voluntary corporate governance disclosure practices of...

VOLUNTARY CORPORATE GOVERNANCE

DISCLOSURE PRACTICES OF SELECTED COMPANIES

This chapter deals with the voluntary corporate governance disclosure of the

listed sampled companies in addition to the corporate governance requirements as per

clause 49 of the listing agreement as prescribed by SEBI. The term “voluntary” denotes a

firm‟s adoption of corporate governance practices or standards in the absence of legal

requirement to do so (Anand, 2005).

Here for the purpose of our study, the term voluntary corporate governance stands

for “the governance practices followed by the companies at their own and disclosed in the

corporate governance section of the annual report in addition to what is required to be

followed or disclosed as per clause 49 of the listing agreement as prescribed by SEBI”.

6.1 Formation of Checklist

In order to study the voluntary corporate governance disclosure practices, over

and above the mandatory requirements, a checklist based on voluntary corporate

governance disclosure has been prepared (Annexure 3). A total number of 56 items have

been selected from the corporate governance section of the annual reports of companies

leading in the matter of voluntary corporate governance. Further, in order to be more

precise, all the items have been clubbed up under seven broad dimensions namely board

of directors, meetings and attendance, formation of committees, corporate governance

initiatives, reports of committees, shareholders and awards or accolades for corporate

governance. While framing up the checklist, only those items have been considered

which were disclosed by the companies in corporate governance section of the annual

reports in addition to the items stipulated in the clause 49 of the listing agreement.

6.2 Scoring of Items

Equal weightage method has been used to weight the items of checklist based on

voluntary governance. Score 1 has been assigned to the company for following a

particular item and 0 for otherwise.

Voluntary Corporate Governance Disclosure Practices of Selected Companies

188

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

company wise and industry wise analysis of voluntary corporate governance disclosure

score and section II throws light on the item wise voluntary corporate governance

disclosure score of the companies.

SECTION I

This section deals with the company wise and industry wise voluntary corporate

governance disclosure score. Company wise voluntary corporate governance disclosure

score has been arrived at as follows:

Voluntary Corporate Governance Disclosure

Score of a Company =

Total Score Gained By a Co. *100

Total No. of Items in the Checklist

For example: Infosys has followed 20 items in the year 2000-01 out of 56 items listed in

the checklist. So, its score will be computed as follows:

= 20

x100 56

= 35.71%

6.3 Company Wise and Industry Wise Analysis of Voluntary

Corporate Governance Disclosure

Table 6.1 shows the company wise and industry wise voluntary corporate

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

Industry wise analysis of voluntary corporate governance disclosure for each year is

given as follows:

1.) Disclosure for the Year 2000-01

The table 6.1 reveals that in case of power industry, Reliance Energy Ltd. occupies

first rank by disclosing 5.36% of items of checklist. Two companies namely Nevyeli

Lignite Power Ltd. and Tata Power Ltd. occupy the second rank by attaining same score of

3.57%. Similarly, from iron & steel industry, just three companies have been disclosing the

1.79% of items of checklist. In case of cement industry, maximum governance score has

been gained by Gujarat Ambuja Cement Ltd. (8.93%) followed by Madras Cement Ltd.


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and Mysore Cement Ltd. with equal disclosure score i.e. 5.36% and subsequently followed

by India Cement Ltd. and Shree Cement Ltd. with equal score of 3.57% and so on.

Similarly, from textiles industry, only four companies out of total of fourteen

have been disclosing the items of checklist. Reliance Industries Ltd. has been disclosing

5.36% of items of governance checklist and this company occupies first rank among all

the sampled companies in the textile industry. Arvind Mills Ltd., Bombay Dyeing &

Mfg Ltd., Indian Rayon & Industries Ltd. and Rajasthan Spinning & Wvng Mills Ltd.

have zero voluntary corporate governance disclosure score. In case of paper industry,

ITC Ltd. and Tamilnadu Newsprint & Paper Mills Ltd. have disclosed 5.36% of items

of checklist followed by Ballarpur Industries Ltd. (3.57%) and Pudumjee Pulp & Paper

Mills Ltd. (1.79%). On the other hand, maximum voluntary governance score has been

obtained by Dr. Reddy‟s Laboratories Ltd. (10.71%) from pharmaceuticals industry

followed by Ranbaxy Laboratories Ltd. (5.36%), Cadila Healthcare Ltd. (3.57%),

Nicholas Piramal India Ltd. (1.79%) and so on. So far as sugar industry is concerned,

Balrampur Chinni Mills Ltd., Bannari Aman Sugars Ltd., DCM Shriram Industries Ltd.

and Upper Ganges Sugar Mills Ltd. all have been disclosing 1.79% of the items of

checklist. Other companies namely EID-Parry (India) Ltd. and Oudh Sugars Ltd. have

not disclosed any item of checklist. Similarly, in case of automobile industry, Bajaj

Auto Ltd. has the highest voluntary corporate governance score i.e. 8.93% followed by

Ashok Leyland Ltd., Hero Honda Motors Ltd., LML Ltd. and Mahindra & Mahindra

Ltd. each of them recording the same score of 1.79%. Three companies from this

industry have not been disclosing even a single item of governance checklist and rests

of the companies have not implemented the provisions of the clause 49. In case of

software industry, maximum no. of items of checklist has been disclosed by Infosys

Technologies Ltd. (35.71%) followed by GTL Ltd. (17.86%), Pentamedia Graphics

Ltd. (8.93%), Polaris Software Lab Ltd. (5.36%), HCL Technologies Ltd. (3.57%),

Igate Global Solutions Ltd. (1.79%) and so on. Satyam Computer Services Ltd. has not

followed even a single item of checklist.


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Table: 6.1

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

Sr. No Industry /Company Name 2000-01 (%)

Score

2001-02 (%)

Score

2002-03 (%)

Score

2003-04 (%)

Score

2004-05 (%)

Score

A) POWER

1 CESC Ltd. - - 1 1.79 1 1.79 1 1.79 2 3.57

2 DPSC Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00

3 Gujarat Industries & Power Ltd. - - 0 0.00 1 1.79 0 0.00 0 0.00

4 Jindal Steel & Power Ltd. - - 1 1.79 2 3.57 2 3.57 2 3.57

5 Nevyeli Lignite Power Ltd. 2 3.57 2 3.57 2 3.57 2 3.57 2 3.57

6 National Thermal Power Corporation Ltd. - - 2 3.57 6 10.71 8 14.29 12 21.43

7 Reliance Energy Ltd. 3 5.36 11 19.64 8 14.29 8 14.29 18 32.14

8 Tata Power Ltd. 2 3.57 2 3.57 3 5.36 3 5.36 3 5.36

9 Torrent Power AEC Ltd. - - 0 0.00 3 5.36 4 7.14 4 7.14

B) IRON & STEEL

10 Bhushan Steel & Strips Ltd. - - 1 1.79 2 3.57 3 5.36 3 5.36

11 Essar Steel Ltd. - - 1 1.79 1 1.79 0 0.00 0 0.00

12 Ispat Industries Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

13 Jayaswals Neco Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

14 JSW Steel Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

15 Mukand Ltd. 1 1.79 0 0.00 0 0.00 0 0.00 4 7.14

16 SAIL Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

17 Tata Sponge Iron Ltd. 1 1.79 0 0.00 0 0.00 0 0.00 1 1.79

18 Tata Steel Ltd. 1 1.79 2 3.57 2 3.57 3 5.36 9 16.07

19 Uttam Galva Steels Ltd. - - 2 3.57 2 3.57 2 3.57 2 3.57

C) CEMENT

20 ACC Cement Ltd. 1 1.79 3 5.36 4 7.14 5 8.93 5 8.93

21 Ambuja Cement Eastern Ltd. 1 1.79 2 3.57 2 3.57 2 3.57 3 5.36

22 Birla Corporation Ltd. - - 0 0.00 1 1.79 1 1.79 1 1.79

23 Chettinad Cement Corporation Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

24 Grasim Industries Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

Contd....


191

25 Gujarat Ambuja Cement Ltd. 5 8.93 5 8.93 5 8.93 5 8.93 5 8.93

26 India Cement Ltd. 2 3.57 2 3.57 3 5.36 3 5.36 4 7.14

27 Kesoram Industries Ltd. 1 1.79 3 5.36 3 5.36 3 5.36 3 5.36

28 Madras Cement Ltd. 3 5.36 3 5.36 3 5.36 3 5.36 3 5.36

29 Mysore Cement Ltd. 3 5.36 3 5.36 3 5.36 4 7.14 4 7.14

30 Prism Cement Ltd. - - 1 1.79 2 3.57 2 3.57 2 3.57

31 Shree Cement Ltd. 2 3.57 3 5.36 2 3.57 2 3.57 2 3.57

D) TEXTILES

32 Alok Industries Ltd. 1 1.79 2 3.57 3 5.36 3 5.36 3 5.36

33 Arvind Mills Ltd. 0 0.00 0 0.00 4 7.14 4 7.14 4 7.14

34 Bombay Dyeing & Mfg Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 1 1.79

35 Century Enka Ltd. 1 1.79 1 1.79 3 5.36 3 5.36 3 5.36

36 Eskay K'N'It Ltd. - 0 0.00 0 0.00 0 0.00 0 0.00

37 Garden Silk Mills Ltd. - 0 0.00 1 1.79 5 8.93 6 10.71

38 Indian Rayon & Inds Ltd. 0 0.00 1 1.79 1 1.79 2 3.57 2 3.57

39 Indo Rama Synthetics Ltd. - 1 1.79 2 3.57 2 3.57 3 5.36

40 Mahavir Spinning Mills Ltd. - 0 0.00 0 0.00 1 1.79 1 1.79

41 Nahar Spinning Mills Ltd. 2 3.57 2 3.57 2 3.57 3 5.36 4 7.14

42 Rajasthan Spinning & Wvng Mills 0 0.00 5 8.93 5 8.93 7 12.50 7 12.50

43 Raymond Ltd. - 0 0.00 4 7.14 4 7.14 4 7.14

44 Reliance Industries Ltd. 3 5.36 3 5.36 6 10.71 6 10.71 7 12.50

45 S.Kumars Nationwide Ltd. - 4 7.14 4 7.14 4 7.14 4 7.14

E) PAPER

46 Andhra Pradesh Paper Mills Ltd. - - 0 0.00 1 1.79 1 1.79 1 1.79

47 Bajaj Hindustan Ltd. - 8 14.29 12 21.43 15 26.79 14 25.00

48 Ballarpur Industries Ltd. 2 3.57 3 5.36 3 5.36 5 8.93 3 5.36

49 Century Textiles & Industries Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

50 ITC Ltd. 3 5.36 3 5.36 11 19.64 12 21.43 11 19.64

51 JK Paper Ltd. 0 0.00 1 1.79 2 3.57 2 3.57 2 3.57

52 Orient Paper & Industries Ltd. - - 1 1.79 1 1.79 1 1.79 1 1.79

53 Pudumjee Pulp & Paper Mills Ltd. 1 1.79 1 1.79 1 1.79 1 1.79 1 1.79

54 Seshasayee Paper Board Ltd. - - 0 0.00 1 1.79 1 1.79 1 1.79

Contd....


