corporate governance disclosure practices...

CORPORATE GOVERNANCE DISCLOSURE

PRACTICES OF SELECTED COMPANIES

This chapter explains the corporate governance practices of the selected

companies as per Indian clause 49 of the listing agreement. After the Cadbury

Committee Report (1991), SEBI set up a committee under the chairmanship of

Kumar Mangalam Birla in the year 2000 to recommend the corporate governance

code for all the companies listed with stock exchanges in India. The committee gave

its recommendations and SEBI directed all the companies to follow these

recommendations in the form of clause 49 of the listing agreement. Birla

committee’s report on corporate governance focused on both mandatory as well as

non-mandatory corporate governance practices.

4.1 Formation of Checklist

On the basis of the report of SEBI on corporate governance, a checklist has

been prepared based on clause 49 of the listing agreement. This checklist covers 64

items and all the items have been divided into two broad categories as given in

clause 49 of the listing agreement such as mandatory (53 items) and non- mandatory

(11). Further, an attempt has been made to club up these 64 items into various broad

dimensions namely company’s philosophy on corporate governance, board of

directors, audit committee, remuneration of directors, investors grievance committee

general board meetings, disclosure, means of communication, general shareholders

information and auditors certificate on compliance with corporate governance code.

All the above mentioned dimensions are covered under mandatory requirements.

Similarly, under non- mandatory requirements, items have been divided into two

broad dimensions namely formation of remuneration committee and shareholders

rights.

Corporate Governance Disclosure Practices of Selected Companies

65

4.2 Scoring of Items

Equal weightage method has been used for analysis purpose. This method has

been used as this is free from the personal biasness of the respondents. This method

has been used by Das (2007) to rate the few items of governance parameters such as

audit committee, remuneration committee, investors grievance committee, general

body meetings, etc. Moreover, Kant (2002), Gupta, et al. (2003), Sareen and Chander

(2003) and Das (2007) have used this method in their studies on disclosure. Score 1

has been assigned to a company for following a particular item and 0 for otherwise.

This chapter has been organized into two sections. Section I deals with the

company wise and industry wise analysis of corporate governance disclosure score

and section II explains the item wise analysis of corporate governance disclosure

score of the companies under study.

SECTION 1

This section explains the company wise and industry wise analysis of corporate

governance disclosure score for each year under study. Company wise disclosure

score has been arrived at as follows:

Corporate Governance Disclosure Score = Total Score Gained by a Co.

x 100 No. of Items in the Checklist

Suppose a company has followed 50 items given in the checklist out of 64 mentioned.

Then its governance score will be calculated as follows:

50

x100 64

= 78.12%


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4.3 Company Wise and Industry Wise Analysis of Corporate Governance

Disclosure Score

Table 4.1 shows the company wise and industry wise corporate governance

disclosure score of the companies for a period of five years i.e. from 2000-01 to 2004-05.

The year wise and industry wise analysis of corporate governance disclosure score for

have been is given as follows:

1.) Disclosure for the year 2000-01

The table 4.1 reveals that Tata Power Ltd. occupies first rank by disclosing

83.59% of items of governance checklist followed by Reliance Energy Ltd. (75.78%) and

Nevyeli Lignite Ltd. (46.09%). Six companies from power industry out of nine in total

have not implemented the recommendations of the clause 49 of listing agreement in the

first year of its implementation. In case of iron and steel industry, Tata Steel Ltd. has

gained maximum governance score i.e. 85.94% followed by Ispat Industries Ltd.

(65.62%),Tata Sponge Iron Ltd. (64.84%), Mukand Ltd. (61.72%), SAIL Ltd. (58.59%)

and so on. Four companies namely Bhushan Steel & Strips Ltd., Uttam Galva Steels Ltd.,

Jayaswals Neco Ltd. and Essar Steel Ltd. have not implemented the provisions of clause

49 of the listing agreement this year. Further it has been observed from the analysis of

cement industry that two companies namely Birla Corporation Ltd. and Prism Cement

Ltd. have not implemented the provisions of clause 49 of the listing agreement. On the

other hand, Gujarat Ambuja Cement Ltd. (78.12%) has gained maximum governance

score followed by ACC Cement Ltd. (77.34%), Kesoram Industries Ltd. (75%), Grasim

Industries Ltd. (63.28%) and India Cement Ltd. (62.5%) and so on.

Similarly, Reliance Industries Ltd. and Bombay Dyeing & Mfg Ltd. have

obtained highest governance score i.e. 75% in case of textiles industry followed by Indian

Rayon & Industries Ltd. (72.66%), Arvind Mills Ltd. (71.09%), Century Enka Ltd.

(57.81%) and so on. In case of paper industry, maximum follow up of items of clause 49

has been made by Century Textiles & Industries Ltd. (70.31%) followed by Ballarpur

Industries (67.19%), Pudumjee Pulp & Paper Mills Ltd. (64.06%) and so on. Again seven

companies


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Table: 4.1

Company Wise and Industry Wise Corporate Governance Disclosure Score of Sampled Companies

S.No Industry /Company Name 2000-01 % of

Score

2001-02 % of

Score

2002-03 % of

Score

2003-04 % of

Score

2004-05 % of

Score

A) POWER

1 CESC Ltd. 45.00 70.31 43.50 67.97 48.00 75 51.00 79.69 2 DPSC Ltd. 39.00 60.93 41.00 64.06 48.00 75 48.00 75 3 Gujarat Industries & Power Ltd. 37 57.81 39 60.94 39 60.94 39.50 61.72 4 Jindal Steel & Power Ltd. 36.00 56.25 37.00 57.81 38.00 59.37 38.00 59.37 5 Nevyeli Lignite Ltd. 29.50 46.09 39.50 61.72 39.50 61.72 40.00 62.5 43.00 67.18 6 6 National Thermal Power

Corporation Ltd.

6.50 10.16 28.50 44.53 36.00 56.25 45.50 71.09

7 Reliance Energy Ltd. 48.50 75.78 51.50 80.47 50.50 78.91 57.00 89.06 58.00 90.62 8 Tata Power Ltd. 53.50 83.59 55.50 86.72 56.00 87.5 56.00 87.5 56.00 87.5 9 Torrent Power AEC Ltd. 44.00 68.75 47.00 73.44 47.00 73.43 46.50 72.65

B) IRON & STEEL

10 Bhushan Steel & Strips Ltd. 28.50 44.53 33.50 52.34 39.00 60.93 37.50 58.59 11 Essar Steel Ltd. 49.00 76.56 45.50 71.09 52.00 81.25 53.00 82.81 12 Ispat Industries Ltd. 42.00 65.62 47.00 73.43 50.00 78.12 50.00 78.12 50.00 78.12 13 Jayaswals Neco Ltd. 43.50 67.96 45.00 70.31 44.00 68.75 44.00 68.75 14 Jindal Vijaynagar Steel Ltd. 38.00 59.37 48.00 75 49.00 76.56 52.00 81.25 51.00 79.68 15 Mukand Ltd. 39.50 61.72 44.50 69.53 44.50 69.53 42.50 66.41 43.50 67.97 16 SAIL Ltd. 37.50 58.59 37.00 57.81 37.50 58.59 36.50 57.03 37.00 57.81 17 Tata Sponge Iron Ltd. 41.50 64.84 50.50 78.91 53.50 83.59 53.50 83.59 54.50 85.1 18 Tata Steel Ltd. 55.00 85.94 55.00 85.94 55.00 85.94 55.00 85.94 55.00 85.94 19 Uttam Galva Steels Ltd. 40.00 62.5 40.50 63.28 46.00 71.87 50.50 78.91

C) CEMENT

20 ACC Cement Ltd. 49.50 77.34 50.00 78.12 49.00 76.56 52.00 81.25 57.00 89.06 21 Ambuja Cement Eastern Ltd. 35.50 55.46 41.50 64.84 44.00 68.75 45.00 70.31 41.00 64.06 22 Birla Corporation Ltd. 42.00 65.62 39.00 60.93 38.00 59.37 42.00 65.62 23 Chettinad Cement Corporation

Ltd.

36.00 56.25 45.00 70.31 46.00 71.87 46.00 71.87 46.00 71.87

24 Grasim Industries Ltd. 40.50 63.28 47.50 74.22 48.50 75.78 48.50 75.78 48.00 75

Contd....


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25 Gujarat Ambuja Cement Ltd. 50.00 78.12 55.00 85.94 55.00 85.93 55.00 85.93 52.00 81.25 26 India Cement Ltd. 40.00 62.5 41.00 64.06 45.00 70.31 46.50 72.65 47.00 73.44 27 Kesoram Industries Ltd. 48.00 75 53.00 82.81 53.00 82.81 55.00 85.93 53.00 82.81 28 Madras Cement Ltd. 38.00 59.37 38.00 59.37 38.50 60.15 39.50 61.71 39.50 61.72 29 Mysore Cement Ltd. 22.00 34.37 37.50 58.59 37.50 58.59 43.50 67.96 41.50 64.84 30 Prism Cement Ltd. 45.50 71.09 46.00 71.87 46.00 71.87 46.00 71.87 31 Shree Cement Ltd. 36.00 56.25 49.50 77.34 50.50 78.90 51.00 79.68 52.00 81.25

D) TEXTILES

32 Alok Industries Ltd. 35.00 54.68 35.00 54.69 42.00 65.62 47.00 73.43 47.00 73.43 33 Arvind Mills Ltd. 45.50 71.09 49.00 76.56 54.00 84.37 54.00 84.37 55.00 85.93 34 Bombay Dyeing & MFG Ltd. 48.00 75 51.00 79.69 51.00 79.69 52.00 81.25 52.00 81.25 35 Century Enka Ltd. 37.00 57.81 41.00 64.06 43.00 67.19 45.00 70.31 44.00 68.75 36 Eskay K'N'It Ltd. 31.00 48.44 34.50 53.91 34.50 53.90 40.00 62.5 37 Garden Silk Mills Ltd. 41.00 64.06 45.00 70.31 47.00 73.43 48.00 75 38 Indian Rayon & Industries Ltd. 46.50 72.66 44.50 69.53 45.00 70.31 45.00 70.31 46.00 71.87 39 Indo Rama Synthetics Ltd. 41.00 64.06 46.00 71.87 47.00 73.43 48.00 75 40 Mahavir Spinning Mills Ltd. 35.50 55.47 41.00 64.06 42.50 66.40 39.50 61.71 41 Nahar Spinning Mills Ltd. 26.50 41.41 35.50 55.47 40.50 63.28 45.00 70.31 45.00 70.31 42 Rajasthan Spinning & Wvng

Mills Ltd.

