Corporate Goverance All Pages

7/29/2019 Corporate Goverance All Pages

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CORPORATE GOVERNANCE

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CHAPTERI

INTRODUCTION


corporate governance is the set of processes, customs, policies, laws, and institutions

affecting the way a corporation is directed, administered or controlled. Corporate governance

also includes the relationships among the many stakeholders involved and the goals for which

the corporation is governed.

The principal stakeholders are the shareholders/members, management, and the board of

directors. Other stakeholders include labour (employees), customers, creditors (e.g., banks, bond

holders), suppliers, regulators, and the community at large.

An important theme of corporate governance is to ensure the accountability of certain

individuals in an organization through mechanisms that try to reduce or eliminate the principal-

agent problem.

It is a system of structuring, operating and controlling a company with a view to achieve

long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers,

and complying with the legal and regulatory requirements, apart from meeting environmental

and local community needs.

Report of SEBI committee (India) on Corporate Governance defines corporate

governance as the acceptance by management of the inalienable rights of shareholders as the true

owners of the corporation and of their own role as trustees on behalf of the shareholders. It is

about commitment to values, about ethical business conduct and about making a distinction

between personal & corporate funds in the management of a company.


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Issues involving corporate governance principles include:

Internal controls and internal auditors The independence of the entity's external auditors andthe quality of their audits

Oversight of the preparation of the entity's financial statements Review of the compensation arrangements for the chief executive officer and other senior

executives

BACKGROUND

As mentioned earlier, the term corporate governance is related to the extent to which

the companies are transparent & accountable about their business. Corporate governance today

has become a major issue of interest in most of the corporate boardrooms, academic circles &

even governments around the globe.

In the 19th century, state corporation laws enhanced the rights of corporate boards to

govern without unanimous consent of shareholders in exchange for statutory benefits like

appraisal rights, to make corporate governance more efficient. Since that time and because most

large publicly traded corporations in the US are incorporated under corporate administration-

friendly Delaware law and because the US's wealth has been increasingly securitized into various

corporate entities and institutions, the rights of individual owners and shareholders have become

increasingly derivative and dissipated. The concerns of shareholders over administration pay and

stock losses periodically has led to more frequent calls for corporate governance reforms.

In the 20th century, in the immediate aftermath of the Wall Street Crash of 1929, legal

scholars such as Adolf Augustus Berle, Edwin Dodd, and Gardiner C. Means pondered on the

changing role of the modern corporation in society. From the Chicago school of economics,

Ronald Coase's "The Nature of the Firm" (1937) introduced the notion of transaction costs into

the understanding of why firms are founded and how they continue to behave. Fifty years later,

Eugene Fama and Michael Jensen's "The Separation of Ownership and Control" (1983, Journal

of Law and Economics) firmly established agency theory as a way of understanding corporate

governance: the firm is seen as a series of contracts. Agency theory's dominance was highlighted


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in a 1989 article by Kathleen Eisenhardt ("Agency theory: an assessement and review",

Academy of Management Review).

The expansion of US after World War II through the emergence of multinational

corporations saw the establishment of the managerial class. Accordingly, the following Harvard

Business School management professors published influential monographs studying their

prominence: Myles Mace (entrepreneurship), Alfred D. Chandler, Jr. (business history), Jay

Lorsch (organizational behavior) and Elizabeth MacIver (organizational behaviour). According

to Lorsch and MacIver "Many large corporations have dominant control over business affairs

without sufficient accountability or monitoring by their board of directors."

Since the late 1970s, corporate governance has been the subject of significant debate in

the U.S. and around the globe. Bold, broad efforts to reform corporate governance have been

driven, in part, by the needs and desires of shareowners to exercise their rights of corporate

ownership and to increase the value of their shares and, therefore, wealth. Over the past three

decades, corporate directors duties have expanded greatly beyond their traditional legal

responsibility of duty of loyalty to the corporation and its shareowners.

In the first half of the 1990s, the issue of corporate governance in the U.S. received

considerable press attention due to the wave of CEO dismissals (e.g.: IBM, Kodak, Honeywell)by their boards. The California Public Employees' Retirement System (CalPERS) led a wave of

institutional shareholder activism (something only very rarely seen before), as a way of ensuring

that corporate value would not be destroyed by the now traditionally cozy relationships between

the CEO and the board of directors (e.g., by the unrestrained issuance of stock options, not

infrequently back dated).

In 1997, the East Asian Financial Crisis saw the economies of Thailand, Indonesia, South

Korea, Malaysia and The Philippines severely affected by the exit of foreign capital after

property assets collapsed. The lack of corporate governance mechanisms in these countries

highlighted the weaknesses of the institutions in their economies.

In the early 2000s, the massive bankruptcies (and criminal malfeasance) of Enron and

WorldCom, as well as lesser corporate debacles, such as Adelphia Communications, AOL,


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Qwest, Arthur Andersen, Global Crossing, Tyco, etc. led to increased shareholder and

governmental interest in corporate governance. Because these triggered some of the largest

insolvencies, the public confidence in the corporate sector was sapped. The popular perception

was that corporate leadership was fraught with greed & excess. Inadequancies & failure of the

existing systems, brought to the fore, the need for norms & codes to remedy them. This resulted

in the passage of the Sarbanes-Oxley Act of 2002, (popularly known as Sox) by the United

States.

In India however, only when the Securities Exchange Board of India (SEBI), introduced

Clause 49 in the Listing Agreement, for the first time in the financial year 2000-2001, that the

listed companies started embracing the concept of corporate governance. This clause was based

on the Kumara Mangalam Birla Committee constituted by SEBI. After these recommendationswere in place for about four years, SEBI, in order to evaluate & improve the existing practices,

set up a committee under the Chairmanship of Mr. N.R. Narayana Murthy during 2002-2003.At

the same time, the Ministry of Corporate Affairs set up a committee under the Chairmanship of

Shri. Naresh Chandra to examine the various corporate governance issues. The recommendations

of the committee however, faced widespread protests & representations from the industry,

forcing SEBI to revise them.

Finally, on the 29th

October, 2004, SEBI announced the revised Clause 49, which wasimplemented by the end of the financial year 2004-2005. Apart from Clause 49 of the Listing

Agreement, corporate governance is also regulated through the provisions of the Companies Act,

1956. The respective provisions have been introduced in the Companies Act by Companies

Amendment Act, 2000.


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SEBI REPORT ON CORPORATE GOVERNANCE

SEBI had constituted a Committee on May 7, 1999 under the chairmanship of Shri

Kumarmangalam Birla, then Member of the SEBI Board to promote and raise the standards of

corporate governance. Based on the recommendations of this Committee, a new clause 49 was

incorporated in the Stock Exchange Listing Agreements (Listing Agreements).

The recommendations of the Kumarmangalam Birla Committee on Corporate Governance (the

Recommendations) are set out in Enclosure I to this report.

Report of the Committee on Corporate Governance

Financial reporting and disclosures

Financial disclosure is a critical component of effective corporate governance. SEBI set up an

Accounting Standards Committee, as a Standing Committee, under the chairmanship of

Shri Y. H. Malegam with the following objectives:

To review the continuous disclosure requirements under the listing agreement for listedcompanies;

To provide input to the Institute of Chartered Accountants of India (ICAI) forintroducing new accounting standards in India; and

To review existing Indian accounting standards, where required and to harmonise theseaccounting standards and financial disclosures on par with international practices.

