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EXECUTIVE SUMMARY
The board recognises that risk is an integral component of our business and
that creating shareholder return is the reward for taking and accepting risk.
Corporations are created as legal persons by the laws and regulations of a
particular jurisdiction. These may vary in many respects between countries,
but a corporation's legal person status is fundamental to all jurisdictions and
is conferred by statute. Need for corporate governance arises due to
separation of management from the ownership. For a firm success, it needs
to concentrate on both economical and social aspect.











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INTRODUCTION
Corporate governance is concerned with set of principles, ethics, values,
morals, rules regulations, & procedures etc. Corporate governance
establishes a system whereby directors are entrusted with duties and
responsibilities in relation to the direction of the companys affairs.
The term governance means control i.e. controlling a company, an
organization etc or a company & corporate governance is governing or
controlling the corporate bodies i.e. ethics, values, principles, morals. For
corporate governance to be good the manager needs to meet its
responsibilities towards its owners (shareholders), creditors, employees,
customers, government and the society at large. Corporate governance helps
in establishing a system where a director is showered with duties and
responsibilities of the affairs of the company.
For effective corporate governance, its policies need to be such that the
directors of the company should not abuse their power and instead should
understand their duties and responsibilities towards the company and should
act in the best interests of the company in the broadest sense.
The concept of corporate governance is not an end; its just a beginning
towards growth of company for long term prosperity.




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Different Terms of Corporate Governance
1. Cadbury Committee ( U.K.), 1992 has defined corporate governance as
such : Corporate governance is the system by which companies are directed
and controlled. It encompasses the entire mechanics of the functioning of a
company and attempts to put in place a system of checks and balances
between the shareholders, directors, employees, auditor and the
management.
2. Corporate governance is the system by which business corporations are
directed and controlled. The corporate governance structure specifies the
distribution of rights and responsibilities among different participants in the
corporation, such as, the board, managers, shareholders and spells out the
rules and procedures for making decisions on corporate affairs. By doing
this, it also provides this; it also provides the structure through which the
company objectives are set, and the means of attaining those objectives and
monitoring performance.
3. Definition of corporate governance by the Institute of Company
Secretaries of India is as under :
Corporate Governance is the application of best Management practices,
Compliance of law in true letter and spirit and adherence to ethical standards
for Effective Management and distribution of wealth and discharge of social
Responsibility for sustainable development of all stakeholders.



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NEED OF CORPORATE GOVERNANCE
Corporate governance concept emerged in India after the second half of
1996 due to economic liberalization and deregulation of industry and
business. With the changing times, there was also need for greater
accountability of companies to their shareholders and customers. The report
of Cadbury Committee on the financial aspects of corporate Governance in
the U.K. has given rise to the debate of Corporate Governance in India.
Need for corporate governance arises due to separation of management from
the ownership. For a firm success, it needs to concentrate on both
economical and social aspect. It needs to be fair with producers,
shareholders, customers etc. It has various responsibilities towards
employees, customers, communities and at last towards governance and it
needs to serve its responsibilities at the best at all aspects.
The corporate governance concept dwells in India from the Arthshastra
time instead of CEO at that time there were kings and subjects. Today,
corporate and shareholders replace them but the principles still remain same,
unchanged i.e. good governance.
20th century witnessed the glossy of Indian Economy due to liberalization,
globalization, and privatization. Indian economy for the 1st time here was
together with world economy for product, capital and lab our market and
which resulted into world of capitalization, corporate culture, business ethics
which was found important for the existence of corporation in the world
market place.

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Scope & Significance of Corporate Governance

Corporate governance is all about ethics in business. It is about transparency,
openness & fair play in all aspects of business operations. The key aspects to
corporate governance include:
1. Accountability of Board of Directors & their constituent
responsibilities to the ultimate owners- the shareholders.
2. Transparency, i.e. right to information, timeliness & integrity of the
information produced.
3. Clarity in responsibilities to enhance accountability.
4. Quality & competence of Directors and their track record.
5. Checks & balances in the process of governance.
6. Adherence to the rules, laws & spirit of codes.