29.50 46.09 42.50 66.41 43.50 67.96 45.50 71.09 49.00 76.56

43 Raymond Ltd. 52.00 81.25 54.00 84.37 52.00 81.25 51.00 79.68 44 Reliance Industries Ltd. 48.00 75 48.00 75 51.00 79.68 54.00 84.37 55.00 85.93 45 S.Kumars Nationwide Ltd. 45.00 70.31 45.00 70.31 46.00 71.87 45.00 70.31 E) PAPER

46 Andhra Pradesh Paper Mills Ltd. 46.00 71.87 47.00 73.43 44.00 68.75 44.00 68.75 47 Ballarpur Industries Ltd. 43.00 67.19 41.50 64.84 41.00 64.06 45.50 71.09 48.00 75 48 Century Textiles & Industries

Ltd.

45.00 70.31 45.00 70.31 46.00 71.87 50.00 78.12 48.00 75

49 ITC Ltd. 25.00 39.06 44.00 68.75 46.00 71.87 48.00 75 50.00 78.12 50 JK Paper Ltd. 27.50 42.97 46.00 71.87 45.00 70.31 46.00 71.87 46.00 71.87 51 Orient Paper & Industries Ltd. 43.00 67.18 43.00 67.18 47.00 73.43 48.00 75 52 Pudumjee Pulp & Paper Mills

Ltd.

41.00 64.06 46.00 71.87 47.00 73.43 47.00 73.43 49.00 76.56

53 Seshasayee Paper Board Ltd. 42.00 65.62 45.00 70.31 45.00 70.31 46.00 71.87 54 Shreyan Industries Ltd. 38.00 59.37 43.00 67.18 42.50 66.41 42.50 66.41 55 Sirpur Paper Mills Ltd. 47.00 73.43 49.00 76.56 51.00 79.69 50.00 78.12

Contd....


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56 Star Paper Mills Ltd. 41.00 64.06 39.50 61.71 41.50 64.84 45.00 70.31 57 Tamilnadu Newsprint & Paper

Mills Ltd.

31.50 49.22 44.00 68.75 44.00 68.75 44.00 68.75 45.00 70.31

58 West Coast Paper Mills Ltd. 46.00 71.87 48.00 75 51.00 79.69 51.00 79.69

F) PHARMACEUTICALS

59 Alembic Ltd. 32.00 50 51.00 79.69 49.00 76.56 47.00 73.44 47.00 73.44 60 Aurobindo Pharma Ltd. 33.00 51.56 46.50 72.65 50.50 78.91 50.50 78.91 61 Aventis Pharma Ltd. 45.50 71.09 45.50 71.09 45.50 71.09 45.50 71.09 62 Cadila Healthcare Ltd. 41.00 64.06 45.00 70.31 48.00 75 50.00 78.12 49.00 76.56 63 Dr. Reddy Laboratories Ltd. 35.50 55.47 49.00 76.56 51.00 79.68 50.00 78.12 51.00 79.68 64 GlaxoSmithKline Ltd. 40.50 63.28 46.00 71.87 48.00 75 49.00 76.56 49.00 76.56 65 IPCA Laboratories Ltd. 39.00 60.94 48.50 75.78 48.50 75.78 48.50 75.78 48.50 75.78 66 Lupin Ltd. 44.00 68.75 44.00 68.75 48.00 75 49.00 76.56 67 Nicholas Piramal Ltd. 45.50 71.09 45.50 71.09 46.50 72.66 46.50 72.66 47.50 74.22 68 Orchid Chemicals &

Pharmaceuticals Ltd.

43.50 67.96 44.50 69.53 45.50 71.09 48.00 75 48.50 75.78

69 Ranbaxy Lab. Ltd. 44.50 69.53 45.50 71.09 49.50 77.34 53.50 83.59 54.50 85.16 70 Sun Pharmaceuticals Ltd. 37.00 57.81 41.50 64.84 45.00 70.31 43.00 67.18 44.00 68.75 71 Torrent Pharma Ltd. 25.00 39.06 45.00 70.31 47.00 73.43 46.50 72.65 47.00 73.43 72 Wockhardt Ltd. 30.50 47.65 38.50 60.15 0.00 0 37.50 58.59 39.50 61.72

G) SUGAR

73 Andhra Sugars Ltd. 41.00 64.06 42.00 65.62 43.00 67.19 43.00 67.19 74 Bajaj Hindustan Ltd. 46.00 71.87 48.00 75 52.00 81.25 49.00 76.56 75 Balrampur Chinni Mills Ltd. 24.00 37.5 44.00 68.75 47.00 73.44 47.00 73.44 47.00 73.44 76 Bannari Amman Sugars Mills

Ltd.

34.00 53.12 42.00 65.62 41.50 64.84 43.00 67.19 44.50 69.53

77 DCM Shriram Industries Ltd. 39.50 61.72 41.00 64.06 0.00 0 48.00 75 48.00 75 78 EID_ Parry India Ltd. 43.00 67.19 50.00 78.12 50.00 78.12 54.00 84.37 54.00 84.37 79 Jeypore Sugar Ltd. 37.50 58.59 44.00 68.75 43.00 67.19 44.50 69.53 80 Oudh Sugars Ltd. 38.50 60.16 44.50 69.53 48.00 75 47.00 73.44 47.00 73.44 81 Sakthi Sugars Ltd. 37.50 58.59 41.00 64.06 40.50 63.28 40.50 63.28 82 Saraswati Industrial Syndicate

Ltd.

29.50 46.09 29.50 46.09 29.50 46.09 39.00 60.94

83 Simbhaoli Sugar Mills Ltd. 37.00 57.81 45.00 70.31 45.00 70.31 47.00 73.44 84 Ugar Sugar Works Ltd. 40.00 62.5 40.00 62.5 45.00 70.31 46.00 71.87 85 Upper Ganges Sugar Mills Ltd. 37.50 58.59 44.50 69.53 47.00 73.43 48.00 75 48.00 75

Contd....


70

H) AUTOMOBILE

86 Ashok Leyland Ltd. 50.00 78.12 51.00 79.68 54.00 84.37 55.00 85.94 56.00 87.5 87 Atul Auto Ltd. 0.00 0 31.50 49.22 33.50 52.34 34.50 53.91 88 Bajaj Auto Ltd. 46.00 71.87 52.50 82.03 52.50 82.03 52.00 81.25 53.00 82.81 89 Force Motors Ltd. 42.50 66.41 44.00 68.75 44.00 68.75 42.00 65.62 90 Eicher Motors Ltd. 45.00 70.31 50.00 78.12 50.00 78.12 50.00 78.12 91 Hero Hondo Motors Ltd. 51.00 79.69 53.00 82.81 54.00 84.37 54.00 84.37 54.00 84.37 92 Hindustan Motors Ltd. 45.00 70.31 51.00 79.68 53.00 82.81 51.00 79.68 93 Kinetic Motor Co. Ltd. 50.00 78.12 48.00 75 48.00 75 48.00 75 94 LML Ltd. 40.00 62.5 43.00 67.19 42.00 65.62 0.00 0 43.00 67.19 95 Mahindra & Mahindra Ltd. 49.00 76.56 53.00 82.81 55.00 85.93 55.00 85.93 55.00 85.94 96 Maruti Udyog Ltd. 0.00 0 0.00 0 50.00 78.12 52.00 81.25 97 Scooters India Ltd. 23.50 36.72 32.50 50.78 33.50 52.34 37.00 57.81 37.00 57.81 98 Swaraj Mazda Ltd. 42.50 66.41 42.00 65.62 43.50 67.96 43.00 67.19 99 Tata Motors Ltd. 51.00 79.69 55.00 85.94 55.00 85.93 57.00 89.06 60.00 93.75 100 TVS Motor Co. Ltd. 36.50 57.03 42.50 66.40 43.00 67.18 43.00 67.18 44.00 68.75

I) SOFTWARE

101 GTL Ltd. 51.00 79.69 50.00 78.12 52.00 81.25 52.00 81.25 52.00 81.25 102 HCL Technologies Ltd. 47.00 73.44 48.00 75 51.50 80.47 53.00 82.81 53.00 82.81 103 IFLEX Solutions Ltd. 42.50 66.41 49.00 76.56 49.00 76.56 49.00 76.56 104 Igate Global Solutions Ltd. 47.00 73.44 43.00 67.19 43.00 67.19 48.00 75 52.00 81.25 105 Infosys Technologies Ltd. 48.00 75 48.00 75 49.00 76.56 49.00 76.56 50.00 78.12 106 Larsen & Toubro Ltd. 50.50 78.91 49.50 77.34 50.50 78.91 50.50 78.91 49.50 77.34 107 Mascon Global Ltd. 39.50 61.72 45.50 71.09 44.50 69.53 41.50 64.84 108 Pentamedia Graphics Ltd. 47.50 74.22 47.50 74.22 46.50 72.65 44.50 69.53 44.00 68.75 109 Polaris Software Lab Ltd. 41.50 64.84 45.50 71.09 44.50 69.53 46.50 72.66 48.50 75.78 110 Rolta India Ltd. 46.50 72.65 0.00 0 48.50 75.78 49.50 77.34 49.00 76.56 111 Satyam Computer Services Ltd. 39.00 60.94 45.00 70.31 46.00 71.87 46.00 71.87 46.00 71.87 112 Wipro Ltd. 45.50 71.09 51 79.69 52 81.25 53 82.81 53 82.81

Source: Compiled and Computed from the Corporate Governance Section of the Annual Reports of the Companies Understudy


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from this industry out of thirteen in total have not implemented the recommendations of

the clause yet. In case of pharmaceutical industry, Nicholas Piramal Ltd. (71.09%) has

highest governance score followed by Ranbaxy Lab Ltd. (69.53%), Orchid Chemicals &

Pharma Ltd. (67.97%), Cadila Healthcare Ltd. (64.06%) and GlaxoSmithKline Ltd.

(63.28%) and so on. Three companies from this industry out of fourteen in total have not

implemented the recommendations of the clause 49 for the year 2000-01.

In case of sugar industry, EID- Parry (India) Ltd. occupies first rank by disclosing

67.19% items of corporate governance checklist followed by DCM Shriram Industries

Ltd. (62%), Oudh Sugar Mills Ltd. (60.16%), Upper Ganges Sugar Mills Ltd. (58.59%)

and so on. Seven companies out of thirteen in total are not following the

recommendations of clause 49 of the listing agreement. Similarly, the analysis of

automobile industry reveals that Tata Motors Ltd. and Hero Hondo Motors Ltd. occupy

first rank by disclosing 79.68% items of checklist followed by Ashok Leyland Ltd.

