CHAPTER-1 INTRODUCTION

1.1 PERSPECTIVE
The concept of "governance" is not new. It is as old as human civilization. Simply put "governance"
means: the process of decision-making and the process by which decisions are implemented (or not
implemented). Governance can be used in several contexts such as corporate governance, international
governance, national governance and local governance. Since governance is the process of decision
making and the process by which decisions are implemented, an analysis of governance focuses on the
formal and informal actors involved in decision-making and implementing the decisions made and the
formal and informal structures that have been set in place to arrive at and implement the decision.

FIG 1 CHARECTERSTICS OF GOOD GOVERNANCE

Good governance has 8 major characteristics. It is participatory, consensus oriented, accountable,
transparent, responsive, effective and efficient, equitable and inclusive and follows the rule of law. It
assures that corruption is minimized, the views of minorities are taken into account and that the voices of
the most vulnerable in society are heard in decision-making. It is also responsive to the present and future
needs of society.

PARTICIPATORY:
Participation by both men and women is a key cornerstone of good governance. Participation could be
either direct or through legitimate intermediate institutions or representatives. It is important to point out
that representative democracy does not necessarily mean that the concerns of the most vulnerable in
society would be taken into consideration in decision making. Participation needs to be informed and
organized. This means freedom of association and expression on the one hand and an organized civil
society on the other hand.
Case-let:
Initiatives such as talent review and job rotation systems, continuous improvement and value engineering
programs, tools such as video conferencing, 'MD Online', special dialogues with senior management,
meetings, conferences and seminars have helped to build a homogeneous and focused team at Tata Steel,
increasing motivation and binding to the vision of the company, and spurred employees to deliver targets
on a participatory management basis leading to ownership of processes.
RULE OF LAW:
Many institutions identify a fair, impartial, and accessible justice system and a representative government
as key elements of the rule of law. The term rule of law is used to mean independent, efficient, and
accessible judicial and legal systems, with a government that applies fair and equitable laws equally,
consistently, coherently, and prospectively to all of its people.
Indeed, the strength of the rule of law is the best predictor of a countrys economic success. Furthermore,
deficiency in the rule of law encourages high rates of corruption, with further devastating consequences
on the confidence of economic actors.
TRANSPARENCY:
Transparency means that decisions taken and their enforcement are done in a manner that follows rules
and regulations. It also means that information is freely available and directly accessible to those who will
be affected by such decisions and their enforcement. It also means that enough information is provided
and that it is provided in easily understandable forms and media.
Case-let:
Airtel was ranked fourth across Asia and Africa in a list of 100 emerging market multinational companies
as part of a study on corporate transparency and reporting by Transparency International. The Companies
were ranked on three parameters:

 Reporting on anti-corruption programmes: covering inter alia bribery, facilitation payments, whistleblower protection and political contributions.
Organisational transparency: including information about corporate holdings.
Country-by-country reporting: including revenues, capital expenditure and tax payments.
Bharti Airtel scored 85% on Reporting on anti-corruption programmes against an average score of 46%.
The score for Organisational Transparency was 75% vs the average score of 54% and for Country-byCountry reporting it was 34% vs the average of 9%.
RESPONSIVENESS:
Good governance requires that institutions and processes try to serve all stakeholders within a reasonable
timeframe.
Case-let:
Wipro won the most ethical company of the world 2015 award by the Ethisphere Institute.
Wipro Cares is Wipros community initiative focused on certain key developmental issues faced by
underserved and underprivileged communities. It is a trust formed in the year 2003 that seeks to work
with communities proximate to Wipros center of operations. Wipro Cares is currently engaged in 16
projects across India. Through seven of its health care projects in four states of India Wipro Cares is
providing more than 75000 people in 53 villages access to primary health care.
More than 47000 children benefit from the five education projects in five Indian cities. Their project in
social forestry has helped plant more than a lakh trees, and has at the same time provided livelihood to
around 80 farmers. Their projects in disaster rehabilitation have helped rebuild the lives of people affected
by Karnataka Floods, Bihar Floods, Japan Tsunami, Hurricane Sandy, Philippines Cyclone, Uttarakhand
Floods, Odisha Floods and many more. Employee engagement is an integral part of Wipro Cares where
they encourage employees to volunteer with their partners, acting thus as catalysts in bringing about
positive change.
CONSENSUS ORIENTED:
There are several actors and as many viewpoints in a given society. Good governance requires mediation
of the different interests in society to reach a broad consensus in society on what is in the best interest of
the whole community and how this can be achieved. It also requires a broad and long-term perspective on
what is needed for sustainable human development and how to achieve the goals of such development.
This can only result from an understanding of the historical, cultural and social contexts of a given society
or community.

