CHAPTER 1

INTRODUCTION TO CORPORATE

GOVERNANCE

CHAPTER 1

1
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
INTRODUCTION TO CORPORATE GOVERNANCE

Understanding Corporate Governance in India

It is a process set up for the firms based on certain systems and

principles by which a company is governed. The guidelines provided

ensure that the company is directed and controlled in a way so as to

achieve the goals and objectives to add value to the company and also

benefit the stakeholders in the long term.

The high profile corporate governance failure scams like the stock

market scam, the UTI scam, Ketan Parikh scam, Satyam scam, which

was severely criticized by the shareholders, called for a need to make

corporate governance in India transparent as it greatly affects the

development of the country.

To understand the scope of the legal framework and study the

amendments, proxy advisory firms analyze the role of directors and

how they are impacted by changes in the amendments. Proxy firms

2
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
offer analytical data for the shareholders and corporate advisory

services to companies.

Transparency in corporate governance is essential for the growth,

profitability and stability of any business. The need for good corporate

governance has intensified due to growing competition amongst

businesses in all economic sectors at the national, as well as

international level.

The Indian Companies Act of 2013 introduced some progressive and

transparent processes which benefit stakeholders, directors as well as

the management of companies. Investment advisory services and

proxy firms provide concise information to the shareholders about

these newly introduced processes and regulations, which aim to

improve the corporate governance in India.

Corporate advisory services are offered by advisory firms to

efficiently manage the activities of companies to ensure stability and

growth of the business, maintain the reputation and reliability for

customers and clients. The top management that consists of the board

3
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
of directors is responsible for governance. They must have effective

control over affairs of the company in the interest of the company and

minority shareholders. Corporate governance ensures strict and

efficient application of management practices along with legal

compliance in the continually changing business scenario in India.

Corporate governance was guided by Clause 49 of the Listing

Agreement before introduction of the Companies Act of 2013. As per

the new provision, SEBI has also approved certain amendments in the

Listing Agreement so as to improve the transparency in transactions of

listed companies and giving a bigger say to minority stakeholders in

influencing the decisions of management. These amendments have

become effective from 1st October 2014.

ISSUE IN CORPORATE GOVERNANCE

4
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Corporate governance is the term used to describe the balance among

participants in the corporate structure who have an interest in the way

in which the corporation is run, such as executive staff, shareholders

and members of the community. Corporate governance directly

impacts the profits and reputation of the company, and having poor

policies can expose the company to lawsuits, fines, reputational

damage, and loss of capital investment. Here are five common pitfalls

your corporate governance policies should avoid.

Conflicts of interest

Avoiding conflicts of interest is vital. A conflict of interest within the

framework of corporate governance occurs when an officer or other

controlling member of a corporation has other financial interests that

directly conflict with the objectives of the corporation. For example, a

board member of a solar company who owns a significant amount of

stock in an oil company has a conflict of interest because, while the

board he or she serves on represents the development of clean energy,

they have a personal financial stake in the success of the oil industry.

When conflicts of interest are present, they deteriorate the trust of

5
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
shareholders and the public while making the corporation vulnerable

to litigation.

Oversight issues

Effective corporate governance requires the board of directors to have

substantial oversight of the company’s procedures and practices.

Oversight is a broad term that encompasses the executive staff

reporting to the board and the board’s awareness of the daily

operations of the company and the way in which its objectives are

being achieved. The board protects the interests of the shareholders,

acting as a check and balance against the executive staff. Without this

oversight, corporate staff might violate state or federal law, facing

substantial fines from regulatory agencies, and suffering reputational

damage with the public.

Accountability issues
6
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Accountability is necessary for effective corporate governance. From

the top-level executives to lower-tier employees, each level and

division of the corporation should report and be accountable to

another as a system of checks and balances. Above all else, the actions

of each level of the corporation is accountable to the shareholders and

the public. Without accountability, one division of the corporation

might endanger the success of the entire company or cause

stockholders to lose the desire to continue their investment.

Transparency

To be transparent, a corporation must accurately report their profits

and losses and make those figures available to those who invest in

their company. Overinflating profits or minimizing losses can

seriously damage the company’s relationship with stockholders in that

they are enticed to invest under false pretenses. A lack of transparency

can also expose the company to fines from regulatory agencies.