(78.12%), Mahindra & Mahindra Ltd. (76.56%), Bajaj Auto Ltd. (71.87%) and so on.

Again seven companies out of fifteen in total from this industry, have not implemented

the recommendations of the clause 49 of the listing agreement yet. In case of software

industry, maximum governance score has been gained by GTL Ltd. (79.69%) followed

by Larsen & Toubro Ltd. (78.91%), Infosys Ltd. (75%), Pentamedia Graphics Ltd.

(74.22%), Igate Global Solutions Ltd. and HCL Technologies Ltd. each recording the

same score of 73.44% and subsequently followed by Rolta India Ltd. (72.65%) and so

on.


The table 4.1 depicts that in case of Power industry, Tata Power Ltd. has gained

the highest governance score (86.72%) followed by Reliance Energy Ltd. (80.47%),

CESC Ltd. (70.31%), Torrent Power AEC Ltd. (68.75%), Nevyeli Lignite Ltd. (61.72%)

and so on. Minimum governance score from this industry is of NTPC Ltd. This company

has implemented the code in the year 2001-02 and disclosed just 10.16% of items of

governance checklist. So far as iron & steel industry is concerned, Tata Steel Ltd.

occupies first rank by disclosing 85.94% of items of governance checklist followed by


72

Tata Sponge Iron Ltd. (78.90%), Essar Steel Ltd. (76.56%), Jindal Vijaynagar Steel Ltd.

(75%), Ispat Industries Ltd. (73.44%) and so on. Similarly, in case of cement industry,

maximum governance score has been obtained by Gujarat Ambuja Cement Ltd. (85.94%)

followed by Kesoram Industries Ltd. (82.81%), ACC Cement Ltd. (78.12%), Shree

Cement Ltd. (77.34%) and so on.

Similarly, in case of textiles industry, maximum governance score has been

gained by Raymond Ltd. (81.25%) and minimum is of Eskay K’N’It Ltd. (48.43%). In

case of paper industry, maximum follow up of items has been made by Sirpur Paper Mills

Ltd. (73.44%) followed by Pudumjee Pulp and Paper Mills Ltd., Andhra Pradesh Paper

Mills Ltd., West Coast Paper Mills Ltd., JK Paper Mills Ltd. and so on. Similarly, in case

of pharmaceutical industry, Alembic Ltd. has the highest governance score (79.69%) and

Aurobindo Pharma Ltd. has the lowest governance score i.e. 51.56%. So far as sugar

industry is concerned, EID-Parry (India) Ltd. has the highest governance score i.e.

78.12% and Saraswati Industrial Syndicate has lowest governance score (46.09%).

In case of automobile industry, Tata Motors Ltd. has been leading among all the

companies by disclosing 85.94% of items of governance checklist. Second rank has been

occupied by Mahindra & Mahindra Ltd. and Hero Hondo Motors Ltd. by disclosing

82.81% of items of checklist followed by Bajaj Auto Ltd. (82.03%), Ashok Leyland Ltd.

(79.68%), Kinetic Motor Co. Ltd. (78.12%), Eicher Motors Ltd. and Hindustan Motors

Ltd. attaining the equal score i.e. 70.31% and so on. Maruti Udyog Ltd. and Atul Auto

Ltd. have not implemented the recommendations of the clause in this year. In case of

software industry, maximum governance score has been obtained by Wipro Ltd.

(79.68%) followed by GTL Ltd. (78.12%), Larsen & Toubro Ltd. (77.34%), Infosys

Technologies Ltd. and HCL Technologies Ltd. each having equal score of 75% and

subsequently followed by Pentamedia Graphics Ltd. (74.22%) and so on.


The table 4.1 shows that in case of power industry, Tata Power Ltd. has gained

maximum governance score i.e. 87.5% while on the other hand, NTPC Ltd. like the

previous year has gained minimum governance score i.e. 44.53%. In case of iron & steel


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industry, maximum governance score has been gained by Tata Steel Ltd. (85.94%)

followed by Tata Sponge Iron Ltd. (83.59%), Ispat Industries Ltd. (78.12%), Jindal

Vijaynagar Steel Ltd. (76.56%) and so on. In case of cement industry, maximum

governance score has been gained by Gujarat Ambuja Cement Ltd. (85.94%) followed by

Kesoram Industries Ltd. (82.81%), Shree Cement Ltd. (78.91%), ACC Cement Ltd.

(76.56%), Grasim Industries Ltd. (75.78%) and so on. Similarly, in case of textiles

industry, Arvind Mills Ltd. and Raymond Ltd. occupy first rank by disclosing 84.37% of

the items of checklist. Reliance industries Ltd. and Bombay Dyeing and Mfg Ltd. occupy

second rank by disclosing 79.69% of items of checklist. Minimum governance score from

this industry is attributable to Eskay K’N’It Ltd. i.e. 53.91%. So far as paper industry is

concerned, maximum governance score has been gained by Sirpur Paper Mills Ltd.

(76.56%) followed by West Coast Paper Mills Ltd. (75%), Pudumjee Pulp & Paper Mills

Ltd. and Andhra Pradesh Paper Mills Ltd. each recorded same score of 73.44% and

subsequently followed by ITC Ltd. (71.87%) and so on. In case of pharmaceutical

industry, Dr Reddy’s Laboratories Ltd. occupies first rank by disclosing 79.68% of items

given in checklist. Ranbaxy Laboratories Ltd. occupies second rank followed by Alembic

Ltd. (76.56%), Ipca Laboratories Ltd. (75.78% Cadila Healthcare Ltd. (75%) and so on.

In case of sugar industry, maximum governance score has been gained by EID-

Parry (India) Ltd. (78.12%). Two companies namely Oudh Sugars Ltd. and Bajaj

Hindustan Ltd. have recorded same score i.e. 75%. Balrampur Chinni Mills Ltd. and

Upper Ganges Sugar Mills Ltd. each have disclosed 73.44% of items of checklist

followed by Simbhaoli Sugar Mills Ltd. (70.31%) and so on. In case of automobile

industry, Tata Motors Ltd. and Mahindra & Mahindra Ltd. occupy first rank by

disclosing 85.94% of items. Two companies namely Ashok Leyland Ltd. and Hero

Honda Motors Ltd. have recorded same score i.e. 84.37% followed by Bajaj Auto Ltd.

(82.03%) and so on. Maruti Udyog Ltd. has not implemented the code in this year. In

case of software industry, maximum governance score is attributable to GTL Ltd. and

Wipro Ltd. Both the companies have been disclosing near about 81.25% of the items of

governance checklist. While on the other hand, Igate Global Solutions Ltd. has gained

minimum governance score i.e. 67.19%.


74


It has been observed from table 4.1 that Reliance Energy Ltd. from power

industry has disclosed 89.06% of items of checklist followed by Tata Power Ltd.

(87.5%), CESC Ltd. (75%), DPSC Ltd. (75%), Torrent Power AEC Ltd. (73.44%) and so

on. Tata Steel Ltd. from iron & steel industry has disclosed maximum no. of items of

governance checklist i.e. 85.94% followed by Tata Sponge Iron Ltd. (83.59%), Jindal

Vijaynagar Steel Ltd. and Essar Steel Ltd. each disclosing the 81.25% of items and

subsequently followed by Ispat Industries Ltd. (78.12%) and so on. In case of cement

industry, maximum governance score has been gained by Gujarat Ambuja Cement Ltd.

and Kesoram Industries Ltd. (85.94%). Birla Corporation Ltd. from this industry has

lowest governance score i.e. 59.37%. In case of textiles industry, Reliance Industry Ltd.

and Arvind Mills Ltd. have the highest governance score (84.37%). Two companies

namely Raymond Ltd., Bombay Dyeing Ltd. occupy second rank by disclosing 81.25%

of items of checklist followed by Alok Industries Ltd., Indo Rama Synthetics Ltd. and

Garden Silk Mills Ltd. each recorded the same score of 73.44% and so on.

Sirpur Paper Mills Ltd. and West Coast Paper Mills Ltd. from paper industry

occupy first rank by disclosing 79.68% of items of governance checklist followed by

Century Textiles & Industry Ltd. (78.12%), Orient Paper & Industries Ltd. and Pudumjee

Pulp & Paper Mills Ltd. each attaining the same score of 73.44% and so on. In case of

pharmaceutical industry, maximum governance score has been gained by Ranbaxy

Laboratories Ltd. (83.59%) and minimum governance score is of Wockhardt Ltd.

(58.59%). Similarly, in case of sugar industry, maximum governance score is attributable

to EID-Parry (India) Ltd. (84.37%) and minimum to Saraswati Industrial Syndicate Ltd.

(46.09%). In case of automobile industry, maximum governance score is attributable to

Tata Motors Ltd. (89.06%) followed by Mahindra & Mahindra Ltd. and Ashok Leyland

Ltd. each recorded a same score of 85.94% and subsequently followed by Hero Hondo

Motors Ltd. (84.37%), Hindustan Motors Ltd. (82.81%) and so on. In case of software

industry, highest governance score has been gained by HCL Technologies Ltd. and

Wipro Ltd. (82.81%). While on the other hand minimum governance score is gained by

Pentamedia Graphics Ltd. and Mascon Global Ltd. (69.53%).


75


The table 4.1 reveals that Reliance Energy Ltd. in case of power industry has

disclosed 90.62% of items of governance checklist and hence occupied first rank among

all the sampled companies from this industry. Jindal Steel & Power Ltd. has lowest

governance score i.e. 59.37%. Tata Steel Ltd. has the highest governance score in case of

iron & steel industry followed by Tata Sponge Iron Ltd. (85.16%), Essar Steel Ltd.

(82.81%), Jindal Vijaynagar Steel Ltd. (79.68%), Uttam Galva Steel Ltd. (78.91%) and

so on. Similarly, in case of cement industry, ACC Cement Ltd. has disclosed maximum

no. of items of checklist (89.06%). On the other hand, Madras Cement Ltd. has disclosed

just 61.72% of items of checklist. Hence, this company has lowest governance score from

this industry.