192

55 Shreyan Industries Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00

56 Sirpur Paper Mills Ltd. - - 3 5.36 4 7.14 5 8.93 5 8.93

57 Star Paper Mills Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00

58 Tamilnadu Newsprint & Paper Mills Ltd. 3 5.36 1 1.79 1 1.79 1 1.79 1 1.79

59 West Coast Paper Mills Ltd. - - 1 1.79 1 1.79 1 1.79 1 1.79

F) PHARMACEUTICALS

60 Alembic Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

61 Aurobindo Pharma Ltd. - - 2 3.57 4 7.14 4 7.14 2 3.57

62 Aventis Pharma Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00

63 Cadila Healthcare Ltd. 2 3.57 2 3.57 1 1.79 1 1.79 2 3.57

64 Dr. Reddy‟s Laboratories Ltd. 6 10.71 5 8.93 8 14.29 11 19.64 14 25.00

65 GlaxoSmithKline Ltd. 0 0.00 2 3.57 2 3.57 2 3.57 0 0.00

66 IPCA Laboratories Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

67 Lupin Ltd. 0 0.00 1 1.79 1 1.79 5 8.93 4 7.14

68 Nicholas Piramal India Ltd. 1 1.79 1 1.79 1 1.79 1 1.79 5 8.93

69 Orchid Chemicals & Pharmaceuticals Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 1 1.79

70 Ranbaxy Laboratories Ltd. 3 5.36 3 5.36 3 5.36 3 5.36 3 5.36

71 Sun Pharmaceuticals Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

72 Torrent Pharma Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

73 Wockhardt Ltd. 1 1.79 1 1.79 0 0.00 1 1.79 1 1.79

G) SUGAR

74 Andhra Sugars Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00

75 Balrampur Chinni Mills Ltd. 1 1.79 1 1.79 2 3.57 2 3.57 2 3.57

76 Bannari Amman Sugars Ltd. 1 1.79 1 1.79 1 1.79 1 1.79 1 1.79

77 DCM Shriram Industries Ltd. 1 1.79 0 0.00 - - 0 0.00 0 0.00

78 EID_ Parry India Ltd. 0 0.00 1 1.79 2 3.57 7 12.50 8 14.29

79 Jeypore Sugar Ltd. - - 1 1.79 1 1.79 1 1.79 1 1.79

80 Oudh Sugars Ltd. 0 0.00 1 1.79 3 5.36 5 8.93 5 8.93

81 Sakthi Sugars Ltd. - - 0 0.00 0 0.00 1 1.79 1 1.79

82 Saraswati Industrial Syndicate Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00

83 Simbhaoli Sugar Mills Ltd. - - 2 3.57 3 5.36 2 3.57 2 3.57

84 Ugar Sugar Works Ltd. - - 0 0.00 0 0.00 0 0.00 1 1.79

85 Upper Ganges Sugar Mills Ltd. 1 1.79 0 0.00 1 1.79 3 5.36 4 7.14

Contd....


193

H) AUTOMOBILE

86 Ashok Leyland Ltd. 1 1.79 2 3.57 2 3.57 2 3.57 3 5.36

87 Atul Auto Ltd. - - - - 0 0.00 0 0.00 0 0.00

88 Bajaj Auto Ltd. 5 8.93 7 12.50 7 12.50 7 12.50 7 12.50

89 Eicher Motors Ltd. - - 4 7.14 4 7.14 4 7.14 4 7.14

90 Force Motors Ltd. - - 0 0.00 1 1.79 1 1.79 1 1.79

91 Hero Hondo Motors Ltd. 1 1.79 1 1.79 2 3.57 3 5.36 2 3.57

92 Hindustan Motors Ltd. - - 1 1.79 1 1.79 1 1.79 1 1.79

93 Kinetic Motor Co. Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00

94 LML Ltd. 1 1.79 1 1.79 0 0.00 - - 1 1.79

95 Mahindra & Mahindra Ltd. 1 1.79 2 3.57 3 5.36 3 5.36 3 5.36

96 Maruti Udyog Ltd. - - - - - - 2 3.57 2 3.57

97 Scooters India Ltd. 0 0.00 1 1.79 1 1.79 1 1.79 1 1.79

98 Swaraj Mazda Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00

99 Tata Motors Ltd. 0 0.00 2 3.57 5 8.93 4 7.14 5 8.93

100 TVS Motor Co. Ltd. 0 0.00 1 1.79 1 1.79 2 3.57 2 3.57

I) SOFTWARE

101 GTL Ltd. 10 17.86 5 8.93 10 17.86 8 14.29 8 14.29

102 HCL Technologies Ltd. 2 3.57 2 3.57 1 1.79 1 1.79 1 1.79

103 IFLEX Solutions Ltd. - - 1 1.79 1 1.79 1 1.79 1 1.79

104 Igate Global Solutions Ltd. 1 1.79 2 3.57 0 0.00 2 3.57 4 7.14

105 Infosys Technologies Ltd. 20 35.71 13 23.21 16 28.57 19 33.93 24 42.86

106 Larsen & Toubro Ltd. 0 0.00 0 0.00 1 1.79 1 1.79 2 3.57

107 Mascon Global Ltd. - - 1 1.79 0 0.00 1 1.79 0 0.00

108 Pentamedia Graphics Ltd. 5 8.93 5 8.93 1 1.79 1 1.79 2 3.57

109 Polaris Software Lab Ltd. 3 5.36 3 5.36 3 5.36 5 8.93 9 16.07

110 Rolta India Ltd. 1 1.79 - - 3 5.36 3 5.36 3 5.36

111 Satyam Computer Services Ltd. 0 0.00 0 0.00 1 1.79 0 0.00 0 0.00

112 Wipro Ltd. 1 1.79 1 1.79 1 1.79 4 7.14 4 7.14

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


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2.) Disclosure for the year 2001-02

The table 6.1 depicts that Reliance Energy Ltd. has disclosed maximum no. of

items given in the checklist i.e. 19.64% in case of power industry.Tata Power Ltd.

(3.57%), Nevyeli Lignite Power Ltd. and NTPC Ltd. have occupied the second rank by

recording the same score of 3.57% and so on. Similarly, in case of iron & steel

industry, Tata Steel Ltd. and Uttam Galva Steel Ltd. have disclosed equal no. of items

of checklist i.e. 3.57%. While on the other hand, Ispat Industries Ltd., Jayaswals Neco

Ltd., JSW Steel Ltd., Mukand Ltd., SAIL Ltd. and Tata Sponge Iron Ltd. have not

disclosed even a single item of governance checklist. In case of cement industry,

maximum governance score has been obtained by Gujarat Ambuja Cement Ltd.

(8.93%). On the other hand, ACC Cement Ltd., Kesoram Industries Ltd., Madras

Cement Ltd., Mysore Cement Ltd. and Shree Cement Ltd. have been disclosing 5.36%

of items of checklist.

In case of textiles industry, Rajasthan Spinning & Wvng Mills Ltd. has

disclosed maximum no. of items i.e. 8.93% followed by S. Kumar‟s Nationwide Ltd.

(7.14%), Reliance Industries Ltd. (5.36%), Alok Industries Ltd. (3.57%) and so on. So

far as paper industry is concerned, Bajaj Hindustan Ltd. has the highest voluntary

governance score i.e. 14.29% followed by Ballarpur Industries Ltd., ITC Ltd. and

Sirpur Paper Mills Ltd. by attaining same score of 5.36% and so on. In case of

pharmaceutical industry, maximum voluntary governance score has been gained by Dr.

Reddy‟s Laboratories Ltd. (8.93%) followed by Ranbaxy Laboratories Ltd. (5.36%) and

subsequently followed by Aurobindo Pharma Ltd., Cadila Healthcare Ltd and

GlaxoSmithKline Ltd. with equal score of 3.57% and so on. From sugar industry,

Simbhaoli Sugar Mills Ltd. has occupied first rank by disclosing 3.57% of items of

checklist. On the other hand, Balrampur Chinni Mills Ltd., Bannari Aman Sugars Ltd.

and EID-Parry (India) Ltd. all have been disclosing 1.79% of items of checklist and so

on. In case of automobile industry, Bajaj Auto Ltd. has disclosed maximum no. of items

of checklist i.e. 12.50% followed by Eicher Motors Ltd. (7.14%) and subsequently

followed by Mahindra & Mahindra Ltd. and Ashok Leyland Ltd. recording the same


195

score of 3.57% and so on. Infosys Technologies Ltd. occupies first rank in case of

software industry by disclosing 23.21% of items of checklist followed by GTL Ltd. and

Pentamedia Graphics Ltd. with equal score of 8.93%, Polaris Software Lab Ltd.

(5.36%) and so on.


The table 6.1 reveals that in case of power industry, Reliance Energy Ltd. has

disclosed maximum no. of items of checklist i.e. 14.29% followed by NTPC Ltd.

(10.71%), Tata Power Ltd. (5.36%) and Torrent Power AEC Ltd. recorded the same score

of 5.36% and so on. So far as iron & steel industry is concerned, just four companies

have disclosed the few items of checklist. Bhushan Steel & Strips Ltd., Tata Steel Ltd.

and Uttam Galva Steels Ltd. each have disclosed the 3.57% of items of checklist. On the

other hand, Essar Steel Ltd. has disclosed 1.79% of the items of governance checklist. In

case of cement industry, maximum voluntary corporate governance score has been gained

by Gujarat Ambuja Cement Ltd. (8.93%). On the other hand, Chettinad Cement

Corporation Ltd. and Grasim Industries Ltd. have not been disclosing even a single item

of voluntary corporate governance checklist.