EQUITY AND INCLUSIVENESS:

A societys wellbeing depends on ensuring that all its members feel that they have a stake in it and do not
feel excluded from the mainstream of society.
Case-let:
Tata Consultancy Services is the biggest employer of women in India. Out of the 3.06 lakh strong
workforce, more than 1 lakh employees are women. The company firmly believes in gender equality and
giving similar opportunities for men and women as far as recruitment and promotions are concerned.
EFFECTIVE AND EFFICIENCY:
Good governance means that processes and institutions produce results that meet the needs of society
while making the best use of resources at their disposal. The concept of efficiency in the context of good
governance also covers the sustainable use of natural resources and the protection of the environment.
Case-let:
HUL: Project aims to create sustainable supply chains across 38 districts of India.
Solidaridad and Hindustan Unilever Foundation (HUF) have jointly launched one of the largest water
linked sustainable supply chain interventions in India that aims to cumulatively and collectively save 0.4
to 1 trillion litres of water through sustainable agriculture. The programme aims to create large-scale
water saving mechanisms that touch 779 thousand workers and farmers engaged in sugarcane, cotton, soy
and tea sub-sectors. The project will develop an accurate water measurement mechanism through a
practical and credible water foot-printing exercise.
ACCOUNTABILITY:
Accountability is a key requirement of good governance. Not only governmental institutions but also the
private sector and civil society organizations must be accountable to the public and to their institutional
stakeholders. In general an organization or an institution is accountable to those who will be affected by
its decisions or actions. Accountability cannot be enforced without transparency and the rule of law.
Case-let:
One of our other key initiatives is built around our commitment of reducing our carbon footprint. We have
embraced Unilever's ambitious target of 25% reduction in CO2 from energy in manufacturing operations
per tonne of production by 2014, against a baseline of 2004. HUL developed a new process of
manufacturing soap based on 'Plough Share Mixer' technology. This eliminates the need for steam in soap

making. Since soaps are a sizeable part of our business, the new technology cuts carbon emissions by
15,000 tons per year.

1.2 BRIEF HISTORY OF GOVERNANCE

The term governance was first used in the sense in which it is deployed today by the World Bank
in a 1989 report on African economies. Trying to account for the failure of its Structural Adjustment
Programmes (SAPs), the World Bank put the blame on a crisis of governance.
But crisis of governance doesnt convey much unless one defines governance. The World Bank
initially defined it simply as the exercise of political power to manage a nations affairs. This early
definition is quite indicative of the animating logic and future discursive career of governance: it is silent
on the legitimacy or otherwise of the political power in question. So whether the Banks client was a
democracy or a dictatorship didnt matter. What mattered for governance is that efficient management
must trump politics. Efficient management, just to be clear, means the withdrawal of the state in favour of
the market. Over the years, the World Bank expanded its governance model to include elements of a
liberal democracy, such as a legal framework for enforcement of contracts, accountability, etc. At the
same time, it brokered a marriage between governance and development. Nations deemed to be in need of
development could now be told that the only way to get development is through governance that
is, by embracing the free market.
But for this, it was necessary to first create a demand for good governance. That meant identifying the
markers of bad governance. Unfortunately, what constitutes bad governance in the neo-liberal text
book an activist state trying to even out socio-economic disparities through distributive justice is
rather popular among the masses, especially the poor. In an electoral democracy, a direct attack on
welfare was never going to resonate beyond the rich and middle-classes, as successive governments in
India have found to their cost.