Ethics violations

7
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Members of the executive board have an ethical duty to make

decisions based on the best interests of the stockholders. Further, a

corporation has an ethical duty to protect the social welfare of others,

including the greater community in which they operate. Minimizing

pollution and eschewing manufacturing in countries that don’t adhere

to similar labor standards as the U.S. are both examples of a way in

which corporate governance, ethics, and social welfare intertwine.

SIGNIFICANCE OF STUDY

 Changing Ownership Structure

 Importance of Social Responsibility

 Growing Number of Scams

 Indifference on the part of Shareholders

 Globalisation

 Takeovers and Mergers

 SEBI

OBJECTIVE OF STUDY

8
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 To determine the impact of corporate governance of the

company's performance.

 To understand the statutory provision of corporate governance.

 Understand the what is corporate governance.

 To determine the importance of Board of Administrator in a

Corporate Governance.

CORPORATE FINANCIAL PERFORMANCE

9
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Corporate governance is the term used to describe the balance among

participants in the corporate

10
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 CHAPTER 2

LITERATURE REVIEW

CHAPTER 2
11
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
LITERATURE REVIEW

CORPORATE GOVERNANCE - DEFINITION & CONCEPT

Corporate governance, in strategic management, refers to the set of

internal rules and policies that determine how a company is directed.

Corporate governance decides, for example, which strategic decisions

can be decided by managers and which decisions must be decided by

the board of directors or shareholders.

CONCEPT& PRINCIPLE

There are a few key concepts underpinning good corporate

governance in an organisation. Here are a few of them you should

know :

Fairness

The board of directors should treat all stakeholders fairly and

equitably.

12
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Independence

Each director should independent. There should be no conflict of

interest. For example, it would not be good for a director to get

involved in the sale of an asset to another company, if he/she was a

director of that other company too.

Honesty

The directors must protect the shareholders interests in the

organisation, and should give confidence to the shareholders that thier

interests are being protected.

Transparency

The directors should disclose material information in a timely and

accurate manner.

Accountability

13
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Those who control the business (i.e. directors) should be accountable

to those who own the business (i.e. shareholders)

Integrity

Moral and ethical issues should be considered when making decisions

relevant to the organisation.

Responsibility

The board of directors should ensure the organisation complies with

the relevant laws where it operates.

MODEL OF CORPORATE GOVERNANCE

14
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Corporate governance is the set of company tools, rules, relations,

processes and systems designed for the fair and efficient management

of the enterprise, meant as a compensation system among the

potentially divergent interests of the minority shareholders, the

controlling shareholders, and the directors of a company. Hence the

corporate governance structure expresses the rules and processes for

company decision-making, the procedures for setting the company's

objectives, and the means for attaining and measuring the results

achieved.

There several different governance models, depending on the degree

of capitalism in which the company operates. The liberal model,

typical of the English-speaking countries, gives priority to

shareholders’ interests. The model prevalent in continental Europe and

Japan also recognizes the interests of the workers, managers,

suppliers, customers, and society.

15
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
The rules of corporate governance are based on both the laws and

regulations in the legal framework of the country in which the

company operates, and its own bylaws. Relations include those among

the actors involved in the company: the owners (shareholders), the

managers, the directors, the regulatory authorities, the employees, and

the company in the wide sense. The processes and systems refer to

mechanisms of delegation of powers, performance measuring,

security, reporting, and accounting.

Usually three different corporate governance systems are

distinguished for joint-stock companies.

The ordinary system, typical of the Italian tradition, is applied in the

absence of a different selection as per the bylaws. This system calls

for the presence of an administrative body (a Sole Director or a Board

of Directors whose number of members is determined by the

shareholders’ meeting, unless set in the bylaws) and a Control Body

(the Board of Statutory Auditors).

16
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
The two-tier system, typical of the German tradition (and the only

direction and control system for joint-stock companies) and later

adopted by other European countries such as France, the Netherlands,

and Finland (where, however, it is optional), by which the company’s

administration is divided into two different bodies, the management

board and the supervisory board.

There must be at least two members of the management board, whose

terms of office may not exceed three financial years and they may be

removed at any time by the supervisory board. They are subject to the

same responsibilities as directors.

There must be at least three members of the supervisory board, they

are appointed by the shareholders’ meeting for three financial years

(the shareholders’ meeting also appoints its chairman) and their terms

are renewable. The shareholders’ meeting may remove them at any

time.

17
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
The one-tier system, typical of the English-speaking country tradition,

where management is assigned to a single board, the board of

directors, among whose members a control committee is appointed.

