kumar mangalam report on corporate governance

8/8/2019 Kumar Mangalam Report on Corporate Governance

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Kumar Kumar MangalamMangalam report onreport onCorporate GovernanceCorporate Governance

Group 7



Introduc tionIntroduc tiony Repor t on Corpora te Governance by a

comm ittee appo inte d by SEBIy Under the Chairma nship of Shr i Kumar

Mangalam Birla, C hairma n, Ad itya Birlagroupy Co nsisting of m embers such as

Shri N. R. Naraya na Mur thy, Chairma n and

Managing Director, Infosys Technolo gies Ltd.Dr. J Bhagwati, Jt. Secret ary, M inistry of F inanceShri S.P. Chhajed, President of Instit ute of Char te red Accou nt ants of India



Nee d for the repor tNee d for the repor ty Unscrupulou s management of compa nies

ra ised cap ital from the mark et at high valuationsperform ed muc h wor se th an the past repor te d f iguresallotment of promo te r·s shares , o n pref erenti al basis



Nee d for the repor tNee d for the repor ty Inadequate attenti on to r edress invest or s·

grievancesdelay in transf er of sharesdelay in dispatch of share cer tif icates anddividend warra ntsnon-receipt of d ividen d warra nts



Nee d for the repor tNee d for the repor ty Insuff icient attenti on paid to timely

dissemination of informa tion to invest or s as also to the quality of such informa tion

y Global cap ital will flow to mark ets which are bette r r egulate d and ob serve higherstandard s of transpar ency, eff iciency andinteg rity



O bjective of the repor tO bjective of the repor ty To set up syste ms of good corpora te

governancey Syste ms which allow suff icient free dom to

the board s and ma nagement to tak e decisions toward s the pro gress of thei rcompa nies and to innovate

y Promo te a cul ture of st ro ng andindependent oversight



O bjective of the repor tO bjective of the repor ty Set up transpar ent corpora te disclosure

norm s and high-quality accou nting prac tices

y Check insider trad ing

y

Recomm end a statutory cod e as underIndian conditions a statutory ra the r th an a volu nt ary cod e would b e far mor e purpo sive and m eaningful



Applicability of r ecomm endationsApplicability of r ecomm endationsy Mandatory

The absolute ly essenti al recomm endationsMay nee d c hange of statute , such as the

Compa nies ActMay nee d am ending the Secur ities Co nt rac ts (Regulation) Rules , 1957May nee d am ending the listing agree ment of the stock exchanges under the direction of SEBI

y Non mandatoryEithe r d esirable or which may r equire change of laws



Applicability of r ecomm endationsApplicability of r ecomm endationsy Applicable to l iste d compa nies

director smanagement

employeesprof essionals assoc iate d with such compa nies

y Applicable to l iste d entities , which are not compa nies (Bank s, FIs, et c.)

recomm endations will apply to the extent th at the y do not violate the guidelines of the respective sector



Board of D irector sBoard of D irector sy Directs the compa ny, by formula ting and

reviewing compa ny·s policies

y Lays do wn the cod e of co nduc t

y Accou nt able to the shareholders forcreating, pro te cting and enh ancing wealth and r esourc es



Board of D irector sBoard of D irector sy Compo sition

Promo te r d irectorexe cutive and non exe cutive director s (not less

than 50%) a par t of whom ar e independentx If compa ny has a non-exe cutive chairma n - not less th an

one thirdx If it do es not - at least half of board

Independent director s are director s who apar t from r eceiving director·s remunera tion do not have any o the r transactions with the compa ny



Board of D irector sBoard of D irector sy Disclosures of Remunera tion Package

All elements of r emunera tion packa ge of allthe director s i.e. salary, b ene f its, bo nuses ,

stock op tions, pension et c.Det ails of f ixed compo nent and p erforma nce link ed incenti ves , along with the performa nce cr ite r iaService co nt rac ts , notice period, severance f eesStock op tion det ails, if any



Chairma n of the BoardChairma n of the Boardy Ensure th at the board m eetings are

conduc te d in a ma nne r which secur es the eff ective par ticipation

y Encoura ge all to mak e an eff ective cont r ibu tion

y Maintain a balance of po we r in the boardy Mak e cer tain th at all director s receive

adequate informa tion, we ll in time andaccept full share of the respo nsibilities of governance

y Role should in pr inciple be diff erent fromth at of the chief exe cutive



Audit Comm itteeAudit Comm itteey It acts as a ca talyst for eff ective f inancial

repor tingy Relates to the oversight of f inancial

repor tingy A sub-group of the full board a nd hen ce the

mo nitor of the proc essy A qualif ied and independent aud it comm ittee

should b e set up by the board of a compa nyy Minimum th ree members, all being non

exe cutive director s, with the major ity being independent , and with at least one directorhaving f inancial and accou nting k nowledge