1.3 PRIVATE SECTOR ENGAGEMENT FOR GOOD GOVERNANCE

India was a latecomer to economic reforms, embarking on the process in earnest only in 1991, in the
wake of an exceptionally severe balance of payments crisis. The need for a policy shift had become
evident much earlier, as many countries in East Asia achieved high growth and poverty reduction through
policies which emphasized greater export orientation and encouragement of the private sector. India took
some steps in this direction in the 1980s, but it was not until 1991 that the government signalled a
systemic shift to a more open economy with greater reliance upon market forces, a larger role for the
private sector including foreign investment, and a restructuring of the role of government.

CHAPTER-2 CORPORATE GOVERNANCE IN

INDIA
2.1 CONCEPTUAL FRAMEWORK
Corporate governance involves a set of relationships amongst the companys management, its board of
directors, its shareholders, its auditors and other stakeholders. These relationships, which involve various
rules and incentives, provide the structure through which the objectives of the company are set, and the
means of attaining these objectives as well as monitoring performance are determined. Thus, the key
aspects of good corporate governance include transparency of corporate structures and operations; the
accountability of managers and the boards to shareholders; and corporate responsibility towards
stakeholders.
While corporate governance essentially lays down the framework for creating long-term trust between
companies and the external providers of capital, it would be wrong to think that the importance of
corporate governance lies solely in better access of finance. Companies around the world are realizing
that better corporate governance adds considerable value to their operational performance:

It improves strategic thinking at the top by inducting independent directors who bring a wealth of

experience, and a host of new ideas

It rationalizes the management and monitoring of risk that a firm faces globally
It limits the liability of top management and directors, by carefully articulating the decision making

process
It assures the integrity of financial reports
It has long term reputational effects among key stakeholders, both internally and externally

In a broader sense, however, good corporate governance- the extent to which companies is run in an open
and honest manner- is important for overall market confidence, the efficiency of capital allocation, the
growth and development of countries industrial bases, and ultimately the nations overall wealth and
welfare.

CHAPTER-3 Principles of Corporate

Governance
G20/OECD Principles of Corporate Governance
Key Points

Ensuring the basis for an effective corporate governance framework;

A. The corporate governance framework should be developed with a view to its impact on overall
economic performance, market integrity and the incentives it creates for market participants and
the promotion of transparent and well-functioning markets.
B. The legal and regulatory requirements that affect corporate governance practices should be
consistent with the rule of law, transparent and enforceable.
C. The division of responsibilities among different authorities should be clearly articulated and
designed to serve the public interest.
D. Stock market regulation should support effective corporate governance.
E. Supervisory, regulatory and enforcement authorities should have the authority, integrity and
resources to fulfil their duties in a professional and objective manner. Moreover, their rulings
should be timely, transparent and fully explained.
F. Cross-border co-operation should be enhanced, including through bilateral and multilateral
arrangements for exchange of information.

The rights and equitable treatment of shareholders and key ownership functions;
A. Basic shareholder rights should include the right to:
1. Secure methods of ownership registration;
2. Convey or transfer shares;
3. Obtain relevant and material information on the corporation on a timely and regular basis;
4. Participate and vote in general shareholder meetings;
5. Elect and remove members of the board; and
6. Share in the profits of the corporation.
B. Shareholders should be sufficiently informed about, and have the right to approve or participate in,
decisions concerning fundamental corporate changes such as:
1. Amendments to the statutes, or articles of incorporation or similar governing documents of the
company;
2. The authorisation of additional shares; and