In case of textiles industry, maximum governance score i.e. 85.94% has been

gained by two companies namely Reliance Industries Ltd. and Arvind Mills Ltd. On

the other hand, minimum governance score has been gained by Mahavir Spinning

Mills Ltd. (61.72%). So far as paper industry is concerned, maximum governance

score has been gained by West Coast Paper Mills Ltd. (79.68%). On the other hand,

minimum governance score belongs to Shreyan Industries Ltd. (66.41%). In case of

pharmaceutical industry, maximum governance score has been gained by Ranbaxy

Laboratories Ltd. (85.16%) while on the other hand, minimum governance score has

been obtained by Wockhardt Ltd. (61.72%). In case of sugar industry, EID-Parry

(India) Ltd. occupies first rank by disclosing 84.37% of items of checklist followed

by Bajaj Hindustan Ltd. (76.56%), DCM Shriram Industries Ltd. and Upper Ganges

Sugar Mills Ltd. each recorded same score of 75% and subsequently followed by

Oudh Sugar Mills Ltd. (73.44%) and so on. In case of automobile industry, Tata

Motors Ltd. has the highest governance score (93.75%) followed by Ashok Leyland

Ltd. (87.5%), Mahindra & Mahindra Ltd. (85.94%), Hero Honda Motors Ltd.

(84.37%), Bajaj Auto Ltd. (82.81%) and so on. HCL Technologies Ltd. and Wipro

Ltd. have the highest governance score i.e. 82.81% in case of software industry

followed by GTL Ltd. and Igate Global Solutions Ltd. both attaining the same score

i.e. 81.25% and subsequently followed by Infosys Technologies Ltd. (78.12%),

Larsen & Toubro Ltd. (77.34%), IFLEX Solutions Ltd. (76.56%) and so on.


76

4.3.1 Industry Wise Classification of Corporate Governance Disclosure Score

The table 4.1.1 reveals the industry wise classification of corporate governance

disclosure score. The industry wise mean disclosure score, standard deviation and

coefficient of variation have been computed for the period of five years i.e. from the year

2000-01 to 2004-05. In the year 2000-01, maximum mean disclosure score is of software

industry i.e. 72.42 and minimum is of paper industry i.e. 55.47. Standard deviation is

highest in case of power industry. It indicates the significant deviations of items from

mean value of the companies in power industry. Software industry has minimum standard

deviation as compared to other industries. On the basis of mean and standard deviations

value, it emerges that software industry has been performing well by disclosing the

maximum no. of items of checklist. Coefficient of variation is also highest in case of

power industry and lowest in case of software industry. Average mean, standard

deviation and coefficient of variation for the year 2000-01 are 63.2, 12.35 and 19.67

respectively.

The table 4.1.1 reveals that for the year 2001-02, automobile industry has the

highest mean value i.e. 73.02 followed by software (72.37), cement (71.03),

pharmaceuticals (69.47), paper (68.55), iron & steel (68.4), textiles (66.07), sugar (64.24)

and power (61.45). Standard deviation is again lowest in case of software industry as

compared to other industries. Power industry is having the highest value of standard

deviation. Coefficient of variation is also the highest in case of power industry and lowest

in case of paper industry. Average mean value, standard deviation and coefficient of

variation for the year 2001-02 are 68.29, 9.68 and 14.47 respectively.

Similarly, for the year 2002-03, mean disclosure score is maximum in case of

software industry (75.26) followed by pharmaceuticals (73.79), automobile industry

(73.16), cement (71.87), textiles (70.93), iron & steel (70.92), paper (70.38), sugar

(68.09), and power (66.32). Standard deviation is lowest in case of pharmaceutical

industry i.e. 3.12. For the year 2002-03, pharmaceutical and software industries are at

better position as compared to other industries. Average mean value, standard deviation

and coefficient of variation are 71.19, 8.16 and 11.56 respectively.


77

Table 4.1.1

Industry Wise Classification of Corporate Governance Disclosure Score

Sr

No. Industry

Mean

Average

Standard Deviation

Average

Coefficient of Variation

Average 2000-

01

01-

02

02-

03

03-

04

04-

05

00-

01

01-

02

02-

03

03-

04

04-

05

00-

01

01-

02

02-

03

03-

04

04-

05

1. Software 72.42 72.37 75.26 76.24 76.49 74.56 5.75 5.57 4.76 4.70 5.61 5.28 7.93 7.69 6.32 6.16 7.33 7.08

2. Textiles 61.72 66.07 70.93 73.27 74.16 69.23 13.53 10.05 8.61 7.98 7.45 9.52 21.92 15.21 12.14 10.89 10.04 14.04

3. Sugar 56.38 64.24 68.09 70.31 71.81 66.18 10.31 7.99 8.56 9.34 5.99 8.44 18.28 12.44 12.57 13.28 8.34 12.98

4. Paper 55.47 68.55 70.38 72.33 73.5 68.05 13.38 4.078 4.28 4.78 4.04 6.11 24.12 5.95 6.08 6.61 5.49 9.65

5. Automobile 67.77 73.02 73.16 75.33 75.26 72.91 15.08 9.93 12.09 11.09 11.45 11.93 22.05 13.59 16.52 14.72 15.21 16.46

6. Cement 61.79 71.03 71.87 73.69 73.57 70.39 13.10 8.88 8.79 8.51 8.64 9.57 21.20 12.5 12.23 11.55 11.74 13.84

7. Iron & Steel 66.01 68.4 70.92 72.65 73.44 70.28 10.16 11.85 10.68 10.01 10.43 10.63 15.39 17.32 15.06 13.78 14.20 15.15

8. Pharmaceutical 58.8 69.47 73.79 74.05 74.83 70.19 10.03 7.01 3.12 5.93 5.44 6.31 17.06 10.09 4.23 8.01 7.27 9.33

9. Power 68.49 61.45 66.32 71 73.87 68.23 19.78 21.8 12.56 12.05 10.68 15.37 28.88 35.47 18.94 16.97 14.46 22.94

Industries’

Average

63.2 68.29 71.19 73.21 74.10 12.35 9.68 8.16 8.26 7.75 7.75 19.67 14.47 11.56 11.33 10.43

Source: Compiled and Computed from the Disclosure Score as Given in Table 4.1


78

The table 4.1.1 shows that for the year 2003-04, again software industry occupies

first rank by disclosing 76.24% items of checklist. Automobile industry occupies second

rank by disclosing 75.33% of items followed by pharmaceutical industry (74.05), cement

(73.69), textiles (73.27), iron and steel (72.65), paper (72.33), power (71) and sugar

(70.31). On the other hand, standard deviation is highest in case of power (12.05)

followed by automobile (11.09), iron and steel (10.01), sugar (9.34), cement (8.51),

textiles (7.98), pharmaceutical (5.93) and software (4.70). It emerges that the software

industry has been performing well by disclosing the maximum number of items of clause

49 of the listing agreement. Pharmaceutical industry is also some what at better position

so far as mean values and standard deviation is concerned. Mean value, S.D. and C.V for

the year 2003-04 are 73.21, 8.26 and 11.33 respectively.

For the year 2004-05, again software, automobile, pharmaceutical industries

occupy first, second and third rank by disclosing 76.49%, 75.26% and 74.83% of items of

checklist respectively followed by textiles (74.16%), power (73.87%), cement (73.57%),

paper (73.50%), iron and steel (73.44%) and sugar (71.81%). Standard deviation is also

highest in case of automobile industry (11.45) followed by power (10.68), iron and steel

(10.43), cement (8.64), textiles (7.45), software (5.61) and pharmaceutical (5.44). It

emerges from the analysis that companies in software and pharmaceutical industries are

disclosing the maximum number of items given in the checklist based on clause 49 of the

listing agreement. On the other hand, though the automobile industry is also disclosing

the maximum number of items yet the variations in items are larger as compared to other

industries. Mean value, standard deviation and coefficient of variation for the year 2004-

05 are 74.10, 7.75 and 10.43 respectively.

From the above analysis, it has been observed that there is increase in the mean

disclosure score over a period of time. There has been increase in the industry average

score from 63.2 in the year 2000-01 to 74.10 in the year 2004-05. On the other hand, a

decrease has been observed in the standard deviation except for the year 2003-04. The

figure has reduced from 12.35 to 7.75. Similarly, coefficient of variation has also

decreased over a period of time. So, from the above analysis, it can be concluded that


79

there is increase in the disclosure of items given in corporate governance checklist over a

period of time. The decrease in standard deviation over a period of time reveals the less

variation of items from average disclosure score of companies. Hence, an increase in the

industry average over a period of five years and decrease in standard deviation shows

improvement in corporate governance disclosure score.

So, it can be concluded on the basis of average score of five years for each

industry that the software industry has been performing well by disclosing the maximum

number of items of checklist. Automobile industry occupies 2nd

rank regarding the mean

disclosure score but so far as standard deviation is concerned, it reveals the maximum

variation of items from the average disclosure score of the companies. Pharmaceutical,

paper and sugar industries are showing significant improvement in their mean disclosure

over a period of time. Standard deviations of these industries are also found to be lower

in comparison to other industries. On the whole, all the industries have been disclosing

score more than 65% of items for an average period of five years. It means that the

companies in the respective industries are following the requirements of clause 49 of the

listing agreement.

In order to see the significance of difference among the disclosure score of

industries, Kruskal- Wallis H Test has been applied. The following table shows the

results of the above mentioned test.

Table: 4.1.2

Results of Kruskal-Wallis Test H

Year(s) 2000-01 2001-02 2002-03 2003-04 2004-05

Chi-Square 14.893 12.355 10.440 5.517 4.510

Df 8 8 8 8 8

Significance .061 .136 .236 .701 .81

Source: Computed from the Disclosure Score as Given in Table 4.1


80

Table 4.1.2 reveals that in the year 2000-01, there is significant difference (at

10% level) among the disclosure score of industries. For rests of the years, no

significant difference among the disclosure score of the industries has been observed.

One of the possible reasons for the difference among the disclosure score of the

industries in the year 2000-01 might be the implementation of the mandatory clause

49 of the listing agreement in this year. Due to the first year of implementation of

code, a very few companies were disclosing the requirements of clause and the

disclosure level was also not exactly same as depicted in the clause. Moreover, for rest

of the years, all the companies from their respective industries have been disclosing

the governance items almost at equivalent level.

