Unit2 - Corporate Governance and Framework in India

Noida Institute of Engineering and Technology, Greater
Noida
Corporate Governance Framework in India
Unit: 2
Corporate Governance, Values &

Ethics SHRUTI SHARMA
MBA
MBA 2nd Year (3RD Sem) Department
11/17/2022 SHRUTI SHARMA CGV&E AMBA0302 Unit 2

1
Index/Content
S. No. Index
1. Name of Subject with code, Course and Subject
Teacher
2. Brief Introduction of Faculty member with
Photograph
3. Evaluation Scheme
4. Syllabus
5. Branch wise Application
6. Course Objective(s)
7. Course Outcome(s)
8. Program Outcomes (POs)
9. COs and POs Mapping
Shruti sharma AMBA 0302

11/17/22 Unit-2 2
Index/Content
S. No. Index
10. Program Specific Outcomes (PSOs)
11. Cos and PSOs Mapping
12. Program Educational Objectives (PEOs)
13. Result Analysis
14. End Semester Question paper Templates
15. Prequisite/Recap
16. Brief Indtroduction about the Subject with Videos
17. Unit Contents
18. Unit Objectives
19. Topic Objectives/Topic Outcome

Unit-2
11/17/22 3
Index/Content
S. No. Index
20. Lecture related to topic
21. Daily Quiz
22. Weekly Assignment
23. Topic Links
24. MCQs
25. Glossary Questions
26. Old question papers
27. Expected Questions
28. Recap of unit

Unit-2
11/17/22 4
Brief Introduction of the Faculty Member
Faculty Name: SHRUTI SHARMA

Designation: ASSISTANT PROFESSOR
Department: MBA
Email ID: shrutisharma@niet.co.in
Qualification: MBA (pursuing PHD.)

Specialisation: Finance & Human Resource
Management
Research Area: Entrepreneurship and innovation
Teaching Area: Management (Finance & Core subjects)
Total Experience: 2.5 years

11/17/22 Unit-2 5
Evaluation Scheme
Shruti sharma AMBA

11/17/22 6
0302 Unit-2
Subject Syllabus
Unit –I Corporate Governance
Meaning, Definition, Nature, Issues, need of corporate governance

code, Code of Corporate Practices, Corporate Social Responsibility,
Corporate Social Reporting, Corporate Governance and the Role of
Board (BOD), Corporate Governance System Worldwide, Corporate
Disclosure and Investor Protection in India.
Shruti sharma AMBA

11/17/22 7
0302 Unit-2
Subject Syllabus
Unit –II Corporate Governance Framework in India
Corporate Boards and Its Powers, Responsibilities and Disqualifications; Board

Committees and their Functions- Remuneration Committee, Nomination Committee,
Compliance Committee, Shareholders Grievance Committee, Investors Relation
Committee, Investment Committee, Risk Management Committee, and Audit
Committee; Regulatory Framework of Corporate Governance in India; SEBI Guidelines
and Clause 49; Reforms in The Companies Act, 2013; Challenges in Corporate
Governance
Shruti sharma AMBA

11/17/22 8
0302 Unit-2
Subject Syllabus
• Unit –III- Values in Modern Business
Values – Concepts, Types and Formation of Values, Values of Indian

Managers; Managerial Excellence through Human Values; Spiritual
Values. Modern Business Ethics and Dilemmas, Conflict between
personal values and organizational goals.
Shruti sharma AMBA

11/17/22 9
0302 Unit-2
Subject Syllabus
Unit –IV- Business Ethics
Meaning, Definition, Nature, Importance. Ethical Dilemma – Ethical

Decision Making, Ethical Reasoning, Ethical issues, Ethics Management –
Key roles and responsibilities, Benefits of Managing Ethics in Work Place,
Code of ethics, Guidelines for developing code of ethics. Historical
Perspective of Ethics – Excerpts from scriptures, Socialization.

11/17/22 10
Unit-2
Subject Syllabus
Unit –V Ethics in Organization
Institutionalizing of Ethics, Traditional view, Contractual theory, Stake-holders’ theory, The

Regulatory and voluntary actions. Ethics and HRM, Ethics and Marketing, Ethics in Finance
and Accounting, Ethical implications of Technology. Ethics and Information Technology
Text books
• 1. Fernando A C – Business Ethics & Corporate Governance, 2e, Pearson
• 2. Kumar T N Satheesh- Corporate Governance, Oxford University Press
• 3. Mandal S K – Ethics in business and corporate governance, 2e, McGraw-Hill
Reference Books
• 1. Hartman Laura P & Chatterjee Abha - Business Ethics, Tata McGraw Hill
• 2. Mohapatra, Sreejesh- Case Studies in Business Ethics & Corporate Governance, 1e,
Pearson

11/17/22 11
Unit-2
Branch Wise Applications
Being a core subject this subject will help the students gain
understanding of the functions and responsibilities of Employees. It
shall provide students the tools and techniques to be used in the
performance of the managerial job. And will also enable them to
analyze and understand the complex values and ethics at organization.

11/17/22 Unit-2 12
Course Objective
• Introduce the concept and importance of corporate

governance in business
• Make students aware of corporate governance frame
work in India.
• Understanding of various aspects and dimensions of
ethics in management
• Discuss the ethical values and that drive the modern
businesses
• Develop the understanding of modern challenges and
issues in corporate Governance.

11/17/22 13
Unit-2
Course Outcome
CO 1:Have insights into various concepts & cases related to Corporate

Governance.
CO2: Gain a deeper understanding of the about the Corporate Governance

framework.
CO3: Develop the ability to practice various aspects, factors related value in
business.
CO 4: Work and discharge responsibilities in an ethical way in the organization
CO 5: Understand modern practices of Corporate Governance in various areas of

business.