CORPORATE GOVERNANCE - INDIAN MODEL

Indian society is predominantly a family oriented society, both at the

social familial level, and almost equally so at the

18
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
CORPORATE GOVERNANCE MODELS WORLDWIDE

Corporate governance is the process by which large companies are

run. There are various different models that are applied across the

world. There is disagreement over which is the best or most effective

model as there are different advantages and disadvantages with each

model. Methods are developed according to the laws and other factors

specific to the country of origin.

Anglo-US Model

The Anglo-US model is based on a system of individual or

institutional shareholders that are outsiders of the corporation. The

other key players that make up the three sides of the corporate

governance triangle in the Anglo-US model are management and the

board of directors. This model is designed to separate the control and

ownership of any corporation. Therefore the board of most companies

19
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
contains both insiders (executive directors) and outsiders (non-

executive or independent directors). Traditionally, though, one person

holds the position of CEO and chairman of the board of directors. This

concentration of power has led many companies to include more

outside directors now. The Anglo-US system relies on effective

communication between shareholders, management and the board

with important decisions being put to the vote of the shareholders.

Japanese Model

The Japanese model involves a high level of ownership by banks and

other affiliated companies and "keiretsu," industrial groups linked by

trading relationships and cross-shareholding. The key players in the

Japanese system are the bank, the keiretsu (both major inside

shareholders), management and the government. Outside shareholders

have little or no voice and there are few truly independent or outside

directors. The board of directors is usually made up entirely of

insiders, often the heads of the different divisions of the company.

However, remaining on the board of directors is conditional on the

company's continuing profits, therefore the bank or keiretsu may

20
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
remove directors and appoint its own candidates if a company's profits

continue to fall. Government is also traditionally influential in the

management of corporations through policy and regulations.

German Model

As in Japan, banks hold long-term stakes in corporations and their

representatives serve on boards. However they serve on boards

continuously, not just during times of financial difficulty as in Japan.

In the German model, there is a two-tiered board system consisting of

a management board and a supervisory board. The management board

is made up of inside executives of the company and the supervisory

board is made up of outsiders such as labor representatives and

shareholder representatives. The two boards are completely separate,

and the size of the supervisory board is set by law and cannot be

changed by the shareholders. Also in the German model, there are

voting right restrictions on the shareholders. They can only vote a

certain share percentage regardless of their share ownership.

21
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
CORPORATE GOVERNANCE PROVISION

The word Governance is derived from the Latin Word Gubernare

which means to steer usually applying to the steering of a ship.

Similarly the application of Governance in Corporate Houses is

known as Corporate Governance. The term Governance refers to a set

of systems, by which an organization is run. Corporate Governance

under the new companies act 2013 have broadened its meaning. They

are a complete module for fixing a liability on the corporate entity. It

is a landmark piece of legislation and likely to have far reaching

consequences on all companies incorporated in India. The repealed act

Companies Act, 1956 was in existence for well over fifty years and

was lately seeming quite ineffective at handling present day

challenges of a growing industry and the complexities related with the

growing stakeholders’ interests and segregation of ownership from

management.

22
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
The Companies (Amendment) Act, 2000 has inducted good corporate

governance [CG] leading to more transparent, ethical and fair business

practice to be adopted by corporates at large. The following are the

provisions which have brought good CG:

 Section 217(2AA) dealing with Directors’ Responsibility

Statement [DRS] to be included in the Directors’ Report

 Section 292A bringing in constitution of Audit Committee

 Section 274(1)(g) debarring a person to act as a Director of a

company if default in filing Annual Return/Accounts or

repayment of deposits/interest/debentures/dividend has taken

place

 Section 275 providing for appointment of a person as a Director

in a maximum of 15 companies

 Clause 49 of the Listing Agreement of the Stock Exchanges

providing for promoting and raising the standards of CG in

respect of listed companies.

23
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 Corporate Governance Voluntary Guidelines, 2009 released in

December, 2009 by the Ministry of Corporate Affairs for

voluntary adoption by the Corporate Sector

SEBI:CLAUSE 49

Clause 49 of the Listing Agreement to the Indian stock exchange that

came into effect from 31 December 2005. It has been formulated for

the improvement of corporate governance in all listed companies.

Background

In corporate hierarchy two types of managements are envisaged:

i) companies managed by Board of Directors; and

24
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
ii) those by a Managing Director, whole-time director or manager

subject to the control and guidance of the Board of Directors

i.e., he is liable to the Board of Directors and the function of the

corporate.

