BUSINESS ETHICS & CORPORATE GOVERNANCE (INDIVIDUAL PROJECT

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Submitted by: Vanita Agarwal Roll no.: 01 TYBBI K C College

It was an enriching experience.ACKNOWLEDGMENT I would like to confer my heartiest thanks to our Prof. I thank you for your kind support and co operation. Rupa for giving us the opportunity to expel & work in the field of Business Ethics & corporate Governance & to select of our choice for the project. I would also like to thank all those people who directly or indirectly helped me in accomplishing this project. .

Directors should inform the company about the committees positions & changes A qualified & Independent Audit Committee should be set up by the board of the company. with a maximum gap of 4 months between any 2 meetings & all information recommended by SEBI committee should be placed before the board. pension & other fixed as well as performance linked incentives paid to directors. It’s Chairman should attend AGM to answer shareholders queries. board should delegate the power of share transfer to an officer or committee or to registrars & share transfer agents. Recommendations of Kumar Mangalam Committee report on Corporate Governance. stock options. 1999 with the following objectives: • • • Promote & raise the standards of corporate governance Draft a code of corporate bets practices Suggest safeguards to be instituted within the companies to deal with insider information & insider trading Following are the recommendations made by Kumar Mangalam Birla Committee: • At least 50% of the board should comprise of non-executive directors. A committee under the chairmanship of a non-executive director/independent director should be set up by the board to look into shareholders issues including share transfers & redressing shareholders complaints & grievances. The corporate Governance section of Annual report should make disclosures on remuneration paid to directors in all forms including salaries. the company’s policy on remuneration packages for executive directors including pension rights & compensation payments. The board meetings should be held at least 4 times in a year. bonus. At least one third of the board should comprise of independent directors where chairman is nonexecutive & at least half of the board should be independent in case of an executive chairman. Maximum 10 directorships & 5 chairmanships per person . The delegated authority should attend to share transfer formalities at least once a fortnight. • • • • • • • .Q1.: Kumar Mangalam Birla headed the committee appointed by SEBI on May 7. The Board Should set up Remuneration Committee to determine on their behalf & on shareholders behalf. This enhances the credibility of financial disclosures of company & promoting Transparency. benefits. (Oct 2006) Ans. To expedite the process of share transfers. Non-executive chairman should have an office & should be paid for related expenses.

• Management Discussion & analysis of annual report including discussion of industry structure & development. expertise in specific areas & names of companies. These include dealing in company shares etc The half yearly declaration of financial performance including summary of the significant events in last 6 months should be sent/mailed to each household of the shareholders Financial Institutions should not have direct role in decision making or should not have nominees on the board of the company. Non-compliance of mandatory recommendations of Clause 49 with reason thereof & extent to which non-mandatory recommendations have been adopted should be specified The company should provide a brief resume. then the nominee directors should take equal responsibility A certificate from auditors on compliance should form a part of annual report & annual return & a copy should be sent to stock exchanges • • • • • • • . where they have personal interest that may have a potential conflict with the interest of large. financial & operational performance in HR front should form a part of the annual report to the shareholders Quarterly results. with details on level of compliance by the Company. in which the person holds both directorship & committee membership of Board. should be communicated to investors through company’s website or may be sent in such a form so as to enable stock exchange on which company is listed to put it on it’s own website There should be separate section in annual report on corporate Governance. while appointing a new director or re-appointing an existing director. financial & commercial transactions. These should form a part of notice to the shareholders Disclosures to be made to the Board by the management relating to all material. Presentation to analysts etc. But if board of Borrower Company has nominees of financial institutions. opportunities & threats.

public & commercial expectations that public has from businesses’. be ethical & be a good corporate citizen.: Definition: Following US-UK tradition Social responsibility is defined as follows-‘Operating Business in a manner that meets or excels the ethical. legal. Responsibility towards Consumers/customers: • • • • • To provide good quality products & services as per needs of customer & provide maximum satisfaction to customers To avoid monopolistic/restrictive/unfair trade practices which are harmful to customers To ensure that product supplied has no adverse effect on the life & health of the customer To avoid hoarding & malpractices such as adulteration & short weights & ensure equitable & fair distribution To supply goods at a fair & reasonable price & provide satisfactory after sales service to consumers .2008) Ans." According to Carroll’s Pyramid of CSR (1991) corporation should strive to make profit. Define Social Responsibilities. maintain cordial relations & create good corporate image through systematic image building measures 2. growth & discharging social obligations honestly by optimally utilizing the available resources fully To earn profits through efficient business management. Responsibility towards enterprise itself: • • • To earn adequate profits every year for Survival. This can be depicted from the Diagram below: Legal Responsibilities (Obey the Law) Philanthropic responsibilities (Be a good corporate citizen) Ethical Responsibilities (Be ethical. The European Commission's definition of CSR is: "A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. be profitable) Following are the various social responsibilities towards various sections of the Society: 1. cost control & quality improvement To follow business laws.Q2. obey law. What are various social responsibilities towards various sections of the Society? (Oct.