SEBI has interacted with the ICAI on a continuous basis in the issuance of recent Indian

accounting standards on areas including segment reporting, related party disclosures,

consolidated financial statements, earnings per share, accounting for taxes on income, accounting

for investments in associates in consolidated financial statements, discontinuing operations,

interim financial reporting, intangible assets, financial reporting of interests in joint ventures andimpairment of assets.

With the introduction of these recent Indian accounting standards, financial reporting

practices in India are almost on par with International Accounting Standards.


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ISSUES IN CORPORATE GOVERNANCE

Corporate governance practices are a set of structural arrangements that ire emerging in

free-market economies to align the management of companies with the interests of their

shareholders (in particular) and other stakeholders, and society at large.

Corporate governance addresses three basic issues:

Ethical issues

Efficiency issues, and

Accountability issues

Ethical issues are concerned with the problem of fraud, which is becoming wide spread in

capitalist economics. Corporations often employ fraudulent means to achieve their goals. They

form cartels to exert tremendous pressure on the government to formulate public policy, which

may sometimes go against the interests of individuals and society at large. At times corporations

may resort to unethical means like bribes, giving gifts to potential customers and lobbying tinder

the cover of public relations in order to achieve their goal of maximizing long-term owner value.

Efficiency issues are concerned with the performance of management. Management is

responsible for ensuring reasonable returns on investment made by shareholders. In developed

countries, individuals usually invest money through mutual, retirement and tax funds. In India,

however, small shareholders are still an important source of capital for corporations as the

mutual finds industry is still emerging. The issues relating to efficiency of management is of

concern to shareholders as there is no control mechanism through which they am control the

activities of the management whose efficiency is detrimental for returns on their (shareholders)

investments.


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The management of a corporation is accountable to its various stakeholders.

"Accountability issues" emerge out of the stakeholders' need for transparency of management in

the conduct of business. Since the activities of a corporation influence the workers, customers

and Society at large, some of the accountability issues tire concerned with the social

responsibility that a corporation must shoulder.

The growing scale of corporations and their style of functioning have raised many new

issues that must be addressed by corporate governance. Some of these issues are:

The growth of private companies Tire magnitude and complexity of corporate groups The importance of institutional investors Rise in hostile activities of predators (take over.) Insider trading Litigations against directors Need for restructuring of boards Changes in auditing practices

The emergence of private companies and the growing complexity of corporate groups is

one of the main concerns of corporate governance. Initially, limited liability companies were

incorporated to raise outside capital. Later, these corporations used their powers as a legal person

under law to acquire shares in other companies. This resulted in the formation of new companies

that took over the assets and liabilities of the original companies before winding them up. This

led to a spate of mergers and acquisitions in the late nineteenth and twentieth centuries.

Corporate governance is also concerned with the growing influence of institutional

investors on the corporations. Issues concerning hostile takeovers particularly management buy-

outs, tire also addressed by corporate governance. Insider trading, imbalanced boards and

compliance with international accounting standards the other issues that are addressed by

corporate governance.


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Jenson feels that corporations should incur some cost to ensure management compliance.

These costs result from setting up of monitoring mechanisms like boards, which require

appointment of outside independent directors to carry out checks like audits to evaluate the

performance of top management. These theories of corporate governance laid the foundations for

further studies in corporate governance.

The aim of "Good Corporate Governance" is to ensure commitment of the board in

managing the company in a transparent manner for maximizing long-term value of the company

for its shareholders and all other partners. It integrates all the participants involved in a process,

which is economic, and at the same time social.

The fundamental objective of corporate governance is to enhance shareholders' value andprotect the interests of other stakeholders by improving the corporate performance and

accountability. Hence it harmonizes the need for a company to strike a balance at all times

between the need to enhance shareholders' wealth whilst not in any way being detrimental to the

interests of the other stakeholders in the company. Further, its objective is to generate an

environment of trust and confidence amongst those having competing and conflicting interests.

It is integral to the very existence of a company and strengthens investor's confidence by

ensuring company's commitment to higher growth and profits. Broadly, it seeks to achieve the

following objectives:

A properly structured board capable of taking independent and objective decisions is in

place at the helm of affairs;

The board is balance as regards the representation of adequate number of non-executive

and independent directors who will take care of their interests and well-being of all the

stakeholders;

The board adopts transparent procedures and practices and arrives at decisions on the

strength of adequate information;


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The board has an effective machinery to subserve the concerns of stakeholders;

The board keeps the shareholders informed of relevant developments impacting the

company;

The board effectively and regularly monitors the functioning of the management team;

The board remains in effective control of the affairs of the company at all times.

The overall endeavour of the board should be to take the organisation forward so as to

maximize long term value and shareholders'


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Evolution of corporate governance in India

Earlier the government was expected to ensure good corporate conduct. Most

shareholders believed that stringent government controls would prevent malpractices of the

corporations for fear of punishment. However, there was soon a growing realization that

government was not always the best guardian of public interest. Shareholders began to feel the

need for market driven corporate governance flint would be more democratic and flexible. This

led to the birth of self imposed corporate governance within the corporate system. The active

participation of various stakeholders like shareholders, financial institutions, etc. have

strengthened the corporate governance mechanism and helped it to evolve beyond set of static

rules.

Many factors have contributed to the evolution of corporate governance. Some of this are-

The responsibility for ensuring good corporate conduct shifted from government to afree-market economy.

Active participation of individual and institutional investors.

Increasing competition in global economy.

With the relaxation of direct and indirect administrative controls by the government,

alternative mechanisms became necessary to monitor the performance of corporations in free-

markets. Shareholders believed that market forces could ensure good corporate conduct (self

imposed) by way of rewarding success and punishing failures of corporations. Many free-market

economies laid down effective regulations to monitor the corporations. However, regulations

alone do not ensure good governance. To become effective, they must be enforceable by law.


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The second factor that boosted corporate governance is the growth of global fund

management business. Institutional investors such as insurance companies, pension and tax funds

account for more than half the capital in the corporations of USA, This trend is also growing in

India. Earlier Institutional investors did not monitor the activities of the corporations in which

they invested. But the competition in the fund management business has forced them to take an

active role in governance in order to safeguard their investments in the corporations. Now, many

institutional investors express their views strongly with regard to various matters such is

financial and operational performance, business strategy, remuneration of top-level managers

etc. Along with the non-executive directors, these institutional investors monitor the performance

of corporations.

The active investor demands good performance in the form of return oil investment

and they also expect timely and accurate information regarding the performance of the company.

Institutional investors can exert pressure on the management as they own a considerable share in

the capital and any criticism from these investors can have a major impact oil the share prices.

Investors believe that only strong corporate governance mechanisms and practices can save them

from the ever-growing power of corporations, which call influence public policy to the detriment

of investors.

The enhanced competition ill the global economy has compelled corporations to

perform better by going in for cost-cutting, corporate restructuring, mergers & acquisitions,

downsizing etc. All these activities can be carried out successfully only if there is proper

corporate governance. Thus, market forces, active individual and institutional investor

participation, and enhanced competition have helped corporate governance to evolve beyond a

set of static rules.


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Unlike South-East and East Asia, the corporate governance initiative in India was nottriggered by any serious nationwide financial, banking and economic collapse

The initiative in India was initially driven by an industry association, the Confederationof Indian Industry

In December 1995, CII set up a task force to design a voluntary code of corporategovernance.

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: BajajAuto, Hindalco, Infosys, Dr. Reddys Laboratories, Nicholas Piramal, Bharat Forge,

BSES, HDFC, ICICI and many others

Following CIIs initiative, the Securities and Exchange Board of India (SEBI) set up acommittee under Kumar Mangalam Birla to design a mandatory-cum-recommendatory

code for listed companies

The Birla Committee Report was approved by SEBI in December 2000 Became mandatory for listed companies through the listing agreement, and implemented

according to a rollout plan:

2000-01: All Group A companies of the BSE or those in the S&P CNX Niftyindex 80% of market cap.