As per Clause 49, for a company with an Executive Chairman, at least

50 per cent of the board should comprise independent directors. In the

case of a company with a non-executive Chairman, at least one-third

of the board should be independent directors.

It would be necessary for chief executives and chief financial officers

to establish and maintain internal controls and implement remediation

and risk mitigation towards deficiencies in internal controls, among

others.

Clause VI (ii) of Clause 49 requires all companies to submit a

quarterly compliance report to stock exchange in the prescribed form.

The clause also requires that there be a separate section on corporate

governance in the annual report with a detailed compliance report.

25
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
A company is also required to obtain a certificate either from auditors

or practicing company secretaries regarding compliance of conditions

as stipulated, and annex the same to the director's report.

The clause mandates composition of an audit committee; one of the

directors is required to be "financially literate".

It is mandatory for all listed companies to comply with the clause by

31 December 2005.

Corporate Governance may be defined as “A set of systems, processes

and principles which ensure that a company is governed in the best

interest of all stakeholders.” It ensures Commitment to values and

ethical conduct of business; Transparency in business transactions;

Statutory and legal compliance; adequate disclosures and Effective

decision-making to achieve corporate objectives.In other words,

Corporate Governance is about promoting corporate fairness,

transparency and accountability. Good Corporate Governance is

simply Good Business.

26
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Clause 49 of the SEBI guidelines on Corporate Governance as

amended on 29 October 2004 has made major changes in the

definition of independent directors, strengthening the responsibilities

of audit committees, improving quality of financial disclosures,

including those relating to related party transactions and proceeds

from public/ rights/ preferential issues, requiring Boards to adopt

formal code of conduct, requiring CEO/CFO certification of financial

statements and for improving disclosures to shareholders. Certain non-

mandatory clauses like whistle blower policy and restriction of the

term of independent directors have also been included.

The term ‘Clause 49’ refers to clause number 49 of the Listing

Agreement between a company and the stock exchanges on which it is

listed (the Listing Agreement is identical for all Indian stock

exchanges, including the NSE and BSE). This clause is a recent

addition to the Listing Agreement and was inserted as late as 2000

consequent to the recommendations of the Kumarmangalam Birla

Committee on Corporate Governance constituted by the Securities

Exchange Board of India (SEBI) in 1999.

27
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Clause 49, when it was first added, was intended to introduce some

basic corporate governance practices in Indian companies and brought

in a number of key changes in governance and disclosures (many of

which we take for granted today). It specified the minimum number of

independent directors required on the board of a company. The setting

up of an Audit committee, and a Shareholders’ Grievance committee,

among others, were made mandatory as were the Management’s

Discussion and Analysis (MD&A) section and the Report on

Corporate Governance in the Annual Report, and disclosures of fees

paid to non-executive directors. A limit was placed on the number of

committees that a director could serve on.

COMPANY ACT 2013

The Companies Act 2013 is an Act of the Parliament of India on

Indian company law which regulates incorporation of a company,

responsibilities of a company, directors, dissolution of a company.

The 2013 Act is divided into 29 chapters containing 470 sections as

against 658 Sections in the Companies Act, 1956 and has 7 schedules.

The Act has replaced The Companies Act, 1956 (in a partial manner)

28
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
after receiving the assent of the President of India on 29 August 2013.

The Act came into force on 12 September 2013 with few changes like

earlier private companies maximum number of member was 50 and

now it will be 200. A new term of "one person company" is included

in this act that will be a private company and with only 98 provisions

of the Act notified. A total of another 184 sections came into force

from 1 April 2014.

The Ministry of Company Affairs thereafter published a notification

for exempting private companies from the ambit of various sections

under the Companies Act.

IMPORTANT PROVISIONS & AMENDMENTS IN NEW

COMPANIES ACT, 2013

implementation of provisions new Companies Act, 2013 with effect

from 01.04.2014:

1. Immediate Changes in letterhead, bills or other official

communications, as if full name, address of its registered office,
Corporate Identity Number (21 digit number allotted by

29
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 Government), Telephone number, fax number, Email id,
website address if any.

2. Woman Director: Every Listed Company /Public Company

with paid up capital of Rs 100 Crores or more / Public
Company with turnover of Rs 300 Crores or more shall have at
least one Woman Director.

3. Resident Director: Every Company must have a director who

stayed in India for a total period of 182 days ore more in
previous calendar year. For existing companies, compliance to
be made before 31stMarch, 2015.

