Unit – 4

Dr Nandini Desai
 Unit 4
• OECD and other reports of various
committees in US, UK and India.
• CII and SEBI initiatives.
• Board of Directors – Duties and
responsibilities, Types of Directors,
Remuneration Committee, Audit Committee,
• Separation of CEO from Chairman Position.
 The Organization for Economic Co-
operation and Development (OECD)
• The Organization for Economic Co-operation and
Development (OECD) is an international organization that
works to build better policies for better lives.
• The major goal is to shape policies that foster prosperity,
equality, opportunity and well-being for all.
• Together with governments, policy makers and citizens, They
work on establishing evidence-based international standards
and finding solutions to a range of social, economic and
environmental challenges.
• From improving economic performance and creating jobs to
fostering strong education and fighting international tax
avoidance, we provide a unique forum and knowledge hub
for data and analysis, exchange of experiences, best-practice
sharing, and advice on public policies and international
standard-setting.
 The Organization for Economic Co-operation and
Development (OECD)
• The Organization for Economic Co-operation and
Development (OECD) is an intergovernmental
economic organization with 38 member countries,
founded in 1961 .
• To stimulate economic progress and world trade.
• It is a forum of countries describing themselves as
committed to democracy and the market economy,
providing a platform to compare policy experiences,
seek answers to common problems, identify good
practices and coordinate domestic and international
policies of its members.
• Generally, OECD members are high-income
economies with a very high Human Development
Index (HDI) and are regarded as developed countries.
 Organization for Economic Co-operation and
Development (OECD)
• The Organization for Economic Co-operation and
Development, abbreviated as OECD and based in
Paris , is an international organization of 36
countries committed to democracy and the
market economy.
• The OECD Council is the organization's
overarching decision-making body. It is
composed of ambassadors from Member
countries and the European Commission, and is
chaired by the Secretary-General.
 OECD
• It meets regularly to discuss key work of the
Organisation, share concerns and take decisions
by consensus. Once a year, the OECD Council
meets for the Ministerial Council Meeting, which
brings together heads of government, economy,
trade and foreign ministers from Member
countries to monitor and set priorities for our
work, discuss the global economic and trade
context, and delve further into issues such as the
budget or the consent process.
 OECD
• The OECD brings together Member countries
and a range of partners that collaborate on
key global issues at national, regional and local
levels.
• 38 Member countries span the globe, from
North and South America to Europe and Asia-
Pacific.
 OECD
• The Securities and Exchange Board of India appointed a
committee on corporate governance on 7 May 1999, with
18 members under the chairmanship of Kumar Mangalam
Birla with a view to promoting and raising the standards of
corporate governance.
• The committee’s terms of reference were: (i) to suggest
suitable amendments to the listing agreement (LA)
executed by the stock exchanges with the companies and
any other measures to improve the standards of corporate
governance in the listed companies in areas such as
continuous disclosure of material information, both
financial and non-financial, manner and frequency of such
disclosures, responsibilities of independent and outside
directors;
• (ii) to draft a code of corporate best practices
 Key Partners

• The OECD works closely with some of the

world’s largest economies: Brazil, China, India,
Indonesia, and South Africa, who are
OECD Key Partners. They participate in the
OECD’s daily work, bringing useful
perspectives and increasing the relevance of
policy debates. Key Partners participate in
policy discussions in OECD bodies, take part in
regular OECD surveys and are included in
statistical databases.
 OECD
• In 2021, OECD celebrated its 60th anniversary
• More than 140 000 policy makers and shapers
from across the globe visit the OECD every year.
• At the OECD, countries assess each other’s policy
performance and propose advice for
improvement. This peer review approach is now
used by other international organizations.
• Some of the international benchmarks we have
set include the Polluter Pays Principle and the
Anti-Bribery Convention.
 Inform
• OECD provide knowledge that members and
partners can use as they make policy decisions.
• Their analysis is captured in the more than 500
major reports and country surveys and more than
5 billion data points we release every year, as well
as the hundreds of policy briefs, articles and
digital content on policy issues that we produce.
• They can and anticipate economic, environmental
and social change, and provide country-specific
reviews at the request of governments.
 Influence
• As a global forum and knowledge hub focused on
designing better policies to improve lives, OECD
convene countries and a range of partners from
around the world to explore innovative ideas and
best practices across the entire policy spectrum.
• Policy makers and policy shapers share insights
and inspiration, tackling tough issues like
inequality, youth unemployment, the gender gap,
migrant integration, or ageing in poverty, to
ensure that successes and challenges in one place
can help inform and benefit others.
 Set standards