4.3.2 Company Wise Analysis of Corporate Governance Disclosure Score

The table 4.1 reveals the company wise and industry wise analysis of corporate

governance disclosure score of the sampled companies. The year wise and company

wise analysis of corporate governance disclosure score have been explained as

follows:

1) Disclosure for the year 2000-01

The table 4.1 reveals that for the year 2000-01, maximum governance score

has been obtained by Tata Steel Ltd. (85.93%) followed by Tata Power Ltd. (83.59%),

GTL Ltd., Tata Motors Ltd. and Hero Honda Motors Ltd. each recording the same

score of 79.68% and subsequently followed by Larsen & Toubro Ltd. ( 78.90%),

Gujarat Ambuja Cement Ltd. (78.12%), ACC Cement Ltd. (77.34%), Mahindra &

Mahindra Ltd. (76.56%), Reliance Energy Ltd. (75.78%), Infosys Technologies Ltd.,

Bombay Dyeing & Manufacturing Ltd., Reliance Industries Ltd. and Kesoram

Industries Ltd. each disclosing 75% of items of checklist, Pentamedia Graphics Ltd.

(74.22%), Igate Global Solutions Ltd. and HCL Technologies Ltd. each attaining the

same score i.e.73.44%, Rolta India Ltd. (72.65%), Indian Rayon & Industries Ltd.

(72.65%), Bajaj Auto Ltd. (71.87%), Nicholas Piramal Ltd., Wipro Ltd. and Arvind

Mills Ltd. recording the same score of 71.09%, Century Textiles & Industries Ltd.


81

(70.31%), Ranbaxy Laboratories Ltd. (69.53%), Orchid Chemicals & Pharmaceuticals

Ltd. (67.97%), Ballarpur Industries Ltd. (67.19%), and so on. The clause 49 of the

listing agreement was not applicable on a few companies for the year 2000-01. So,

those companies have been excluded from the sample for analysis purpose for this

particular year.


It has been observed from table 4.1 that Tata Power Ltd. has been disclosing

the maximum number of items of the corporate governance checklist i.e. 86.72%.

Three companies namely Tata Motors Ltd., Gujarat Ambuja Cement Ltd. and Tata

Steel Ltd occupy second rank by recording the same score of 85.94%. Similarly, three

companies namely Mahindra & Mahindra Ltd., Hero Honda Motors Ltd. and Kesoram

Industries Ltd. occupy third rank by attaining the same score of 82.81% followed by

Bajaj Auto Ltd. (82.03%), Raymond Ltd. (81.25%), Reliance Energy Ltd. (80.47%),

Wipro Ltd., Bombay Dyeing & Manufacturing Ltd., Ashok Leyland Ltd. and Alembic

Ltd. recorded the same score of 79.69% and subsequently followed by Tata Sponge

Iron Ltd. (78.91%), GTL Ltd., ACC Cement Ltd., Kinetic Motor Co. Ltd., EID-Parry

(India) Ltd. each recorded the same score of 78.12%. Larsen & Toubro Ltd. and

Shree Cement Ltd have been disclosing 77.34% of items of checklist followed by

Arvind Mills Ltd., Essar Steel Ltd. and Dr. Reddy’s Laboratories Ltd. each recorded

the same score of 76.56% and subsequently followed by IPCA Laboratories Ltd.

(75.78%), Infosys Technologies Ltd., Reliance Industries Ltd., Jindal Vijaynagar

Steel Ltd. and HCL Technologies Ltd. each disclosed the 75% of items of checklist.

Two companies namely Pentamedia Graphics Ltd. and Grasim Industries Ltd. each

have been disclosing 74.22% of items of checklist. On the other hand, Sirpur Paper

Mills Ltd. (73.44%) and Ispat Industries Ltd. each have recorded a score of 73.44%

and so on. NTPC Ltd. has been disclosing the minimum no. of items i.e. 10.16% of

checklist. For the year 2001-02, maximum no. of companies has started following the

recommendations of the clause 49 except Atul Auto Ltd. and Maruti Udyog Ltd. In

case of Rolta India Ltd., annual report of 2001-02 was not available due to change in

its financial year.


82


The table 4.1 shows that Tata Power Ltd. has been leading among all the

sampled companies by disclosing 87.5% of items of checklist. Mahindra & Mahindra

Ltd., Tata Motors Ltd., Gujarat Ambuja Cement Ltd. and Tata Steel Ltd. occupy

second rank by securing 86% followed by Arvind Mills Ltd., Raymond Ltd., Ashok

Leyland Ltd. and Hero Honda Motors Ltd. each recorded the same score of 84.37%

and subsequently followed by Tata Sponge Iron Ltd. (83.59%), Kesoram Industries

Ltd. (82.81%), Bajaj Auto Ltd. (82.03%), GTL Ltd. (81.25%), HCL Technologies

Ltd. (80.47%) and so on. On the other hand, Reliance Industries Ltd., Hindustan

Motors Ltd. and Dr. Reddy’s Laboartories Ltd. each have disclosed 79.69% of items

of checklist followed by Reliance Energy Ltd., Shree Cement Ltd. and Larsen &

Toubro Ltd. each recorded a same score of 78.91% and subsequently followed by

Eicher Motors Ltd. (78.12%) and so on. Minimum corporate governance score has

been gained by NTPC Ltd. (44.53%) from power industry. For the year 2002-03, it

has been observed that both maximum and minimum governance score are

attributable to the companies belonging to power industry.


The table 4.1 depicts that for the year 2003-04, maximum governance score

has been gained by two companies i.e. one from automobile industry and other from

power industry. Both Reliance Energy Ltd. and Tata Motors Ltd. occupy the first rank

by disclosing 89.06% of the items given in governance checklist followed by Tata

Power Ltd. (87.5%), Mahindra & Mahindra Ltd., Ashok Leyland Ltd., Gujarat

Ambuja Cement Ltd., Kesoram Industries Ltd. and Tata Steel Ltd. each recorded the

same score of 85.94%. Reliance Industries Ltd., Arvind Mills Ltd., EID-Parry (India)

Ltd. and Hero Honda Motors Ltd. have been disclosing 84.37% of items of checklist

followed by Tata Sponge Iron Ltd. and Ranbaxy Laboratories Ltd. each recorded the

same score of 83.59% and subsequently followed by HCL Technologies Ltd., Wipro

Ltd. and Hindustan Motors Ltd. each attained the same score of 82.81%. GTL Ltd.,


83

Raymond Ltd., Bajaj Hindustan Ltd., Bombay Dyeing & Manufacturing Ltd., Bajaj

Auto Ltd., Jindal Vijaynagar Steel Ltd. and ACC Cement Ltd. have been disclosing

81.25% of items of checklist and so on. Atul Auto Ltd. has minimum corporate

governance score i.e. 52.34%. So, it emerges from the analysis for the year 2003-04

that both the maximum and minimum corporate governance scores have been gained

by the companies from the automobile industry.


The table 4.1 shows that Tata Motors Ltd. occupies the first rank by

disclosing (93.75%) of items of governance checklist followed by Reliance Energy

Ltd. (90.62%), ACC Cement Ltd. (89.06%), Ashok Leyland Ltd. and Tata Power Ltd.

each recorded the same score of 87.5% and subsequently followed by Mahindra &

Mahindra Ltd., Tata Steel Ltd., Reliance Industries Ltd. and Arvind Mills Ltd. each

attained the same score of 85.94%. Two companies namely Tata Sponge Iron Ltd.

and Ranbaxy Laboratories Ltd. have been disclosing 85.16% of items of checklist

followed by EID-Parry (India) Ltd. (84.37%), HCL Technologies Ltd., Wipro Ltd.,

Bajaj Auto Ltd., Kesoram Industries Ltd., Essar Steel Ltd., GTL Ltd., Igate Global

Solutions Ltd., Bombay Dyeing & Mfg Ltd., Maruti Udyog Ltd., Shree Cement Ltd.

and Gujarat Ambuja Cement Ltd. each recorded the same score of 81.25% and

subsequently followed by Raymond Ltd., West Coast Paper Mills Ltd., Hindustan

Motors Ltd., Jindal Vijaynagar Steel Ltd., Dr. Reddy’s Laboratories Ltd. and CESC

Ltd. each attained the same disclosure score i.e. 79.69%. On the other hand, Uttam

Galva Steels Ltd. and Aurobindo Pharma Ltd. have been disclosing 78.91% of items

of checklist followed by Infosys Technologies Ltd., Sirpur Paper Mills Ltd., ITC

Ltd., Eicher Motors Ltd. and Ispat Industries Ltd. each gained the same score of

78.12% and so on. Minimum corporate governance disclosure score is of Atul Auto

Ltd. (53.91%). It means that this company is just disclosing 54% of items given in the

corporate governance checklist.


84

So, it emerges from the above analysis that the Tata group companies have

been leading so far as the disclosure of corporate governance practices as per clause

49 is concerned. For the year 2001, just 68 companies are following the

recommendations of clause 49 of the listing agreement out of total 112 sampled

companies under study. This is due to the reason that the provisions of clause 49 of

the listing agreement were applicable on Group A companies as on March 31st, 2001.

Later on, all the companies with minimum paid up capital of Rs. 10 crore and net

worth of Rs. 25 crore had to comply with the requirements of clause 49 as on March

31st 2002. Over a period of time, an increase has been observed in the number of

companies following the mandatory corporate governance code. There are few

companies namely Rajasthan Spinning & Wvng Mills Ltd., Balrampur Chinni Mills

Ltd., Bannari Aman Sugars Mills Ltd., Tamilnadu Newsprint & Paper Mills Ltd.,

ITC Ltd., EID-Parry (India) Ltd., Scooters India Ltd., Nahar Spinning Mills Ltd.,

Shree Cement Ltd., Chettinad Cement Corporation Ltd., Pudumjee Pulp & Paper

Mills Ltd., Torrent Pharma Ltd., Wockhardt Ltd., Dr. Reddy’s Laboratories Ltd., Tata

Sponge Iron Ltd., JK Paper Ltd., Nevyeli Lignite Ltd., NTPC Ltd., etc., which are

showing significant improvement in the disclosure score over the period of 5 years

with base year 2000-01. Similarly, on the other hand, a slight improvement in the

range between 1-5% has been observed in the corporate governance score of a few

companies namely Infosys Technologies Ltd., Rolta India Ltd., Nicholas Piramal

Ltd., Jindal Steel & Power Ltd., Gujarat Industries & Power Ltd., Swaraz Mazda Ltd.,

Hero Honda Motors Ltd., Madras Cement Ltd., Andhra Sugars Ltd., etc.