11/17/22 14
Unit-2
Program Outcomes
PO1: Knowledge of Management theories and practices
PO2: Analytical & Critical thinking abilities
PO3: Value based leadership
PO4: Understand, analyze and communicate all aspects of business
PO5: Achievement of Organizational goals

11/17/22 15
Unit-2
CO-PO Mapping
S No CO/PO PO1 PO2 PO3 PO4 PO5
1 CO1 1 2
2 CO2 2 2
3 CO3 2 2 3
4 CO4 3 1
5 CO 5 2 1
avg. 1.6 0.8 0.6 0.2 1

**3= High *2= Medium
*1=Low

11/17/22 16
Unit-2
Program Educational Objectives
PEO1: Conceptual Knowledge to adapt in rapidly changing environment and

learn new skills and demonstrate application of management principles in
professional work setting.
PEO2: Apply appropriate tools for decision making for solving complex
managerial problems in local or global context.
PEO3: Exhibit Integrity, social responsibility and teamwork.
PEO4: Exhibit ethics, communication skills, leadership qualities and

entrepreneurial mindset.

11/17/22 Unit-2 17
Result Analysis
Subject Total
Name & No.
Code Of Pass 40>65 65>75 75>90 90 & Backlo Avera
Stud % (%) (%) Abov g ge
(%)
ents e (%) Marks
Corporate 109 99 31 41 34 2 01 86
governance,
values &
ethics
(AMBA0302)

11/17/22 18
Unit-2
End Semester Question Paper Template
11/17/22 Shruti sharma AMBA 0302 19

Unit-2

11/17/22 20
Unit-2

Unit-2
Prerequisite
• Student should have a primary understanding of

corporate governance.
• Student should have a primary understanding of
company’s act, and regulation for Indian corporation.
SHRUTI SHARMA CGV&E AMBA0302 Unit 2
11/17/2022 22
Brief Introduction about the Subject
Corporate governance is the system of rules, practices, and

processes by which a firm is directed and controlled.
Corporate governance essentially involves balancing the
interests of a company's many stakeholders, such as
shareholders, senior management executives, customers,
suppliers, financiers, the government, and the community.
11/17/2022 23
Subject Videos
https://www.youtube.com/watch?v=5_btNIdvEfo
https://www.youtube.com/watch?v=Lx83q3mW0oo
https://www.youtube.com/watch?v=uXuj-Kj6_wE
11/17/2022 24
unit content
• Corporate Boards and Its Powers, Responsibilities and Disqualifications;

• Board Committees and their Functions- Remuneration Committee,
Nomination Committee, Compliance Committee, Shareholders
Grievance Committee, Investors Relation Committee, Investment
Committee, Risk Management Committee, and Audit Committee;
• Regulatory Framework of Corporate Governance in India;
• SEBI Guidelines and Clause 49; Reforms in The Companies Act, 2013;
• Challenges in Corporate Governance
11/17/2022
25
Objectives of the Unit
The objectives of this unit are:
• To understand the meaning of corporate board

• To understand the corporate board by objectives
• To understand the committees
• To learn about disclosure process and company’s act
2013, SEBI regulations, clause 49 in India.
11/17/2022 26
Noida Institute of Engineering and Technology,
Greater Noida
• Corporate Boards and Its Powers, Responsibilities and

Disqualifications;
Topic 1
Corporate Governance, Values &

SHRUTI SHARMA
Ethics
MBA
MBA Department
3 Sem
27
11/17/2022
Topic Objective & Topic Outcome
S No Topic CO
1 Understand the meaning of Corporate CO 2
Boards and Its Powers, Responsibilities and
Disqualifications
11/17/2022 28
Session Learning Objective with CO mapping
1. Understand the meaning of Corporate Boards and Its Powers,

Responsibilities and Disqualifications
Topic Course
Outcome
1. to make them understand the meaning of CO2
Corporate Boards and Its Powers, Responsibilities

and Disqualifications

11/17/2022 29
Introduction
Structure
India, like most countries which have common law traditions, has a one-tier, or
unitary board structure
Management
The board is the governing body of the company which consists of executive
(managing director) and non-executive directors. The board delegates the day-to-day
executive control to manage and operate the business of the company to its
managing director or full-time director. The board of a company can also delegate
certain duties and powers to a committee of directors.
The Companies Act 2013 also prescribes different classes of directors such as
independent, female, resident and nominee directors for specific companies.
Board members
Only individuals can be appointed to the board of a company.
Employees' representation
11/17/2022
Employees do not have a right to be represented on the board.30 However, the

Companies Act 2013 provides that minority shareholders can appoint a
representative to the board of a listed company.
Introduction
Number of directors or members
The Companies Act 2013 provides that at least three directors can be
appointed to the board in a public company. It also states that there must be
at least two directors in the board of a private company and one director in a
one-person company board, and that there can be up to 15 directors. A
company can appoint more than 15 directors after passing a special resolution
of the shareholders. As per LODR (Listing Obligations and Disclosure
Requirements) Regulations, by April 1, 2020, top 2000 listed entities are
required to have a minimum of six directors.
As mentioned above, a private company should have at least two members and
can have up to 200 members. A public company requires at least seven
members and can invite the public to subscribe to its securities.
11/17/2022
31
General restrictions
A person cannot be appointed as a director if:

• The person is of unsound mind declared by a competent court, is an
undischarged insolvent; or is adjudicated as an insolvent.
• Five years have not elapsed since expiry of sentence of imprisonment of
six months (or less) granted by a court;
• The person has been found guilty of any offence and sentenced for
imprisonment for a period of seven years or more, or an order has been
passed by a court or tribunal, disqualifying him from being appointed as a
director.
• The person has not paid any calls related to any shares of the company
held by him/her, alone or jointly with other officers, and six months have
passed from the last day decided for the payment of the call.
11/17/2022
32
General restrictions
• The person has been accused of the offence dealing with related party
transactions in the last five years.
• The person has not complied with the provisions of director
appointment (section 152 and 165, Companies Act 2013).
• The person has failed to comply with section 165(1).
• The person was not a director of a company which has either not filed
annual returns or financial statements for continuously for any three
financial years, or has failed to repay deposit, pay declared dividend or
redeem debentures or pay interest thereon for a period of one year
(section 164(2), Companies Act 2013).