Similarly, from textiles industry, Reliance Industries Ltd. has been disclosing

maximum no. of items of governance checklist i.e. 10.71% followed by Rajasthan

Spinning & Wvng Mills Ltd. (8.93%) and subsequently followed by Arvind Mills Ltd.

and Raymond Ltd. recording the same score of 7.14%, Century Enka Ltd. (5.36%) and so

on. In case of paper industry, Bajaj Hindustan Ltd. occupies first rank by disclosing

21.43% of items of checklist followed by ITC Ltd. (19.64%), Sirpur Paper Mills Ltd.

(7.14%), Ballarpur Industries Ltd. (5.36%) and so on. Similarly, in case of

pharmaceutical industry, Dr. Reddy‟s Laboratories Ltd. has the highest governance score

i.e. 14.29% followed by Aurobindo Pharma Ltd. (7.14%), Ranbaxy Laboratories Ltd.

(5.36%), GlaxoSmithKline Ltd. (3.57%) and so on. From sugar industry, Oudh Sugars

Ltd. and Simbhaoli Sugar Mills Ltd. have disclosed the maximum no. of items of

governance checklist i.e. 5.36%. While on the other hand, Sakthi Sugars Ltd., Andhra

Sugars Ltd., Saraswati Industrial Syndicate Ltd. and Ugar Sugar Works Ltd. have not

disclosed even a single item of governance checklist. In case of automobile industry,

Bajaj Auto Ltd. has disclosed maximum no. of items of governance checklist i.e. 12.50%


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followed by Tata Motors Ltd. (8.93%), Eicher Motors Ltd. (7.14%), Mahindra &

Mahindra Ltd. (5.36%) and so on. Again Infosys Technologies Ltd. like the earlier years

has occupied the first rank by disclosing 28.57% of items of governance checklist

followed by GTL Ltd. (17.86%), Polaris Software Lab Ltd. and Rolta India Ltd. recorded

the same score of 5.36% and so on.


The table 6.1 shows that Reliance Energy Ltd. and NTPC Ltd. have gained the

highest governance score i.e. 14.29% in case of power industry followed by Torrent

Power AEC Ltd. (7.14%), Tata Power Ltd. (5.36%), Jindal Steel & Power Ltd. (3.57%)

and so on. In case of iron & steel industry, Bhushan Steel & Strips Ltd. and Tata Steel

Ltd. have the highest voluntary governance score i.e. 5.36% followed by just a single

company i.e. Uttam Galva Steel Ltd. (3.57%). Similarly, in case of cement industry,

ACC Cement Ltd. and Gujarat Ambuja Cement Ltd. have been disclosing the maximum

no. of items of governance checklist i.e. 8.93% followed by Mysore Cement Ltd.

(7.14%) and subsequently followed by India Cement Ltd. and Kesoram Industries Ltd.

by recording the same score of 5.36% and so on.

In case of textiles industry, Rajasthan Spinning & Wvng Mills Ltd. has

disclosed the maximum no. of items of governance checklist i.e. 12.50% followed by

Reliance Industries Ltd. (10.71%), Garden Silk Mills Ltd. (8.93%) and subsequently

followed by Arvind Mills Ltd. and Raymond Ltd. by disclosing 7.14% of items of

checklist and so on. In case of paper industry, maximum no. of items have been

disclosed by Bajaj Hindustan Ltd. (26.79%) followed by ITC Ltd. (21.43%) and

subsequently followed by Ballarpur Industries Ltd. and Sirpur Paper Mills Ltd.

(8.93%), and so on. In case of pharmaceutical industry, Dr. Reddy‟s Laboratories Ltd.

has been disclosing the maximum no. of items of governance checklist i.e. 19.64%

followed by Lupin Ltd. (8.93%), Aurobindo Pharma Ltd. (7.14%), Ranbaxy

Laboratories Ltd. (5.36%) and so on. Similarly, from sugar industry, EID-Parry (India)

Ltd. has disclosed the maximum no. of items of governance checklist i.e. 12.50%

followed by Oudh Sugar Works Ltd. (8.93%), Upper Ganges Sugar Mills Ltd. (5.36%),

Balrampur Chinni Mills Ltd. (3.57%) and so on. In case of automobile industry, Bajaj


197

Auto Ltd. occupies first rank by disclosing 12.50% of items of governance checklist.

Two companies namely Tata Motors Ltd. and Eicher Motors Ltd. have been occupying

the second rank by attaining the same score of 7.14% followed by Mahindra &

Mahindra Ltd. and Hero Honda Motors Ltd. each of them disclosed 5.36% of items of

checklist and so on. Again like the earlier years, Infosys Technologies Ltd. occupies the

first rank in case of software industry by disclosing 33.93% of items of checklist

followed by GTL Ltd. (14.29%), Polaris Software Lab Ltd. (8.93%), Wipro Ltd.

(7.14%), Rolta India Ltd. (5.36%) and so on.


The table 6.1 reveals that Reliance Energy Ltd. has disclosed maximum no. of

items given in the checklist i.e. 32.14% from power industry followed by NTPC Ltd.

(21.43%), Torrent Power AEC Ltd. (7.14%), Tata Power Ltd. (5.36%) and so on. So far

as iron & steel industry is concerned, Tata Steel Ltd. has been disclosing the 16.07% of

items of checklist followed by Mukand Ltd. (7.14%), Bhushan Steel & Strips Ltd.

(5.36%), Uttam Galva Steel Ltd. (3.57%), Tata Sponge Iron Ltd. (1.79%) and so on.

Similarly, in case of cement industry, ACC Cement Ltd. and Gujarat Ambuja

Cement Ltd. have obtained the highest governance score by disclosing 8.93% of items of

checklist. On the other hand, Chettinad Cement Corporation Ltd. and Grasim Industries

Ltd. have not disclosed even a single item of checklist. In case of textiles industry,

Rajasthan Spinning & Wvng Mills Ltd. and Reliance Industries Ltd. have gained the

highest governance score i.e. 12.50% followed by Garden Silk Mills Ltd. (10.71%) and

subsequently followed by Arvind Mills Ltd., Nahar Spinning Mills Ltd. and S. Kumar‟s

Nationwide Ltd. by recording the same score of 7.14% and so on. In case of paper

industry, Bajaj Hindustan Ltd. has the highest governance score i.e. 25% followed by

ITC Ltd. (19.64%), Sirpur Paper Mills Ltd. (8.93%), Ballarpur Industries Ltd. (5.36%),

JK Paper Ltd. (3.57%) and so on. Similarly, in case of pharmaceutical industry, Dr.

Reddy‟s Laboratories Ltd. has occupied the first rank by disclosing 25% of items of

checklist followed by Nicholas Piramal India Ltd. (8.93%), Lupin Ltd. (7.14%), Ranbaxy

Laboratories Ltd. (5.36%), Cadila Healthcare Ltd. (3.57%) and so on. In case of sugar

industry, EID- Parry (India) Ltd. has been disclosing 14.29% of items of governance


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checklist followed by Oudh Sugar Works Ltd. (8.93%), Upper Ganges Sugar Mills Ltd.

(7.14%), Simbhaoli Sugar Mills Ltd. (3.57%) and so on. In case of automobile industry,

Bajaj Auto Ltd. like the previous years has attained the highest governance score

(12.50%) followed by Tata Motors Ltd. (8.93%), Eicher Motors Ltd.(7.14%) Ashok

Leyland Ltd. (5.36%) and so on. Infosys Technologies Ltd. has occupied the first rank by

disclosing 42.86% of items of checklist followed by Polaris Software Lab Ltd.

(16.07%), GTL Ltd. (14.29%), Igate Global Solutions Ltd. (7.14%), Wipro Ltd.

(7.14%) and so on.

6.3.1 Industry Wise Classification of Voluntary Corporate Governance Disclosure

Score

The table 6.1.1 reveals the industry wise mean disclosure score, standard

deviation and coefficient of variation of the sampled companies. In the year 2000-01,

maximum mean disclosure score has been gained by software industry i.e. 7.68 and

minimum has been gained by iron & steel industry i.e. 0.89. Similarly, standard

deviation is higher in case of software industry. It means that there are more

variations in the disclosure of the items from average disclosure score of the

companies. In case of sugar industry, the value of standard deviation is minimum i.e.

0.92. Coefficient of variation is the highest in case of pharmaceutical industry while it

is the lowest in case of power industry. Coefficient of variation (CV) measures the

standard deviation relative to the mean in percentages (Sharma 2005, p. 165).

The table 6.1.1 shows that for the year 2001-02, mean disclosure score is again

the highest in case of software industry but as compared to the previous year, a

decline has been observed in its mean value. On the other hand, minimum mean

disclosure score has been gained by iron and steel industry, same as the previous year.

So far as the standard deviation is concerned, the highest figure belongs to software

industry and it reveals the 6.45% of variation in items from the disclosure score of

companies. Minimum value of S.D. belongs to iron and steel industry i.e. 1.51.

Coefficient of variation is the highest in case of sugar industry i.e. 186.69% while it is

the lowest in case of cement industry i.e. 75% and indicates the large variation of

standard deviation from mean value.