3. Extraordinary transactions, including the transfer of all or substantially all assets that in effect
result in the sale of the company.
C. Shareholders should have the opportunity to participate effectively and vote in general shareholder
meetings and should be informed of the rules, including voting procedures that govern general
shareholder meetings:
1. Shareholders should be furnished with sufficient and timely information concerning the date,
location and agenda of general meetings, as well as full and timely information regarding the
issues to be decided at the meeting.
2. Processes and procedures for general shareholder meetings should allow for equitable
treatment of all shareholders. Company procedures should not make it unduly difficult or
expensive to cast votes.
3. Shareholders should have the opportunity to ask questions to the board, including questions
relating to the annual external audit, to place items on the agenda of general meetings,
and to
propose resolutions, subject to reasonable limitations.
4. Effective shareholder participation in key corporate governance decisions, such as the
nomination and election of board members, should be facilitated. Shareholders should be able to
make their views known, including through votes at shareholder meetings, on the remuneration of
board members and/or key executives, as applicable. The equity component of compensation
schemes for board members and employees should be subject to shareholder approval.
5. Shareholders should be able to vote in person or in absentia, and equal effect should be given
to votes whether cast in person or in absentia.
6. Impediments to cross border voting should be eliminated.
D. Shareholders, including institutional shareholders, should be allowed to consult with each other on
issues concerning their basic shareholder rights as defined in the Principles, subject to exceptions to
prevent abuse.
E. All shareholders of the same series of a class should be treated equally. Capital structures and
arrangements that enable certain shareholders to obtain a degree of influence or control
disproportionate to their equity ownership should be disclosed.
1. Within any series of a class, all shares should carry the same rights. All investors should be
able to obtain information about the rights attached to all series and classes of shares before they
purchase. Any changes in economic or voting rights should be subject to approval by those
classes of shares which are negatively affected.
2. The disclosure of capital structures and control arrangements should be required.
F. Related-party transactions should be approved and conducted in a manner that ensures proper
management of conflict of interest and protects the interest of the company and its shareholders.
1. Conflicts of interest inherent in related-party transactions should be addressed.
2. Members of the board and key executives should be required to disclose to the board whether
they, directly, indirectly or on behalf of third parties, have a material interest in any transaction or
matter directly affecting the corporation.

G. Minority shareholders should be protected from abusive actions by, or in the interest of,
controlling shareholders acting either directly or indirectly, and should have effective means of
redress. Abusive self-dealing should be prohibited.
H. Markets for corporate control should be allowed to function in an efficient and transparent manner.
1. The rules and procedures governing the acquisition of corporate control in the capital markets,
and extraordinary transactions such as mergers, and sales of substantial portions of corporate
assets, should be clearly articulated and disclosed so that investors understand their rights and
recourse. Transactions should occur at transparent prices and under fair conditions that protect the
rights of all shareholders according to their class.
2. Anti-take-over devices should not be used to shield management and the board from
accountability.

Institutional investors, stock markets and other intermediaries;

A. Institutional investors acting in a fiduciary capacity should disclose their corporate governance and
voting policies with respect to their investments, including the procedures that they have in place for
deciding on the use of their voting rights.
B. Votes should be cast by custodians or nominees in line with the directions of the beneficial owner
of the shares.
C. Institutional investors acting in a fiduciary capacity should disclose how they manage material
conflicts of interest that may affect the exercise of key ownership rights regarding their investments.
D. The corporate governance framework should require that proxy advisors, analysts, brokers, rating
agencies and others that provide analysis or advice relevant to decisions by investors, disclose and
minimise conflicts of interest that might compromise the integrity of their analysis or advice.
E. Insider trading and market manipulation should be prohibited and the applicable rules enforced.
F. For companies who are listed in a jurisdiction other than their jurisdiction of incorporation, the
applicable corporate governance laws and regulations should be clearly disclosed. In the case of cross
listings, the criteria and procedure for recognising the listing requirements of the primary listing
should be transparent and documented.
G. Stock markets should provide fair and efficient price discovery as a means to help promote
effective corporate governance.