11/17/2022
33
Appointment of directors
Appointment of directors
All directors (except the first director, additional director, nominee director,
alternate director and a director appointed in a casual vacancy) must be
appointed by the company in a general meeting (section 152, Companies
Act 2013). A person intending to become a director must obtain an
identification number from the central government, without which he or
she cannot be appointed. The person must also give his or her consent for
the appointment, and this consent must also be filed with the ROC. The
director must not be subject to a disqualification order (section 164,
Companies Act 2013).
Listed companies must appoint at least one-third of the total number of
directors as independent directors (section 149, Companies Act 2013). An
independent director is also eligible for re-appointment by passing a special
resolution.
11/17/2022
34
Removal of directors
Removal of directors
A director (including a managing director) of a company can be removed by an
ordinary resolution (unless he/she is a director appointed by the NCLT (National
Company Law Tribunal) and if he or she has been given a reasonable opportunity
to be heard) (section 169, Companies Act 2013). A special notice (approved by the
board) for removing a director must be given. After the board meeting, an EGM
(extraordinary general meeting) must be convened for the removal of the director
and appointment of a new director.
A director may also choose to resign by sending a resignation letter to the company,
which the company must subsequently notify to the ROC (Registrar of Companies).
A board meeting and shareholders’ meeting must then be convened to approve the
removal of the director, and the appointment of a new director.
The articles of association of a company may provide for additional procedures for
the removal of a director. Under the Companies Act 2013, such powers conferred
by the articles will not be affected by section 169.
11/17/2022
35
Directors' powers
Directors' powers
The board is entitled to exercise all the powers that the company authorises
them to.
Some of the powers include being able to:

•Make calls on shareholders in respect of unpaid money.
•Authorise buy back of securities.
•Issue securities including debentures.
•Borrow monies.
•Invest funds of the company.
Restrictions
For certain specified activities, the board cannot exercise its powers without the
consent of the company by way of a shareholders’ resolution (section 180,
Companies Act 2013). The powers of the board can be further restricted by the
provisions of the articles of association of the company.

36
Director's duties and liabilities
Duties
The directors of a company have a fiduciary duty to the company, the

shareholders and the employees as a whole. Directors have inter alia the
following statutory duties:
•The duty to act in accordance with the articles of association of the company.
•The duty to act in good faith to promote the objects of the company.
•The duty of care, skill and diligence and to exercise independent judgment.
(Section 166, Companies Act 2013.)
Independent directors also have additional duties which are codified in
Schedule IV of the Companies Act 2013. Тhe LODR Regulations also set out
11/17/2022
the duties and liabilities of the directors
SHRUTI SHARMA and board ofUnitlisted
CGV&E AMBA0302 2 companies
(regulations 17 and 25). 37
Director's duties and liabilities
Liability
If a director breaches the Companies Act 2013 or the LODR Regulations,

he/she is subject to a fine and/or imprisonment depending on the
nature of contravention. Some of the instances in which a director can
be criminally held liable include the following:
•Failure to file annual returns.
•The company failing to fulfil its corporate social responsibility
obligations under the Companies Act 2013.
•The issue of prospectus with a misleading statement.
•Breaching provisions in relation to related party transactions.
11/17/2022
38
Daily quiz
(code law, chairman, board structure, CEO)

The ________ is responsible for setting the agenda, scheduling
a meetings, and coordinating actions of board committees
The _____ has served as the chairman of the board in most U.S.
b corporations.
c Civil law is also known as
A _______ in which directors are elected to multiple-year terms, with a
d only subset of directors standing for reelection each year.
• A company's________ is the primary force influencing corporate governance.

• Corporate governance often result in prompt and effective decision-making.
(true/false)

11/17/2022 39
Greater Noida
• Disqualifications; Board Committees and Audit Committee;
Topic 2
Corporate Governance, Values & Ethics

SHRUTI SHARMA
MBA
MBA Department
3 Sem

40
11/17/2022
S No Topic CO
1 to understand the meaning of Corporate CO 2
Boards and Its Powers, Responsibilities and
Disqualifications and board committees
11/17/2022 41
1. Understand the meaning of Corporate Boards and Its Powers,

Responsibilities and Disqualifications and board committees.
Topic Course
Outcome

Corporate Boards and Its Powers, Responsibilities
and Disqualifications and board committees

11/17/2022 42
Disqualification of Directors – Definition,
Meaning & Effects
A company has no physical existence, it is merely a legal entity. It can only act
through natural persons. The person acting on the company’s behalf is called a
Director. They are professional people, hired by the company to direct its
affairs. They can also be called – the officers of a company.
Any person can hold the position of Director. Company law in India does not
prescribe any qualifications for Directors. Therefore, the Indian companies may,
in its Articles, lay down qualifications for Directors.
Effects of Disqualification
Once disqualified, a person is not eligible for being appointed as Director of
that company or any other company. This restriction is imposed for a period of
five years or as the caseSHRUTI
11/17/2022 maySHARMA
be. Since theCGV&E
yearAMBA0302
2017, the Ministry
Unit 2 of Corporate
Affairs (MCA) has been strictly enforcing these provisions of the
43
Companies
Act. It has recently published the names of the disqualified Directors on the
government website.
Disqualifications of Directors
Under company law, a director can be disqualified for any of the following
reasons:
• .
•He is of an unsound mind and is declared so by the court.
•He is insolvent.
•He is in the process of declaring insolvency and his application is pending.
•He has been convicted by a court of any offence (whether or not involving
moral turpitude) and has been imprisoned for at least six months. However, if
a person has been convicted of any offence and has served a period of seven
years or more, he shall not be eligible to be appointed as a director in any
company.
44

•If an order has been passed disqualifying him from being appointed
as a director by a court or Tribunal.
•He has not paid any calls with respect to any shares of the
company held by him, whether alone or jointly with others, and a
period of six months has elapsed from the last day fixed for the
payment of the call.
•He has been convicted of offences dealing with related party
transactions at any time during the last preceding five years.
•He has failed to acquire a Director Identification Number.

