/26

    Best Governed Companies

    IC0I !ational A(ard for #

  • 7/23/2019 CG With Mythological Example

    25/26

    Concluding $bservations

    Code of CG should be redesigned to reflect international bestCode of CG should be redesigned to reflect international bestpracticespractices

    0tringent enforcement of "a(0tringent enforcement of "a(

    More effective coordination and cooperation bet(een 0#/I' +CAMore effective coordination and cooperation bet(een 0#/I' +CA

    CG mechanism should be fle

  • 7/23/2019 CG With Mythological Example

    26/26

    WINNING

    EMPLOYEES

    WINNING

    EMPLOYEESGROWING

    INESTORS

    GROWING

    INESTORS

    !ELIG"TE!

    C#STOMERS

    !ELIG"TE!

    C#STOMERS

    TR#STE!

    S#PPLIERS

    TR#STE!

    S#PPLIERS

    S$TIS%IE!

    GOERNMENT $N!

    REG#L$TORS

    S$TIS%IE!

    GOERNMENT $N!

    REG#L$TORS

    "$PPY

    SOCIETY

    "$PPY

    SOCIETY

    !"#$%&'Debo(it "oy )**Sritanu Das +ahapatra )-.bhise/ Sahu )0

    1rishna/ant %andey )23is4a(it !hosh )52