2001-02: All companies with paid-up capital of Rs.100 million or more or networth of Rs.250 million or more.

2002-03: All companies with paid-up capital of Rs.30 million or more

Following CII and SEBI, the Department of Company Affairs (DCA) modified theCompanies Act, 1956 to incorporate specific corporate governance provisions regarding

independent directors and audit committees.

In 2001-02, certain accounting standards were modified to further improve financialdisclosures. These were:


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Disclosure of related party transactions. Disclosure of segment income: revenues, profits and capital employed. Deferred tax liabilities or assets. Consolidation of accounts.

Initiatives are being taken to (i) account for ESOPs, (ii) further increase disclosures, and(iii) put in place systems that can further strengthen auditors independence.

With the goal of promoting better corporate governance practices in India, the Ministry of

Corporate Affairs, Government of India, has set up National Foundation for Corporate

Governance (NFCG) in partnership with Confederation of Indian Industry (CII), Institute of

Company Secretaries of India (ICSI) and Institute of Chartered Accountants of India (ICAI).

Studies of corporate governance practices across several countries conducted by the

Asian Development Bank, International Monetary Fund, Organization for Economic

Cooperation and Development and the World Bank reveal that there is no single model of good

corporate governance.

The OECD Code also recognizes that different legal systems, institutional frameworks

and traditions across countries have led to the development of a range of different approaches to

corporate governance. However, a high degree of priority has been placed on the interests of

shareholders, who place their trust in corporations to use their investment funds wisely and

effectively is common to all good corporate governance regimes.


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One area of concern is whether the accounting firm acts as both the independent auditor

and management consultant to the firm they are auditing. This may result in a conflict of interest

which places the integrity of financial reports in doubt due to client pressure to appease

management. The power of the corporate client to initiate and terminate management consulting

services and, more fundamentally, to select and dismiss accounting firms contradicts the concept

of an independent auditor. Changes enacted in the United States in the form of the Sarbanes-

Oxley Act (in response to the Enron situation as noted below) prohibit accounting firms from

providing both auditing and management consulting services. Similar provisions are in place

under clause 49 ofSEBI Act in India.

The Enron collapse is an example of misleading financial reporting. Enron concealed

huge losses by creating illusions that a third party was contractually obliged to pay the amount ofany losses. However, the third party was an entity in which Enron had a substantial economic

stake. In discussions of accounting practices with Arthur Andersen, the partner in charge of

auditing, views inevitably led to the client prevailing.

In India, the concept of corporate governance is still in its nascent stage. The

recommendations of Kumaramangalam Birla and CII committees' reports are the first steps in

India towards ensuring better corporate governance. Prior to these recommendations SEBI has

take various steps to strengthen corporate governance in India. Some of these steps are as

follows:

Strengthening of disclosure norms for Initial Public Offers following therecommendations of the Committee set up by SEBI under the Chairmanship of Shri Y H

Malegam;

Providing information in directors' reports for utilization of funds and variation betweenprojected and actual use of funds according to the requirements of the Companies Act '

inclusion of cash flow and funds flow statement in annual reports

Declaration of quarterly results; Mandatory appointment of compliance officer for monitoring the share transfer process

and ensuring compliance with various rules and regulations;
http://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/Arthur_Andersenhttp://en.wikipedia.org/wiki/Arthur_Andersenhttp://en.wikipedia.org/wiki/SEBI


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The underlying principles of corporate governance revolve around three basic inter-

related segments. These are:

Integrity and Fairness

Transparency and Disclosures

Accountability and Responsibility

The organizational framework for corporate governance initiatives in India consists of

the Ministry of Corporate Affairs (MCA) and the Securities and Exchange Board of India

(SEBI). The first formal regulatory framework for listed companies specifically for corporate

governance was established by the SEBI in February 2000, following the recommendations of

Kumarmangalam Birla Committee Report. It was enshrined as Clause 49 of the Listing

Agreement.

Thereafter SEBI had set up another committee under the chairmanship of Mr. N. R.

Narayana Murthy, to review Clause 49, and suggest measures to improve corporate governance

standards. Some of the major recommendations of the committee primarily related to audit

committees, audit reports, independent directors, related party transactions, risk management,

directorships and director compensation, codes of conduct and financial disclosures.

The Ministry of Corporate Affairs had also appointed Naresh Chandra Committee on

Corporate Audit and Governance in 2002 in order to examine various corporate governance

issues. It made recommendations in two key aspects of corporate governance: financial and non-

financial disclosures: and independent auditing and board oversight of management.


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The Main Constituents of Good Corporate Governance are:

Role and powers of Board:

The foremost requirement of good corporate governance is the clear identification

of powers, roles, responsibilities and accountability of the Board, CEO and the Chairman

of the board.

Legislation:

A clear and unambiguous legislative and regulatory framework is fundamental to

effective corporate governance.

Code of Conduct:

It is essential that an organization's explicitly prescribed code of conduct is

communicated to all stakeholders and is clearly understood by them. There should be

some system in place to periodically measure and evaluate the adherence to such code of

conduct by each member of the organization.

Board Independence:

An independent board is essential for sound corporate governance. It means that the

board is capable of assessing the performance of managers with an objective perspective.

Hence, the majority of board members should be independent of both the management

team and any commercial dealings with the company. Such independence ensures the

effectiveness of the board in supervising the activities of management as well as make

sure that there are no actual or perceived conflicts of interests.


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Board Skills:In order to be able to undertake its functions effectively, the board must possess

the necessary blend of qualities, skills, knowledge and experience so as to make quality

contribution. It includes operational or technical expertise, financial skills, legal skills as

well as knowledge of government and regulatory requirements.

Management Environment:

Includes setting up of clear objectives and appropriate ethical framework,

establishing due processes, providing for transparency and clear enunciation of

responsibility and accountability, implementing sound business planning, encouraging

business risk assessment, having right people and right skill for jobs, establishing clear

boundaries for acceptable behaviour, establishing performance evaluation measures and

evaluating performance and sufficiently recognizing individual and group contribution.

Board Appointments:

To ensure that the most competent people are appointed in the board, the board

positions must be filled through the process of extensive search. A well defined and open

procedure must be in place for reappointments as well as for appointment of new

directors.

Board Induction and Training:

Is essential to ensure that directors remain abreast of all development, which are or

may impact corporate governance and other related issues.

Board Meetings:

Are the forums for board decision making. These meetings enable directors to

discharge their responsibilities. The effectiveness of board meetings is dependent on

carefully planned agendas and providing relevant papers and materials to directors

sufficiently prior to board meetings.


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Strategy Setting:

The objective of the company must be clearly documented in a long term corporate

strategy including an annual business plan together with achievable and measurable

performance targets and milestones.

Business and Community Obligations:

Though the basic activity of a business entity is inherently commercial yet it must

also take care of community's obligations. The stakeholders must be informed about the

approval by the proposed and on going initiatives taken to meet the community

obligations.

Financial and Operational Reporting:

The board requires comprehensive, regular, reliable, timely, correct and relevant

information in a form and of a quality that is appropriate to discharge its function of

monitoring corporate performance.

Monitoring the Board Performance:

The board must monitor and evaluate its combined performance and also that of

individual directors at periodic intervals, using key performance indicators besides peer

review.

Audit Committee:

Is inter alia responsible for liaison with management, internal and statutory

auditors, reviewing the adequacy of internal control and compliance with significant

policies and procedures, reporting to the board on the key issues.