The role of stakeholders in corporate governance;

A. The rights of stakeholders that are established by law or through mutual agreements are to be
respected.

B. Where stakeholder interests are protected by law, stakeholders should have the opportunity to
obtain effective redress for violation of their rights.
C. Mechanisms for employee participation should be permitted to develop.
D. Where stakeholders participate in the corporate governance process, they should have access to
relevant, sufficient and reliable information on a timely and regular basis.
E. Stakeholders, including individual employees and their representative bodies, should be able to
freely communicate their concerns about illegal or unethical practices to the board and to the
competent public authorities and their rights should not be compromised for doing this.
F. The corporate governance framework should be complemented by an effective, efficient insolvency
framework and by effective enforcement of creditor rights.

Disclosure and transparency;

A. Disclosure should include, but not be limited to, material information on:
1. The financial and operating results of the company.
2. Company objectives and non-financial information.
3. Major share ownership, including beneficial owners, and voting rights.
4. Remuneration of members of the board and key executives.
5. Information about board members, including their qualifications, the selection process, other
company directorships and whether they are regarded as independent by the board.
6. Related party transactions.
7. Foreseeable risk factors.
8. Issues regarding employees and other stakeholders.
9. Governance structures and policies, including the content of any corporate governance code or
policy and the process by which it is implemented.
B. Information should be prepared and disclosed in accordance with high quality standards of
accounting and financial and non-financial reporting.
C. An annual audit should be conducted by an independent, competent and qualified, auditor in
accordance with high-quality auditing standards in order to provide an external and objective
assurance to the board and shareholders that the financial statements fairly represent the financial
position and performance of the company in all material respects.
D. External auditors should be accountable to the shareholders and owe a duty to the company to
exercise due professional care in the conduct of the audit.
E. Channels for disseminating information should provide for equal, timely and cost-efficient access
to relevant information by users.

The responsibilities of the board;

A. Board members should act on a fully informed basis, in good faith, with due diligence and care
and in the best interest of the company and the shareholders.
B. Where board decisions may affect different shareholder groups differently, the board should treat
all shareholders fairly.
C. The board should apply high ethical standards. It should take into account the interests of
stakeholders.
D. The board should fulfil certain key functions, including:
1. Reviewing and guiding corporate strategy, major plans of action, risk management policies and
procedures, annual budgets and business plans; setting performance objectives; monitoring
implementation and corporate performance; and overseeing major capital expenditures,
acquisitions and divestitures.
2. Monitoring the effectiveness of the companys governance practices and making changes as
needed.
3. Selecting, compensating, monitoring and, when necessary, replacing key executives and
overseeing succession planning.
4. Aligning key executive and board remuneration with the longer term interests of the company
and its shareholders.
5. Ensuring a formal and transparent board nomination and election process.
6. Monitoring and managing potential conflicts of interest of management, board members and
shareholders, including misuse of corporate assets and abuse in related party transactions.
7. Ensuring the integrity of the corporations accounting and financial reporting systems,
including the independent audit, and that appropriate systems of control are in place, in particular,
systems for risk management, financial and operational control, and compliance with the law and
relevant standards.
E. The board should be able to exercise objective independent judgement on corporate affairs.
1. Boards should consider assigning a sufficient number of nonexecutive board members capable
of exercising independent judgement to tasks where there is a potential for conflict of interest.
Examples of such key responsibilities are ensuring the integrity of financial and non-financial
reporting, the review of related party transactions, nomination of board members and key
executives, and board remuneration.
2. Boards should consider setting up specialised committees to support the full board in
performing its functions, particularly in respect to audit, and, depending upon the companys size
and risk profile, also in respect to risk management and remuneration. When committees of the
board are established, their mandate, composition and working procedures should be well defined
and disclosed by the board.
3. Board members should be able to commit themselves effectively to their responsibilities.
4. Boards should regularly carry out evaluations to appraise their performance and assess whether
they possess the right mix of background and competences.
F. In order to fulfil their responsibilities, board members should have access to accurate, relevant and
timely information.