11/17/2022 45
Remedies against Disqualification
Remedies against Disqualification

• In case of disqualification, a director can appeal to the National Company Law
Appellate Tribunal (NCLAT).
• He/she can temporarily ask for a stay order. Under the Companies Act 2013, an order
disqualifying a Director does not take effect within the next 30 days of it being passed.
• As soon as an appeal is initiated, the disqualified person will still continue to be a
director for the next seven days. Within this period, he can file his annual returns to
stay the order of disqualification.
• However, there exists no procedure to reappoint a disqualified director. He can only be
reappointed after a period of five years has elapsed from the date of disqualification.

11/17/2022
46
Board Committees
COMMITTEES MANDATORILY TO BE CONSTITUTED UNDER THE

COMPANIES ACT, 2013
In addition to the Audit Committee, the New Act has also
mandated the constitution of three additional board committees
for all listed companies and such other classes of companies
prescribed in the Rules.
• The Nomination and Remuneration Committee is expected to

ensure among other things that remuneration arrangements
support the strategic goals of the business and more
importantly to conduct performance evaluation of every director.
47

Greater Noida
• The Corporate Social Responsibility Committee would

formulate the Corporate Social Responsibility policy of the
company, recommend the expenditure that can be incurred for
this purpose and monitor such policy of the company from
time to time.
• The Stakeholders Relationship Committee would help resolve

the grievances of the security holders of the company.

11/17/2022 48
AUDIT COMMITTEE BOARD COMMITTEES
AUDIT COMMITTEE BOARD COMMITTEES –
• A HAND BOOK Audit Committee is one of the main pillars of the corporate
governance mechanism in any company. Charged with the principal oversight of
financial reporting and disclosure, the Audit Committee aims to enhance the
confidence in the integrity of the company’s financial reporting, the internal
control processes and procedures and the risk management systems.
• Under the Companies Act, 1956, every public company in India having paid-up
capital of not less than rupees five crores was required to constitute an Audit
Committee under Section 292A The Clause 49 of the Listing Agreement , applicable
only to the listed companies, requires all listed companies to duly constitute an
Audit Committee with a prescribed set of responsibilities.

11/17/2022
49
AUDIT COMMITTEE BOARD COMMITTEES
Under the Companies Act, 2013(hereinafter called the Act), the Audit
Committee’s mandate is significantly different from what was laid down under
Section 292A of the Companies Act 1956, and its scope and constitution have
also been broadened. The Act mandates every listed company and certain other
class or classes of companies to constitute an Audit Committee
Functions of the Committee BOARD COMMITTEES –

A HAND BOOK Section 177(4) of the Act provides that every Audit Committee
shall act in accordance with the terms of reference specified in writing by the
Board. Terms of reference as prescribed by the board shall inter alia, include,
(a)the recommendation for appointment, remuneration and terms of appointment
of auditors of the company;
(b)review and monitor the auditor’s independence and performance, and
effectiveness of audit process;
11/17/2022
50
Greater Noida
(a)examination of the financial statement and the auditors’ report

thereon;
(b)approval or any subsequent modification of transactions of the
company with related parties;
(c)scrutiny of inter-corporate loans and investments;
(d)valuation of undertakings or assets of the company, wherever it
is necessary;
(e)evaluation of internal financial controls and risk management
systems;
(f) monitoring the end use of funds raised through public offers
and related matters.
11/17/2022 51
Daily quiz
Column A Column B
of trust as the board is
entrusted with the
Responsibilities cast upon directors are responsibility to act in the best
a quite a interests of the company.
direction, control, conduct
The position of board of directors is management and supervision
b that b of the company’s affairs.
c Board is responsible for c onerous and multifarious

the premise that a group of
The institution of Board of Directors is trustworthy and respectable
d based on d people
11/17/2022 52
Greater Noida
• Board Committees and their Functions- Remuneration Committee,

Nomination Committee, Compliance Committee, Shareholders Grievance
Committee, Investors Relation Committee, Investment Committee, Risk
Management Committee;
Topic 3

SHRUTI SHARMA
MBA
MBA Department
3 Sem

53
11/17/2022
S No Topic CO
1 to understand the meaning of Corporate CO 2
Boards committees
11/17/2022 54
1. Understand the meaning of Corporate Boards committees.
Topic Course
Outcome
Corporate Boards committees

11/17/2022 55
Risk Management Committee
• In addition to the requirement of the Companies Act 2013 as well as the

revised clause 49 that the audit committee will evaluate of internal financial
controls and risk management systems, the revised Clause 49 of the Listing
Agreement also requires that the company through its Board of Directors shall
constitute a Risk Management Committee. The majority of the Risk
Management Committee shall consist of members of the Board of Directors.
Senior executives of the company may be members of the said committee but
the chairman of the committee shall be a member of the Board of Directors.
The Board shall be responsible for farming, implementing and monitoring the
risk management plan for the company. Further, the Board shall define the roles
and responsibilities of the Risk Management Committee and may delegate
monitoring and reviewing of the risk management plan to the committee and such
other functions as it may deem fit.

