CORPORATE

GOVERNANCE
AND
SOCIAL
RESPONSIBILITY
 What is corporate governance?

• The primary purpose of corporate leadership is to create wealth legally

and ethically.

• This translates to bringing a high level of satisfaction to five

constituencies -- customers, employees, investors, vendors and the
society-at-large.

• The raison d'être of every corporate body is to ensure predictability,

sustainability and profitability of revenues YEAR AFTER YEAR.
-N R Narayana Murthy
Parties to Corporate Governance
Characteristics of Good Governance
 ISSUES INVOLVING CORPORATE
GOVERNANCE PRINCIPLES
INCLUDE
• Internal controls and internal auditors.
• The independence of the entity's external auditors and the quality of
their audits.
• Oversight and management of risk.
• Oversight of the preparation of the entity's financial statements.
• Review of the compensation arrangements for the chief executive
officer and other senior executives .
• The resources made available to directors in carrying out their duties.
• The way in which individuals are nominated for positions on the
board.
Some Cases of Corporate Governance
in Indian History
 • Raja headed the
Telecommunications and IT
Ministry. CAG holds Raja
personally responsible for the
sale of 2G spectrum at 2001
rates in 2008.
• The 2G spectrum financial
scandal, amounting to around
200 crore (US$39.9 million) of
lost income for the Government
of India.
• In 2011, TIME magazine listed
the 2G spectrum scam, in which
Raja was allegedly involved, as
Former Telecom Minister: Andimuthu Raja number two on their “Top 10
Abuses of Power” list.
 • The biggest corporate scam in
India has come from one of the
most respected businessmen.
Satyam founder Byrraju
Ramalinga Raju resigned as its
chairman after admitting to
cooking up the account books.
His efforts to fill the "fictitious
assets with real ones“.
• Through Maytas acquisition
failed, after which he decided to
confess the crime. With a fraud
involving about Rs 8,000 crore
(Rs 80 billion).

Satyam founder : Ramalinga Raju

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

HARSHAD MEHTA : THE SCAMSTER

 ICSI National Award for Excellence in
Corporate Governance

1. Indian Oil Corporation Limited

2. HCL Technologies Limited
 Corporate Social Responsibility

“CSR is a concept which suggests that commercial

corporations must fulfill their duty of providing care to
the society”

• Ethical behavior of a company (or business) towards society. Promoting

activities like engaging directly with local communities, identifying their
basic needs, and integrating their needs with business goals and strategic
intent.

• The government perceives CSR as the business contribution to the

nation’s sustainable development goals.

• Essentially, it is about how business takes into account the economic,

social and environmental impact of the way in which it operates.
Benefits of CSR
 Evolution of Corporate Social
Responsibility in India
First Phase

• In the first phase charity and philanthropy were the main drivers of CSR.
• With the arrival of colonial rule in India from the 1850s onwards, the
approach towards CSR changed.

Second Phase

• In the second phase, during the independence movement, there was

increased stress on Indian Industrialists to demonstrate their dedication
towards the progress of the society.
• Mahatma Gandhi introduced the notion of "trusteeship“.
• Businesses established trusts for schools and colleges and also helped in
setting up training and scientific institutions. The operations of the trusts
were largely in line with Gandhi's reforms,
Third Phase (1960-80)

• Element of "mixed economy“.

• The public sector was seen as the prime mover of development.
• The policy of industrial licensing, high taxes and restrictions on the
private sector led to corporate malpractices.
• This led to enactment of legislation regarding corporate governance,
labour and environmental issues.
• Shift of expectation from the public to the private sector and their
active involvement in the socio-economic development of the country
became absolutely necessary.
• In spite of such attempts the CSR failed to catch steam.
Forth Phase (1980 until the present)

• Indian companies started abandoning their traditional engagement

with CSR and integrated it into a sustainable business strategy.
• Increased growth momentum of the economy helped Indian
companies grow rapidly and this made them more willing and able to
contribute towards social cause.
• Indian companies who export and produce goods for the developed
world need to pay a close attention to compliance with the international
standards.
 Current State of CSR in India

• Basic objective of CSR in these days is to maximize the

company's overall impact on the society and stakeholders.
• It is important for protecting the goodwill and reputation,
defending attacks and increasing business competitiveness.
• Companies have specialised CSR teams.
•Also Corporate increasingly join hands with Non-governmental
organizations (NGOs) and use their expertise in devising programs
which address wider social problems.

Law : Under the Companies Act, 2013, any company having a net
worth of rupees 500 crore or more or a turnover of rupees 1,000
crore or more or a net profit of rupees 5 crore or more should
mandatorily spend 2% of their net profits per fiscal on CSR
activities. The rules came into effect from 1 April 2014.
 Key Persons About CSR

•Mrs. Rajashree Birla, Chairperson of The Aditya Birla Centre for

Community Initiatives and Rural Development17 says:
“ CSR is an aspect of a company’s policy. The government has so many
schemes and has also allocated funds for them. If government ropes in
corporate besides the NGOs, the scheme would be very effective. With
corporate coming on scene, there would be a discipline and a definite
manner of working. It would also bring about a greater transparency”

•Mr. N. R. Naryana Murthy, Chairman and Chief Mentor, Infosys Ltd.

We must consider ourselves very fortunate to have bestowed this
extraordinary responsibility of handing over our planet intact to the next
generation at a very crucial stage when economic equity, economic
awareness and economic inclusivity is bringing about an unpredented
transformation is developing countries.