G. When employee representation on the board is mandated, mechanisms should be developed to

facilitate access to information and training for employee representatives, so that this representation is
exercised effectively and best contributes to the enhancement of board skills, information and
independence.

CHAPTER 4 -CLAUSE 49 of Listing Agreement

4.1 Board of Directors (Clause 49 I)
Composition of Board - Clause 49 (IA)

The Board of directors of the company shall have an optimum combination of executive and nonexecutive directors with not less than fifty percent of the board of directors comprising of non-

executive directors.
Where the Chairman of the Board is a non-executive director, at least one-third of the Board should
comprise of independent directors and in case he is an executive director, at least half of the Board

should comprise of independent directors.

The 1956 Act provided that the limit for maximum number of directors be based on its articles or
twelve whichever is lower. This has been done to bring more flexibility and enable companies to get

more experienced and competent personnel at the Board level.

Appointment of at least one woman director on the Board has been made mandatory. This provision

has been introduced to make the Board more gender sensitive.

All listed companies must have at least one director who has been elected by small shareholders. This
provision is to safeguard the interest of small investors in the company. This director might act as the
representative of the small investors.

When the Act was introduced in 2013, a one year period was given to all the companies to comply with
these rules.
Independent director

A person who does not have any peculiar monetary interest in the company, apart from the director

fees that he or she receives.

A person who does not have any relationship with the companys promotors, its directors, its senior

management or its holding company, its subsidiaries and associates

A person has not been an executive of the company in the immediately preceding three financial years
A person who is not a material supplier, service provider or customer or a lessor or lessee of the

company
He should not own more than 2 percent of shares with voting rights.

Case:
Ireena Vittals exit from Axis Bank

Ireena Vittal was an independent director on the Board of Axis Bank. She was entitled to hold her position
till 2019. Her husband Gopal Vittal is the CEO of Bharti, which won a payment bank licence in
partnership with Kotak Mahindra Bank. Axis Bank being a direct competitor of Kotak Mahindra Bank,
officials of at Axis Bank said Mrs. Vittal resigned voluntarily citing this conflict of interest. Though
industry stalwarts have questioned the resignation of Vittal saying that such conflict of interest is
farfetched.
Coal India

Coal India limited is in non-compliance with clause 49 of listing agreement. In 2014, Coal India
had 12 members in the board; currently the composition of board shrank to 6, which is in
violation of SEBI norms of corporate governance. The lack of IDs mean Coal India was not
being able to form the statutorily mandated board committees that must have an ID (audit
committee, nomination and remuneration committee, and corporate social responsibility
committee).Government was in process of divesting 10% stake in its shareholding in this fiscal.
But due to non-compliance of CG norms, it went with indian oil divestment programme. The
government must take its role as a promoter seriously and stop making board appointments a
bureaucratic process or using them for politicking. The government needs to look at listed public
sector units differently from its unlisted ones and accept that non-promoter shareholders also
have rights and expect governance standards that are at least aligned to, if not better than, other
listed companies
BASF
Multinational company BASF India has appointed Germany-based Andrea Frenzel as a non-executive
director to comply with the law on having women directors on company boards. On that day it appointed
N J Baliga an alternate director to attend meetings in place of Frenzel. BASF argues appointment of
alternate directors under the Companies Act and it did not alter board composition. Appointment of man
inplace of sole women director cant be deemed as compliance with the law.

Non-executive directors compensation and disclosures- Clause 49 (IB)

All fees/compensation, if any paid to non-executive directors, including independent directors, shall be
fixed by the Board of Directors and shall require previous approval of shareholders in general meeting.