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Risk Management:Risk is an important element of corporate functioning and governance. There should

be a clearly established process of identifying, analysing and treating risks, which could

prevent the company from effectively achieving its objectives. The board has the ultimate

responsibility for identifying major risks to the organization, setting acceptable levels of

risks and ensuring that senior management takes steps to detect, monitor and control

these risks.

Good corporate governance recognizes the diverse interests of shareholders, lenders,

employees, government, etc. The new concept of governance to bring about quality corporate

governance is not only a necessity to serve the divergent corporate interests, but also is a key

requirement in the best interests of the corporates themselves and the economy.

Also, irrespective of the model, there are three different forms of corporate responsibilities which

all models do respect:

Political Responsibilities:

The basic political obligations are abiding by legitimate law; respect for the

system of rights and the principles of constitutional state.

Social Responsibilities:

The corporate ethical responsibilities, which the company understands and

promotes either as a community with shared values or as a part of larger community with

shared values.

Economic Responsibilities:

Acting in accordance with the logic of competitive markets to earn profits on the

basis of innovation and respect for the rights/democracy of the shareholders which can be

expressed in terms of managements' obligation as 'maximizing shareholders value'.


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MODELS OF CORPORATE GOVERNANCE

1] Anglo - American Model

Many models of corporate governance try to involve various stakeholders like

shareholders, employees and financial institutions in the governance of the company. In this

section we will discuss the Anglo -American, German Japanese, and Indian models of corporate

governance.

In this model of corporate governance, shareholders elect the board of directors. They

take up the advisory role. Shareholders usually control a private corporation through the board of

directors. The board of directors performs three functions on behalf the shareholders:

representation, direction and oversight. The Board appoints and supervises the officers

(managers) who take care of the daily activities of the organization.

The structural framework of the Anglo-American model as laid down by the legal system

is shown in the Figure below. Employees, suppliers and creditors are stakeholders in the

corporation. The creditors have a lien on the assets of the corporation The Board of Directors

designs the policy of the corporation, which is then implemented by the management, using awell-designed information system the board monitors the implementation of this policy in the

organization. This model is most suitable for a production or manufacturing organization as it

facilitates efficient monitoring of production, exchange and performance.


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2] German model of corporate governance

In the Gentian model of corporate governance, even though the shareholders own the

corporation, they do not directly control the governance mechanism. Half of the members on the

supervisory board are elected by file labor unions while the remaining are elected by the

shareholders (owners). In this model the employees are not just stakeholders, but also have a say

in the governance mechanism.

Thus, employees become responsible for the policies that are to be implemented by them

for attaining the objectives (profit, market share, high volumes ... etc) of the organization. Tire

supervisory board, which is appointed jointly by the shareholders and the labor unions

(employees), appoints and monitors the management board. This management board conducts

the day-to-day operations of the organization independently. But, it has to report to the

supervisory board. One of the Unique features of this model is that the labor relations' officer

finds a place on the management board, This ensures workers participation in the governance

mechanism This model of corporate governance and the relationship between various

constituents is as shown in Figure below.


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3] Japanese Model

In the Japanese model of corporate governance, the financial institutions have a major say

in the governance mechanism. The shareholders, along with the banks, appoint the members of

the board. In this model even the president is appointed on the basis of a consensus between the

shareholders and the banks. The president consults the board and their relation is hierarchical in

nature. Usually the board ratifies whatever decisions the president takes. The financial

institutions that finance the business have a crucial role in it even though the shareholders are the

owners of the business. In this model, the executive management (board of directors) carries out

file management function. Sometimes the financial institutions monitor the management function

by nominating the managerial personnel. The banks even have the power to suspend the board in

case of an emergency. This model is as shown in the Figure below.


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4] Indian Model

The Indian model of corporate governance is a mix of the Anglo-American and German

models. Corporations in India can be grouped into three categories: private companies, public

companies, banks and other corporations.

The founder, his family, and associates closely hold the private companies and they

exercise maximum control over the activities of the company The businesses of private

companies like that of the Tata group, the Reliance group, or the Birla group, are financed by

retained earnings or/and debt. The role of external equity finance is minimal.

In the case of public enterprises, the central and state governments choose tile members

of the board. Even after the disinvestment of some public sector companies, the government

continues to have a considerable hold over the activities of the company. Here the interests of the

stakeholders are given low priority, large public sector enterprises are run to serve the interests of

the government rather than aiming for efficiency and maximizing long-term owner value.


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ROLE AND RESPONSIBILITIES OF THE BOARD

ROLE OF DIRECTORS

A director assumes two roles while governing the activities of an organization. They are:

The performance role

The conformance role

Performance Role

In this role, the director performs various activities that are aimed at improving [fie

overall performance of the corporation. Firstly, a director act as a source of knowhow, expertise

and external information, secondly, he caters to needs of the corporation for networking,

representing and adding status.

The director brings into the corporation the knowledge and experience required to solve

the problems that the board faces, Outside directors sometimes play the role of -specialists,"drawing upon their expertise, knowledge and skills in different areas such as finance marketing,

law, and engineering. The outside directors appointed by the corporations on their boards usually

play the role of specialists. The outside directors act as the eye of the board to the external world.

They bring in information related to international markets, the financial or technological

environment etc, which is not readily accessible to the corporation.

The directors represent the company on public forums or committees. They act with the

media on behalf of the corporation. The presence of outside directors who are renowned in

various fields enhances the status, reputation and credibility of the board. This boosts

customer/shareholder confidence in the company.


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Conformance Role

In this role the director is concerned with ensuring that the company follows the policiesand procedures laid down by the board. Directors usually accomplish this by questioning and

supervising the executive management. Conformance role is a very tricky role as it involves,

monitoring and evaluating their own performance, (in case of majority/All-executive boards.

What Should a Board Do?

1. Exercise leadership, enterprise, integrity and judgment in directing the corporation so as

to achieve continuing prosperity for the corporation and to act in the best interests of the business

enterprise in a manner based on transparency, accountability and responsibility.

2. Ensure that through a managed and effective process board appointments are made that

provide a mix of proficient directors, each of whom is able to add value and to bring independent

judgment to bear on the decision-making process;

3. Determine the corporation's purpose and values, determine the strategy to achieve its

purpose and to implement its values in order to ensure that it survives and thrives, and, ensure

that procedures and practices are in place that protect the corporation's assets and reputation;

4. Monitor and evaluate the implementation of strategies, policies, management

performance criteria and business plans;

5. Ensure that the corporation complies with all relevant laws, regulations and codes of best

business practice;


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6. Ensure that the corporation communicates with shareholders and other stakeholders

effectively;

7. Serve the legitimate interests of the shareholders of the corporation and account to

them fully;

8. Identify the corporation's internal and external stakeholders and agree on a policy, or

policies, that indicate how the corporation should relate to them;

9. Ensure that no one person or a block of persons has unfettered power and that there is

an appropriate balance of power and authority on the board which is, inter alia, usually reflected

by separating the roles of the chief executive officer and Chairman, and by having a balance

between executive and non-executive directors,

10. Regularly review processes and procedures to ensure the effectiveness of the board's

its internal systems of control, so that its decision-making capability and the accuracy of its

reporting and financial results are maintained;

11. Regularly assess its performance and effectiveness as a whole, and that of the

individual directors, including the chief executive officer,

12. Appoint the chief executive officer and at least participate in the appointment of senior

management, ensure the motivation and protection of intellectual capital intrinsic to the

corporation, ensure that there is adequate training in the corporation for management and

employees, and a succession plan for senior management;

13. Take care that all technology and systems used in the corporation are adequate to

properly run the business and ensure that it remains a meaningful competitor;


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14. Identify key risk areas and key performance indicators of the business enterprise and

monitor these factors;

15. Ensure annually that the corporation will continue as a going concern for the next

fiscal year. Independent outside directors is in good position to analyze issues that are brought to

the notice of the board from a perspective that is different from that of the executive directors.