For a few no. of companies namely Pentamedia Graphics Ltd., Kinetic Motor

Ltd., Force Motors Ltd., SAIL Ltd., Larsen & Toubro Ltd., Raymond Ltd., Indian

Rayon & Industries Ltd., Andhra Pradesh Paper Mills Ltd., a decrease with slight

variations in the governance score has been observed from the year of implementation

of the code till the end period of study. Tata Steel Ltd., Aventis Pharma Ltd. and

Prism Cement Ltd. have stable corporate governance score over the entire period of

study. A few companies namely Reliance Energy Ltd., Tata Motors Ltd., Ashok

Leyland Ltd., Tata Power Ltd., ACC Cement Ltd., Ranbaxy Ltd., Tata Steel Ltd.,


85

Mahindra & Mahindra Ltd., etc., are leading in governance matter by disclosing more

than 85% of items of the checklist in the year 2004-05. It is concluded that though the

companies are following the mandatory corporate governance code as prescribed by

the SEBI but the degree of disclosure varies from company to company.

4.3.3 Extent of Variation in Corporate Governance Disclosure Score

The table 4.1.3 reveals the extent of variation in corporate governance disclosure

score for the period of five years under study. It has been observed that 10% of the

sampled companies have been disclosing the corporate governance items in the range

between 30-45% in the year 2000-01. Maximum no. of companies i.e. 41% have been

disclosing the items in the range between 60-75%. Just 22% companies are disclosing in

the range between 75-90%. For the year 2001-02, there is one such company i.e. NTPC

Ltd. (0-15%) which has just implemented the code of corporate governance. Bhushan

Steel & Strips Ltd. has also started following the code in the year 2001-02 and this

company has been disclosing the items in the range between 15-30%. A slight increase in

the disclosure score has been observed as more number of companies i.e. 57% and 26.6%

has started reporting the corporate governance items in the range between 60-75% and

75-90% respectively.

Similarly, for the year 2002-03, again NTPC Ltd. has been reporting the items of

governance checklist in the range between 30-45%. As compared to the previous year,

less no. of companies have been disclosing in the range between 45-60% and 60-75%.

38% have started disclosing the corporate governance practices in the range between 75-

90%. All these are showing an improvement in disclosure score of the companies.

For the year 2003-04, a slight increase has been observed in the disclosure range except

for the range between 45-60%. Now, 47% of companies have started disclosing in the range

between 75-90%. Again for the year 2004-05, as compared to the earlier years, significant

variations have been observed in the disclosure range. There are two companies namely

Reliance Energy Ltd. and Tata Motors Ltd. which have been disclosing more than 90% of

items of checklist. 43% of the companies fall in the disclosure range between 60-75%. There is

also an increase in the number of companies in the disclosure range between 75-90%.


86

Table: 4.1.3

Extent of Variation in Corporate Governance Disclosure Score

Disclosure Score

(Range in %)

No. of Companies Percentage of Companies

2000-01 01-02 02-03 03-04 04-05 00-01 01-02 02-03 03-04 04-05

0-15 0 1 0 0 0 0 .92 0 0 0

15-30 0 0 0 0 0 0 0 0 0 0

30-45 7 1 1 0 0 10.29 .92 .92 0 0

45-60 18 16 8 9 5 26.47 14.68 7.34 8.11 4.46

60-75 28 62 59 50 48 41.18 56.88 54.13 45.04 42.86

75-90 15 29 41 52 57 22.06 26.60 37.61 46.85 50.89

90 or Above 0 0 0 0 2 0 0 0 0 1.79

68 109 109 111 112 100 100 100 100 100

Source: Compiled and Computed from the Disclosure Score as Given in Tabl. 4.1


87

So, it can be concluded from the above analysis that there is increase in the extent

of disclosure score over a period of time but with significant variations. In the initial

years, the disclosure score of the companies seems to be an average because at that time

only those sampled companies which belong to ‘Group A’ have to follow the

requirements of clause 49 of the listing agreement. But from the year 2003 onwards,

significant increase in the corporate governance score has been observed for a few

companies because after a period of 2002-03, it was mandatory for all the listed

companies in India to follow the requirements of clause 49 of the listing agreement.

SECTION-II

This section explains the item wise corporate governance disclosure score of the

companies. The item wise disclosure score has been arrived at as follows:

Item Wise Corporate

Governance Disclosure Score =

No. of Companies Following a Particular Item x 100

Total No. of Sampled Companies

4.4 Item Wise Corporate Governance Disclosure Score of the

Companies

Table 4.2 reveals the details of the item wise corporate governance disclosure

score of companies based on clause 49 of the listing agreement. The details of item wise

disclosure score are given as follow:

I Mandatory Corporate Governance Disclosure Requirements

A) Company’s Philosophy on Corporate Governance is based on the mission and

vision of the company. Every company has its own principles, vision or mission

statement to be followed for the best interests of all the shareholders. It explains that the

affairs of the company should be conducted in a fair and transparent manner. The table

4.2 shows that 97% of the sampled companies have disclosed their philosophy regarding

corporate governance in corporate governance section of the annual report for the year

2000-01 which has increased to 100% for the year 2004-05.


88

B) Board of Directors

This head covers eight items. On the basis of an average, maximum number of

companies have been disclosing the information regarding the ‘size of the board’ (99.46)

followed by ‘no. of board meetings held along with dates’ (98.06), ‘attendance of

individual director at the board meetings’ (98.05), ‘attendance of individual director at

last annual general meeting’ (96), ‘composition of the board’ (94.19), ‘committees

position held on other companies boards’ (86.5), ‘brief resume of the director to be

appointed or re-appointed’ (40.68) and ‘information to be placed before the board at

board meeting’(35.11).

The details of individual item wise disclosure are as follow:

1. Size of the Board

Size of the board implies the total number of directors serving on the board.

The table 4.2 reveals that for the years 2000-01, 2001-02 and 2002-03 the compliance

level of this item is 100%. But later on, 98.2% and 99.11% of the sampled companies

have been disclosing the size of the board in corporate governance section of the

annual report for the years 2003-04 and 2004-05 respectively.

2. Composition of the Board

Composition of the board refers to the proportion of non-executive,

independent, nominee independent, promoters and executive directors on the board.

Clause 49 of the listing agreement states that the board should have optimum

combination of executive and non-executive directors and the no. of non-executive

directors should be atleast 50% of the board size. This clause further clarifies that if

the position of chairman is held by executive director then atleast ½ of the board

should be of independent directors otherwise in case of non-executive director

chairmanship, 1/3rd

of the board should comprise of independent directors. The table

4.2 reveals that 88.24% of the sampled companies have disclosed the composition of

the board in an appropriate manner as per clause 49 of the listing agreement in the

year 2000-01 which has increased to 96.43% in the year 2004-05.


89

Table: 4.2

Item Wise Corporate Governance Disclosure Score of the Sampled Companies

S.No. Items 2000-01

(no. of

cos.)

(%) 2001-02

(no. of

cos.)

(%) 2002-03

(no. of

cos.)

(%) 2003-04

(no. of

cos.)

(%) 2004-05

(no. of

cos.)

(%) Average

Score (%)

I Mandatory Requirements

A Company’s Philosophy on Corporate Governance 66 97.06 107 98.17 107 98.17 111 100 112 100 98.68

B Board of Directors

1 Size of the Board 68 100.00 109 100.00 109 100.00 109 98.198 111 99.11 99.46

2 Composition of the Board 60 88.24 103 94.50 104 95.41 107 96.396 108 96.43 94.19

3 No. of Board Meetings Held Along with Dates 64.5 94.85 107 98.17 108 99.08 109.5 98.649 111.5 99.55 98.06

4 Attendance of Individual Director at the Board Meetings 67 98.53 100 91.74 109 100.00 111 100 112 100 98.05

5 Attendance of Individual Director at Last Annual General

Meeting.

60 88.24 104 95.41 108 99.08 110 99.099 110 98.21 96

6 Information to be Placed Before the Board at Board Meeting 19 27.94 28 25.69 42 38.53 46 41.441 47 41.96 35.11

7 Committees Position Held on Other Companies Boards 45 66.18 95 87.16 99.5 91.28 103 92.793 106.5 95.09 86.5

8 A Brief Resume of the Director to be Appointed or Re-

appointed.

20 29.41 41 37.61 48 44.04 51 45.946 52 46.43 40.68

C Audit Committee

1 Brief Description of Terms of Reference 66 97.06 108 99.08 107 98.17 107 96.396 108 96.43 97.43

2 Composition and Names of Members 68 100.00 108.5 99.54 109 100.00 111 100 112 100 99.91

3 Independent Director to be Act as a Chairman 45 66.18 99.5 91.28 101 92.66 105 94.595 107 95.53 88.05

4 Presence of Chairman at AGM 38 55.88 80 73.39 90 82.57 97 87.387 92 82.14 76.27

5 Participation of Head of Finance, Statutory Auditors, Chief

Internal Auditor and Other Invitees in the Meetings.

30 44.12 58 53.21 63 57.80 70 63.063 73 65.18 56.67

6 No. of Meetings Held and Attendance During the Year 46.5 68.38 97.5 89.45 108 99.08 108 97.297 110.5 98.66 90.57

7 Financial Literacy of Members 27 39.71 47 43.12 58 53.21 60 54.054 65 58.03 49.62

8 Secretary of the Audit Committee 35 51.47 63 57.80 66 60.55 74 66.667 76 67.86 60.87

D Remuneration of Directors

1 Details of Remuneration Package of All the Directors 52 76.47 97.5 89.45 100 91.74 101 90.991 103.5 92.41 88.21

2 Information on Performance linked incentives 23 33.82 46 42.20 48 44.04 55 49.55 53 47.32 43.39

3 Information on Performance Evaluation Criteria 2 2.94 3 2.75 4 3.67 7 6.3063 8 7.14 4.56

4 Information on Service Contracts of Directors 24 35.29 56 51.38 55 50.46 60 54.054 60 53.57 48.95

Contd...


