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Corporate Governance

Institute of Company Secretaries of India

Corporate Governance is the application of best Management Practices, Compliance of Laws in true letter and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders.

Standard and Poor Corporate Governance is the way a company is organized and
managed to ensure that all financial stakeholders receive a fair share of the companys earnings and assets.

Objectives of Corporate Governance: Corporate Governance is aimed at creating an organization which maximizes the wealth of shareholders. It envisages an organization in which emphasis is laid on fulfilling the social responsibilities towards the stakeholders in addition to the earning of profits. The objectives of Corporate Governance is to ensure the following: 1. Properly constituted Board capable of taking independent and objective decisions. 2. Board is independent in terms of Non-Executive and Independent Directors. 3. Board adopts transparent procedures and practices. 4. Board has an effective machinery to serve the concerns of the Stakeholders. 5. Board to monitor the functioning of the Management Team. 6. Properly constituted Board capable of taking independent and objective decisions. 7. Board is independent in terms of Non-Executive and Independent Directors. 8. Board adopts transparent procedures and practices. 9. Board has an effective machinery to serve the concerns of the Stakeholders. 10. Board to monitor the functioning of the Management Team. 11. Board remains in effective control of the affairs of the Company.

Elements of Good Corporate Governance :1. Role and Powers of the Board. 2. Legislation 3. Management Environment 4. Board Skills 5. Board Appointments 6. Board Induction and Training 7. Board Independence 8. Board Meetings 9. Board Resources 10. Code of Conduct 11. Strategy setting 12. Financial and Operational Reporting 13. Monitoring the Board Performance 14. Audit Committee 15. Risk Management

Secretarial Standards :The Institute of Company Secretaries of India has issued the following Standards in order to maintain the uniformity of procedure with regard to the Board Meetings, General Meetings, Payment of Dividend, Maintenance of Registers and Records, Recording of Minutes and Transfer and Transmission of Shares. A brief detail of these standards is given as under : SS1 Meetings of Board of Directors : The Secretarial Standard 1 deals with the meetings of the Board of Directors. It deals with the various aspects of the conducting the Board Meetings, the frequency of such meetings in an year, Quorum required for the meeting, powers of the Chairman in such meetings, and recording of minutes of such meetings. SS2 - General Meetings : The Secretarial Standard 2 deals with the General Meetings. It explains the procedure of conducting the General Meetings, the frequency of meetings in an year, Quorum required for the conduct of the meeting, powers of the Chairman in such meetings, recording of minutes of such meetings, procedure of voting, etc.

SS3 Dividend : This Secretarial Standard pertains to Dividend. It illustrates the calculation of amount payable as dividend, declaration of dividend, Treatment of Unpaid Dividend, and Transfer of Dividend to Investor Education and Protection Fund(IEPF). SS4 Registers and Records This Secretarial Standard enumerates the various Registers required to be maintained as per statutory requirements. It requires the following registers to be maintained : Register of members and Debenture holders. Register of Contracts u/s 301. Register of Directors u/s 303. Register of Transfer of Shares. SS5 Minutes This Secretarial Standard deals with the recording and signing of Minutes of the Meetings. Minutes should contain : (a) The appointment of the Chairman of the meeting. (b) The presence of Quorum. (c) The fact that certain registers and documents were available for inspection. (d) The number of members present in person including representatives. (e) The number of proxies and the number of shares represented by them. (f) The presence of the Chairman of the Audit Committee at the Annual General Meeting. (g) The presence if any, of the Auditors, the Practising Company Secretary who issued the Compliance Certificate, the Court appointed observers or scrutineers. (h) Reading of the notice of the meeting. (i) Reading of the report of the auditors. (j) Summary of the opening remarks of the Chairman. (k) Summary of the clarifications provided. (l) In respect of each resolution, the type of the resolution, the names of the persons who proposed and seconded and the majority with which such resolution was passed. Resolutions should be written in the present tense.

SS6 Transfer and Transmission of Shares This Secretarial Standard deals with the procedure of Transfer and Transmission of shares held singly and jointly. The register and records pertaining to transmission should be preserved permanently and kept in the custody of the secretary of the company or any other person authorized by the Board for the purpose.

Factors Influencing the quality of Corporate Governance :1. Integrity of the Management 2. Ability of the Board 3. Adequacy of the Process 4. Quality of Corporate Reporting 5. Participation of Stakeholders 6. Quality of Corporate Reporting

Committee Reports on Corporate Governance :Narayana Murthy Report on Corporate Governance: Corporate Governance is beyond the realm of Law. It stems from the culture and mindset of management and cannot be regulated by legislation alone. Corporate Governance is all about openness, integrity and accountability. It is a key element in improving the economic efficiency of the firm. Credibility offered by Corporate Governance also helps in improving the confidence of the investors both domestic and foreign. It involves a set of relationships between a companys management, its Board, shareholders and Stakeholders. Kumarmangalam Birla Committee on Corporate Governance: All companies are required to submit a quarterly Compliance Report to the Stock Exchanges within 15 days from the end of financial reporting quarter. The Report has to be submitted by Compliance Officer or by the Chief Executive Officer after obtaining due approvals, on the following clauses :-

Board of Directors Audit Committee Shareholders/ Investors Grievance Committee Remuneration of Directors Board Procedures Management Shareholders Report on Corporate Governance CII Desirable Corporate Governance: Corporate Governance helps in maximizing the long-term shareholder value. It is more a way of business life than a mere legal compulsion. Four ideals , which should be the guiding force of companys philosophy on Corporate Governance are :Transparency Accountability Disclosure Value Creation.

The Code of Business Conduct and Ethics helps ensuring compliance with legal requirements and other standards of Business Conduct. All company Employees and Trainees are expected to read and understand this code of ethics, comply with all applicable policies and procedures, and ensure that all agents and contractors are aware of, understand and adhere to these standards. The Company expects all employees, agents and contractors to exercise good judgment to ensure all employees, agents and contractors and to maintain competitive, efficient, positive harmonious and productive Work Environment and business organization. Insider Trading :Insider trading is the trading of a corporation's stock or other securities (e.g. bonds or stock options) by corporate insiders such as officers, key employees, directors, or holders of more than ten percent of the firm's shares. Insider trading may be perfectly legal, but the term is frequently used to refer to a practice, illegal in many jurisdictions, in which an insider or a related party trades based on material non-public information

obtained during the performance of the insider's duties at the corporation, or otherwise misappropriated. Prohibition on dealing communication or counseling on matters relating to inside trading : 3. No insider shall (i) either on his own behalf or on behalf of any other person, deal in securities of a company listed on any stock exchange when in possession of any unpublished price sensitive information; or (ii) communicate, counsel or procure, directly or indirectly, any unpublished price sensitive information to any person who while in possession of such unpublished price sensitive information shall not deal in securities. (iii) Provided that nothing contained above shall be applicable to any communication required in the ordinary course of business or under any law. 3A. No company of shall that deal other in the securities while of in another company of or any




unpublished price sensitive information. Whistleblower Policy : Whistle Blower policy is an internal policy on access to Audit Committees. Elimination of unethical or improper practices is the responsibility of respective Corporate Promoters and Management for which they have to put in place of the systems for efficient administration and transparent transaction. Clause 49 of the Listing Agreement provides for formulation of an internal Policy, which extends to any level of employment and by virtue of which any personnel who observes an Unethical or improper practices shall be able to approach the Audit Committee without informing their supervisors. Whistle blower policy will afford protection to the Whistle blower from reprisals such as loss of employment, financial issues, and harassment on the workplace.