2. 2
So far…
• Ethical issues in Finance, Operations, and Strategic
Management
• CSR Rules as per Companies Act 2013, Standards of CSR
(SAI 800 and ISO 26000)
• Relationship between responsibility and ethics
• CSR – India & Western World
• Corporate Governance – Theories & Models
• Corporate Governance – Role of Board & its Committees
5. 5
Business Ethics / ValuesBusiness Ethics / Values
Corporate
Governance
Corporate
Governance
Corporate Social
Responsibility
Corporate Social
Responsibility
Stakeholder
Expectations
Stakeholder
Expectations
Government
Rules
Government
Rules
Third Party /
Other Agencies
Third Party /
Other Agencies
6. 6
Cadbury Committee
• Set up in May 1991
• By the Financial Reporting Council and London Stock
Exchange
• To address the financial aspects pertaining to the
Corporate governance
7. 7
Cadbury Committee
Why the Committee was set up?
• Absence of a clear framework for formal & robust internal
controls
• Inadequate faith in the ability of auditors to provide safeguards
• Lack of auditors’ ability to withstand the Board pressure
• Low level of confidence in financial reporting
8. 8
Cadbury Committee
Scope
• Responsibilities of EDs and NEDs for reviewing & reporting on
performance to shareholders
• Composition and role of Audit committee of the Board
• Principal responsibilities of auditors
• Links between shareholders, boards, and auditors
9. 9
Cadbury Committee
Code of Best Practice
• Role of Board of Directors and its composition
• Role of EDs & NEDs
• Remuneration of NEDs
• Addressing questions of financial reporting & financial controls
10. 10
Cadbury Committee
Key Recommendations
• Clear separation of the roles of Chairperson of the Board and the
CEO
• NEDs should act independently while discharging their
responsibilities
• Majority of Directors should be INED without any direct / oblique
financial interest in the company
12. 12
Kumar Mangalam Birla Committee
• Set up in May 1999
• By SEBI
• To promote and raise the standards of good corporate
governance and prepare a code to suit the Indian
corporate environment.
• Gave mandatory & non-mandatory recommendations
Tata Finance & HLL Scam
14. 14
Kumar Mangalam Birla Committee
Key Recommendations:
• Roles, procedures and composition of Board
• Clarity on meaning and responsibilities of IDs
• Composition, powers, and functions of the Audit Committee
• Role of Remuneration Committee
• Accounting standards and financial reporting
• Management reporting on SWOT, risk assessment, and internal
controls
• Shareholders’ rights and responsibilities
15. 15
CII Task Force – Chaired by Mr. Naresh Chandra
• Set up in 2009
• “Desirable Corporate Governance: A Code” – 1998 –
adopted by SEBI (clause 49 of Listing Agreement)
• Satyam episode prompted a relook at CG standards and
practices
• Advocated against overregulating
• ‘Much of best-in-class corporate governance is
voluntary’
16. 16
CII Task Force – Chaired by Mr. Naresh Chandra
Focus Elements
• Board of Directors
• Auditors
• Regulatory Agencies
• External Institutions
17. 17
CII Task Force – Chaired by Mr. Naresh Chandra
Key Recommendations
• Role of Nomination Committee
• Content of appointment letter to NEDs & IDs
• Contractual payment OR profit linked payment - “Levels of
remuneration for NEDs should reflect the time commitment and
responsibilities of the role”
• Separation of roles of Chairman & CEO, wherever possible
• Prohibition of non-audit services by statutory auditors
• Independence of auditors (revenue based)
• Whistle Blowing Policy
18. 18
Organization for Economic Cooperation &
Development (OECD)
• The Organization for Economic Cooperation and Development
(OECD) is a unique forum where the governments of more
than 30 democracies with market economies work with each
other, as well as with more than 70 non-member economies
to promote economic growth, prosperity, and sustainable
development
19. 19
Organization for Economic Cooperation &
Development (OECD)
• Corporate Governance Principles developed by the OECD in 1999
and last updated in 2004 – Global business context
• Corporate Governance Principles under revision & likely to be
endorsed by end 2015
• Corporate Governance is a means to create market confidence
and business integrity, which in turn is essential for companies
that need access to low-cost equity capital for long term
investment.
20. 20
Organization for Economic Cooperation &
Development (OECD)
• Board Responsibilities
• Timely & accurate disclosure on all material matters regarding
the Company, including the financials, ownership, and
governance of the company.
• Recognizing the rights of stakeholders established by law or
through mutual agreements
• Equitable treatment of all shareholders, including minority and
foreign shareholders