199

Table: 6.1.1

Industry Wise Classification of Voluntary Corporate Governance Disclosure Score of the Sampled Companies

S.No. Industry Mean (X) Standard Deviation (σ)

Coefficient of Variation (cv) 100 x X

σ

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

Average

(X)

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

Average

( σ)

2000-

01

2001-

02

2002-

03

2003-04 2004-

05

Average

(cv)

I. Power 4.17 3.77 5.16 5.56 8.53 5.44 1.03 6.15 4.59 5.46 10.93 5.63 24.7 163.1

3

88.9 98.2 128.1

3

100.61

II. Iron & Steel 0.89 1.07 1.25 1.43 3.39 1.61 0.98 1.51 1.69 2.35 5.15 2.34 110 141.1

2

135.2 164.33 151.9 140.51

III. Cement 3.22 3.72 4.16 4.46 4.76 4.06 2.77 2.79 2.67 2.99 3.07 2.86 86 75 64.18 67 64.5 71.34

IV. Textiles 1.56 2.42 4.46 5.61 6.25 4.06 2.01 2.93 3.48 3.69 3.82 3.19 128.8

5

121.0

7

78.03 65.77 61.12 90.97

V. Paper 2.68 1.92 3.57 4.12 3.71 3.2 2.46 2.12 5.26 5.98 5.38 4.24 91.79 110.4 147.3

4

145.15 145.0

1

127.94

VI. Pharmaceutical 2.11 2.17 2.75 3.57 4.08 2.94 3.37 2.64 4.16 5.47 6.69 4.47 159.7 121.6

6

151.2

7

153.22 163.9

7

149.96

VII. Sugar 1.19 2.06 3.43 5.08 5.36 3.42 0.92 3.85 5.76 7.54 7.22 5.06 77.31 186.8

9

167.9

3

148.42 134.7

0

143.05

VIII. Automobiles 2.01 3.02 3.45 3.57 3.81 3.17 2.93 3.45 3.80 3.51 3.56 3.45 145.7

7

114.2

4

110.14 98.32 93.44 112.38

IX. Software 7.68 5.06 5.6 6.8 8.6 6.75 11.23 6.45 8.67 9.44 11.94 9.55 146.2

2

127.4

7

154.8 138.8

2

138.8

4

141.23


200

Overall

Industries‟

Average

2.83 2.8 3.76 4.46 5.38 3.07 3.54 4.45 5.16 6.42 107.8 128.9

9

121.97 119.9 120.1

8

Source: Computed from Disclosure Score as Given in Table 6.1


201

As revealed by table 6.1.1, mean disclosure score is again highest for the year

2002-03 in case of software industry (5.6) followed by power (5.16), textiles (4.46),

cement (4.16), paper (3.57), automobiles (3.45), sugar (3.43), pharmaceuticals (2.75)

and iron & steel (1.25). Standard deviation is higher in case of software industry

followed by sugar (5.76), paper (5.26), power (4.59), pharmaceuticals (4.16),

automobiles (3.80), textiles (3.48), cement (2.67) and iron & steel (1.69). Coefficient

of variation is larger in case of sugar industry indicating 167.93% of variation in

standard deviation from its mean value followed by software (154.8), pharma

(151.27), paper (147.54), iron & steel (135.2), automobiles (110.14), power (88.9)

and textiles (78.03).

The table 6.1.1 reveals that for the year 2003-04, mean disclosure score is

again maximum in case of software industry (6.8) followed by textiles (5.61), power

(5.56), sugar (5.08), cement (4.46), paper (4.1), pharmaceuticals and automobiles

each have been recording the same score of 3.57 and subsequently followed by iron &

steel (1.43). On the other hand, standard deviation is the highest in case of software

industry (9.44) followed by sugar (7.54), paper (5.98), pharmaceutical (5.47), power

(5.46), textiles (3.69), automobiles (3.51), cement (2.99) and iron & Steel (2.35).

Coefficient of variation is the highest in case of iron & steel industry (164.33) while it

is the lowest in case of textiles industry (65.77).

Similarly, for the year 2004-05, the table 6.1.1 reveals that mean disclosure score

is maximum in case of software industry (8.6) followed by power (8.53), textiles (6.25),

sugar (5.36), cement (4.76), pharmaceuticals (4.08), automobiles (3.81), paper (3.71) and

iron & steel (3.39). While standard deviation is also higher in case of software (11.94)

followed by power (10.93), sugar (7.22), pharmaceutical (6.69), paper (5.38), iron & steel

(5.15), textiles (3.82), automobiles (3.56) and cement (3.07). Coefficient of variation is

the highest in case of pharmaceutical industry (163.97) followed by iron & steel (151.9),

paper (145.01), software (138.84), sugar (134.70), power (128.13), automobiles (93.44),

cement (64.5) and textiles (61.12).

From the above analysis, it has been concluded that there is overall increase in

the mean disclosure score from 2.83 in the year 2000-01 to 5.38 in the year 2004-05.


202

Similarly, the standard deviation is also showing an increasing trend from 3.07 in the

year 2000-01 to 6.42 in the year 2004-05. It means that the companies are disclosing

more the voluntary corporate governance items over a period of time but with

significant variations. Software industry occupies the first rank so far as average score

for the period of five years is concerned, same as for the standard deviation also.

Average coefficient of variation of this industry is 141.23. Similar is the case with the

power industry also. It occupies the second rank so far as the mean value for the

period of five years is concerned. Standard deviation of this industry is also high.

Coefficient of variation for power industry is 100.61. Textiles and cement industries

occupy 3rd

and 4th

rank so far as mean disclosures scores are concerned but standard

deviations of these two industries are low as compared to others. Sugar industry

occupies 5th

rank by having 3.42 mean value and standard deviation of this industry is

5.06. Similarly, for the paper industry, mean value for the period of five years stands

at 3.2 and its standard deviation is 4.24 while automobile industry has mean

disclosure score of 3.17 and its standard deviation stands at 3.45. Again mean

disclosure score of pharmaceutical industry is the lowest i.e. 2.94 but its standard

deviation is 4.47 which is comparatively higher and revealing the negative

association. Coefficient of variation of pharma industry is 149.96. Mean disclosure

score of iron & steel industry is 1.61 and its standard deviation is 2.34.

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: 6.1.2

Results of Kruskal-Wallis Test H

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

Chi-Square 12.84 12.11 12.94 12.56 9.96

df 8 8 8 8 8

Significance .117 .146 .114 .128 .267

Source: Computed from the Disclosure Score as Given in Table 61.1


203

Table 6.1.2 reveals that there is no significant difference among the disclosure

score of the industries over a period of five years. It means that all the industries are

disclosing the items of voluntary corporate governance checklist almost at equivalent

level.

6.3.2 Company Wise Analysis of Voluntary Corporate Governance

Disclosure Score

The year wise and company wise analysis of voluntary corporate governance

disclosure score have been given as follows:

1) Disclosure for the year 2000-01

Table 6.1 reveals that in the year 2000-01, Infosys Technologies Ltd. has

disclosed the maximum information and has the highest voluntary corporate

governance disclosure score i.e. 36% followed by GTL Ltd. (17.86%), Dr. Reddy‟s

Laboratories Ltd. (10.71%), Pentamedia Graphics Ltd., Bajaj Auto Ltd, and Gujarat

Ambuja Cements Ltd. recorded the same score of 8.93% and subsequently followed

by Polaris Software Lab Ltd., Reliance Industries Ltd., Tamilnadu Newsprint and

Paper Mills Ltd, ITC. Ltd., Madras Cements Ltd., Mysore Cements Ltd., Ranbaxy

Laboratories Ltd. and Reliance Energy Ltd. each have attained the same score of

5.36% and so on. A few companies in the sample are not disclosing the governance

practices beyond the mandatory requirements. Larsen and Toubro Ltd., Satyam

Computers Services Ltd., Arvind Mills Ltd., Bombay Dyeing and Mfg Ltd., Indian

Rayon and Industries Ltd., EID Parry (India) Ltd., etc., all are having zero voluntary

corporate governance disclosure score. A few companies in the sample are those on

which clause 49 is not applicable for the year 2000-01. So, those companies have

been excluded from the analysis for the year 2000-01.

2) Disclosure for the year 2001-02,

As revealed by table 6.1, maximum voluntary governance score has been

obtained by Infosys Technologies Ltd. (23.21%) but the percentage of i tems disclosed


204

is less as compared to the previous year. Reliance Energy Ltd. occupies the second

rank by disclosing 19.64% of items followed by Bajaj Hindustan Ltd. (14.29%), Bajaj

Auto Ltd. (12.50%), Pentamedia Graphics Ltd., Rajasthan Spinning and Weaving

Mills Ltd., Gujarat Ambuja Cement Ltd., and Dr. Reddy‟s Lab. Ltd. each recorded the

same score of 8.93% and so on. On the other hand, Larsen and Toubro Ltd., Arvind

Mills Ltd., Mahavir Spinning Mills Ltd., Satyam Computer Services Ltd., Raymond

Ltd., Garden Silk Mills Ltd., Eskay KN‟I‟T Ltd., Bombay Dyeing and Mfg. Ltd. have

not reported any item of checklist.


The table 6.1 reveals that Infosys Technologies Ltd. has occupied the first

rank by securing 28.6% followed by Bajaj Hindustan Ltd. (21.43%), ITC Ltd.

(19.64%), GTL Ltd. (17.86%), Dr. Reddy Lab. Ltd. and Reliance Energy Ltd. each

recorded the same score of 14.29% and subsequently followed by Bajaj Auto Ltd.

(12.50%) and so on. On the other hand, Igate Global Solutions Ltd., Mascon Global

Ltd., Mahavir Spinning Mills Ltd., Eskay KN‟IT Ltd., Bombay Dyeing and Mfg Ltd.,

Saraswati Industrial Syndicate Ltd., etc., are not following even a single item of

checklist.


Similarly, for the year 2003-04, the table 6.1 shows that the first rank has been

occupied by Infosys Technologies Ltd. by disclosing 34% of items of checklist followed

by Bajaj Hindustan Ltd. (27%), ITC Ltd. (21.43%), Dr. Reddy‟s Laboratories Ltd.

(19.64%), GTL Ltd., Reliance Energy Ltd. and NTPC Ltd. each recording the same score

i.e. 14.29% and subsequently followed by Rajasthan Spinning and Weaving Mills Ltd.,

EID-Parry (India) Ltd. and Bajaj Auto Ltd. each of them disclosing 12.50% of items of

checklist and so on. On the other hand, Satyam Computer Services Ltd., Eskay KN‟IT

Ltd., Bombay Dyeing and Mfg Ltd., Saraswati Industrial Syndicate Ltd., Andhra Sugars

Ltd., Star Paper Mills Ltd., etc., have not reported any item of checklist.


205


The table 6.1 reveals that for the year 2004-05, Infosys Technologies Ltd. has

been disclosing the maximum number of items given in the checklist i.e. 42.86%

followed by Reliance Energy Ltd. (32.14), Bajaj Hindustan Ltd. and Dr. Reddy‟s

Laboratories Ltd each have same disclosure score i.e. 25% and subsequently followed

by NTPC Ltd. (21.43%), ITC Ltd. (19.64%), Polaris Software Lab. Ltd. (16.07%) and

so on. On the other hand, Mascon Global Ltd., Satyam Computer Services Ltd., Eskay

KN„IT Ltd., Saraswati Industrial Syndicate Ltd., Andhra Sugars Ltd., DCM Shriram

Industries Ltd., etc., have not been disclosing anything else in addition to the

requirements of clause 49 of the listing agreement.