11/17/2022
56
NOMINATION AND REMUNERATION
COMMITTEE
Applicability
As per section 178 of the Act read with rule 6 of the Companies (Meetings of the Board
and its Powers) Rules, 2014, the Board of directors of every listed company and the
following classes of companies are required to constitute a Nomination and
Remuneration Committee of the Board
(i) all public companies with a paid up capital of ten crore rupees or more;
(ii) all public companies having turnover of one hundred crore rupees or more;
(iii)all public companies, having in aggregate, outstanding loans or BOARD
COMMITTEES –borrowings or debentures or deposits exceeding fifty crore rupees or
more. The paid up share capital or turnover or outstanding loans, or borrowings
or debentures or deposits, as the case may be, as existing on the last audited
financial statement shall be taken into account for the above purpose.
11/17/2022
57
NOMINATION AND REMUNERATION
COMMITTEE
Functions:
Sub- sections (2), (3) and (4) of section 178 deal specifically with the
functions of the Committee. The Nomination and Remuneration Committee
shall:
1. identify persons who are qualified to become directors and who may be
appointed in senior management in accordance with the criteria laid down,
recommend to the Board their appointment and removal. Further it has
been attached with a wider responsibility of carrying out evaluation of
every director’s performance.
2. formulate the criteria for determining qualifications, positive attributes and
independence of a director and recommend to the Board a policy, relating
to the remuneration for the directors, key managerial personnel and other
employees.
11/17/2022
58
Greater Noida
1. While formulating the policy, the Committee shall consider the following:
(a)the level and composition of remuneration is reasonableand sufficient to
attract, retain and motivate directors of the quality required to run the
company successfully;
(b)relationship of remuneration to performance is clear and meets appropriate
performance benchmarks; and
(c)remuneration to directors, key managerial personnel and senior management
involves a balance between fixed and incentive pay reflecting short and long-
term performance objectives appropriate to the working of the company and
its goals.

11/17/2022 59
STAKEHOLDER RELATIONSHIP COMMITTEE
Applicability
Sub-Section(5) of section 178 provides that the Board of Directors of a
company which consists of more than one thousand shareholders,
debenture-holders, deposit-holders and any other security holders at any
time during a financial year shall constitute a Stakeholders Relationship
Committee.
Functions
The main function of the committee is to consider and resolve the
grievances of security holders of the company.
• On similar terms revised clause 49 of the listing agreement provides that a
committee under the Chairmanship of a non-executive director and such
other members as may be decided by the Board of the company shall
be formed to specifically look into the redressal of grievances of
shareholders, debenture holders and other security holders.
• The grievances of the security holders of the company may include
complaints related to transfer of shares, non-receipt of balance sheet, non-
receipt of declared dividends, which shall be handled by this committee.
SHRUTI SHARMA CGV&E AMBA0302 Unit 2 60
11/17/2022
CORPORATE SOCIAL RESPONSIBILITY
COMMITTEE
Applicability
Sec 135 (1) read with rule 3 of Companies (Corporate Social Responsibility Policy) Rules,
2014, mandates every company (which may include a holding company or a
subsidiary company) having:
(a)net worth of rupees five hundred crore or more, or;
(b)turnover of rupees one thousand crore or more or;
(c)a net profit of rupees five crore or more
during any financial year to constitute a Corporate Social Responsibility (CSR)
Committee of the Board.
• Any financial year has been clarified as to imply any of the three preceding
financial years. Further a foreign company defined under clause (42) of section 2 of
the Act having its branch office or project office in India which fulfills the criteria
specified above is required to comply with the provisions of section 135 of the Act and
the rules made thereunder.
• The net worth, turnover or net profit of a foreign Company for the purpose of this
section, shall be computed in accordance with balance sheet and profit and loss
account of such company in respect of its Indian business operations.

61
Greater Noida
Any financial year has been clarified as to imply any of the three
preceding financial years. Further a foreign company defined under clause
(42) of section 2 of the Act having its branch office or project office in
India which fulfills the criteria specified above is required to comply with
the provisions of section 135 of the Act and the rules made thereunder. The
net worth, turnover or net profit of a foreign Company for the purpose of
this section, shall be computed in accordance with balance sheet and
profit and loss account of such company in respect of its Indian
business operations.

11/17/2022 62
CORPORATE SOCIAL RESPONSIBILITY
COMMITTEE
Functions
In accordance with section 135 the functions of the CSR committee
include:
(a)formulating and recommending to the Board, a CSR Policy which shall
indicate the activities to be undertaken by the company as specified
in Schedule VII;
(b)recommending the amount of expenditure to be incurred on the CSR
activities.
(c)monitoring the Corporate Social Responsibility Policy of the company
from time to time.
(d)Further the rules provide that the CSR Committee shall institute a
transparent monitoring mechanism for implementation of the CSR
projects or programs or activities undertaken by the company
11/17/2022
63
Daily quiz
• The three most commonly adopted board sub-committees are the audit
committee, the remuneration (compensation) committee, and the
___________ committee.
• We all know that conflicts of interests between management and _______
do exist on a day-to-day basis, and can result in bankruptcies or major
frauds.
• In large corporations, the ____________ is/are the legal overseers of
management
• Training of directors is a mandatory requirement under Clause 49 of the
Listing Agreement. (true/ false)
• In terms of Clause 49, related party transactions are prohibited. (true/ false)
• A company's________ is the primary force influencing corporate
governance.
• The foundation for corporate culture are laid by _______________
11/17/2022 64
Noida Institute of Engineering and
Technology, Greater Noida
• Regulatory Framework of Corporate Governance in India; SEBI