This independent evaluation of the top management's performance overcomes the danger of

adoption of a narrow vision of the executive board.


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RESPONSIBILITIES OF DIRECTORS

The company law lays down the duties and responsibilities of the board of directors.

Directors also have certain duties and responsibilities, which are embedded in the laws of

insolvency, consumer protection, employment act, mergers and monopolies, and other securitiesand stock exchange rules. The responsibilities of the directors may differ from country to

country, but there are some responsibilities that are common to directors all over the world.

These are:

Responsibilities to shareholders

Obligation to maintain honesty and integrity.

The shareholders of a company appoint the directors. Hence, the basic responsibility of

the directors is towards the shareholders. Directors fulfill this responsibility by providing

strategic direction to the company by setting appropriate policies and monitoring the

performance of the top management. Directors are also accountable to the shareholders. They

have to give the shareholders regular reports and accounts, which are duly audited, Directors are

expected to be honest in their dealings with the shareholders and to take decisions that will

benefit the organization as a whole. All the shareholders must be given adequate and accurate

information regarding every issue that could affect their interests.


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LEGAL ASPECTS AND LIABILITIES OF DIRECTORS

The Companies Act makes directors liable for the following:

Misrepresentations in offer documents and annual accounts

Failure to refund subscription money to investors

Contravention of the law

Duties of Directors

Exercise care in the discharge of functions as directors. Attend board meetings and devote sufficient time and attention to the affairs of the

company.

Not to be negligent and not to commit or let others commit tort-liable acts Act in thebest interest of the company and its stockholders and customers

Not to misuse power Protect interests of creditors Maintain confidentiality Not to make secret profits and make good loss, if accrued due to breach of duty, of

negligence.

Not to exercise powers for a collateral purpose. Not to waste company assets.


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THE ROLE OF THE CHAIRMAN

The role of the chairman is to manage the board and ensure that its policies are put into

practice by the management. He also has to work closely with the company secretary to address

legal issues. The chairman must have a good understanding of the financial standing of the

company. He must keep a strict watch on the company's actual performance. The chairman

should have a clear idea of where the company stands and where it is headed.

He should also have clear understanding of the way in which a company is managed He

must identify shortcomings and see that the board discusses these. A chairman should play aproactive role and should be in a position to identify a problem even before the CEO recognizes

or senses it. By being proactive the chairman can help the CEO take corrective action before

things get out of hand, The chairman also plays crucial role in maintaining good relations

between the board and the company' stakeholders. In the process of maintaining such relations

lie ensures that the board makes decisions in accordance with the interest of shareholder and all

other stakeholders of the company.

The primary responsibility of the chairman lies in catering to the internal needs of the

board and its conduct. He has to handle people from varied fields who serve the board

A chairman must have good interpersonal relations. For ensuring functioning of it board a

chairman should forge good relationships with the CEO, executive and not executive directors.

Relationship with the CEO

The chairman must have a good relationship with the CEO. This will not only give him

broad understanding of 'what is going on in the organization, but also allow him determine

whether the CEO is working towards achieving the set targets or not. Strained relations between

the CEO and chairman may turn out to be detrimental the company. Differences with the

chairman may compel the CEO to withhold information from him.


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Relationship with Executive Directors

It is the responsibility of the chairman to ensure that the executive directors report the

activities of the organization in an honest way. The information presented to the executive

directors determines the effectiveness of the contribution of the no executive directors.

Relationship with non-executive Directors

Cordial relations with the non-executive directors enable the chairman to motivate, them

to make decisions that are beneficial to the company. A good chairman should have the ability to

attract and maintain good non-executive directors on his board.


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FUNCTIONS OF THE CHAIRMAN

Some of the functions of a chairman, apart from the roles and responsibilities discussed

above are:

To set standards and ensure that policies and practices are in place.

To ensure that the directors take good decisions.

To make sure that directors are continuously upgraded to the levels required investors tomeet the current and future needs of the company.

To act decisively in times of crisis

To act as a representative of the company.


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THE ROLE OF CEO

The primary role of a CEO is to run the organization in an efficient manner to produce thedesired results. Apart from running the business effectively, the CEO is expected to have a

constructive working relationship with the chairman and the directors.

Relation with the Chairman

The CEO should establish a constructive working relationship with the chairman. This

requires a high degree of trust, respect, and an ability to communicate openly with each other.

When the CEO and chairman know each others strengths and weakness they can work closely,

complementing each others strengths to set the future course of the company.

Relation with Directors

The CEO should maintain cordial relationships with the directors to ensure that they Act

in the interest of the whole organization instead of pursuing the narrow interests of the owners

(shareholders, employees, banks, government etc.) The CEO can use his good relations with the

directors to motivate them to participate actively in improving the performance of various

departments of the organization.


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Functions of the CEO

In addition to the roles discussed above, a CEO is expected to be able.

To assist the executive directors in Formulating strategic proposals that have to be endorsed by the board. To provide leadership and direction to all his executive directors. To develop a plan for implementing the strategy formulated by the board and/or Management. To act as representative of the executive directors when interacting with the non-

executive directors.

To present the company to major investors, the media and government. To be a source of inspiration, leadership and direction to the employees, customers and

suppliers.

To be able to identify the situations that requires intervention.

FUNCTIONS OF THE BOARD

The primary function of the Board of directors is to take responsibility for the

performance of the corporation and work to promote its interests on behalf of the shareholders, to

whom it is accountable. Corporate boards oversee the performance of the corporation, its CEO

and the top-level managers. The board ensures that timely and accurate reports are provided oil

corporate performance, including the financial conditions and non-financial indicators of the

corporation. It monitors corporate performance by closely following the progress of the

corporation towards the pre-set goals and targets. The board provides strategic guidance to the

corporation; it studies the future trends so that the corporation has the necessary and adequate

resources to secure its long-term position.

The board has to maintain good relations with the stakeholders and try to keep the

shareholders happy. Apart from carrying out the above functions, the board enacts various

performance and conformance roles.


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Kumarmangalam Committee Recommendations - Composition of Audit

Committee

The composition of the audit committee is based on the fundamental premise of

independence and expertise. The Committee therefore recommends that

The audit committee should have minimum three members, all being non executivedirectors, with the majority being independent, and with at least one director having

financial and accounting knowledge;

The chairman of the committee should be an independent director.

The chairman should be present at Annual General Meeting to answer shareholderqueries;

The audit committee should unite such of the executives, as it considers appropriate (andparticularly the head of the finance function) to be present at the meetings of the

Committee but on occasions it may also meet without the presence of any, executives of

the company, Finance director and head of internal audit and when required, a

representative of the external auditor should be present as invitees for the meetings of the

audit committee;

The Company Secretary should act as the secretary to the committee.(These are mandatory recommendations.)


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Strategic Role of the Board:

The primary role of the board is to supervise the quality of strategic thinking of the

executive committee. When necessary, the board can take corrective measures to guide the top

management to develop strategies to achieve corporate goals.

The board has a final say in the strategy that decides the fate of the company. The board

has the right to either pass the decisions taken by the executives or question the effectiveness of

these strategies. Hence it is the responsibility of the executives to come up with proposals for the

board to agree on, to improve oil using their collective experience and expertise in various fields

of business, The board, therefore, plays key role & in leading and directing the organization.