It emerges from the above analysis that a few companies in the software

industry have been disclosing the maximum information of voluntary corporate

governance checklist. Infosys Technologies Ltd. has been leading among all the

sampled companies by occupying first rank for the entire period of study. Hence, it

can be named as a good governed company. So far as the paper industry is

concerned, Bajaj Hindustan Ltd. and ITC Ltd. have been performing well. Similarly,

in case of automobile industry, Bajaj Auto Ltd. has been disclosing the maximum

information with respect to voluntary governance items as compared to other

companies in the same industry. In case of iron and steel industry, Tata Steel Ltd. has

been showing the improvement in the voluntary governance disclosure score over a

period of time. In case of pharmaceuticals industry, Dr. Reddy‟s Laboratories Ltd. has

been performing well by disclosing maximum information of checklist while on the

other hand, Ranbaxy Lab Ltd. has constant disclosure score for the entire period of

study.

So far as power industry is concerned, Reliance Energy Ltd. has been showing

significant improvement in the disclosure score. It occupied fifth rank in the year

2000-01 which shifted to second rank in the year 2004-05. NTPC Ltd. has also been

showing improvement in its disclosure score in the year 2004-05 by securing fourth

rank among all the sampled companies.


206

6.3.3 Extent of Variation in Voluntary Corporate Governance Disclosure Score

The table 6.1.3 reveals the extent of variation in the voluntary corporate

disclosure governance disclosure score of the companies for a period of five years

under study.

Table: 6.1.3

Extent of Variation in Voluntary Corporate

Governance Disclosure Score

Disclosure Score

(Range in %)

No. of Companies Percentage of No. of Cos.

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

Nil 24 40 32 30 27 35.3 36.7 29.35 27 24

1-10 41 65 68 70 71 60.3 59.6 62.23 63 63

11-20 2 3 7 8 9 3 2.7 6.4 7.2 8

21-30 0 1 2 2 3 0 1 2 1.8 3

31-40 1 0 0 1 1 1.4 0 0 1 1

41-50 0 0 0 0 1 0 0 0 0 1

51 or above 0 0 0 0 0 0 0 0 0 0

Total 68 109 109 111 112 100 100 100 100 100


The above table reveals that 43 companies in the year 2000-01 have been

disclosing the voluntary corporate governance items in the range of up to 20%. There is

one such company i.e. Infosys Technology Ltd. which has gained maximum voluntary

governance score i.e. 36% in the year 2000-01. 24 (35%) sampled companies are of such

types which have been disclosing the corporate governance practices as per clause 49 of

the listing agreement but voluntary governance scores of these companies are zero. The

above table also reveals that 59.6% of the companies have been disclosing the voluntary

corporate governance items in the range of 1-10% in the year 2001-02. Again only one

such company i.e. Infosys Technologies Ltd. has been disclosing the voluntary

governance information in the range of 21-30%. 40 sampled companies have been just

following the requirements of clause 49 of the listing agreement. Again for the year

2002-03, 62.23% of the companies have been disclosing in the range of 1-10% but an

increase has been observed in the number of companies disclosing in the range of 11-


207

20%. Infosys Technologies Ltd. and Bajaj Hindustan Ltd. have been disclosing the

maximum information in the range of 21-30%. For the year 2003-04, a slight increase in

the disclosure score has been observed and 63% of the companies have been disclosing

the voluntary information in the range of 1-10%. There is also increase in the number of

companies disclosing in the range of 11-20%. Maximum disclosure has been made by

Infosys Technologies Ltd. in the range of 31-40%. Similarly, for the year 2004-05, 63%

of the companies have been disclosing in the range of 1-10%. Again maximum disclosure

has been made by Infosys Technologies Ltd. in the range of 41-50%. 24% of the sampled

companies have not been disclosing even a single item of checklist. An increase in the

range of disclosure score has been observed in the year 2004-05 to some extent.

So, it has been concluded from above analysis that there is a slight increase in the

disclosure score over a period of time. But still, overall voluntary governance disclosure

score is less than 50% of items. Further, wide variations have been observed in the voluntary

corporate governance disclosure score of the companies over a period of five years.

SECTION II

This section deals with the item wise voluntary corporate governance disclosure

score of the companies under study. The item wise disclosure score have been arrived at

as follows:

Item Wise Voluntary Governance

Disclosure Score =

No. of Companies Following a Particular Item x 100

Total No. of Sampled Companies

6.4 Item Wise Voluntary Corporate Governance Disclosure Score of

the Companies

Table 6.2 reveals the item wise voluntary corporate governance disclosure score of

the sampled companies. The details of item wise voluntary corporate governance

disclosure score the sampled companies have been given as follows:

A) Board of Directors: This head covers nine items. On the basis of mean value

(8.46) as revealed by table 6.2, the maximum no. of companies have been disclosing the

information regarding the „functions of the board‟ followed by „relationships with other

directors‟ (3.85), date of appointment of directors (3.78), retirement age or tenure of


208

directors ( 3.66), board membership criteria (2.88), shareholdings of the directors (1.44),

appointment of lead independent director (1.19), training of board members (0.65) and

mechanism for evaluating the performance of non-executive director (0.18).

Details of individual item wise disclosure are as follow:-

a) Functions of the Board

This item includes functions as well as responsibilities of the board. Functions of

the board can be defined as planning, formulating corporate strategy, monitoring, control,

external contacts, acquisitions, etc. The table 6.2 reveals that in the year 2000-01, only

13.24% of companies were disclosing this information which has decreased to 7.14% for

the year 2004-05.

b) Board Membership Criteria

This item deals with the expected skills, experience and talent of the board

members to manage the firm. Board member should be expert in strategy formulation,

financial matters, technology, etc., in order to run the corporation in this competitive

world. The table 6.2 reveals that 4.41% of sampled companies have been providing the

information for the year 2000-01 which has decreased to 1.79% for the year 2004-05.

c) Date of Appointment of Directors

Again a very few companies have been mentioning the date of appointment of the

directors in the corporate governance section of the annual reports. The table 6.2 reveals

that 4.4% of the sampled companies have been disclosing this information for the year

2000-01 which has decreased to 3.57% in 2004-05. So, variation in disclosure score has

been observed for this sub category.

d) Appointment of Lead Independent Director

Lead independent director is a director who leads the group of independent

directors and works as a liaison between the chairman, managing director and the

independent directors on the board. He also finalizes the meetings‟ agendas and

schedules along with the chairman and chief executive officer. The table 6.2 reveals that

1.47% of the sampled companies have appointed lead independent directors on the board

for the year 2000-01 which has increased to 2.68% for the year 2004-05.


210

Table 6.2

Item Wise Voluntary Corporate Governance Disclosure Score of the Companies

S.No. Items 2000-01 (%)

Score

2001-02 (%)

Score

2002-03 (%)

Score

2003-04 (%)

Score

2004-05 (%)

Score

Average

(%)

A) Board of Directors

a) Functions of the Board 9 13.24 8 7.34 9 8.26 7 6.31 8 7.14 8.46

b) Board Membership Criteria 3 4.41 4 3.67 3 2.75 2 1.80 2 1.79 2.88

c) Date of Appointment of Directors 3 4.41 4 3.67 3 2.75 5 4.50 4 3.57 3.78

d) Appointment of Lead Independent Director 1 1.47 0 0.00 0 0.00 2 1.80 3 2.68 1.19

e) Training of Board Members 1 1.47 0 0.00 0 0.00 0 0.00 2 1.79 0.65

f) Retirement Age or Tenure of Directors 2 2.94 3 2.75 4 3.67 4 3.60 6 5.36 3.66

g) Mechanism for Evaluating the Performance of

Non executive Directors

0 0.00 0 0.00 0 0.00 0 0.00 1 0.89 0.18

h) Relationship with Other Directors 2 2.94 5 4.59 4 3.67 5 4.50 4 3.57 3.85

i) Shareholdings of the Directors 0 0.00 1 0.92 1 0.92 2 1.80 4 3.57 1.44

B) Meetings and Attendance

a) Information on Scheduling and Selection of

Agenda Items

3 4.41 3 2.75 2 1.83 2 1.80 1 0.89 2.34

b) Duration of Board Meetings 1 1.47 0 0.00 1 0.92 1 0.90 2 1.79 1.01

c) Duration of Gap Between Two Board or

Committee Meetings

0 0.00 0 0.00 1 0.92 1 0.90 1 0.89 0.54

d) Procedure of Board or Committee Meetings 2 2.94 3 2.75 3 2.75 4 3.60 3 2.68 2.95

e) Individual Attendance Record of Directors at

Board or Committee Meetings

3 4.41 10 9.17 8 7.34 9 8.11 7 6.25 7.06

Contd....


211

C) Formation of Committees

a) Corporate Governance Committee 1 1.47 1 0.92 1 0.92 2 1.80 3 2.68 1.56

b) Ethics or Compliance Committee 0 0.00 0 0.00 2 1.83 2 1.80 3 2.68 1.26

c) Nomination Committee 2 2.94 2 1.83 4 3.67 5 4.50 5 4.46 3.48

d) Investment Committee 3 4.41 5 4.59 6 5.50 6 5.41 6 5.36 5.05

e) Committee of Directors 17 25.00 26 23.85 25 22.94 26 23.42 25 22.32 23.51

f) Management Committee 4 5.88 9 8.26 11 10.09 13 11.71 13 11.61 9.51

g) Research and Development Committee 1 1.47 2 1.83 2 1.83 2 1.80 2 1.79 1.75

h) Finance Committee 1 1.47 6 5.50 6 5.50 6 5.41 7 6.25 4.83

i) Health, Safety and Environment Committee 2 2.94 1 0.92 1 0.92 1 0.90 2 1.79 1.49

j) Project Monitoring Committee 2 2.94 3 2.75 3 2.75 4 3.60 5 4.46 3.30

k) Strategy Committee 0 0.00 0 0.00 0 0.00 1 0.90 1 0.89 0.36

l) Risk Management Committee 0 0.00 0 0.00 0 0.00 0 0.00 4 3.57 0.71

m) Miscellaneous 13 19.12 19 17.43 20 18.35 23 20.72 26 23.21 19.77

D) Corporate Governance Initiatives

a) Whistle Blower Policy 0 0.00 0 0.00 0 0.00 0 0.00 8 7.14 1.43

b) Code of Conduct for Directors or Senior

Management Personnel

1 1.47 1 0.92 1 0.92 2 1.80 9 8.04 2.63

c) Corporate Governance Rating 1 1.47 1 0.92 2 1.83 3 2.75 2 1.79 1.74

d) Succession Planning 1 1.47 1 0.92 1 0.92 1 0.90 1 0.89 1.02

e) Insider Trading Code 3 4.41 8 7.34 22 20.18 24 21.62 27 24.11 15.53

E) Reports’ of Committees

a) Compliance Report on Cadbury Committee‟s

Recommendations

2 2.94 1 0.92 1 0.92 1 0.90 1 0.89 1.31

Contd....