• The OECD sets international standards and codes

in collaboration with Member countries.
• Standards and codes help level the global playing
field, deepen international co-operation, and
encourage all countries to address challenges and
improve their own performance.
• OECD have developed over 450 international
standards.
Confederation of Indian Industry – CII

• Confederation of Indian Industry – CII

• The Confederation of Indian Industry (CII) works to create
and sustain an environment conducive to the development
of India, partnering Industry, Government and civil society,
through advisory and consultative processes.
• CII is a non-government, not-for-profit, industry-led and
industry-managed organization, with over 9000 members
from the private as well as public sectors, including SMEs
and MNCs, and an indirect membership of over 300,000
enterprises from 294 national and regional sectoral
industry bodies.
 Confederation of Indian Industry – CII
• CII charts change by working closely with Government
on policy issues, interfacing with thought leaders, and
enhancing efficiency, competitiveness and business
opportunities for industry through a range of
specialized services and strategic global linkages. It also
provides a platform for consensus-building and
networking on key issues.
• Theme for 2021-22 as Building India for a New World:
Competitiveness, Growth, Sustainability, Technology,
rededicates itself to meeting the aspirations of citizens
for a morally, economically and technologically
advanced country in partnership with the Government,
Industry and all stakeholders.
 CII
• Across the world, innovative governance
practices are evolving in response to the
global financial crisis, wave of privatization,
activity and integration in the capital markets,
rising investment levels, greater stakeholder
awareness and the urge to survive and thrive
in uncertain times.
 CII
• CII has been a front-runner in the evolution of corporate
governance in India.
• From the Voluntary Code of Corporate Governance released
as early as 1998.
• CII Task Force in 2009, CII established its position as a front-
runner when, in a unique instance, an industry association
took the lead in recommending corporate governance
practices for its member companies.
• CII’s Code served as a base for various reports leading to
Clause 49, as we know it today.
• CII also hosts the National Foundation for Corporate
Governance, a Public Private Partnership initiative of the
Ministry with the 3 professional institutes – the Institute of
Chartered Accountants of India, Institute of Company
Secretaries of India, and the Institute of Cost Accountants of
India.
 CII
• CII has also been advocating industry’s concerns on the
regulatory front. It has been involved in each stage of
development of the Companies Bill, finalization of the
merger review process and revision in the SEBI Takeover
Code.
• It has represented industry’s concerns and engaged in
constructive dialogue with the government and the
regulator for the creation of a conducive regulatory
environment for industry’s growth.
• CII encourages voluntary adoption of best practices and
self-regulation by corporates, thus obviating the need
for warranting additional regulations. Its comprehensive
and sustained policy advocacy is aimed at facilitating the
creation of a streamlined and harmonized regulatory
environment.
 SECURITIES AND EXCHANGE BOARD
OF INDIA - SEBI initiatives
• SEBI initiatives in corporate governance are
based on the Securities and Exchange Board
of India Act and aim to prevent fraudulent
practices.
• The organization is responsible for enforcing
rules and regulations to promote orderly
development in the stock market.
 SECURITIES AND EXCHANGE BOARD
OF INDIA - SEBI
• SEBI had constituted a Committee on Corporate
Governance under the Chairmanship of Shri Kumar
Mangalam Birla, Member, SEBI Board to promote
and raise the standard of Corporate Governance in
respect of listed companies.
• The SEBI Board in its meeting held on January 25,
2000 considered the recommendation of the
Committee and decided to make the amendments
to the listing agreement in pursuance of the
decision of the Board, it is advised that a new
clause, namely clause 49, be incorporate in the
listing agreement.
 49. Corporate Governance
• I. Board of Directors
• The company agrees that the board of directors of the company shall have an
optimum combination of executive and non-executive directors with not less
than fifty percent of the board of directors comprising of non-executive
directors. The number of independent directors would depend whether the
Chairman is executive or non-executive. In case of a non-executive chairman,