An active & involved board consisting of professional & truly independent
directors plays an important role in creating trust between a company & its
investors and is the best guarantor of good corporate governance.



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Good corporate governance is integral to the very existence of a company. It
is important for the following reasons:
1. Corporate governance ensures that a properly structured Board,
capable of taking independent & objective decisions is at the helm of
affairs of the company. This lays down the framework for creating
long-term trust between the company & external providers of capital.
2. It improves strategic thinking at the top by inducting independent
directors who bring a wealth of experience & a host of new ideas.
3. It rationalizes the management & monitoring of risk that a corporation
faces globally.
4. Corporate governance emphasises the adoption of transparent
procedures & practices by the Board, thereby ensuring integrity in
financial reports.
5. It limits the liability of top management & directors, by carefully
articulating the decision making process.
6. It inspires & strengthens investors confidence by ensuring that there
are adequate number of non-executive & independent directors on the
Board, to look after the interests & well-being of all the stakeholders.
7. Corporate governance helps provide a degree of confidence that is
necessary for the proper functioning of a market economy, as it
contemplates adherence to ethical business standards.
8. Finally, globalisation of the market place has ushered in an era
wherein the quality of corporate governance has become a crucial
determinant of survival of corporates. Compatibility of corporate
governance practices with global standards has also become an
important constituent of corporate success. Thus, good corporate
governance is a necessary pre-requisite for the success of Indian
corporates.
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Important Issues in Corporate Governance
There are several important issues in corporate governance and they play a
great role, all the issues are inter related, interdependent to deal with each
other. Each issues connected with corporate governance have different
priorities in each of the corporate bodies.
The issues are listed as below:
1. Value based corporate culture: For any organization to run in effective
way, it needs to have certain ethics, values. Long run business needs to have
based corporate culture. Value based corporate culture is good practice for
corporate governance. It is a set of beliefs, ethics, principles which are
inviolable. It can be a motto i.e. A short phrase which is unique and helps in
running organization, there can be vision i.e. dream to be fulfilled, mission
and purpose, objective, goal, target.
2. Holistic view: This holistic view is more or less godly, religious attitude
which helps in running organization. It is not easier to adopt it, it needs
special efforts and once adopted it leads to developing qualities of nobility,
tolerance and empathy.
3. Compliance with laws: Those companies which really need progress,
have high ethical values and need to run long run business they abide and
comply with laws of Securities Exchange Board Of India (SEBI), Foreign
Exchange Regulation Act, Competition Act 2002, Cyber Laws, Banking
Laws etc.
4. Disclosure, transparency, and accountability: Disclosure, transparency
and accountability are important aspect for good governance. Timely and
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accurate information should be disclosed on the matters like the financial
position, performance etc. Transparency is needed in order that government
has faith in corporate bodies and consequently it has reduced corporate tax
rates from 30% today as against 97% during the late 1970s. Transparency is
needed towards corporate bodies so that due to tremendous competition in
the market place the customers having choices dont shift to other corporate
bodies.
5. Corporate Governance and Human Resource Management: For any
corporate body, the employees and staff are just like family. For a company
to be perfect the role of Human Resource Management becomes very vital,
they both are directly linked. Every individual should be treated with
individual respect, his achievements should be recognized. Each individual
staff and employee should be given best opportunities to prove their worth
and these can be done by Human Resource Department. Thus in Corporate
Governance, Human Resource has a great role.
6. Innovation: Every Corporate body needs to take risk of innovation i.e.
innovation in products, in services and it plays a pivotal role in corporate
governance.
7. Necessity of Judicial Reform: There is necessity of judicial reform for a
good economy and also in todays changing time of globalization and
liberalization. Our judicial system though having performed salutary role all
these years, certainly are becoming obsolete and outdated over the years.
The delay in judiciary is due to several interests involved in it. But then with
changing scenario and fast growing competition, the judiciary needs to bring
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reforms accordingly. It needs to speedily resolve disputes in cost effective
manner.
8. Globalization helping Indian Companies to become global giants
based on good governance: In todays age of competition and due to
globalization our several Indian Corporate bodies are becoming global giants
which are possible only due to good corporate governance.
9. Lessons from Corporate Failure: Every story has a moral to learn
from, every failure has success to learn from, in the same way, corporate
body have certain policies which if goes as a failure they need to learn from
it. Failure can be both internal as well as external whatever it may be, in
good governance, corporate bodies need to learn from their failures and need
to move to the path of success.