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5 Notice Period of Directors 22 32.35 44 40.37 44 40.37 48 43.243 50 44.64 40.19

6 Severance Fee for Directors 8 11.76 12 11.01 14 12.84 15 13.514 16 14.28 12.68

E Investors Grievance Committee

1 Name of Non-executive Director Heading the Committee 51 75.00 104 95.41 105 96.33 110 99.099 111 99.11 92.99

2 Name and Designation of Compliance Officer 59.5 87.50 102 93.58 98 89.91 100.5 90.541 102 91.07 90.52

3 Number of Shareholders Complaints Received 46 67.65 91 83.49 98 89.91 101 90.991 105 93.75 85.16

4 Number of Outstanding Complaints 49 72.06 99 90.83 101 92.66 103 92.793 106 94.64 88.59

5 Number of Pending Share Transfers 41 60.29 86 78.90 88 80.73 89 80.18 88 78.57 75.73

F General Body Meetings

1 Location and Time: Last Three AGMS Held 63 92.65 106.5 97.71 108.5 99.54 110.5 99.55 111.5 99.55 97.8

G Disclosures

1 Materially Significant Related Party Transactions 60 88.24 102 93.58 105 96.33 105 94.595 107 95.53 93.65

2 Details of Non-compliance, Penalties Imposed by SEBI or Any

Statutory Authority

57 83.82 104 95.41 108 99.08 107 96.396 108 96.43 94.23

H Means of Communication

1 Information on Quarterly Results 66 97.06 108 99.08 109 100.00 109 98.198 111 99.11 98.69

2 Newspapers Details 45 66.18 78 71.56 83 76.15 85 76.577 92 82.14 74.52

3 Website Details 51 75.00 77 70.64 83 76.15 86 77.477 90 80.36 75.93

4 Display of Official News Releases 37 54.41 54 49.54 58 53.21 56 50.45 59 52.68 52.06

5 Presentations Made to Institutional Investors/ Analysts 24 35.29 34 31.19 34 31.19 39 35.135 44 39.28 34.42

6 Management Discussion and Analysis Report as a Part of

Annual Report

56 82.35 95 87.16 95 87.16 97 87.387 101 90.18 86.85

I General Shareholders Information

1 AGM : Date, Time and Venue 67 98.53 106.5 97.71 107.5 98.62 109 98.198 109.5 97.77 98.17

2 Tentative Financial Calendar 61 89.71 105.5 96.79 105.5 96.79 107.5 96.847 108.5 96.87 95.4

3 Date of Book Closure 66 97.06 107 98.17 108 99.08 109 98.198 108 96.43 97.79

4 Dividend Payment Date 61 89.71 89 81.65 91 83.49 93 83.784 92 82.14 84.15

5 Listing Details 68 100.00 109 100.00 109 100.00 111 100 111 99.11 99.82

6 Stock Code 61 89.71 104 95.41 106 97.25 105 94.595 111 99.11 95.21

7 Market Price Data 64 94.12 102 93.58 105 96.33 107 96.396 108 96.43 95.37

8 Performance of Company's Stock in Comparison to Broad Based

Indices Such as BSE Sensex, CRISL Checklist, etc. 56 82.35 92 84.40 95 87.16 99 89.189 101 90.18 86.66

9 Registrar and ShareTransfer Agents 39 57.35 67 61.47 88 80.73 97 87.387 101 90.18 75.42

10 Share Transfer System 66 97.06 107 98.17 108 99.08 109 98.198 110 98.21 98.14

Contd..


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. 11 Distribution of Shareholding 60 88.24 102 93.58 103 94.50 105 94.595 106 94.64 93.11

12 Shareholding Pattern 53 77.94 88 80.73 99 90.83 101 90.991 103 91.96 88.69

13 Dematerialization of Shares and Liquidity 64 94.12 107 98.17 109 100.00 110 99.099 111 99.11 98.11

14 Plant Locations 54 79.41 95 87.16 99 90.83 101 90.991 101 90.18 87.71

15 Address for Correspondence 67 98.53 108 99.08 109 100.00 110 99.099 111 99.11 99.16

16 Certificate of Auditor on Compliance with Corporate

Governance Code

63 92.65 108 99.08 109 100.00 110 99.099 111 99.11 97.98

II Non-Mandatory Requirements

A Remuneration Committee

1 Brief Description of Terms of Reference 32 47.06 55 50.46 65 59.63 71 63.964 74 66.07 57.44

2 Composition and Names of Members 32 47.06 66 60.55 74 67.89 77 69.369 80 71.43 63.26

3 Independent Director to Act as a Chairman 21 30.88 43 39.45 56 51.38 60 54.054 52 46.43 44.44

4 Presence of Chairman at AGM 24 35.29 43 39.45 56 51.38 60 54.054 52 46.43 45.32

5 Number of Meetings Held & Attended During the Year 24 35.29 41.5 38.07 58.5 53.67 54 48.649 61.5 54.91 46.12

B Shareholders Rights

1 Half Yearly Report Sent to the Shareholders 10 14.71 14 12.84 16 14.68 16 14.414 17 15.18 14.36

2 Special Resolutions Passed Through Postal Ballot During Last

Year 0 0.00 5 4.59 7 6.42 14 12.613 14 12.5 7.22

3 Name of the Person Who Conducted Postal Ballot Exercise 0 0.00 5 4.59 6 5.50 11 9.9099 9 8.03 5.6

4 Special Resolution Proposed to be Conducted Through Postal

Ballot

0 0.00 4 3.67 3 2.75 2 1.8018 3 2.68 2.18

5 Procedure for Postal Ballot 0 0.00 1 0.92 0 0.00 0 0 0 0 0.18

6 Information on Reimbursement of Expenses Incurred by NE

Chairman to Maintain Chairman’s Office

3 4.41 9 8.26 8 7.34 8 7.2072 8 7.14 6.87

Source: Compiled and Computed from the Annual Reports of the Companies Under Study


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3. No of Board Meetings Held Along with Dates

As per clause 49 of the listing agreement, the company must held a minimum

of 4 board meetings in a year and the maximum gap should be of four months

between two board meetings. The table 4.2 shows that 94.8% of the sampled

companies are following this provision in the year 2000-01 which has increased to

99.55% in the year 2004-05. At few instances, it has been observed that the time gap

between two board meetings exceeds 120 days by 2 or 3 days. If the companies have

followed the requirement of minimum board meetings but do not comply with the

requirement of gap between two board meetings then .5 score has been assigned to

this particular item.

4. Attendance of Individual Director at the Board Meetings

The table 4.2 reveals that 98.53% of the sampled companies in the year 2000-

01 have given the detailed record of attendance of individual directors at the board

meetings. For the year 2004-05, the compliance level is 100% of this provision.

5. Attendance of Individual Director at Last Annual General Meetings (AGM)

This item explains the absence or presence of the director at last annual general

meeting held by the company. The table 4.2 depicts that 88% of the sampled companies

have disclosed the attendance record of directors at last annual general meeting in the

year 2000-01 which has increased to 98.2% in the year 2004-05. The table 4.2.1 (a)

reveals the percentage of attendance record of the directors for the period of five years

under study.

The table 4.2.1 reveals that in the year 2000-01, 63 companies have disclosed the

attendance records of the directors at last AGM. 23 companies are of such type where

more than 80% of directors were present at AGM. 5 companies namely Nahar Spinning

Mills Ltd., Rajasthan Spinning & Wvng Mills Ltd., Ballarpur Industries Ltd., Shree

Cement Ltd. and Torrent Pharmaceuticlas Ltd. have not mentioned the attendance record

of directors at last AGM. Similarly, for the year 2001-02, Nahar Spinning Mills Ltd.,


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Ballarpur Industries Ltd., Shreyan Industries Ltd. and NTPC Ltd. have not given the

attendance record of the directors. For the years 2002-03 and 2003-04, Ballarpur

Industries Ltd. has not disclosed this item. For the year 2004-05, Ballarpur Industries

Ltd., Atul Auto Ltd. and Pentamedia Graphics Ltd. are silent on the disclosure of this

item.

Table: 4.2.1

Attendance Record of the Directors at AGM

Year(s)

Attendance

Record (%)

2000-01

(No. of Co's)

2001-02

(No. of

Co's)

2002-03

(No. of

Co's)

2003-04

(No. of

Co's)

2004-05

(No. of

Co's)

Less than 20 3 5 4 6 4

20-40 5 9 10 10 11

40-60 14 28 29 16 14

60-80 18 25 26 22 35

More than 80 23 38 39 56 45

Total 63 105 108 110 109

Source: Compiled and Computed from Corporate Governance Section of the Annual Report

6. Information to be Placed Before the Board at Board Meeting

This item deals with the information placed before the board of directors at the

time of board meeting. This includes annual operating plans, budgets, major capital

changes if any, proceedings of audit and other committees’ meetings of the board, sale of

substantial assets, investments or subsidiaries, non-compliance of any statutory or

regulating provisions, etc. The table 4.2 shows that 27.94% of the sampled companies

have been complying with this provision in the year 2000-01 by giving the details of

information in the corporate governance section of the annul report. For the year 2004-

05, 42% of sampled companies have started reporting this item.


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7. Committees Position Held on other Companies Boards

The clause 49 states that the director should not be a member of more than 10

committees or chairman of more than 5 committees in all the companies where he holds

the position of director. The table 4.2 shows that 66% of the sampled companies have

shown their compliance with this provision in the year 2000-01 which has increased to

95.09% in the year 2004-05

8. Brief Resume of the Director to be Appointed or Re-appointed

The clause 49 (VI-A) explains that the shareholders must be provided with the

information regarding brief resume of the directors to be appointed or re-appointed. The

table 4.2 shows that 29.41% of the sampled companies in the year 2000-01 have

disclosed the resumes of the directors in corporate governance section of the annual

report which has increased to 46.43% in the year 2004-05.

C. Audit Committee

Section 292 (A) of the Co’s Act 1956 also deals with the formation of audit

committee but it is stated in the listing agreement that the provisions of listing agreement

will be in addition to the Co’s Act provisions. This head covers eight items. Maximum

mean disclosure is of item ‘composition and names of the members (99.9) followed by ‘ a

brief description of terms of reference’ (97.43), ‘meetings held and attended during the

year’ (90.57), ‘independent director to act as a chairman’ (88.05), ‘presence of chairman

at AGM to answer shareholders queries’ (76.27), ‘secretary of the committee’ (60.87),

‘participation of invitees in the meeting’ (56.67) and ‘financial literacy of the members’

(49.62). The details of individual item wise disclosure score are as follow:

1. A Brief Description of Terms of Reference

This sub head explains the role or functions of the audit committee members. As

per the clause, the main role of the audit committee is to (i) review the co’s financial

reporting process and financial statements before its submission to the board members (ii)

to recommend the appointment and removal of external auditors (iii) to review any


95

changes in accounting policies and practices and qualifications in audit committee report

and (iv) compliance with accounting standards, etc. (Report of the SEBI Committee,

2003). The table 4.2 reveals that 97% of sampled companies have disclosed this item in

the year 2000-01. But later on, in the years 2003-04 and 2004-05, a declining trend has

been observed for compliance with this provision.

2. Composition and Names of Members

The clause 49 of the listing agreement states that the audit committee should

compose of minimum of three non executive members and majority of them should be

independent. It has been observed that almost all the companies over a period of five

years have disclosed the composition and names of members present in the committee.