Effective boards are familiar with the activities of the organization and can, as a result, play a

major role in guiding the strategic decision making process of the company. At times, non-

executive director on the board identify and warn the CEO about operational issues that may lead

to crisis situation. The board performs its role in strategy development in the following levels.

Systematic level strategy Structural and portfolio strategy Implementation strategy Systematic level strategy

Systematic level strategy, formulation is based on the board's understanding of what is

happening in the national, international and global environment. The board's knowledge about

the external environment extends too many areas: socio-political environment, potential market

trends, the impact of changes in technology and the international competitive forces that have in

effect on the company. Since the board members scan the external environment regularly, they

can provide the executives/management crucial inputs for effective decision-making.

Structural and portfolio strategy is concerned with decisions regarding the structure of

the company and the businesses that it should enter into. The board addresses issue like what

changes can be done in the structure of the company to achieve the growth aspirations of the


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board. This level of strategic thinking involves discussions among the board of directors and the

management, relating to acquisitions, mergers, strategic alliances or sale of a part of the business.

Implementation strategy is concerned with the board's role in ensuring that the strategy is

feasible. 'The board ensures that a broad game plan for implementing the policies and strategies

is in place, so that the management can deliver the desired results.

Policy Making Role of the Board

The board of directors frames guidelines or policies to ensure that the business plans and

management decisions conform to the corporate strategy. These policies cover all the key areas

like marketing, finance, personnel, operations, customer relations and research and development.

The board develops broad policies for the above areas and the executives of the organization

draw up derived policies (pricing, advertising, sales and distribution in the marketing field).

These policy statements are usually, published and made available to employees.

Monitoring and Supervisory Role

The board monitors and supervises the corporation to ensure that it adopts the right strategic

direction. It regularly checks whether the business is following the policies laid down for

achieving the goals and inquires into the causes of deviations, if any. The board reviews the

plans, policies and strategies of the corporation in the light of the changing competitive

environment. If necessary it makes changes in the corporations' strategies. For effective

executive supervision, a board has to monitor all the activities or the company that are crucial for

ensuring consistent growth and building market share. For example, the board of a

manufacturing company may have to monitor the activities concerned with financial

performance, market performance, product and services performance, technological

performance, management and organizational performance, employee relations, acquisitions and

divestments, corporate social responsibility etc.


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OBJECTIVES OF THE STUDY

By doing this project we will be able to understand:

1. The meaning of CORPORATE GOVERNANCE2. LAUSE 49 OF LISTING AGREEMENTS3. Initiatives, regulations, and policy developments with regard to the evolution of

corporate governance practice in India

4. Whether reporting in the ANNUAL REPORTS of the companies are in accordancewith the provisions of clause 49 of CORPORATE GOVERNANCE.

5. This project will enhance our capability of summarizing and to get conclusion andproviding recommendations about the effective working of CORPORATE

GOVERNANCE in the companies.


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LIMITATIONS OF THE STUDY

The study has following limitations

Non availability of certain data with the department, like statutory compliance andshareholders compliances.

There may be approximations. Lack of reliability Incompetence Errors in rating

Stereotyping Central tendency Constant error Personal bias Spillover effect


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RESEARCH METHODOLOGY & DATA COLLECTION

The meaning of research as a careful investigation or inquiry specially through search

for new facts in any branch of knowledge. Redman and Mory define research as a

systematized effort to gain new knowledge.

Some people consider research as a movement, a movement from the known to the

unknown. It is actually a voyage of discovery. 0-The study is descriptive research study. The

main purpose of descriptive research is description of the state of affairs as it exists at present. In

the present study, descriptive method is used to know the level of employees engagement with

the organization.

DATA COLLECTION METHOD:

The primary data was collected through a well structured questionnaire with close-ended

questions measures at 5-point liker type scale and suggestion questions. Secondary data required

for the project was collected from the company records and Internet.


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CHAPTER SCHEME

Chapter I deals with the meaning introduction to the topic

Chapter II presents the profile of the industry and Review of Literature

Chapter III analyses and interprets the collected secondary data

Chapter IV Findings and Suggestions

Chapter V Conclusion.


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CHAPTER II

2.1 REVIEW OF LITERATURE

"Corporate governance is a field in economics that investigates how to secure/motivateefficient management of corporations by the use of incentive mechanisms, such as

contracts, organizational designs and legislation. This is often limited to the question of

improving financial performance, for example, how the corporate owners can

secure/motivate that the corporate managers will deliver a competitive rate of return" -

www.encycogov.com, Mathiesen [2002].

Corporate governance deals with the ways in which suppliers of finance to corporationsassure themselves of getting a return on their investment.

-The J ournal of Finance, Shleifer and Vishny [1997].

"Corporate governance is the system by which business corporations are directed andcontrolled. The corporate governance structure specifies the distribution of rights and

responsibilities among different participants in the corporation, such as, the board,

managers, shareholders and other stakeholders, and spells out the rules and procedures

for making decisions on corporate affairs. By doing this, it also provides the structure

through which the company objectives are set, and the means of attaining those

objectives and monitoring performance".

OECD April 1999. OECD's definition is consistent with the one presented by Cadbury[1992, page 15].


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"Corporate governance - which can be defined narrowly as the relationship of acompany to its shareholders or, more broadly, as its relationship to society". -

From an article in Financial Times [1997].

"Corporate governance is about promoting corporate fairness, transparency andaccountability". - J. Wolfensohn, (President of the Word bank, as quoted by an

article in Financial Times, June 21, 1999).

Some commentators take too narrow a view, and say it (corporate governance) is thefancy term for the way in which directors and auditors handle their responsibilities

towards shareholders. Others use the expression as if it were synonymous with

shareholder democracy. Corporate governance is a topic recently conceived, as yet ill-

defined, and consequently blurred at the edgescorporate governance as a subject, as

an objective, or as a regime to be followed for the good of shareholders, employees,

customers, bankers and indeed for the reputation and standing of our nation and its

economyMaw et al. [1994].

Sir Adrian Cadbury in his preface to the World Bank publication CorporateGovernance: A framework for implementation, said, Corporate governance is

holding the balance between economic & social goals and between individual &

community goals. The aim is to align as nearly as possible, the interests of individuals,

corporations & society.

The Cadbury Committee U.K, defined corporate governance as follows:It is a system by which companies are directed & controlled.


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Terminology

The literature on the theory of the firm, corporate governance, and information theory

attributes different meanings and nuances to a number of words in common usage. As words are

the tools of thinking, they need to be clearly defined to provide a basis for clear communication

and rigourous analysis.

Ambiguity exists in the meaning of key words such as 'control', 'regulate', 'manage'

'govern' and 'governance'. Both the ambiguities and circular dictionary definitions need to be

resolved to develop rigour in the study of corporate governance.

Tannenbaum (1962) defined control as 'any process in which a person or group of

persons or organization of persons determines, i.e., intentionally affects, what another person or

group or organization will do'. This definition provides a word to describe a situation where no

standard of performance is required. Other writers (Etzioni, 1965:650; Downs, 1967:144) use

the word control in the sense of meeting some standard of performance. In these situations, the

word 'regulate' will be used whether or not the 'regulator' is a manager of the organisation

concerned or an external bureaucrat. Defining 'control' and 'regulate' in these ways provides a

common language with the science of information and control described as 'cybernetics' (Ashby

1968). This facilitates the use of information theory in corporate governance analysis.