Audit Comm itteeAudit Comm itteey Chairma n of the comm ittee should b e an

independent directory Chairma n should b e present at Annual

Gene ral Meeting to a nswe r shareholderqueries

y Compa ny Secret ary should ac t as the

secret ary to the comm ittee



Audit Comm itteeAudit Comm itteey Should m eet at least th rice a yeary O ne meeting must be he ld before

f inalisation of annual accou nts and o ne necess ar ily every six mo nths

y Q uorum should b e eithe r two m embers or o ne-thi rd of the members of the audit

comm ittee , whichever is higher a nd the re should b e a m inimum of two independent director s



Accou nting standard sAccou nting standard sy Compa nies should b e required to give

consolidate d accou nts in respect of all its subsidiar ies in which the y hold 51 % ormor e of the share capital

y Financial repor ting in respect of each

produc t segment should b e available toshareholders and the mark et to ob tain acompl ete f inancial picture of the compa ny



Management Management y Aim is to ma ximize shareholder valu e

with ou t being det r iment al to the inte rests of o the r stak eh olders

y

Subse rv ient to the board of d irector s andmust op era te within the bou ndar ies and the pol icy fram ework la id do wn by the board

y Respo nsible for translating into ac tion, the

pol icies and st ra tegies of the board a ndimplementing its directives to ac hieve corpora te objectives of the compa ny fram edby the board



ManagementManagementy Compr ises the Chief Executive,

Executive-director s and the k ey managers of the compa ny, involved in day-to-day

activities of the compa ny

y Assists the board in its decision mak ing proc ess in respect of the compa ny·s st ra teg y, pol icies, cod e of co nduc t andperforma nce targets , by prov iding necess ary inputs



ShareholdersShareholdersy Respo nsibilities

comm ent on and d emand any ex planation on the annual r epor t or o n the overall

functioning of the compa ny in Gene ral BodyMeetings Must show a greate r d egree of inte rest andinvolvement in the appo intment of the director s and the aud itor s



ShareholdersShareholdersy Rights

Tra nsf err ing and r egist ra tion of sharesO btaining relevant informa tion on the compa ny on a timely and r egular ba sisPar ticipating and vo ting in shareholdermeetings

Electing members of the board a nd shar ing in the residual prof its of the corpora tion



ShareholdersShareholdersy Instit utional shareholders

H ave or ar e in the proc ess of becom ing major ityshareholdersH ave special respo nsibility given the weight age of

thei r vo tes Can eff ectively use thei r po wers to influence the standard s of corpora te governance

Tak e active inte rest in the compo sition of the Board

of D irector sBe vigilantMaintain regular a nd syste matic co nt act at seniorlevel for exchange of views on management , st ra teg y,performa nce and the quality of ma nagement



Recomm endations for ma nne rs of Recomm endations for ma nne rs of implement ationimplement ation

y SEBI to write to the Cent ral Gov ernment to am end the Secur ities Co nt rac ts (Regulation) Rules , 1957 for incorpora ting the mandatory prov isions of this Repor t

y The mandatory prov isions of the recomm endations may b e implemente d

th rou gh the listing agree ment of the stock exchanges




y The listing agree ment of the stock exchanges be st rengthene d and the exchanges the mselves be veste d with mor e po wers

y The Secur ities Co nt rac t (Regulation) Act,1956 should b e amended, so th at in

addition to the above, the concept of listing agree ment be replaced by l isting conditions




y Empower SEBI and stock exchanges totak e dete rr ent and appropr iate action in case of violation of the prov isions of the listing agree ment

po wer of l evying mo net ary p enalty bo th on the compa ny and the co ncerned off icials of the compa nyf iling of winding-up p etiti on, et c.




y SEBI to write to the Depar tment of Compa ny Affairs for suitable amendments to the Compa nies Act in respect of the recomm endations which fall within thei r

jur isdictiony Include a separa te section on Corpora te

Governance in the annual r epor ts of compa nies , with a det ailed compl iance repor t on Corpora te Governance




y The compa ny should arra nge to ob tain acer tif icate from the auditor s of the compa ny regard ing compl iance of

mandatory r ecomm endations and annexethe cer tif icate with the director s· repor t,which is sent annually to all the shareholders of the compa ny.

y The same cer tif icate should al so b e sent to the stock exchanges along with the annual r et ur ns f iled by the compa ny



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kumar mangalam report on corporate governance

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