3. Independent Director to Act as a Chairman

The clause 49 of the listing agreement states that the chairman of the audit

committee should be an independent director. The table 4.2 depicts that 66.18% of the

sampled companies in the year 2000-01 had independent director as chairman of the audit

committee but later on, 91%, 93%, 95% and 96% of the companies had compliance with

this requirement for the years 2001-02, 02-03, 03-04 and 04-05 respectively. It has been

revealed that the compliance of this mandatory provision is not 100%.

4. Presence of Chairman at AGM

The chairman of the audit committee was present at AGM to answer shareholders

queries. The table 4.2 reveals that 56% of the sampled companies in the year 2000-01

have disclosed this fact which has increased to 87% in the year 2003-04. In the year

2004-05, 82% of the sampled companies have disclosed that their chairmen were present

at AGMs to answer any type of query raised by the shareholders.

5. Participation of Invitees at the Audit Committee Meetings

It is mentioned in the clause that head of finance, statutory auditors, chief internal

auditor and other invitees, as the case may be, should be invited in the audit committee


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meetings to seek any advice or suggestions on certain matters. It has been observed from

the table 4.2 that 44%, 53%, 58%, 63% and 65% of the sampled companies have invited

these persons in the audit committee meetings in the years 2000-01, 01-02, 02-03, 03-04

and 04-05 respectively.

6. Number of Meetings Held and Attended During the Year

It has been stipulated in the clause that minimum 3 audit committee meetings

should be held in a year. It has been observed that the compliance with this provision is

not 100%. The table 4.2 reveals that 68% of the sampled companies have met this

requirement which have increased to 99% in the year 2002-03. Again for the years 2003-

04 and 2004-05, 97.3% and 98.6% of the sampled companies have followed this

provision. 15%, 6.4% and 2% of the sampled companies in the years 2000-1, 2001-02,

and 2002-03 respectively conducted audit committee meetings less than the statutory

requirement of minimum of three audit committee meetings in a year.

Table: 4.2.2

Non-Disclosure of Attendance Record of Directors at Audit Committee Meetings

Year(s)

(a)

Number of Companies

(b)

Total Number of

Sampled Companies

( c)

Percentage

(b)/(c)*100

2000-01 8 68 12

2001-02 12 109 11

2002-03 8 109 7.3

2003-04 5 111 4.5

2004-05 2 112 1.8

Source: Compiled from the Corporate Governance Section of the Annual Report

Above table reveals that 12%, 11%, 7.3%, 4.5% and 2% of the sampled

companies have not been disclosing the attendance record of the directors at audit

committee meetings.


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7. Financial Literacy of Members

The clause 49 of the listing agreement states that atleast one of the members of

the audit committee should have financial and accounting knowledge or background. A

very few i.e. 39.7%, 43.12%, 53.2%, 54.05% and 58.03% of the sampled companies as

reported in table 4.2 have disclosed that their committee members have sound knowledge

of accounts and finance.

8. Secretary of the Audit Committee

The table 4.2 shows that 51.47% of the sampled companies have been disclosing

in the governance section of the annual report that company secretary has been acting as

a secretary of the audit committee. For the year 2004-05, 67.8% of the sampled

companies have made the disclosure of this item but still the compliance level is not

100%.

D. Remuneration of Directors

This head covers six items. On the basis of average value reported in the table

4.2, the maximum score has been gained by the item ‘details of remuneration package of

all the directors’ (88.21) followed by ‘information on service contracts of directors’

(48.95), ‘performance linked incentives’ (43.39), ‘notice period of directors’ (40.19),

‘severance fee for directors’ (12.68) and ‘information on performance evaluation

criterion of directors’ (4.56). The details of individual item wise disclosure score are as

follow:

1. Details of Remuneration Package of All the Directors

The clause 49 of the listing agreement explains that details of remuneration package

of all the directors like salary, bonus, benefits, stock options, pensions, etc., should be given

in the corporate governance section of the annual report. It has been observed from the

table 4.2 that 76.47%, 89.45%, 91.74%, 90.99% and 92.41% of the sampled companies

have disclosed the details of the remuneration package of all the directors for the years

2000-01, 01-02, 02-03, 03-04 and 04-05 respectively. Again it has been observed that all

the companies have not been disclosing this mandatory requirement.


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Table: 4.2.3

Non-Payment of Sitting Fee of Directors

Year(s)

(a)

Number of

Companies

(b)

Total No. of

Sampled

Companies

( c )

Percentage

(b)/(c)*100

2000-01 4 68 5.79

2001-02 5 109 4.58

2002-03 7 109 6.42

2003-04 9 111 8.11

2004-05 5 112 4.46

Source: Compiled from the Corporate Governance Section of the Annual Report.

The table 4.2.3 reveals that 5.79%, 4.58%, 6.42%, 8.11% and 4.46% of the

sampled companies have not been paying the sitting fee to the non-executive directors in

the years 2000-01, 2001-02, 2002-03, 2003-04 and 2004-05 respectively.

2. Information on Performance Linked Incentives

This item deals with the performance incentives in the form of commission given

to the directors as a result of their good performance. The table 4.2 depicts that 33.8%,

42.20%, 44.04%, 49.55% and 47.32% of the sampled companies have disclosed the

performance linked incentives in the corporate governance section of the annual report in

the years 2000-01, 01-02, 02-03, 03-04 and 04-05 respectively.

3. Information on Performance Evaluation Criteria of Directors

The performance of the directors has been evaluated on the basis of certain pre-

agreed or pre-defined criterion as decided by the board from time to time. A very few i.e.

2.94%, 2.75%, 3.67%, 6.31% and 7.14% of the sampled companies have disclosed the

performance evaluation criteria along with the performance incentives in the years 2000-

01, 01-02, 02-03, 03-04 and 04-05 respectively


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4. Information on Service Contracts of Directors

As revealed by table 4.2, 35%, 51.38%, 50.46%, 54.05% and 53.57% of the

sampled companies have been disclosing the information regarding the service contracts

of directors for the years 2000-01, 01-02, 02-03, 03-04 and 04-05 respectively.

5. Notice Period of the Directors

It is a mandatory requirement that the director must give three months notice to

the company before leaving the office or salary in lieu thereof. The table 4.2 shows that

32.35% of the sampled companies in the year 2000-01 have mentioned the notice period

for the directors which has increased to 44.64% in the year 2004-05.

6. Severance Fee for Directors

The table 4.2 shows that 11.76%, 11.01%, 12.84%, 13.51% and 14.28% of the

sampled companies in the years 2000-01, 01-02, 02-03, 03-04 and 04-05 respectively

have disclosed the information regarding the severance fee paid to the director, if any, at

the time of termination of his service.

E. Investors Grievance Committee

This committee is generally set up to look for the investors’ grievances, queries, if

any and take further actions to redress those grievances. The formation of this committee

is considered as an effective governance mechanism adopted by the companies. This

head covers 5 items. On the basis of an average value as given in table 4.2, maximum

score has been gained by the item named as ‘name of non-executive director heading the

committee’ (92.99) followed by ‘name and designation of compliance officer’ (90.52),

‘no. of outstanding complaints’ (88.59), ‘number of shareholders complaints received’

(85.16) and ‘number of pending share transfers’ (75.73). The details of individual item

wise disclosure are as follow:

1. Name of Non-Executive Director Heading the Committee

It is stipulated in the clause that the chairman of the committee should be a non-

executive director. It has been observed from the table 4.2 that 75% of the sampled


100

companies have set up investors grievance committees in the year 2000-01 and disclosed

the names of non-executive directors chairing the committee. For the year 2004-05, 99%

of the sampled companies have started disclosing the name of non-executive director

heading the committee. At few instances, it has been observed that executive directors are

heading the investors’ grievance committee.

2. Name and Designation of the Compliance Officer

It has been observed that either company secretary or chief financial officer

(CFO) of the companies act as compliance officers. The table 4.2 reveals that 87.5% of

the sampled companies in the year 2000-01 have mentioned the name and designation of

compliance officer of the committee. For the year 2004-05, 91.07% of the sampled

companies have disclosed this item.

3. Number of Shareholders Complaints Received

This item deals with the investors complaints like transfer of shares, non-receipt

of balance sheet, non-receipt of dividend, non-receipt of debenture interest, etc., received

during the year. It has been observed from the table 4.2 that 67.65% of the sampled

companies in the year 2000-01 have disclosed the details of investors’ complaints

received. While considering the follow up this provision, this fact has been ignored

whether category wise breakup of complaints has been given or not. For the year 2004-

05, 94% of the sampled companies have mentioned the total number of investors

complaints received during the year.

4. Number of Outstanding Complaints

The table 4.2 shows that 72% of the sampled companies in the year 2000-01 have

given the information about the outstanding complaints. It has been observed from the

analysis that in most of the cases there were no outstanding complaints. This shows the

effectiveness of grievance redressal mechanism adopted by the companies. For the year

2004-05, 95% of the sampled companies have started following this practice.


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5. Number of Pending Share Transfers

The table 4.2 reveals that 60.29%, 78.90%, 80.73%, 80.18% and 78.57% of the


have disclosed the information regarding the number of pending shares transfers, if any.

It has been observed from the analysis that company’s shares do not remain untransfered

for more than 15 days and hence presenting a good view of corporate governance

practices adopted by the companies.

F. General Body Meetings

On the basis of an average value as given in table 4.2, 97.8% of the sampled

companies have given the details of the venue, time and date where the last three AGMs

were held. For the year 2000-01, 92.65% of the sampled companies have given the

details of the item which has been increased to 99.55% in the year 2004-05.

G. Disclosures

This head covers two items and explains the disclosures made by the management

to the board on all the matters where they have any personal interests and may have

conflict with the interests of the company. On the basis of an average as revealed by table

4.2, the maximum score has been obtained by the item dealing with ‘details of non-

compliance and penalties imposed by SEBI or any other statutory authority’ (94.23)

followed by materially significant related party transactions, if any’ (93.65).

The details of both the items are given as under:

1. Materially Significant Related Party Transactions



have been disclosing that none of the business transaction is of materially nature and

related to the interests of the management. Here material transactions are linked with

dealing in company’s shares, dealing with those companies where management or its


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relatives hold shares, sale of major or substantial capital asset to the management or any

of its relatives, etc.

2. Details of Non-compliance and Penalties Imposed by SEBI or Any Regulatory

Authority


sampled companies in the years 2000-01, 01-02, 02-03, 03-04 and 04-05 respect

corporate governance disclosure practices...

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