Guidelines and Clause 49; Reforms in The Companies Act, 2013;
Challenges in Corporate Governance
Topic 4

SHRUTI SHARMA
MBA
MBA Department
3 Sem

65
11/17/2022
S No Topic CO
1 Framework of corporate governance, CO 2
guidelines and regulatory acts.
11/17/2022 66
• To understand the Regulatory Framework of Corporate Governance

in India.
Topic Course
Outcome
1. to make them understand the Regulatory CO2
Framework of Corporate Governance in India

11/17/2022 67
Corporate Governance Framework In India
The Organisation for Economic Cooperation and Development (OECD), which, in 1999,
published its Principles of Corporate Governance gives a very comprehensive definition
of corporate governance, as under:
"a set of relationships between a company's management, its board, its shareholders
and other stakeholders. Corporate governance also provides the structure through
which the objectives of the company are set, and the means of attaining those
objectives and monitoring performance are determined. Good corporate governance
should provide proper incentives for the board and management to pursue objectives
that are in the interests of the company and shareholders, and should facilitate effective
monitoring, thereby encouraging firms to use recourses more efficiently."

11/17/2022
68
• Generally, Corporate Governance refers to practices by which organisations

are controlled, directed and governed.
• The fundamental concern of Corporate Governance is to ensure the
conditions whereby organisation's directors and managers act in the interest
of the organisation and its stakeholders and to ensure the means by which
managers are held accountable to capital providers for the use of assets.
• To achieve the objectives of ensuring fair corporate governance, the
Government of India has put in place a statutory framework.
Regulatory framework on corporate governance

The Indian statutory framework has, by and large, been in consonance with the
international best practices of corporate governance. Broadly speaking, the
corporate governance mechanism for companies in India is enumerated in the
following enactments/ regulations/ guidelines/ listing agreement:
11/17/2022
69
• 1. The Companies Act, 2013 inter alia contains provisions relating to board

constitution, board meetings, board processes, independent directors, general
meetings, audit committees, related party transactions, disclosure requirements
in financial statements, etc.
• 2. Securities and Exchange Board of India (SEBI) Guidelines: SEBI is a regulatory
authority having jurisdiction over listed companies and which issues regulations,
rules and guidelines to companies to ensure protection of investors.
• 3. Standard Listing Agreement of Stock Exchanges: For companies whose shares
are listed on the stock exchanges.
• 4. Accounting Standards issued by the Institute of Chartered Accountants of
India (ICAI): ICAI is an autonomous body, which issues accounting standards
providing guidelines for disclosures of financial information. Section 129 of the
New Companies Act inter alia provides that the financial statements shall give a
true and fair view of the state of affairs of the company or companies, comply
with the accounting standards notified under s 133 of the New Companies
11/17/2022
70
5. Secretarial Standards issued by the Institute of Company Secretaries of

India (ICSI): ICSI is an autonomous body, which issues secretarial standards in
terms of the provisions of the New Companies Act. So far, the ICSI has issued
Secretarial Standard on "Meetings of the Board of Directors" (SS-1) and
Secretarial Standards on "General Meetings" (SS-2). These Secretarial Standards
have come into force w.e.f. July 1, 2015. Section 118(10) of the New Companies
Act provide that every company (other than one person company) shall observe
Secretarial Standards specified as such by the ICSI with respect to general and
board meetings.

11/17/2022
71
The Companies Act, 2013
The Government of India has recently notified Companies Act, 2013 ("New Companies Act"), which
replaces the erstwhile Companies Act, 1956. The New Act has greater emphasis on corporate
governance through the board and board processes. The New Act covers corporate governance through
its following provisions:
•New Companies Act introduces significant changes to the composition of the boards of directors.
•Every company is required to appoint 1 (one) resident director on its board.
•Nominee directors shall no longer be treated as independent directors.
•Listed companies and specified classes of public companies are required to appoint independent
directors and women directors on their boards.
•New Companies Act for the first time codifies the duties of directors.
•Listed companies and certain other public companies shall be required to appoint at least 1 (one)
woman director on its board.
•New Companies Act mandates following committees to be constituted by the board for prescribed
class of companies:
• Audit committee
• Nomination and remuneration committee
• Stakeholders relationship committee
• Corporate social responsibility committee 72

Clause 49
SEBI has amended the Listing Agreement with effect from October 1, 2014 to align it
with New Companies Act.
Clause 49 of the Listing Agreement can be said to be a bold initiative towards
strengthening corporate governance amongst the listed companies. This Clause intends
to put a check over the activities of companies in order to save the interest of the
shareholders. Broadly, cl 49 provides for the following:
1. Board of Directors
• The Board of Directors shall comprise of such number of minimum independent
directors, as prescribed. In case where the Chairman of the Board is a non-executive
director, at least one-third of the Board shall comprise of independent directors and
where the Chairman of the Board is an executive director, at least half of the Board
shall comprise of independent directors. A relative of a promoter or an executive
director shall not be regarded as an independent director.

11/17/2022
73
Clause 49
2. Audit Committee
• The Audit Committee to be set up shall comprise of minimum three directors as
members, two-thirds of which shall be independent.
3. Disclosure Requirements
• Periodical disclosures relating to the financial and commercial transactions,
remuneration of directors, etc, to ensure transparency.
4. CEO/ CFO Certification
• To certify to the Board that they have reviewed the financial statements and the same
are fair and in compliance with the laws/ regulations and accept responsibility for
internal control systems.
5. Report and Compliance
• A separate section in the annual report on compliance with Corporate Governance,
quarterly compliance report to stock exchange signed by the compliance officer or CEO,
company to disclose compliance with non-mandatory requirements in annual reports.
11/17/2022
74

challenges in corporate governance
ten issues affecting corporate governance practices in India.