4. Accounting Year: Every company shall follow uniform

accounting year i.e. 1 st April -31st March.

5. Loans to director: The Company CANNOT advance any kind

of loan / guarantee / security to any director, Director of holding
company, his partner, his relative, Firm in which he or his
relative is partner, private limited in which he is director or
member or any bodies corporate whose 25% or more of total
voting power or board of Directors is controlled by him.

6. Acceptance of Deposits: The company can not avail unsecured

loans from the members / shareholders of the company until and
unless certain conditions are fulfilled
30
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
7. Share application money: The Company (whether Private
Company or Public Company) can not hold share application
money beyond thirty days.

8. Commencement of Business: Now, every new company

should obtain commencement of business before it commences
its business

9. Issue of further shares: Now, every company (whether private

or public limited company) should allot shares other than the
existing shareholders after passing special resolution (other than
rights issue).

10. Borrowing powers: Now, every company (whether private or

public limited company), should obtain the approval of the
shareholders by way of a special resolution before borrowing
any money in excess of the aggregate of the paid up capital and
free reserves

11. Notice of General Meetings: Whether the company is a private

company or public company, the notice must be not less than 21
days clear notice

12. Filing of resignation letter by Director: Even the director who

has resigned should forward a copy of his resignation along

31
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 with detailed reasons for the resignation to the Registrar of
Companies within thirty days of resignation

13. Notice of Board Meeting: A meeting of the Board shall be

called by giving not less than 7 days’ notice in writing to every
director at his address registered with the company and such
notice shall be sent by hand delivery or by post or by electronic
means.

14. Attendance to Board Meetings: A director is bound to attend

atleast one meeting of the Board of Directors in a span of every
twelve months ever since he becomes a director, failing which
he is bound to vacate his office by operation of law
automatically, even if such director had sought leave of
absence.

For instance, if a person becomes a director, whether ordinary

or independent or woman director, on 1st April 2014 and fails
to attend any meeting until 31st March 2015, with or without
seeking leave of absence, at the end of 31st March 2015, he will
have lost his directorship.

15. Key Managerial Personnel (KMP): “KMP”, in relation to a

company, means (i) the Chief Executive Officer or the
managing director or the manager; (ii) the company secretary;
(iii) the whole-time director; (iv) the Chief Financial Officer;
32
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 and (v) such other officer as may be prescribed. Every listed
company and every other public company having a paid-up
share capital of Rs.10 Crores or more shall have whole-time
KMP. The KMP of one company cannot double as KMP of
another company save and except the holding of such a position
in a subsidiary company.

16. Corporate Social Responsibility (CSR): CSR is mandated for

the Companies having net worth of Rs.500 Crores or more or
Companies having turnover of Rs.1000 Crores or more or
Companies having a net profit of Rs.5 Crores or more. The
Board of Directors of the company need to ensure that the
company spends at least 2% of average net profits made by it
during the three immediately preceding financial years in a
financial year in CSR activities as per its CSR Policy. In
advancement of its CSR efforts, the Company is required to
give preference to local areas and areas where it operates

17. Board’s Report: Board’s Report should contain (i) Extract of

Annual Return (ii) Details of meetings of Board of Directors,
(iii) Directors Responsibility Statement (iv) Particulars of
Loans, Investments, Guarantees and (v) Risk Management
Policy Etc.

18. Secretarial Audit: Every listed company and every public

company having a paid-up share capital of Rs.50 Crores or
33
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 more; or (b) every public company having a turnover of Rs.250
Crores or more must annex to Board’s Report a secretarial audit
report issued by a company secretary in practice

19. One Person Company (OPC): It's a Private Company having

only one Member and at least One Director. No compulsion to
hold AGM. Conversion of existing private Companies with
paid-up capital up to Rs 50 Lacs and turnover up to Rs 2 Crores
into OPC is permitted.