The word control, as defined above, infers that a person or group possess power to

determine what actions are taken. Self-control then means that not all the power available is used

to further the self interest of the controller(s). Self-control simply becomes the avoidance ofusing power in some degree, rather than meeting a given result.


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The word 'manage' will be used to communicate the responsibility for executive action. It

could be ambiguous to mean either control or regulate. The word 'govern' is likewise ambiguous.

'Governance' will be used to describe a system of control or regulation which includes the

process of appointing the controllers or regulators.

Self-regulation means that the standards of performance are established by those being

regulated. Self-governance means that the system of control or regulation includes the

appointment of the controllers by the governed. By this means, self-regulation can be introduced

through self-governance. Self-governance involves a political process within institutions to

appoint the controllers responsible for regulation. Self-governance in a political context means

'government of the people, by the people for the people'. This describes democracy. The

introduction of elements of self-governance into institutions involved in productive activities

would enrich democracy. There are arguments and evidence that this produces operating

advantages (Turnbull 1997c,e).

In discussing systems of corporate control, economists frequently use the word 'capital' in

different ways. In their 'Corporate Governance Survey', Shleifer & Vishny (1996) used the word

in four different ways to indicate: (i) the means of production (p.6); (ii) an investment which may

not be represented by the means of production (p.3); (iii) finance (p.2) and 'external capital' (p.6);

or even (iv) just credit created by contract; ('bank debt' and 'junk bonds').

The problem introduced by such ambiguity is illustrated by their reference to 'the people

who sink the capital' (p.3). It is not clear if these 'people' are: (i) investors subscribing for new

shares; (ii) shareholders who purchase existing shares from others; (iii) bankers who lend money;

or (iv) the managers/'entrepreneurs' who purchase the means of production or what Moulton

(1935:7) describes as 'procreative assets'. The agency costs, benefits and risk, change according

to the various meanings of the word capital.


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Clarity of the Shleifer & Vishny statement is fundamental for their survey as they define

corporate governance as 'the ways in which suppliers of finance to corporations assure

themselves of getting a return on their investment' (p. 2). With this perspective of considering the

moral and other hazards of investors obtaining satisfactory returns, Shleifer & Vishny provide a

comprehensive literature review.

Confusion about the word capital can be compounded by accountants who introduce their

own professional meanings which can also be ambiguous. Clear analysis and communication

would be advanced with less ambiguous words, especially when the context does not make the

meaning clear. In an interdisciplinary topic like corporate governance it may be safer simply not

to use the word 'capital'.

However, ambiguous words can be useful. Alchian & Demsetz (1972: note 1) use the

word 'meter' in the sense of both measuring and control. In other words, they are discussing

regulation as defined above. Ambiguity in the words 'manage' and 'govern' can likewise be

useful. However, care needs to be taken not to use ambiguous words un-necessarily. The term

'governance' is often used when the word 'control' or 'regulate' would be more appropriate or

provide greater clarity of the process involved. The study by Porter (1992) rarely uses the word

governance.

If the term 'management' is reserved to describe processes which involve executive action

then it describes a subset of governance processes. However, the kudos perceived by some

writers in corporate governance matters has resulted in the word governance being over used.

Many board activities are subject to management processes such as establishing sub-committees.

Greater clarity and focus would be achieved by using terms such as 'board management', 'board

conduct', 'corporate management', 'corporate organisation', or 'corporate conduct', rather than the

less specific, more ambiguous and ambitious phrase 'corporate governance'.


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A useful definition for the word 'stakeholder' has been provided by Donaldson & Preston

(1995). 'Stakeholders are identified through the actual or potential harms and benefits that they

experience or anticipate experiencing as a result of the firm's actions or inactions'. In 1963, the

Stanford Research Institute defined as stakeholders 'those groups without whose support the

organisation would cease to exist' (Freeman 1984:31). This class of stakeholders are described

by Turnbull (1997c,e,f) as 'strategic stakeholders' as strategic issues concern the ability of a firm

to exist. Strategic issues transcend discounted cash flow analysis based on a relative performance

measure of an 'opportunity rate of return'.

The term 'compound board' will be used to describe the existence of two or more control

centres whether or not they are required by law, the constitution of the firm or are created by

relationships external to the firm. Compound boards are commonly found in Anglo cultures

although they may not be recognised as such. Publicly traded corporations controlled by a parent

company, control group, relationship investor or family shareholder create a compound board.

Two and three tiered boards may be required by law in Europe (Analytica 1992) and are found in

Japanese firms where the shareholders elect 'statutory auditors' to oversee the conformance role

of the board described as Kansayaku(Charkam 1994:93). A Keiretsu Council creates a third

control centre.


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2.2 PROFILE OF THE COMPANY

Company Secretaries play a predominant role in Corporate Management, Corporate

Litigations and resolution of Shareholder Disputes, Directorial Complaints, rendering Legal

Advisory Services and carrying out Due Diligence, advising, organizing and implementing

Mergers, Demergers, compromises and arrangements, capital issues, public offer, acquisition of

shares, acquisition of control, setting up of Companies, Partnership Firms, Limited Liability

Partnerships, Holding companies, Subsidiary companies in India and abroad, Transaction

Advisory and Documentation, Compliance Management Services, drafting Share Subscription

Agreements, Shareholder Agreements, Joint ventures and Foreign collaborations, Registration

and protection of Trademarks, passing off and infringement suits, appearance before Company

Law Board, National Company Law Tribunal, Debts Recovery Tribunals, Trademarks Tribunals,Arbitral Tribunals, Intellectual Property Appellate Tribunals, Securities Appellate Tribunals and

other quasi-judicial forums, winding up of companies, creditor voluntary arrangements, advising

and assisting in dealing with offences and prosecution under the Companies Act, SEBI Act,

FEMA, Competition Act, Securities Contracts Regulation Act, compounding of offences,

answering show cause notices, handling inspections and investigations, obtaining relief and

advising on remedial action to be taken.

The Partners and the senior professional staff and counsels of KSR&Co, a firm of

Company Secretaries, in Bangalore in Karnataka and Coimbatore, and Chennai in Tamilnadu

with more than 17 years of rich and unique experience render the above basket of services to

individuals, firms, trusts, societies, corporate and non-corporate entities and beyond.


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Dr.K.S.Ravichandran, M.Com, LL.B, FCS, Ph.D.,

Managing Partner

He is a Fellow Member of the Institute of Company Secretaries

of India, with a Master's Degree in Commerce and Bachelor's Degree in

Law. He was awarded the Doctorate of Philosophy by Alagappa

University in the Faculty of Management for his research on

the Effectiveness of the Trial Procedure for Offences under the

Companies Act in India and UK.

He holds a Diploma in Electronics and Radio Communication Engineering awarded by

the Indian Air Force (IAF) and has over nine years technical experience in IAF. He was a

lecturer in Commerce in the Department of Education, Government of Arunachal Pradesh.

He is a member of the International Association for the Protection of Intellectual

Property (AIPPI). He is a member ofChartered Institute of Arbitrators. He is a member of

the core group constituted for developing ICSI Vision Plan 2020. He is a member in sub-

group ofPMQ Course in Corporate Insolvency and Restructuring. He is the founder member

and one of the Vice Presidents of the Society of Insolvency Practitioners of India (SIPI). He

is a member of the Expert Advisory Group to provide advisory services to the members of

ICSI. He is an advisory partner of M/s.S.Chandrasekaran Associates, a firm of Company

Secretaries, in Delhi.