212

b) Compliance Report on Blue Ribbon

Committee‟s Recommendations

2 2.94 3 2.75 1 0.92 1 0.90 1 0.89 1.68

c) Compliance of OECD Principles on Corporate

Governance

0 0.00 0 0.00 0 0.00 1 0.90 1 0.89 0.36

d) Euro Shareholders Corporate Governance

Guidelines

1 1.47 1 0.92 1 0.92 1 0.90 1 0.89 1.02

e) Compensation Committee Report 1 1.47 1 0.92 1 0.92 2 1.80 2 1.79 1.38

f) Nomination Committee Report 2 2.94 0 0.00 1 0.92 0 0.00 0 0.00 0.77

g) Audit Committee Report 2 2.94 1 0.92 1 0.92 3 2.70 2 1.79 1.85

h) Investors Grievance Committee Report 2 2.94 0 0.00 2 1.83 1 0.90 1 0.89 1.31

i) Compliance with Naresh Chandra

Committee‟s Recommendations

1 1.47 0 0.00 1 0.92 2 1.80 2 1.79 1.20

j) Compliance with Narayana Murthy‟s Code on

Corporate Governance

0 0.00 0 0.00 0 0.00 2 1.80 2 1.79 0.72

k) CEO and CFO Certification on Financial

Statements

0 0.00 0 0.00 0 0.00 0 0.00 1 0.89 0.18

l) Miscellaneous 4 5.88 2 1.83 5 4.59 3 2.70 5 4.46 3.89

F) Shareholders

a) Dividend History of the Company 3 4.41 4 3.67 6 5.50 7 6.31 8 7.14 5.41

b) Information on Unclaimed Dividends 5 7.35 10 9.17 18 16.51 24 21.62 27 24.11 15.75

c) Top Ten Shareholders of the Company 1 1.47 3 2.75 5 4.59 6 5.41 6 5.36 3.91

d) List of Persons Holding More than 1% Shares 0 0.00 0 0.00 1 0.92 1 0.90 2 1.79 0.72

e) Changes in Equity Share Capital During the

Year

1 1.47 1 0.92 1 0.92 1 0.90 2 1.79 1.20

f) Paid Up Equity Share Capital History 2 2.94 3 2.75 2 1.83 4 3.60 4 3.57 2.94

Contd....


213

g) List of Investors Service Centers 2 2.94 3 2.75 2 1.83 1 0.90 0 0.00 1.69

h) Shareholders‟ Satisfaction Survey 1 1.47 2 1.83 2 1.83 2 1.80 4 3.57 2.10

i) Submission of Information to SEBI Edifar

System

2 2.94 3 2.75 20 18.35 26 23.42 31 27.68 15.03

j) Electronic Clearing Service (ECS) Mandate 3 4.41 6 5.50 10 9.17 15 13.51 16 14.29 9.38

k) Nomination Facility 3 4.41 6 5.50 9 8.26 11 9.91 13 11.61 7.94

G) Award or Accolades for Corporate

Governance

2 2.94 0 0.00 0 0.00 1 0.90 2 1.79 1.13

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


214

e) Training of Board Members

This item reveals any type of training provided to the directors after their

induction on the board. Various presentations are made by the executive directors to

make the non-executive directors and independent directors familiarize about the

company‟s strategy, operations, board procedure, etc. The table 6.2 depicts that 1.47% of

the sampled companies are giving this information for the year 2000-01 which has

increased to 1.79% for the year 2004-05.

f) Retirement Age or Tenure of Directors

The table 6.2 reveals that in the year 2000-01, just 2.94% of the sampled

companies have been disclosing this information in corporate governance section which

has increased to 5.36% for the year 2004-05.

g) Mechanism for Evaluating the Performance of Non- executive Directors

This item includes the criteria to be followed by the board for evaluating the

performance of non-executive directors. The board generally evaluates the performance

of non-executive or independent directors on the basis of certain pre-defined criterion

each year. As per the table 6.2 till the year 2003-04, not even a single company has

disclosed the information about this item. For the year 2004-05, 0.89% of the sampled

companies have been following this item.

h) Relationships with Other Directors

This item provides the information related to relationship of promoter, executive

and non-executive directors with each other. The table 6.2 reveals that 2.94% of the

sampled companies have been disclosing the information about this item for the year

2000-01, 4.59% in 2001-02, 3.67% for 2002-03, 4.5% for 2003-04 and 3.57% for the

year 2004-05.

i) Shareholdings’ of the Directors

Shareholdings of the directors mean the total number of shares held in that

particular company. The table 6.2 depicts that for year 2001-02, 0.92% of the sampled


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companies have been giving information in corporate governance section of the report

which has increased to 3.6% in for year 2004-05.

B) Meetings and Attendance

This head covers five items. On the basis of average (7.06) as revealed by table

6.2, maximum no. of companies have been disclosing the information regarding the

„individual attendance record of directors at the board or committee meetings‟ followed

by „procedure of board and committee meetings‟ (2.95), „information on scheduling and

selection of agenda items‟ (2.34), „duration of board meetings‟ (1.01) and „duration of

gap between two board or committee meetings‟ (0.54).

The details of individual item wise disclosure are as follow:

a) Information on Scheduling and Selection of Agenda Items

This item deals with the setting up of agenda items by company secretary in

consultation with chairman and lead independent director. According to table 6.2, 4.4%

of the sampled companies are providing information about this item for the year 2000-01,

2.75% for 2001-02 1.83% for 2002-03, 1.80% for 2003-04 and just 0.89% for the year

2004-05.

b) Duration of Board Meetings

This item implies the total length of time (in hrs or minutes) from the start of the

meeting till its conclusion. The table 6.2 shows that 1.47% of the sampled companies

have been giving information for this item for the year 2000-01 which has increased to

1.79% for the year 2004-05.

c) Duration of Gap between Two Board or Committee Meetings

This item implies the time gap in days or months between two board or committee

meetings. The table 6.2 reveals that 0.92% of the sampled companies have been


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providing this information for the year 2002-03 which has decreased to 0.89% for the

year 2004-05.

d) Procedure of Board and Committee Meetings

The table 6.2 reveals that 2.94% of the sampled companies have been disclosing

the information about this item for the year 2000-01. For the years 2001-02 and 2002-03,

2.75% of the companies are providing the information which has increased to 3.6% for

the year 2003-04. Further, a declining trend has been observed in the disclosure of this

item for the year 2004-05 i.e. 2.68%.

e) Individual Attendance Record of Directors at Board or Committee Meetings

This item reveals the presence or absence of each director at each board or

committee meetings. The table 6.2 depicts that the disclosure score of this item is varying

from 4.4% for the year 2000-01 to 6.25% for the year 2004-05. For the year 2001-02,

9.17% of the sampled companies have been disclosing this item in the corporate

governance section of the annual report.

C) Formation of Committees

This head covers thirteen items. The table 6.2 reveals that most of the companies

on the basis of average (23.5) are having „committee of directors‟ followed by

„miscellaneous committees‟ (19.78), „management committee‟ (9.51), „investment

committee‟ (5.05), „finance committee‟ (4.83), „nomination committee‟ (3.4), „project

monitoring committee‟ (3.3), „research & development (R&D) committee‟ (1.74),

„corporate governance committee‟ (1.56), „health, safety and environment committee‟

(1.48), „ethics or compliance committee‟ (1.26), „risk management committee‟ (0.71) and

„strategy committee‟ (0.36).

The details of individual item wise disclosure are as follow:

a) Corporate Governance Committee

This committee generally reviews the corporate governance policies of the

companies. The table 6.2 reveals that for the year 2000-01, just a single company has


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formed this committee. For the year 2004-05, the total no. of three companies from

sample has formed this committee.

b) Ethics or Compliance Committee

The table 6.2 reveals that for the year 2002-03, 1.83% of the sampled companies

have formed this committee which has increased to 2.68% for the year 2004-05.

c) Nomination Committee

The main function of this committee is to select or recommend to the board the

names of the nominee directors to be appointed or re-appointed in the ensuing annual

general meeting. Nomination committee also oversees the performance evaluation

process of directors, recommends the termination of directors and oversees the

governance structure of board and committees. The table 6.2 reveals that 2.94% of the

sampled companies have formed nomination committee for the year 2000-01 which has


d) Investment Committee

This committee deals with the major investment or capital decisions. It reviews

the co‟s major investment proposals. As revealed by table 6.2, 4.4% of the sampled

companies have been disclosing this item for the year 2000-01 which has increased to

5.36% for the year 2004-05. On the whole, varying disclosure score has been observed

for this item over a period of time.

e) Committee of Directors

This committee basically deals with the granting of powers of attorney to the

officers of the company to appoint proxies to attend the general meetings on behalf of the

company, etc. According to table 6.2, the most of the companies i.e. 25% have formed

this committee for the year 2000-01. In further years, the percentage of follow up of this

item has been showing the decreasing trend. For the year 2004-05, 22.3% of the

companies have been providing this information in corporate governance section of the

annual report.