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STEPS IMPLEMENTED BY COMPANIES ACT WITH
REGARD TO CORPORATE GOVERNANCE

The Ministry of Company Affairs appointed various committees on the
subject of corporate governance which lead to the amendment of the
companies Act in 2000. These amendments aimed at increasing
transparency and accountabilities of the Board of Directors in the
management of the company, thereby ensuring good corporate governance.
The dealt with the following:

1. COMPLIANCE WITH ACCOUNTING STANDARDS SECTION
210A
As per this subsection inserted by the Companies Act, 1999 every profit and
loss account and balance sheet of the company shall comply with the
accounting standards. The compliance of Indian Accounting standards was
made mandatory and the provisions for setting up of National Committee on
accounting standards were incorporated in the Act.

2. INVESTORS EDUCATION AND PROTECTION FUND
SECTION 205C
This section was inserted by the Companies Act 1999which provides that the
central government shall establish a fund called the Investor Education and
protection Fund and amount credited to the fund relate to unpaid dividend,
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unpaid matured deposits, unpaid matured Debenture, unpaid application
money received by the companies for allotment of securities and due for
refund and interest accrued on above amounts.

3. DIRECTORS RESPONSIBILITY STATEMENT- SECTION
217(2AA)
Subsection (2AA)added by the Companies Act, 2000 provides that the
Boards report shall also include a Directors Responsibility statement with
respect to the following matters:
a. Whether accounting standards had been followed in the preparation of
annual accounts and reasons for material departures, if any;
b. Whether appropriate accounting policies have been applied and on
consistent basis;
c. Whether directors had made judgments and estimate that are
reasonable prudent so as to give a true and fair view of the state of
affair and profit and loss of the company;
d. Whether the directors had prepared the annual accounts on a going
concern basis.
e. Whether directors had taken proper and sufficient care for the
maintenance of adequate accounting records for safeguarding the
assets of the company.



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4. NUMBER OF DIRECTORSHIPA- SECTION 275
As per this section of Companies Act, 2000 a person cannot hold office at
same time as director in more than fifteen companies.

5. AUDIT COMMITTEES SECTION 292A
This section of the companies Act, 2000 provides for the constitution of
audit committees by every public company having a paid- up capital of Rs. 5
crores or more. Audit Committee is to consist of at least 3 directors. Two of
the members of the Audit Committee shall be directors other than managing
or whole time director. Recommendation of the Audit Committee on any
matter related to financial management including audit report shall be
binding on the Board.

6. PROHIBITION ON INVITIN OR ACCEPTING PUBLIC DPOSIT
The Companies Act, 2000 has prohibited companies to invite/accept deposit
from public.

7. SMALL DEPOSITOR- SECTIONS 58AA AND 58AAA
The Companies Act, 2000 had added two new sections, viz, section a 58AA
and 58AAA, for the protection of small depositors. These provisions are
designed to protect depositors who have invested upto Rs. 20, 000 in a
financial year in a company.
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8. CORPORATE IDENTITY NUMBER
Registrar of Companies is to allot a Corporate Identity Number to each
company registered on or after November 1, 2000 (Valid circular
No.)12/2000 dated 25-10-2000)

9. POWERS TO SEBI SECTION 22A
This section added Companies Act, 2000 empowers SEBI to administer the
provisions contained in section 44 to 48, 59 to 84, 10, 109, 110, 112, 113,
116, 117, 118, 119, 120, 121, 122, 206, 206A and 207 so far as they relate to
issue and transfer ofsecurities and non payment of dividend. However,
SEBIS power in this regard is limited to listed companies.