The shareholders resolution shall specify the limits for the maximum number of stock options that can be
granted to non-executive directors, including independent directors, in any financial year and in aggregate

Other provisions as to Board and Committees- Clause 49 (IC)

The board shall meet at least four times a year, with a maximum time gap of three months between

any two meetings.

A director shall not be a member in more than 10 committees or act as Chairman of more than five
committees across all companies in which he is a director.

Code of Conduct- Clause 49 (ID)

The Board shall lay down a code of conduct for all Board members and senior management of the

company. The code of conduct shall be posted on the website of the company.
All Board members and senior management personnel shall affirm compliance with the code on an
annual basis. The Annual Report of the company shall contain a declaration to this effect signed by
the CEO.

Stricter Secretarial Practices

The Companies Act, 2013 has made it compulsory for all companies to serve a 7 day notice to all the
directors before the meeting, to make sure that all the members are prepared to discuss all the aspects

about the companys affairs and make appropriate decisions.

The Act also mentions the compulsion for at least 1 independent director at every board meeting that
would ensure that all decisions taken in the meeting are in the interest of the company.

Non-Mandatory Requirements- Annexure I D

The Board
Independent Directors may have tenure of not more than nine years, on the Board of a company.
Remuneration Committee
Companies may set up Remuneration Committees, that will decide the compensation and benefits that the
Board of Directors will receive. This committee may comprise of at least three directors, all of whom
should be non-executive directors, the Chairman of committee being an independent director. This can be
done to ensure that the Directors act in the interest of the company and do not misuse their dominant
position in decision making process.

The Chairman of the remuneration committee could be present at the Annual General Meeting, to answer
the shareholder queries. However, it would be up to the Chairman of the Board to decide who should
answer the queries.
Training of Board Members
The independent Directors may not be well versed with the business model of the company. This might
hamper their ability to take appropriate decisions for the company. A company may train its Board
members in the business model of the company as well as the risk profile of the business parameters of
the company, their responsibilities as directors, and the best ways to discharge them.
Mechanism for evaluating non-executive Board Members
The performance evaluation of non-executive directors could be done by a peer group comprising the
entire Board of Directors, excluding the director being evaluated and Peer Group evaluation could be the
mechanism to determine whether to extend / continue the terms of appointment of non-executive
directors.
Whistle Blower Policy
The company may establish a mechanism for employees to report to the management concerns about
unethical behaviour, actual or suspected fraud or violation of the companys code of conduct or ethics
policy.

4.2 Audit Committee (Clause 49 II)

Qualified and Independent Audit Committee - Clause 49 (IIA)
The audit committee has to be set up taking into account the following norms:

The audit committee shall have minimum three directors as members. Two-thirds of the members of

the committee shall be independent directors.

All members of the committee shall be financially literate and at least one member shall have
accounting or related financial management expertise.

The term financially literate means the ability to read and understand basic financial statements i.e.
balance sheet, profit and loss account and cash flow statement.
A person who possesses experience in finance or accounting, or requisite professional certification in
accounting, or any other comparable experience or background which results in the individuals financial
sophistication, including being a chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities is a person with accounting or financial management expertise.

The Chairman of the Committee shall be an Independent Director

The Chairman of the Committee shall be present at Annual General Meeting to answer shareholder

queries
The Committee may invite such of the executives, as it considers appropriate (and particularly the
head of the finance function) to be present at the meetings of the committee, but on occasions it may
also meet without the presence of any executives of the company. The finance director, head of
internal audit and a representative of the statutory auditor may be present as invitees for the meetings

of the audit committee

The Company Secretary shall act as the secretary to the committee.

Meeting of Audit Committee - Claus 49 (IIB)

The audit committee should meet at least four times a year and not more than four months shall lapse
between two meetings. The quorum shall be either two members or one third of the members of the
committee whichever is greater, but there should be a minimum of two independent members present.