•Getting the Board Right. ...
•Performance Evaluation of Directors. ...
•True Independence of Directors. ...
•Removal of Independent Directors. ...
•Accountability to Stakeholders. ...
•Executive Compensation. ...
•Founders' Control and Succession Planning. ...
•Risk Management.

11/17/2022
75
Daily quiz
• We all know that conflicts of interests between management and

_______ do exist on a day-to-day basis, and can result in
bankruptcies or major frauds.
• Corporate governance can temper growth. (true/ false)
• Good corporate governance can result in excessive risk-taking. (true/
false)
• The generally accepted definition of a medium business is one with
_____________ or fewer employees.
• The generally accepted definition of a small business is one with
____________ or fewer employees.
• Voluntary responsibilities are optional activities that promote human
welfare or goodwill. (true/ false).

11/17/2022 76
Weekly assignment
1. Give the 10 marks assignment over the framework in India with

the help of example of current corporate organisation.

11/17/2022 77
Topic Links
• All the relevant links are being added under the notes
of that same slide.
11/17/2022 78
GLOSSARY QUESTIONS
( Board of Directors, busy board, management, monitor)

A group of individuals elected to represent the interests of
shareholders and monitor the corporation and its management is
a known as __________.
In advisory capacity, the board consults with ________ regarding
b the strategic and operational direction of the company.
The board is expected to ________ management and ensure that it

c is acting diligently in the interests of shareholders.
Companies whose directors sit on multiple boards is termed as
d _____.

11/17/2022 79
END SEMESTER QUESTION PAPER ( SESSIONALS +
UNIVERSITY)
Printed page: 2 Subject Code: CGV&E
Roll No:
NOIDA INSTITUTE OF ENGINEERING AND TECHNOLOGY ,GREATER NOIDA
(An Autonomous Institute Affiliated to AKTU, Lucknow)
B.Tech/B.Voc./MBA/MCA/M.Tech (Integrated)
(SEM: 3rd SESSIONAL EXAMINATION –I )(2021-2022)
Subject Name: Corporate Governance , Values & Ethics
Time: 1.15Hours Max. Marks:30
General Instructions:
•All questions are compulsory. Answers should be brief and to the point.
• This Question paper consists of 2 pages & 5 questions.
•It comprises of three Sections, A, B, and C. You are to attempt all the sections.
•Section A -Question No- 1 is objective type questions carrying 1 mark each, Question No- 2 is very short
answer type carrying 2 mark each. You are expected to answer them as directed.
•Section B - Question No-3 is Short answer type questions carrying 5 marks each. You need to attempt
any two out of three questions given.
•Section C -Question No. 4 &5are Long answer type (within unit choice) questions carrying 6marks
each. You need to attempt any one part a or b.
•Students are instructed to cross the blank sheets before handing over the answer sheet to the invigilator.
•No sheet should be left blank. Any written material after a blank sheet will not be evaluated/checked.
Shruti sharma AMBA

11/17/22 80
0302 Unit-2
UNIVERSITY) sessional 1

SECTION – A [8]

1.
Attempt all parts (4×1=4) CO
a. Who is a primary stakeholder? (1) 1
b. Write the full form of SEBI. (1) 1
c. Ethics and social responsibility mean the same thing. (1) 1
(TRUE/FALSE)
d. Business ethics refers to principles and standards that determine (1) 1
acceptable conduct in business organizations.
(TRUE/FALSE )

2.
Attempt all parts (2×2=4) CO

a. Define corporate ethics and values. (2) 1
a. What are the basic principles of corporate governance? (2) 1

SECTION – B

3.
Answer any two of the following- [2×5=10] CO
a. Discuss the social responsibility issue of businesses toward its employees. (5) 1
b. Explain corporate governance transparency. (5) 1

Unit-2
UNIVERSITY)
c. How do you recognize an ethical issue in business? (5) 1

SECTION – C

4 Answer any one of the following- (Anyone can be applicative if applicable) [2×6=12] CO
a. Question- Manoj, an assistant pharmacist at Mahajan Inc., stole money (6) 1
from the cash counter to purchase cocaine. In this scenario, discuss the
ethics that have been violated by Manoj in his workplace.

b. Question- Discuss the measures that companies have taken to address (6) 1
environmental concerns and to become more sustainable.
5. Answer any one of the following-
a. Raj, an employee at Shield Corp., bullies new employees in the (6) 1
workplace. In this context, discuss the kind of misconduct that Raj
engages in.

b.
Site a CSR activity example for any organisation. (6) 1

11/17/22 82
Unit-2
END SEMESTER QUESTION PAPER ( SESSIONALS + UNIVERSITY) sessional 2
SECTION – A [08Marks]

1. All questions are compulsory (4×1=4)
a. Directors responsibilities are unlikely to include (1) CO2
a) a duty to keep proper accounting records
b) a fiduciary duty
c) a duty to propose high dividends for shareholders
d) a duty of care

b. At least three directors can be appointed to the board in a public company. (True/False) (1) CO2
c. Write the full form of LODR. (1) CO2

d. Voluntary responsibilities are optional activities that promote human welfare or goodwill. (1) CO2
(True/False)
2. All questions are compulsory (2×2=4)
a. Define special resolution. (2) CO2

a. Is SEBI a regulatory body in India. Explain. (2) CO2

SECTION – B [10Marks]
3. Answer any two of the following- (2×5=10)
a. What is a procedure for appointing a director? (5) CO2
b. What is an independent director? (5) CO2
c. What is the role of the chair of the board of directors? (5) CO2

Unit-2
UNIVERSITY)
SECTION – C [12Marks
]
4 Answer any one of the following- (1×6=6)
a Question- (6) CO2
. What is the main functions of Audit Committee?
b Question- (6) CO2

. What are the differences between a Board of Directors and
Audit Committee?