10. DISQUALIFICATION OF A DIRECTOR- SETION 274 CLAUSE
(G)
Clause (g) of Section 2i7i4, added by the companies Act, 200 disqualifies a
person who is already director of a public company which (a) has not filed
the annual accounts and annual returns for any continuous three financial
years commencing on and after the first day of
April 1999; or (b) has failed or repay its deposit or interest thereon on due
date or redeem its debentures on due date or pay dividend and such failure to
continues for one year or more, however, the aforesaid disqualification will
last for five years only.

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CORPORATE GOVERNANCE RATINGS
ICRA: ICRAs Corporate Governance Rating (CGR) is meant to
indicate the relative level to which an organisation accepts and
follows the codes and guidelines of corporate governance practices.
The corporate governance practices prevalent in a company reflect the
distribution of rights and responsibilities among different participants
in the organisation such as the Board, management, shareholders and
other financial stakeholders, and the rules and procedures laid down
and followed for making decisions on corporate affairs. The emphasis
of ICRAs CGR is on a corporates business practices and quality of
disclosure standards that address the requirements of the regulators
and are fair and transparent for its financial stakeholders. The
emphasis of ICRAs Stakeholder Value and Governance (SVG)
Rating, on the other hand, is on value creation and value management
for all stakeholders of a company, besides the companys corporate
governance practices. An SVG Rating considers a companys actual
performance and the accrual of the benefits of such performance
among all its stakeholders, apart from the quality of the companys
corporate governance practices. It is the combined assessment of
stakeholder value creation and management and the quality of
corporate governance practices that determines the SVG Rating.
ICRAs CGR and SVG Ratings may help the Rated corporate entity in
raising funds; listing on the stock exchange; dealing with third parties
like creditors; providing comfort to regulators; improving
image/credibility; improving valuation; and bettering corporate
governance practices through benchmarking.
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GVC Ratings: A pioneering product CRISIL GVC (Governance &
Value Creation) assesses corporate governance practices at companies
with respect to their impact on all stakeholders who deal with the
company such as employees, suppliers, shareholders, lenders and
society. CRISIL's analysis of corporate failures reveals that they are
largely attributable to shortcomings in corporate governance practices.
The broad areas of failure are:

Accounting frauds carried out in collusion with statutory
auditors
Lack of independence of the board with board members having
significant financial linkages with the companies
Insider trading
Disproportionate compensation paid to executive board
members and senior management
Fiduciary failure by the board to exercise care and diligence in
approving proposals, even though all the information was
provided by the management
Weak internal control mechanisms and lack of supervision
Corporate governance has thus become a critical area of focus
for various market participants and stakeholders.
Corporate governance is about commitment to values and
ethical business conduct. Good corporate governance is
reflected in fair, transparent and responsible interactions
between a company's management, its board of directors,
shareholders and other stakeholders.
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CARE : CAREs Corporate Governance Rating (CGR) is an opinion
on relative standing of an entity with regard to adoption of corporate
governance practices. It provides information to stakeholders about
the level of corporate governance practices of the entity. It enables
corporate entities to obtain an independent and credible assessment of
the quality and extent of their corporate governance. The rating
process would also determine the relative standing of the entity vis--
vis the best practices followed in the domestic as well as international
arena. Companies can also use these ratings as reference and set
benchmarks for further improvements. Investors and other
stakeholders get benefited as they are able to differentiate companies
based on degree of corporate governance.