20. Penal Provisions: Now, the penal provisions are very stringent.
For Ex: If any company violates the provisions related to
acceptance of deposits, the company shall, in addition to the
payment of the amount of deposit or part thereof and the interest
due, be punishable with fine which shall not be less than one
crore rupees but which may extend to ten crore rupees and
every officer of the company who is in default shall be
punishable with imprisonment which may extend to seven years
or with fine which shall not be less than twenty-five lakh rupees
but which may extend to two crore rupees, or with both

34
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
HOW TO MEASURE OF FINANCIAL PERFORMANCE

Five important measure of Financial Performance :

1. Gross Profit Margin

Your gross profit margin tells you whether you are pricing your goods

or services appropriately. Here is the equation to calculate this:

Gross profit margin = (revenue – cost of goods sold)/revenue

Your gross profit margin should be large enough to cover your fixed

(operating) expenses and leave you with a profit at the end of the day

2. Net Profit

35
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
This is where the rubber hits the road. Your net profit is your bottom

line — the amount of cash left over after you’ve paid all the bills. You

can figure out your net profit using simple subtraction:

Net profit = total revenue – total expenses

For example, if your sales last year totaled$100,000 and your business

expenses for rent, inventory, salaries, etc. added up to $80,000, your

net profit is $20,000.

If you are a sole proprietor, your salary or draw will come out of your

net profit, so it’s vital that this amount be enough to cover your

personal needs plus enough extra to build reserves that can keep your

business operational during slow periods.

Financing is also a possibility to help smooth out seasonal

fluctuations. Many companies go this route to keep things moving

during the down season.

3. Net Profit Margin

36
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Net profit margin tells you what percentage of your revenue was

profit. The equation is simple:

Net profit margin = net profit/total revenue

In the example above, your net profit margin is 20 percent. This

metric helps you project future profits and set goals and benchmarks

for profitability.

4. Aging Accounts Receivable

If your business involves sending bills to customers, an accounts

receivable aging report (most likely a standard report in your

accounting software) can be eye-opening. If customer A consistently

pays her bills within 15 days, while customers B, C, and D drag their

payments out to 90 or even 120 days, you may have found a root

cause of your business’ cash flow problems. It could be time to start

charging interest on overdue accounts or let go of slow-paying clients.

Invoice financing is also an option that can help you capitalize on

outstanding invoices.
37
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
5. Current Ratio

This accounting term describes the ability of a business to pay its bills.

It can be calculated like this:

Current ratio = current assets/current liabilities

The resulting number should ideally fall between 1.5 and 3. A current

ratio of less than 1 means you don’t have enough cash coming in to

pay your bills. Tracking this indicator may give you advance warning

of cash flow problems, especially if your current ratio dips into the

danger zone between 1.5 and 1.

38
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
RESEARCH TREND IN CORPORATE GOVERNANCE

There is a lot of research going on and the International Corporate

Governance has taken alots of alteration. Some of the research treads

are :

1. Restoring Trust in Business through Corporate Governance-

explores how trust is antecedent to, related with, and/or

generated by corporate governance systems and practices.

2. Boards of Directors. Every corporation in the world is led by a

board of directors.

However, in some nations, corporate boards are vested with

great power and responsibility; while in other nations, the board

is an impotent pawn. Furthermore, the power and influence

ofcorporate boards often varies within national economies and

39
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 industries. In this track, we seek tounderstand the antecedents,

processes and effects of boardroom effectiveness.

3. Ownership. Every corporation in the world is also owned by a

single or array of investors. These owners have a vested interest

in seeing that the corporation is governed well. In this track, we

will explore the antecedents and outcomes associated with

different ownership profiles throughout the global economy.

4. National Governance Environments- focuses on corporate

governance mechanisms and outcomes within a single national

governance environment. Typically, this governance

environment is within a national economy. Multiple governance

mechanisms operating within a single governance environment

are especially welcome.

5. Transnational Governance Environments. In our increasingly

global economy, pressure and accountability is exerted from

transnational non-governmental institutions. In this track, the

antecedents and effects of comparative governance systems is

40
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 explored. Corporate governance research surrounding the

multinational firm fits well in this track.

6. Multi-Level Governance Systems. Recent research has shown

that corporate governance mechanisms and systems often

complement or substitute for each other. Furthermore, all

corporate governance practices are embedded within a larger

governance system. This track explores research related to

corporate governance bundles and the embedded nature of

corporate governance.

7. Self-Governance. Rules, regulations, and continuous monitoring

by outsiders are the norm for most governance solutions, but

they are inflexible and often quite costly. When corporations

choose socially-responsible behavior and/or executives possess

an internal moral compass that translates into ethically-sound

decisions and actions, society often benefits as does the

corporation. Thus, this track seeks to understand the potential

and limits of self-governance.

41
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
8. Teaching Corporate Governance. This track seeks to enhance

the teaching of corporate governance within our educational

programs. Specifically, we welcome such innovations as new

case studies, teaching tips, simulations, experiential exercises

that have been used to convey important corporate governance

concepts and relationships. In addition, any research related to

online education and innovative teaching delivery mechanisms

are welcome.