5. Answer any one of the following- (1×6=6)

a How do you implement an effective corporate governance (6) CO1
. system within your company?
b What is a difference between director’s duties and his powers (6) CO2
. and responsibilities?

11/17/22 Unit-2 84
UNIVERSITY) question paper

11/17/22 85
Unit-2
UNIVERSITY)

11/17/22 86
Unit-2
MCQS
• External audit of the accounts of a limited company is required?

a) Because it is demanded by the company’s bankers
b) By the companies act 2006
c) At the discretion of the shareholders
d) To detect fraud
• Directors responsibilities are unlikely to include

a) a duty to keep proper accounting records
b) a fiduciary duty
c) a duty to propose high dividends for shareholders
d) a duty of care
• A company may become insolvent if it

a) makes a loss
b) has negative working capital
c) cannot meet its budgeted level of profit
d)cannot pay creditors in full after realisation of its assets
11/17/2022
87

MCQS
• A director of a limited company may not be liable for wrongful trading if he or

she
a) increased the valuation of its inventories to cover any potential shortfall
b) brought in some expected sales from next year in to the current year
c) took every step to minimise the potential loss to creditors
d) introduce into the balance sheet an asset based on a valuation of its brands
sufficient to meet
any shortfall
• Disqualification of directors may result from breaches under the

a) Health and Safety Act
b) Financial Services Act
c) Sale of Goods Act
d)Companies Act

11/17/2022
88
Expected questions
• List the points to be included while appointing the directors.

• Define the different types of committees and explain any one of
them.
• What is a procedure for appointing a director?
• In what circumstances a director can get removed?
• What is a difference between director’s duties and his powers
and responsibilities?
• What are the powers of a director of any organisation?
• Define companies act.

11/17/2022
89
Youtube links
https://www.scu.edu/ethics/focus-areas/business-ethics/resources/the-role-of-the-
corporate-board-in-ethics/
https://www.youtube.com/watch?v=RV8_EXPtvLE&t=75s
https://www.youtube.com/watch?v=IMXPmVlB7jw
https://www.youtube.com/watch?v=AmwI0QrqQAE

11/17/2022
90
RECAP OF UNIT
• Qualification of directors,
• Appointment of directors
• Disqualification of directors
• Duties and responsibilities of directors
• Mandatory committees
• Clause 49
• SEBI guidelines framework for India

11/17/2022 91

Unit2 - Corporate Governance and Framework in India

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Unit2 - Corporate Governance and Framework in India

Uploaded by

Copyright:

Available Formats

Noida Institute of Engineering and Technology, Greater

Corporate Governance Framework in India

Corporate Governance, Values &

11/17/2022 SHRUTI SHARMA CGV&E AMBA0302 Unit 2

Shruti sharma AMBA 0302

Shruti sharma AMBA 0302

Shruti sharma AMBA 0302

Faculty Name: SHRUTI SHARMA

Qualification: MBA (pursuing PHD.)

Shruti sharma AMBA 0302

Shruti sharma AMBA

Unit –I Corporate Governance

Meaning, Definition, Nature, Issues, need of corporate governance

Shruti sharma AMBA

Unit –II Corporate Governance Framework in India

Corporate Boards and Its Powers, Responsibilities and Disqualifications; Board

Shruti sharma AMBA

• Unit –III- Values in Modern Business

Values – Concepts, Types and Formation of Values, Values of Indian

Shruti sharma AMBA

Unit –IV- Business Ethics

Meaning, Definition, Nature, Importance. Ethical Dilemma – Ethical

Shruti sharma AMBA 0302

Unit –V Ethics in Organization

Institutionalizing of Ethics, Traditional view, Contractual theory, Stake-holders’ theory, The

Shruti sharma AMBA 0302

Shruti sharma AMBA 0302

• Introduce the concept and importance of corporate

Shruti sharma AMBA 0302

CO 1:Have insights into various concepts & cases related to Corporate

CO2: Gain a deeper understanding of the about the Corporate Governance

CO 4: Work and discharge responsibilities in an ethical way in the organization

CO 5: Understand modern practices of Corporate Governance in various areas of

Shruti sharma AMBA 0302

PO1: Knowledge of Management theories and practices

PO2: Analytical & Critical thinking abilities

PO3: Value based leadership

PO4: Understand, analyze and communicate all aspects of business

PO5: Achievement of Organizational goals

Shruti sharma AMBA 0302

avg. 1.6 0.8 0.6 0.2 1

Shruti sharma AMBA 0302

PEO1: Conceptual Knowledge to adapt in rapidly changing environment and

PEO3: Exhibit Integrity, social responsibility and teamwork.

PEO4: Exhibit ethics, communication skills, leadership qualities and

Shruti sharma AMBA 0302

Shruti sharma AMBA 0302

11/17/22 Shruti sharma AMBA 0302 19

Shruti sharma AMBA 0302

11/17/22 Shruti sharma AMBA 0302 21

• Student should have a primary understanding of

SHRUTI SHARMA CGV&E AMBA0302 Unit 2

Corporate governance is the system of rules, practices, and

SHRUTI SHARMA CGV&E AMBA0302 Unit 2

SHRUTI SHARMA CGV&E AMBA0302 Unit 2

• Corporate Boards and Its Powers, Responsibilities and Disqualifications;

The objectives of this unit are:

• To understand the meaning of corporate board

SHRUTI SHARMA CGV&E AMBA0302 Unit 2

• Corporate Boards and Its Powers, Responsibilities and

Corporate Governance, Values &

SHRUTI SHARMA CGV&E AMBA0302 Unit 2

1. Understand the meaning of Corporate Boards and Its Powers,