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SUGGESTIONS AND OPINIONS
Corporations are the prominent players in the global markets.
They are mainly responsible for generating majority of economic activities
in the world, ranging from goods and services to capital and resources. The
essence of corporate governance is in promoting and maintaining integrity,
transparency and accountability in the management of the company as well
as in manifestation of the values, principles and policies of a corporation.
Many efforts are being made, both at the Centre and the State
level, to promote adoption of good corporate governance practices, which
are the integral element for doing and managing business. However, the
concepts and principles of good governance are still not clearly known to the
Indian business set up.
Hence, there is a greater need to increase awareness among
entrepreneurs about the various aspects of corporate governance. There are
some of the areas that need special attention, namely:-
o Quality of audit, which is at the root of effective corporate
governance;
o Role of Board of Directors as well as accountability of the
CEOs and CFOs;
o Quality and effectiveness of the legal, administrative and
regulatory framework; etc.
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That is, it is necessary to provide the corporates desired level of comfort in
compliance with the code, principles and requirements of corporate
governance; as well as provide relevant information to all stakeholders
regarding the performance, policies and procedures of the company in a
transparent manner. There should be proper financial and non-financial
disclosures by the companies, such as, about remuneration package,
financial reporting, auditing, internal controls, etc.














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CLAUSE 49 OF THE LISTING AGREEMENT
SEBI revise Clause 49 of the Listing Agreement pertaining to corporate
governance vide circular date October 29th, 2004, which superseded all
other earlier circulars issued by SEBI on this subject. All existing listed
companies were required to comply with the provisions of the new clause by
31st December 2005.
The major provisions included in the new Clause 49 are:
The board will lay down a code of conduct for all board members and
senior management of the company to compulsorily follow.
The CEO an CFO will certify the financial statements and cash flow
statements of the company.
If while preparing financial statements, the company follows a
treatment that is different from that prescribed in the accounting
standards, it must disclose this in the financial statements, and the
management should also provide an explanation for doing so in the
corporate governance report of the annual report.
The company will have to lay down procedures for informing the
board members about the risk management and minimization
procedures.
Where money is raised through public issues etc., the company will
have to disclose the uses/ applications of funds according to major
categories ( capital expenditure, working capital, marketing costs etc)
as part of quarterly disclosure of financial statements.
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Further, on an annual basis, the company will prepare a statement of funds
utilized for purposes other than those specified in the offer document/
prospectus and place it before the audit committee.
The company will have to publish its criteria for making its payments to
non-executive directors in its annual report. Clause 49 contains both
mandatory and non mandatory requirements.

Mandatory requirements refer primarily to:
1. Board of Directors with respect to their composition, independence,
procedures, code of conduct and disclosures;
2. Audit Committee and its composition, powers, role and
responsibilities;
3. Subsidiary Companies to ensure their better control and supervision;
4. Disclosures in the context of related party transctions, risk
management and minimization procedures, utilization of proceeds
from Initial Public Offerings, inverstor education and protection;
5. CEO/CFO certification regarding the correction of the financial
statement and compliance with prescribed Accounting Standards
6. Separate report on corporate Governance in the annual reports with
respects to compliance of mandatory and non mandatory
requirements; and
7. Compliance certificate obtained either from the auditors or practicing
company Secretaries

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Non mandatory requirements refer to those requirements which are not
compulsory and can be adopted at the discretion of the company.
These include requirements:
1. Regarding the maximum tenure of the independent directors,
2. Formation of a remuneration committee for determining the
remuneration packages for executives directors,
3. Moving towards a regime of unqualified financial statements,
4. Training of board members,
5. Evaluation of non executive board members, and
6. Establishing a mechanism for employees to report unethical behavior
to the management under a Whistle Blower Policy.









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BIBLIOGRAPHY

http://business.gov.in/corporate_governance/concept_objectivess.php
http://business.gov.in/corporate_governance/index.php
www.careratings.com
www.icra.in
www.crisil.com
http://www.indiacsr.in/en/corporate-governance-in-india-past-present-
future
http://profit.ndtv.com/news/corporates/article-sebi-issues-new-
corporate-governance-norms-385870