42
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 CHAPTER 3

OBJECTIVE OF THE STUDY

43
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 CHAPTER 3

OBJECTIVE OF THE STUDY

 Understand the what is corporate governance.

 To determine the impact of corporate governance of the

company's performance.

 To understand the statutory provision of corporate governance.

 To determine the importance of Board of Administrator in a

Corporate Governance.

44
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 CHAPTER 4

RESEARCH METHODOLOGY

45
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 CHAPTER 4

RESEARCH METHODOLOGY

The current study is based on data in form secondary collected from

respondents and magazines from the different sources.

RESEARCH TYPE USED - ANALYTICAL

An analytical research essay is an in-depth exploration of a particular

topic. To create a solid piece, you must carefully prepare for this type

of project. An analytical research paper can cover a wide range of

topics from a period of time to a work of literature. In fact, you can

present an analytical research paper on nearly any topic as long as

there is enough fact-based evidence to support your conclusion. A

good analytical research paper requires careful preparation and a

thorough understanding of the paper’s purpose.

DESCRIPTIVE RESEARCH
46
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Descriptive research is used to describe characteristics of a population

or phenomenon being studied. It does not answer questions about

how/when/why the characteristics occurred. Rather it addresses the

"what" question. The characteristics used to describe the situation or

population are usually some kind of categorical scheme also known as

descriptive categories. For example, the periodic table categorizes the

elements. Scientists use knowledge about the nature of electrons,

protons and neutrons to devise this categorical scheme. We now take

for granted the periodic table, yet it took descriptive research to devise

it. Descriptive research generally precedes explanatory research. For

example, over time the periodic table’s description of the elements

allowed scientists to explain chemical reaction and make sound

prediction when elements were combined. Hence, descriptive research

cannot describe what caused a situation. Thus, descriptive research

cannot be used as the basis of a causal relationship, where one variable

affects another. In other words, descriptive research can be said to

have a low requirement for internal validity.

Sample Design

47
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Sampling Plan

Sampling unit: This call is for important the target population to be

surveyed. In this study the sampling unit was the customers who have

been using the digital payment modes.

Sample size

In this survey the sample size decided was 50.

Sampling procedure:

We accepted Intercept interview method for collection of primary

data, as taking appointment is not possible from a large number of

respondents. Purpose of this study was told to respondents and

questions were explained to them in case there was any need for

understanding any particular question. There had been no personal

bias or distortions were allowed although recording the responses.

The procedure accepted for conducting the study requires a lot of

attention as it has direct bearing on accuracy, reliability and adequacy

48
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
of outcomes obtained. It is due to this reason that study methodology,

which we used at the time of conducting the study, needs to be

elaborated upon. It may be understood as a science of studying how

study is done scientifically. So, the study methodology not only talks

about the study methods but also considers the logic behind the

method used in the context of the study study. Study Methodology is a

way to systematically study and solve the study problems. If a studyer

wants to claim his study as a good study, he must clearly state the

methodology adapted in conducting the study the study so that it way

be judged by the reader whether the methodology of work done is

sound or not.

The Study Methodology here includes -

• Goal of study

• Meaning of Study.

• Study Problem.

• Study Design.
49
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
• Data Collection method.

• Analysis and interpretation of Data

• Limitation of study

Study methodology is a methodology for collecting all sorts of

information & data pertaining to the subject in question. The goal is to

inspect all the issues involved & conduct situational analysis. The

methodology includes the overall study design, sampling procedure &

fieldwork done & finally the analysis procedure. The methodology

used in the study consistent of sample survey using both primary &

secondary data.

50
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 CHAPTER 5

DATA INTERPRETATION

51
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
52
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
53
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
54
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
55
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
56
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
57
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
58
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
59
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
60
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
61
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
62
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
63
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
64
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
65
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
66
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
67
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
68
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
69
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
70
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
71
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
72
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
73
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
74
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
75
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
76
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
77
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
78
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
CHAPTER 6

CONCLUSION

79
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 CHAPTER 6

CONCLUSION

Net profit of both SBI and ICICI banks were fluctuating. The highest

Net Profit ratio of SBI was 10.39% in 2012-13 and that of ICICI bank,

it was 18.24% in 2014-15, where as the lowest Net Profit Ratio of SBI

was 4.96% in 2016-17and that of ICICI, it was 13.30 % in 2016-17.