at least one-third of board should comprise of independent directors and in
case of an executive chairman, at least half of board should comprise of
independent directors.
• Explanation: For the purpose of this clause the expression ‘independent
directors’ means directors who apart from receiving director’s remuneration,
do not have any other material pecuniary relationship or transactions with the
company, its promoters, its management or its subsidiaries, which in
judgment of the board may affect independence of judgment of the director.
• The company agrees that all pecuniary relationship or transactions of the non-
executive directors viz-a-viz. the company should be disclosed in the Annual
Report.
 Audit Committee.
• The company agrees that a qualified and independent audit committee shall
be set up and that :
• The audit committee shall have minimum three members, all being non-
executive directors, with the majority of them being independent, and with
at least one director having financial and accounting knowledge.
• The chairman of the committee shall be an independent director;
• The chairman shall be present at Annual General Meeting to answer
shareholder queries
• The audit committee should invite such of the executives, as it
considers appropriate (and particularly 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. The finance director, head of internal
audit and when required, a representative of the external auditor
shall be present as invitees for the meetings of the audit
committee;
 Audit Committee
• The Company Secretary shall act as the
secretary to the committee.
• The audit committee shall meet at least thrice
a year. One meeting shall be held before
finalization of annual accounts and one every
six months. The quorum shall be either two
members or one third of the members of the
audit committee, whichever is higher and
minimum of two independent directors.
 The audit committee shall have powers which should
include the following :
• To investigate any activity within its terms of
reference.
• To seek information from any employee.
• To obtain outside legal or other professional advice.
• To secure attendance of outsiders with relevant
expertise, if it considers necessary
• Any changes in accounting policies and practices.
• Major accounting entries based on exercise of
judgment by management.
• Qualifications in draft audit report.
 Remuneration Committee
The board should set up a remuneration committee to
determine on their behalf and on behalf of the
shareholders with agreed terms of reference, the
company’s policy on specific remuneration packages for
executive directors including pension rights and any
compensation payment.
– To avoid conflicts of interest, the remuneration committee,
which would determine the remuneration packages of the
executive directors should comprise of at least three
directors, all of whom should be non-executive directors, the
chairman of committee being an independent director.
– All the members of the remuneration committee should be
present at the meeting.
– The Chairman of the remuneration committee should be
present at the Annual General Meeting, to answer the
shareholder queries. However, it would be up to the
Chairman to decide who should answer the queries.
 Remuneration Committees

• To recommend to the Board a policy, relating

to the remuneration for the Directors, Key
Managerial Personnel and other employees.
Such Remuneration policy shall be disclosed in
the Annual Report of the Company.
• Remuneration committee be comprised of a
majority of independent non-executive
directors, which allows an executive director
to also be a committee member.
 A suggested checklist of the responsibilities
of the remuneration committee
• Review the framework for the remuneration and terms
and conditions of employment of the chairman of the
board and of executive directors.
• Monitor the level and structure of the remuneration of
senior managers.
• Set detailed remuneration of the executive directors and
chairman including termination payments
• Ensure that executive directors are fairly rewarded for
their contribution to the performance of the company
• Ensure transparency to shareholders that remuneration
of the executive directors is set by individuals with no
personal interest in the outcome of the committee
decisions
 separate the roles of chairperson
• Listed entities were initially required to
separate the roles of chairperson and MD/CEO
from April 1, 2020 onwards.
• "Separation of the roles will reduce excessive
concentration of authority in a single
individual. Having the same person as
chairman and MD brings in conflict of
interest," he added.
• Thank YOU !!