He has 15 years practical experience and is a specialist in Company Law, FEMA and

other Economic Legislations focusing mainly in Mergers and Acquisitions, Corporate

Restructuring, Joint Ventures and Foreign Collaborations, Due Diligence Audits, Transaction

Documents, Capital Market Issues, Protection of Intellectual Properties and Domestic and

International Alternative Dispute Resolutions. He is a prolific writer and speaker. He has

participated in more than 200 seminars, workshops, and conferences. He has about 100 published

articles to his credit. He is the author of the books "Secretarial Audit", "Prosecution ofDirectors

and Officers under Company Law - Relief and Remedies" and "A Treatise on Corporate

Lending, Charges, Debts Recovery, Enforcement of Security Interest and Winding up."


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Mr.C.V.Madhusudhanan, B.Sc., B.L., FCS

Partner

He is a Fellow Member of the Institute of Company Secretaries

of India, with a Bachelor's degree in Law. Also holds a Bachelor's

degree in Science. He has over a decade experience in practice and

specializes in Corporate Laws, Economic Legislations, Securities Laws,

SEBI, FEMA, Banking Laws, Intellectual Property Laws, Joint Ventures

and Documentation. He heads the firm's operations at Bangalore.

He speaks regularly in workshops and seminars on various subjects in the areas of

Corporate Laws, Economic Legislations, Securities Laws, Intellectual Property Laws, Mergers

and Amalgamations, Demergers and spin-offs, Legal Due Diligence Audits. Mr.Madhusudhanan

is a visiting faculty at Southern India Banks Staff Training College, Bangalore.

Senior Management Executives of the firm

Mr.V.R.Sankaranarayanan, B.Com, ACS.,

Associate

He is an Associate member of the Institute of Company Secretaries of

India with a Bachelors degree in Commerce. He is also doing CA-Final. He has

more than 11 years of experience, involved in Compliance Management Services

with regard to Company Law, Securities Laws, Industries (Development and

Regulation) Act, 1951.

Mr.R.Valluvan,

AGM - Compliance Management & Public RelationsHe takes care of all the registration works with the Ministry of Corporate

Affairs, Service Tax Registration, Partnership Firm Registration and Sales Tax

Registration. He is very shrewd man having more than 16 years of experience and

he takes care of public relation functions and external security matters.


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Mrs.S.Shilpa,B.Com.,

AGM Administration & Accounts

She holds a Bachelor's Degree in Commerce. She maintains the accounts

of the Firm and ensures payment of taxes and duties and she also manages the

office administration. She has 12 years of experience. She is the CM

Administration and Accounts of our Firm. She is multi-tasking specialist with

varied expertise in all administrative and general management works.

Ms.S.Manjula Devi,B.A.B.L.,

Senior I n-house Counsel

She is an In-house Counsel of our firm. She holds a Bachelor's degree in Law. She

handles matters coming under Corporate Laws / IPR Law / Debt Recovery Laws and other

matters of Civil in nature. She has got around 5 years of experience.

Mrs.Meera Elizabeth,B.A., B.B.L.,

Chief ManagerIPR Compliances & Updates

She holds a bachelor degree in Economics and a bachelor degree in Business Laws. She

is an expert in various matters including Computer Operations and Maintenance, Company Law

Compliances, IPR Registration Matters, preparation of applications and petitions for mergers and

demergers. She has got around 14 years of rich experience.

Mr. N.Subrahmanian,M.A., P.G.D.L.L.,

DGM Compliance Management

He holds a Masters degree in Political Science and has done postgraduate diploma in

Labour Laws. He has more than 15 years of experience, looking after the Chennai Branch.


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Mrs.G.Sarojini,B.B.A.,

ManagerSystems & Data

She holds a bachelor degree in Business Administration. She is an expert in matters like

hardware and software maintenance, email maintenance, database security and a solution

provider for security threats. She has around 7 years of experience in the firm.

Officers of the firm

Mrs.G.Indhumathi,B.Sc.,

ManagerMIS

She is the Welfare Officer of our Firm carrying on welfare measures for staff members.

She has around 7 years of experience in the firm.

Mr.K.S.Kumaresan,

Relationship Officer

He is handling charge matters and liaisoning with various banks for the same. He has gotaround 14 years of experience.

Mrs.R.Yamuna,

Secretarial Officer

She holds a bachelors degree in Commerce. She is doing Final CS. She is handling all

corporate compliance management jobs. She has around 1 year experience in the firm.


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Services Provided

Compliance Management Services (CMS)

All matters connected with Company Law, Rules and Regulations includingIncorporation of Companies, Board of Directors Compliances, Shareholders

Compliances, Charge Management, Liquidation and Winding Up and all other

compliances, Advisory and other services under the said law

Approvals and Licences under various Corporate Legislations Consultancy and Compliance Management in relation to Foreign Direct Investment,

External Commercial Borrowings, Joint Venture / Wholly Owned Subsidiaries in Indiaand abroad

Consultancy on Foreign Exchange Management related approvals and compliances Consultancy on Takeover Code, Insider Trading Regulations and other SEBI guidelines,

rules and regulations

Management Consultancy Services (MCS)

Joint Ventures and Foreign Collaborations Mergers and Acquisitions Corporate Strategic Planning and Structuring Introduction of Management Principles in SMEs and Devising Mindset Changes and

Growth Strategies

Issue and Listing of Securities in India and other Countries Valuation of Shares, Brands and Goodwill Implementing and Monitoring the Corporate Governance Systems Private Evaluation and other Joint Venture Proposals


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Legal Management Services (LMS)

Drafting/Vetting of Legal and Commercial Contracts, Agreements, Undertakings,declarations and all documents on any subject

Legal, Financial and Managerial Due Diligence Preparation of Transaction Documentation, Analysis, Negotiation and Settling of Terms

in respect of various transactions including Property Deals

Preparation, Scrutiny and negotiating terms contained in Shareholders & ShareSubscription Agreements

Property Evaluation and other Joint Venture Proposals

Legal Representation Services (LRS)

Case Study, Analysis & Advisory Services for devising strategies. Representing litigants on matters falling under Corporate Laws, Securities Laws, IPR

Laws and Debts Recovery Law and Appearance before Company Law Board, Debts

Recovery Tribunal, Securities Appellate Tribunals, Intellectual Property Appellate Board

and Monopolies and Restrictive Trade Practices Commission, Competition Commission

of India and other Tribunals

Intellectual Property Rights (IPRs)

Registration of Trademarks and Brands, Copyrights, Patents and Industrial Designs inIndia and abroad

Global IPR Adoption Advisory Services, Comprehensive Search Services, Registration,services relating to Licensing, Assignment of Trademarks and other Intellectual Property

Rights, Services relating to managing Infringements and Passing off and other threats to

IPRS

Alternative Dispute Resolution (ADR)

Domestic and International Commercial Arbitration, Mediation and Conciliation with an

analytical, commercial and legal approach for removal of deadlocks and resolution of disputes.


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Chapter III

Analysis of Fundamental Analysts

Investors prefer to invest in stock market due to:This chart illustrates the preference of the investors in stock market such as the stocks that

provide high return, the stocks which considers the capital appreciation.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1st

rank

2nd

rank

3rd

rank

4th

rank

5th

rank

6th

rank

7th

rank

8 th

rank

weitage

Rank

Services

Liquidity

Diversification Benefit

Capital Appriciation

Tax Benefit

High return

Flexibility

safety

Different Criteria for Investment


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Result:

Analysis:

From analysis we can say that at 1st

rank investors give highest importance to High return. 45%

investor selects high return as most preferred criteria for investment.

While 35% investors give preference to capital appreciation at 1st

rank. And 20% investor

gives preference to safety at 1st

rank.

At 2