The average Net Profit Ratio of SBI is 7.48% and ICICI bank is

16.04% which implies that the Net Profit Ratio of ICICI bank is 8.56,

which is more than that of the SBI.

The Operating Profit Ratio of both SBI and ICICI banks were

fluctuating during the period of the study. The highest Operating

Profit Ratio of SBI in the year 2011-12 was 26.12% and that of ICICI

bank was 35.96% in 2016-17. Where as, the lowest Operating Profit

Ratio of SBI was 20.72% in the year 2013-14 and 22.31% in 2010-11

in ICICI bank respectively.

80
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
The average Operating Profit Ratio of SBI is 22.26% and that of ICICI

bank is 29.61% which implies that the Operating Profit Ratio of ICICI

7.35% which is more than that of SBI bank.

The Return on Net worth Ratio of both SBI and ICICI banks were

fluctuating during the period of the study. The highest Return on Net

Worth Ratio of SBI in the year 2012-13 was 14.26% and that of ICICI

bank in 2014-15 was 13.89% .Whereas, the lowest Return on Net

Worth Ratio of SBI in the year 2016-17 was 5.57% and of ICICI bank,

it was 9.35% inn 2010-11.

The average Net Worth Ratio of SBI is 10.20% and that of ICICI bank

is 8.046% which implies that the average Net Worth Ratio of SBI i.e.

2.154% more than the ICICI bank.

The highest Earnings per Share was 206.21 in the year 2012-13 and

that of ICICI bank was 96.37 in 2014-15. Whereas, the lowest

Earnings per share of SBI in the year 2010-11 was 63.50 and that of

ICICI bank in the year 2010-11 was 44.70.

81
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
The average Earnings per Share of SBI is 153.97 and ICICI bank is

74.56, which implies that the Average Earnings per share of SBI is

79.41, which is more than that of ICICI bank.

Table No. 5 depicts that the Total Assets Turnover Ratio of both SBI

and ICICI banks was stable. The highest Assets Turnover Ratio of SBI

is 0.09 times in 2011-12 and that of ICICI bank was stable during the

study period. The average Total Assets Turnover Ratio of SBI is 0.078

times and of ICICI bank is 0.087 times, which implies that the

average Total Assets ofSBI Bank ismore than that of the ICICI bank.

Interest expended to Interest Earned Ratio of both SBI bank and ICICI

bank fluctuated. The highest Interest Expended to Interest Earned

Ratio of SBI was 65.24% in the year 2015-16 and for ICICI bank; it

was 68.00% in 2011-12. Whereas the lowest Interest Expended to

Interest Earned Ratio of SBI was 59.36% in 2011-12 and for ICICI

bank was 59.47 in 2016-17.

82
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
The average Interest Expended to Interest Earned Ratio of SBI is

62.86% and that of ICICI bank is 63.11%, which implies that the

average interest Expended to Interest Earned Ratio of ICICI bank is

more than that of the SBI bank with 0.25%.

83
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
CHAPTER 7

LIMITATIONS

CHAPTER 7
84
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
LIMITATIONS

The report is limited to few number of respondent only.

Lack of study experience.

Lack of time.

Lack of data available on the topic.

The topic is very wide and has to be covered in limitedwords.

Therefore, it is not possible to cover all other linkedissues.

Proper source of information from Govt. could not beofferd.

Only internet, magazines and various surveys areavailable.

Accurate Questionnaire cannot be created due to the limitation of

subject.

Scope of study is quite large but the time is limited.

85
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
Complexity of export and import documentationprocedure

86
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 CHAPTER 8

SUGGESTIONS

CHAPTER 8

SUGGESTIONS

87
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
• Leading corporate houses in country needs to take responsibility

in managing the commercial occupation in according to

corporate governance.

• Policies of the company should be made in such a way that it

boost the working of company and helps in expanding.

88
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
 CHAPTER 9

BIBLIOGRAPHY

CHAPTER 9

BIBLIOGRAPHY

89
Mohd. Asif
Bachelor of Commerce (H)
150701071900030
WEB SITES

WEB SITES

• https://bizfluent.com/info-8503616-recommendations-

corporate-social-responsibility.html

• www.wikipedia.com

• https://study-methodology.net/corporate-social-responsibility

-csr-recommendations...

MAGAZINE & NEWSPAPER

• The Times of India - Newspaper

• Hindusthan Times - Newspaper

90
Mohd. Asif
Bachelor of Commerce (H)
150701071900030