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f) Management Committee

This committee consists of all the executive directors on the board. The main

functions of this committee are to frame up the capital or other major budgets of the

organization and to give the necessary directions to the functional heads for the effective

or efficient functioning of the organization. The table 6.2 shows that 5.9% of the sampled

companies have formed management committee in the year 2000-01 which has increased

to 11.6% for the year 2004-05.

g) Research and Development Committee

This committee has been generally formed by the pharmaceutical companies. The

table 6.2 shows that for the year 2000-01, 1.47% of the sampled companies have set up

this committee which has increased to 1.79% for the year 2004-05.

h) Finance Committee

This committee recommends to the board the major capital structure changes,

issue of securities, cash management, reviewing certain long term and short term

investments, etc. The table 6.2 reveals that 1.47% of sampled companies have formed

this committee in the year 2000-01 which has increased to 6.25% for the year 2004-05.

i) Health, Safety and Environment Committee

This committee is generally formed under the social responsibility concept of the

firm. The table 6.2 reveals that 2.94% of the sampled companies have set up this

committee for the year 2000-01 which has decreased to 1.79% for the year 2004-05.

j) Project Monitoring Committee

This committee makes the decisions about the major projects of the company. The

table 6.2 shows that 2.94% of the sampled companies have been disclosing this item in

the corporate governance section of the annual report for the year 2000-01 which has



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k) Strategy Committee

This committee works closely with the management to frame the new or modify

the existing corporate strategy. It also reviews the implementation process and further

monitors the execution of the developed strategy. Dr. Reddy‟s Laboratories Ltd. has

formed this committee for the years 2003-04 and 2004-05.

l) Risk Management Committee

This committee generally reviews the external or internal risk levels of the

company and frames up the policies to manage the risk attached to the company. The

table 6.2 reveals that 3.6% of the sampled companies have formed this committee in the

year 2004-05.

m) Miscellaneous

This sub head covers the committees other than those mentioned above.

Miscellaneous committees include GDR committee, science committee, executive

committee, management councils, operations committee, debenture or share allotment

committee, committee for initial public offering of equity shares, pricing committee for

contracts, forex committee, sub committee for resource mobilization, committee for

purchase, committee for investor servicing, etc. The table 6.2 reveals that 19.12% of the

sampled companies have formed these miscellaneous committees for the year 2000-01.

The disclosure of this item has been varying over a period of time. For the year 2004-05,

23.21% of the sampled companies have formed a few of these committees

D) Corporate Governance Initiatives

This head covers five items and maximum disclosure on the basis of an average as

revealed by table 6.2, is for the item named as „insider trading code‟ (15.53) followed by

„code of conduct for directors or senior management personnel‟ (2.63), „corporate


220

governance rating‟ (1.74)‟, „whistle blower policy‟ (1.43) and „succession planning‟

(1.02). Item wise voluntary disclosure is as follows:

a) Whistle Blower Policy

“Whistle Blowing can be defined as the release of information by a member or

former member of an organization that is evidence of illegal and/or immoral conduct in

the organization that is not in the public interest” (Boatright, 2008, p.106 ). In other

words, it is a mechanism generally set up for employees to report any unethical

behaviour, fraud, violation of policies or code by superiors to top management personnel.

Whistle Blower is ensured job security by top personnel in the future. Now this provision

has become mandatory part of the revised clause 49 of the listing agreement. According

to table 6.2, 8 companies (7.14%) have been disclosing this item for the year 2004-05.

b) Code of Conduct for Directors or Senior Management Personnel

Code of conduct is a written document that outlines various principles or policies

to be followed by various personnel in the organization. The table 6.2 shows that 1.47%

of companies have been disclosing this item in the year 2000-01 which has increased to

8.04% for the year 2004-05. Now the disclosure of this voluntary item has become

mandatory for the companies as per revised clause 49 of the listing agreement.

c) Corporate Governance Rating

Corporate governance rating is generally conducted by the various rating agencies

like ICRA, ICSI, CRISIL, S&P, etc. ICSI conducts corporate governance rating every

year and then nominates top 50 companies on the basis of rating for the „Award of

Excellence in Corporate Governance‟. The table 6.2 reveals that just one company has

been providing information regarding the corporate governance rating in the year 2000-

01. The number of companies has increased to 2 in the year 2004-05. In order to attract

more foreign capital, the companies should go voluntary for corporate governance rating.


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d) Succession Planning

Succession planning is generally done by the companies to meet any unexpected

occurrence regarding the vacant posts of the chairman, CEO, CFO or some other senior

management personnel. Again just one company has been found providing this

information for the entire period of study.

e) Insider Trading Code

Insiders are the managers or retired managers of the organization who are holding

the share price sensitive as well as any other crucial information about company‟s

strategies or policies. In order to prevent the insiders to go for unethical practices, SEBI

has made mandatory for the companies to adopt insider trading code. The table 6.2

reveals that for the year 2000-01, 4.41% of the sampled companies have been disclosing

this information in the corporate governance section of the annual report, which has


E) Reports’ of Committees

This head covers twelve items. The table 6.2 reveals that on the basis of average,

most of the companies have been disclosing the information under „miscellaneous‟

category followed by „audit committee report‟ (1.85), „compliance report on Blue Ribbon

committee‟s recommendations‟ (1.68), „compensation committee report‟ (1.38), „report

on Cadbury committee‟s recommendations‟ (1.31), „investors grievance committee

report‟ (1.31), „compliance with Naresh Chandra committee‟s recommendations‟ (1.19),

„Euro shareholders corporate governance guidelines‟ (1.02),„nomination committee

report‟, (0.77),„compliance with Narayana Murthy‟s code on corporate governance‟

(0.72), „compliance with OECD principles on corporate governance‟ (0.36) and „CEO

and CFO certification on financial statements‟ (0.18).

The details of item wise voluntary disclosure are as follow:

a) Compliance Report on Cadbury Committee’s Recommendations

This committee was set up by London Stock Exchange under the chairmanship of

Sir Adrian Cadbury in May 1991 to give the recommendations to improve the system of


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internal financial controls. The report of this committee was published in the year 1992.

According to table 6.2, this item has been disclosed by 2 companies for the year 2000-01.

For the rest of the years, just a single company has been disclosing this item.

b) Compliance Report on Blue Ribbon Committee’s Recommendations

The recommendations of the Blue Ribbon Committee generally focused on audit

committee, its formation, members, meetings, etc. The table 6.2 reveals that 2.94% of the

sampled companies are giving the information regarding the extent to which they are

complying with the recommendations of Blue Ribbon Committee. For the year 2000-01,

2.94% of the sampled companies have been disclosing the compliance report of Blue

Ribbon Committee‟s Recommendations which ultimately reduced to 0.89% in the year

2004-05.

c) Compliance of OECD Principles on Corporate Governance

This organization (OECD) has developed certain principles of corporate

governance to be followed by the companies. Just one company in our sample i.e. Infosys

Technologies Ltd. has been disclosing the compliance with the OECD principles of

corporate governance in the years 2003-2004 and 2004-05.

d) Euro Shareholders’ Corporate Governance Guidelines

Euro shareholders‟ is the confederation of European shareholders associations. Its

principles are based on the OECD principles of corporate governance. Only one company

i.e. Infosys Technologies Ltd. has been disclosing its compliance with the Euro

shareholders corporate governance guidelines for the entire period of study.

e) Compensation Committee Report

The report of this committee generally certifies the performance of executive

directors as well as grant of performance incentives to them. The table 6.2 depicts that for

the year 2000-01, 1.47% of the sampled companies have been disclosing this information


223

in corporate governance section of annual report which has increased to 1.79% in the

year 2004-05.

f) Nomination Committee Report

The report of this committee certifies the retirement, appointment or re-

appointment of directors. The table 6.2 shows that for the year 2000-01, 2.94% of the

sampled companies have been disclosing this information in corporate governance

section which has reduced to zero level in the year 2004-05.

g) Audit Committee Report

The report of this committee basically certifies the status of independent director,

internal control system of management, adoption of accounting policies or standards,

accuracy or inaccuracy of financial statements, etc. The table 6.2 reveals that 2.94% of

sampled companies have been disclosing this information in the corporate governance

section of annual report in the year 2000-01. For the year 2004-05, only 1.79% of

companies have provided this information. A variation in disclosure score has been

observed for this item over a period of 5 years.

h) Investors Grievance Committee Report

The report of this committee certifies that all type of investors‟ grievances have

been redressed within the stipulated time framework. The table 6.2 shows that 2.94% of

sampled companies have been providing the investor grievance committee report in the

corporate governance section for the year 2000-01 which has reduced to 0.89% for the

year 2004-05.

i) Compliance with Naresh Chandra Committee’s Recommendations


the compliance with recommendations of Naresh Chandra Committee for the year 2000-

01. Further in the year 2004-05, 1.79% of the sampled companies have been disclosing

this item.


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j) Compliance with Narayana Murthy’s Code on Corporate Governance

The table 6.2 reveals that 1.8% of sampled companies in the years 2003-04 and

2004-05 have been showing their compliance with Narayana Murthy‟s code on corporate

governance. These companies have started adopting the few recommendations of code

before its mandatory implementation by SEBI.

k) CEO and CFO Certification on Financial Statements

Just a single company in the year 2004-05 has disclosed the report of CEO and

CFO on certification of financial statements. Now the disclosure of this item has become

mandatory under revised clause 49 of the listing agreement.

l) Miscellaneous

This head includes the compliance reports of other committees such as

„compliance with findings and recommendations of the Conference Board Commission

on Public Trust and Private Enterprises in the US‟, „United Nations Global Compact

Programme‟, „company‟s secretary responsibility statement‟, „compliance with

Greenburry committee recommendations‟, „report of Deloittee Haskin on corporate

governance‟, etc. 5.88% of sampled companies have been following the

recommendations of these committees and disclosing the same in corporate governance

section of annual report. The variations have been observed in the disclosure of this item

in further years. 4.46% of the companies have been disclosing this item in the year 2004-

05.

F) Shareholders

This head covers eleven items and deals with the information related to

shareholders. Maximum no. of companies on the basis of average as revealed by table 6.2

have been disclosing the „information on „unclaimed dividends‟ (15.75) followed by „

submission of information to SEBI Edifar system‟ (15.03), „electronic clearing service

(ECS) mandate‟ (9.38), „nomination facility‟ (7.94) „dividend history of the company‟

(5.41), „top ten shareholders of the company‟ (3.91), „history of paid up equity share

capital of the company‟ (2.94), „shareholders‟ satisfaction survey‟ (2.1),„list of investors‟


225

service centers‟ (1.68) and „list of persons holding more than 1% shares of the company‟

(.722).

