GROUP B.

Ashish Kumar Pandit

Topic: Corporate Governance Committees

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What Is CG
• India, after the economic initiatives in1991, the
Govt. thought it fit to respond to the
developments taking placing the world over and
accordingly the initiatives recommended by
Cadbury Committee Report got prominence.

• Confederation of Indian Industry (CII), the

Associated Chambers of Commerce and Industry
(ASSOCHAM) and, the Securities and Exchange
Board of India (SEBI) constituted committees to
recommend initiatives in Corporate Governance.

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INDIA CG CODE SECURITIES AND EXCHANGE BOARD CIRCULAR

Amendments to Clauses 35B and 49 of the Equity

Listing Agreement (2004, most recently revised April
2014; Clause 49 to be effective October 1, 2014) Issuing
Body Securities and Exchange Board of India (“SEBI”)
Legal Basis and Complianc e Mandatory with certain
exceptions as to certain recommendations Objectives
Make corporate governance framework more effective
Scope Listed companies with certain exceptions
Predominant Board Structure (listed companies):
Unitary

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Corporate Governance Guidelines

• There shall be a separate section on Corporate

Governance in the Annual Reports of company,
with a detailed compliance report on Corporate
Governance.
• Non-compliance of any mandatory requirement
of this clause with reasons thereof and the
extent to which the non-mandatory
requirements have been adopted should be
specifically highlighted.

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COMMITTEES ON CORPORATE GOVERNANCE
1 Cadbury England 1992
2 King Committee South of Africa 1994 & 2002
3 CII India 1996
4 Hampel England 1998
5 Kumar Mangalam Birla India 2000
6 SEBI India 2000 7 Narayana Murty India 2003

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CII Confederation of Indian Industry Committee
• The thrust of this report, therefore, is to suggest
certain voluntary recommendations for industry to
adopt.
• Good corporate governance involves a
commitment of a company to run its businesses in
a legal, ethical and transparent manner - a
dedication that must come from the very top and
permeate throughout the organization.

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CII Recommendations
• No need for German style two-tiered board.
• For a listed company with turnover exceeding Rs 100 crores, if the
chairman is also the MD, at least half of the board should be
independent directors, else at least 30%.
• No single person should hold directorships in more than 10 listed
companies.
• Non-executive directors should be competent and active and have
clearly defined responsibilities like in the Audit committee.
• Directors should be paid a commission not exceeding 1% (3%) of net
profits for a company with (out) an MD over and above sitting fees. Stock
options may be considered too.
• Attendance record of directors should be made explicit at the time of
re- appointment. Those with less than 50% attendance shouldn’t be re-
appointed.
• Key information that must be presented to the board is listed in the
code.
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Kumara Managalam Birla Committee Report 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.
• continuous disclosure of material information
• draft a code of corporate best practices
• safeguards to deal with insider information and insider
trading.

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Birla Committee’s recommendations Mandatory
Recommendations:
• Applicability
• Board of Directors
• Audit Committee
• Remuneration Committee
• Board Procedures
• Management
• Shareholders Non-mandatory Recommendations:
• Chairman of the Board 102
• Remuneration Committee
• Shareholders’ rights
• Postal ballot

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SEBI CG Report
• 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).

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SEBI Recommendations
• at least 50 per cent of the board should comprise
independent directors
• In corporate hierarchy two types of managements are
envisaged
• i) managed by Board of Directors ii) Managing
Director.
• Clause 49 requires all companies to submit a
quarterly compliance report to stock exchange in the
prescribed form.
• directors is required to be "financially literate“
• Mandatory certificate either from auditors or
practicing company secretaries

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Narayana Murthy committee report
• NARAYAN MURTHY reports were submitted to SEBI,
It praised him by saying, "The suggestion contained
in the Narayana Murthy Committee’s report is more
elaborate and this would encourage a meaningful
discussion at the board level periodically and the
company will have the benefit of advice from board
members.”
• SEBI issued a circular dated August 26, 2003 to all
the stock exchanges in this regard.

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Narayana Murthy committee recommendations
• Training of board members suggested.
• There shall be no nominee directors. All directors to be
elected by shareholders with same responsibilities and
accountabilities.
• Non-executive director compensation to be fixed by
board and ratified by shareholders and reported. Stock
options should be vested at least a year after their
retirement. Independent directors should be treated the
same way as non- executive directors.
• The board should be informed every quarter of business
risk and risk management strategies.

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• Boards of subsidiaries should follow similar composition
rules as that of parent and should have at least one
independent directors of the parent company.
• The Board report of a parent company should have access
to minutes of board meeting in subsidiaries and should
affirm reviewing its affairs.
• Performance evaluation of non-executive directors by all
his fellow Board members should inform a re-appointment
decision.
• While independent and non-executive directors should
enjoy some protection from civil and criminal litigation,
they may be held responsible of the legal compliance in the
company’s affairs.

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Thank You Ma’am

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