provide welfare activities & make arrangements recreation so that they can put their best efforts to achieve company’s objectives To protect Rights of Workers: right to fair wages.• • • To maintain customer cells for addressing the complaints of customers & thereby protecting rights of customers To reveal correct information in advertising. right to join trade unions. To introduce impartial promotional & transfer policies for labour force of the company To introduce grievance handling machinery in consultation with the Trade Union To recognize. Responsibility towards Shareholders: • • • • • To earn profits & provide fair return for the investment made by shareholders in the form of Dividend so as to appreciate the long term value of shares To keep the Enterprise Financially stable & dynamic by running the business in cost conscious & effective manner To give full & accurate information about financial position of the company to inform the owners that capital has been used fruitfully To undertake R&D activities for growth. diversification & expansion to face competition & provide safety to investment of Shareholders To raise Public image of the company so that Shareholders feel proud about their company . right to participate in decisions affecting their jobs. training & promotion To provide safety of Job so as to raise their morale & loyalty towards organisation To create best working conditions. Responsibility towards Employees/Workers: • • • • • • • • To provide Opportunities to develop their capabilities through education. right to strike etc. appreciate & encourage special skills of employees To introduce schemes of Participative Management 4. packaging & labelling to customers To give fair profit margin to retailers so that they do not enter in unfair trade practices 3.

rules & regulations. in 1992. Responsibility towards Government: • • • • To pay tax. however there were many others who did not pay adequate attention to the interest of the shareholders.g. which raised capital from the market at very high premium. 3. economic stability & national security • • • 6. which evoked considerable interest in Indian companies. pollution control. duties.5. smoky chimneys. The confederation of Indian industries (CII) thereafter published a Desirable Code Governance. fees etc. generate employment opportunities & provide a better life & welfare to all members of the community To avoid bad effluent. This prompted SEBI to constitute a Committee under the chairmanship of Shri Kumar .K. E. if any To contribute to social & cultural activities such as education & rural development & to introduce social audit by professional experts To contribute towards economic growth. The various aspects of this issue crept into India after the report of the Cadbury committee in U. ugly buildings & ensure environmental & ecological balance To rehabilitate the population affected by operation of business. Many companies voluntarily established high standards of corporate governance. However SEBI continued to receive a large number of investor complaints daily. industry safety etc. till recently relatively little attention was paid to the process by which companies were governed. They did not attend to investors also who suffered on account of unscrupulous companies. Responsibility towards Society/Community: • • To improve Quality of products. SEBI initiated several steps for strengthening corporate governance through the amendment of the listing agreement. 5. Evolution of corporate Governance in India (Nov. In India. To avoid use of corrupt & unethical means to get favours from government & political parties To help Government in raising social welfare & implementing socio-economic & industrial policies by adopting fair business practices Q3. 4. 2. industrial & other relevant laws. 2006) 1.: law relating to licensing. Regularly & honestly to government authorities as per rule To follow commercial. which some companies voluntary adopted.

6. having analyzed the disclosures made by companies under Clause 49 and observed that there was considerable variance in the extent and quality of disclosures made by companies in their annual reports and concluded that there was also a need to review the existing code on corporate governance. vii. vi. (b) Thus. (c) The Narayan Murthy Committee report (February 2003). ix. Board Procedure Management Discussion and Analysis Report Shareholders/Investors Grievance Committee and Other shareholders’ issues Report on Corporate Governance Certificate of Compliance 8. 7. Based on the recommendations of the Committee and the feedback.” (a) In late2002. viii. 2000 considered the recommendations of the Committee and decided to make amendments to the listing Agreement in pursuance of these recommendations. v. Former Cabinet secretary “to examine the AuditorCompany relationship. In August 2002. Board of Directors (specifying a minimum number of independent directors and board procedures). reviewed existing best practices in corporate governance and also drew upon the recommendations of the Kumar Mangalam Birla Committee and the Naresh Chandra Committee to . iii. namely Clause49 be incorporated in the agreement covering the following primary areas: i. iv. to suggest changes in the Listing Agreement to promote corporate governance. Director’s remuneration (disclosures of Director’s remuneration). Disclosures (mandatory Management Discussion and Analysis section in Annual Reports and other disclosures). SEBI. ii. Audit Committee (introducing the mandatory requirement of an audit committee and its roles and responsibilities).Mangalam Birla. under the Chairmanship of Naresh Chandra. the Department of Company Affairs (DCA) under the Ministry of Finance and Company Affairs appointed a High Level Committee. role of independent directors and disciplinary mechanism over auditors in the light of regularities committed by companies in India and abroad. the SEBI Board at its meeting held on January25. It was advised that a new clause. the SEBI Committee on Corporate Governance was constituted under the Chairmanship of N R Narayan Murthy to look into these matters.

vii. vi. These changes primarily strengthened the requirements in the following areas: i. Board composition and procedure Audit committee responsibilities Subsidiary companies Risk management CEO/CFO certification of financial and internal controls Legal compliance Other disclosures . 9. v. iii. SEBI amended Clause 49 of the listing agreement in alignment with the recommendations of the Narayan Murthy Committee.recommend further improvements in the existing system of corroborate governance applicable to Indian companies. but there is still a lot of scope for improvement & this is evident by the number of frauds & scams taking place in corporate sector. ii. Conclusion: India has increased & improved its exposure to Corporate Governance over the years. iv. The Revised Clause 49 In October 2004.

google.com www.com Book.BIBLIOGRAPHY     www.investopedia.com www.Business Ethics & corporate governance (Vipul Prakash) .wikipedia.

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