The details of item wise disclosure are as follow:

a) Dividend History of the Company

The table 6.2 reveals that 4.41% of the sampled companies in the year 2000-01

have provided the dividend history of the company for last few years which has increased

to 7.14% in the year 2004-05.

b) Information on Unclaimed Dividends

This item deals with the amount of dividend remaining unclaimed by the investors

for at least seven years. The table 6.2 reveals that 7.35% of the sampled companies are

providing the details of unclaimed dividends in the year 2000-01. An increase in the

disclosure of this item has been observed as 9.17%, 16.5%, 21.62%, 24.11% of the

companies have been providing this information in the years 2001-02, 2002-03, 2003-04,

2004-05 respectively.

c) Top Ten Shareholders of the Company


this information in the year 2000-01 which has increased to 2.75%, 4.59%, 5.41% in the

years 2000-01, 2001-02, 02-03, 03-04 and further reduced to 5.36% in the year 2004-05.

d) List of Persons Holding More Than 1% shares

The table 6.2 shows that 0.92%, 0.90% and 1.79% of the sampled companies have

been disclosing this information for the years 2002-03, 03-04 and 04-05 respectively.

e) Changes in Equity Share Capital during the Year

The table 6.2 reveals that 1.47%, 0.92%, 0.92%, 0.90% and 1.79% of the sampled

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


226

giving the information to the shareholders regarding any type of changes made in equity

share capital during a particular financial year.

f) History of Paid Up Equity Share Capital

The table 6.2 reveals that 2.94% of the sampled companies in the year 2000-01

have been disclosing the information regarding the amount of paid up equity share capital

during the last 7, 10 or 15 years. This figure has increased to 3.57% for the year 2004-05.

g) List of Investors’ Service Centers

The table 6.2 reveals that 2.94% of the sampled companies for the year 2000-01,

have been providing the information regarding the investors‟ service centers i.e. where

investors can approach for any type of queries or assistance from the companies. 2.75%,

1.83% and 0.90% of the companies have been disclosing this information for the years

2001-02, 02-03 and 03-04 respectively.

h) Shareholders’ Satisfaction Survey

Shareholders‟ satisfaction survey is generally conducted by the companies to

judge the satisfaction level of shareholders. Questionnaire is administered to the

shareholders along with the annual reports. The table 6.2 reveals that1.47% of the

sampled companies have been providing this information for the year 2000-01 which has

increased to 3.57% for the year 2004-05. This is considered to be a good practice adopted

by the companies as the companies can frame up their future strategies or policies as per

the expectations of the shareholders.

i) Submission of Information to SEBI Edifar System

It is mandatory for the companies to file with the SEBI, the annual report,

corporate governance compliance report, shareholding pattern, etc. SEBI has created a

separate link i.e. Electronic Data Information Filing and Retrieval System (EDIFAR) to

post the relevant information submitted by the co. The table 6.2 depicts that 2.94% of the

sampled companies in the year 2000-01 have been filing with SEBI the required


227

statements. The percentage of the companies has increased to 18.35%, 23.42% and

27.68% for the years 2002-03, 03-04 and 04-05 respectively.

j) Electronic Clearing Service (ECS) Mandate

This item basically deals with the opening up of bank accounts by the

shareholders with their depositories and crediting of dividend amount in their respective

accounts by the companies. The table 6.2 reveals that 4.41% of the sampled companies

have been informing their shareholders regarding ECS mandate in the corporate

governance section of annual report which has increased to 5.50%, 9.1%, 13.51% and

14.29% for the years 2001-02, 2002-03, 03-04 and 04-05 respectively.

k) Nomination Facility

The table 6.2 reveals that 4.41% of the sampled companies have been providing

the information to the shareholders regarding the nomination facility offered as well as its

procedure. An increase has been observed in the percentage of its follow-up in the

subsequent years.

G) Awards or Accolades

The table 6.2 shows that 2.94%, 0.90% and 1.79% of the sampled companies for

the years 2000-01, 03-04 and 04-05 respectively have won awards for adopting the best

corporate governance practices.

6.4.1 Overall Item Wise Voluntary Corporate Governance Disclosure Score of the

Companies

The table 6.2.1 reveals the mean, standard deviation and co-efficient of variation

of items categorized into 7 heads namely board of directors, meetings and attendance,

formation of committees, corporate governance initiatives, reports of committees,

shareholders and others.

Overall item wise mean disclosure in the year 2000-01 is 3.018. It indicates that

the sampled companies have been just disclosing 3% of the items given in the voluntary


228

corporate governance checklist. Mean disclosure score is maximum i.e. 5.20 with respect

to „formation of committees‟ whereas minimum disclosure score has been observed in

case of „corporate governance initiatives‟ i.e. 1.76. S.D. and CV are maximum i.e. 7.77

and 149.92 respectively under the heading of „formation of committees‟. This implies the

greater variation of the items under this category.

The table 6.2.1 shows that in the year 2001-02, mean disclosure score is

maximum i.e. 5.22 with respect to „formation of committees‟ followed by „shareholders‟

(3.41), „meetings and attendance‟ (2.93), „board of directors‟ (2.55), „corporate

governance initiatives‟ (2.02), „reports‟ of committees‟ (0.688) and „others‟ (0). Overall

mean disclosure score is 2.40, indicating that the sampled companies have been

disclosing just 2.40% of items given in voluntary corporate governance checklist. S.D is

maximum i.e. 7.38 under the heading „formation of committees‟ and hence, implies the

greater variation in items. C.V. is the highest in case of „corporate governance initiatives‟

and „committees‟ i.e. 148.51 and 141.38 respectively.

In the year 2002-03, it has been observed from overall item wise mean disclosure

score (3.3) given in table 6.2.1 that the sampled companies have been disclosing 3.3% of

items given in voluntary corporate governance checklist. Mean disclosure score is

maximum i.e. 6.34 with respect to „shareholders‟ followed by „formation of committees‟

(5.72), „corporate governance initiatives‟ (4.77), „meetings and attendance‟ (2.75), „board

of directors‟ (2.45), „reports of committees‟ (1.07) and „others‟ (0). S.D and CV are

higher under the heading „corporate governance initiatives‟ i.e. 8.64 and 181.13. This

reveals the greater variations of items given in the checklist under this heading.

The table 6.2.1 shows that in the year 2003-04, the item wise mean disclosure

score is maximum in case of „shareholders‟ (8.02) followed by „formation of committees‟

(6.30), „corporate governance initiatives‟ (5.40), „meetings & attendance‟ (3.06), „board

of directors‟ (2.70), „reports‟ of committees‟ (1.27) and „others‟ (.90). S.D. and CV are

maximum i.e. 9.12 and 168.89 with respect to „corporate governance initiatives‟. This

shows the larger variations in the items under this heading. Overall item wise mean

disclosure score is 3.95.


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Table: 6.2.1

Overall Item Wise Voluntary Corporate Governance Disclosure Score of the Companies

S.No. Items 2000-01 2001-02 2002-03 2003-04 2004-05

Mean cv X cv X cv X cv X cv

1. Board of

Directors 3.43 4.03 117.49 2.55 2.54 99.61 2.45 2.67 108.98 2.70 2.16 80 3.37 1.93 57.27

2. Meetings and

Attendance

2.65 1.92 72.45 2.93 3.75 127.98 2.75 2.67 97.09 3.06 3.02 98.69 2.5 2.22 86.8

3. Formation of

Committees

5.20 7.77 149.42 5.22 7.38 141.38 5.71 7.24 126.57 6.30 7.64 121.26 7 7.50 107.14

4. Corporate

Governance

Initiatives

1.76 1.61 91.477 2.02 3 148.51 4.77 8.64 181.13 5.40 9.12 168.89 8.49 9.33 111.20

5. Reports‟ of

Committees 2.082 1.71 82.132 0.688 0.88 127.91 1.07 1.23 114.95 1.27 0.89 70.55 1.41 1.107 78.51

6. Shareholders 3.07 2.02 65.79 3.41 2.53 74.19 6.34 6.19 97.62 8.02 8.22 102.49 9.17 9.34 101.85

7. Awards or

Accolades

2.94 0 0 0 0 0 0 0 0.90 0 0 1.79 0 0

Overall Mean

Disclosure

3.018 2.40 3.3 3.95 4.8



230

Similarly, the table 6.2.1 reveals that overall item wise mean disclosure score of

the sampled companies is 4.8. It depicts that the companies have been disclosing 4.8% of

items given in the voluntary corporate governance checklist. Mean disclosure score is

maximum with respect to „shareholders‟ (9.17) followed by „corporate governance

initiatives‟ (8.49), „ formation of committees‟ (7), „board of directors‟ (3.37), „meetings

& attendance‟ (2.5), „others‟ (1.79) and „reports of committees‟ (1.41). S.D is the highest

with respect to „shareholders‟ (9.34) and „corporate governance initiatives‟ (9.33). This

implies the larger variations in the items under these two headings as compared to other

heads of the checklist. CV is the highest under the heading „corporate governance

initiatives‟.

On the whole, it can be concluded from the above analysis that though there is

slight improvement in the mean disclosure score over a period of time except for the year

2001-02 yet the disclosure score is considered to be very low. Mean disclosure score

even ranges up to 5% level which can be assumed as a weak disclosure. It emerges that

the companies are not paying more attention to adopt the practices other than those as

required by law.

6.5 Summary: It emerges from the above analysis that there are variations in the

disclosure of items over a period of time. Maximum no. of companies have been

disclosing the information regarding the „committee of directors‟, „insider trading code‟,

„submission of information to SEBI Electronic Data Filing and Retrieval System‟,

„electronic clearing service mandate‟, functions of the board, etc. On the other hand, a

very few companies have been paying attention to provide the „training to its board

members‟. Moreover, companies are also silent on the information regarding the

„mechanisms for evaluating the performance of non-executive directors‟. So far as

formation of committees is concerned, the companies must form strategy committee in

order to frame the various policies or strategies for the business in this competitive world.

But it has been observed that just one company out of 112 sampled companies, has set up

strategy committee and risk management committee. At present, due to financial crisis in

the world stock market, it has become essential for the companies to set up risk


231

management committee so that external or internal risks attached to the companies can be

managed.

Hence, it can be concluded that though there is slight increase in the mean

disclosure score of voluntary governance items over a period of time yet the overall

disclosure score is less than 50%. It has been observed that mean disclosure score just

ranges between 3-5%. It emerges that the companies are not paying attention to adopt the

practices other than those as required by law. There are few items namely „whistle blower

policy‟, „code of conduct for directors or senior management personnel‟, „CFO/CEO

certification on financial statements‟ and „risk management‟ which have become a part of

the revised clause 49 of the listing agreement. There is a need to extend the scope of

mandatory corporate governance practices further so that more transparency can be

ensured to the investors in governance matters. Moreover, institutes like ICAI and ICSI,

etc., must conduct awards for the best voluntary corporate governance practices also.

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voluntary corporate governance disclosure practices of...

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