Powers of Audit Committee - Clause 49 (IIC)

The audit committee shall have following powers:

To investigate any activity within its terms of reference.

To seek information from any employees.
To obtain outside legal or other professional advice.
To secure attendance of outsiders with relevant expertise.

These powers are only illustrative and not exhaustive. The auditor should check whether the terms of
reference of the audit committee have been suitably framed mentioning the above powers. It is mandatory
for the above powers to be vested in the audit committee. The Board may delegate/ vest further power to
the committee.

Role of Audit Committee - Clause 49 (IID)

The role of the audit committee includes the following:

Oversight of the companys financial reporting process and the disclosure of its financial information

to ensure that the financial statement is correct, sufficient and credible.

Recommending the appointment and removal of external auditors, fixation of audit fee and approval

for payment of any other services.

Reviewing with management the annual financial statements before submission to the Board,
focusing primarily on:
o

Any changes in Accounting policies and/or practices

Major accounting entries based on exercise of judgements by management

Qualification in draft audit report

Significant adjustment arising out of audit

The going concern assumption

Compliance with accounting standards

Compliance with stock exchanges and legal requirement concerning financial statements

Any related party transactions

Reviewing with the management, external and internal auditors, and the adequacy of internal control

system.
Reviewing the adequacy of internal audit function, if any including the structure of the internal audit
department, staffing and seniority of the official heading the department, reporting structure coverage

and frequency of internal audit.

Discussion with internal auditors any significant findings and follow-up thereon.
Reviewing the findings of any internal investigation by the internal auditors into matters where there
is suspected fraud or irregularity or a failure of internal control systems of a material nature and

reporting the matter to the Board.

Discussion with external auditors before the audit commences, nature and scope of audit as well as

have post audit discussion to ascertain any area of concern.

Reviewing the companys financial and risk management policies.
To look into the reasons for substantial defaults in the payment to the depositors, debenture holders,

shareholders (in case of non-payment of declared dividend) and creditors.

Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.

Functions of the Audit Committee

The Audit Committee performs various important functions like investigating the matters referred by
board, discuss about internal control system etc. The sub-section 6 & 7 of Section 292A are reproduced
hereunder which specify the functions of the audit committee:
The Audit Committee should have discussions with the auditors periodically about internal control
systems, the scope of audit including the observations of the auditors and review the half-yearly and
annual financial statements before submission to the Board and also ensure compliance of internal control
systems.
The Audit Committee shall have authority to investigate into any matter in relation to the items specified
in this section or referred to it by the Board and for this purpose, shall have full access to information
contained in the records of the company and external professional advice, if necessary.
Review of Information by Audit Committee
The Audit Committee shall mandatorily review the following information as per Clause 49 II (E):

Management discussion and analysis of financial condition and results of operations;

Statement of significant related party transactions (as defined by the audit committee), submitted by
management;

Management letters / letters of internal control weaknesses issued by the statutory auditors;

Internal audit reports relating to internal control weaknesses; and

The appointment, removal and terms of remuneration of the Chief internal auditor shall be subject to
review by the Audit Committee.

The auditor should ascertain from the minutes book of the audit committee and other sources like agenda
papers, etc. whether the audit Committee has reviewed the above-mentioned information. The auditor
should ascertain whether as a part of directors report or as an addition thereto, a management discussion
and analysis report forms part of the annual report to the shareholders. Under the old Clause 49, this was
specifically mandated, but now not spelt out clearly. The auditor should further ascertain whether the
management discussion and analysis includes discussion on the matters stipulated in this sub-clause.
Where certain deficiencies or adverse findings

are

noted by the audit committee, the auditor will be

required to see that these have been suitably dealt with by the management in the Report on Corporate
Governance.
The auditor should ascertain that the information reviewed by the Audit Committee is consistent with the
reporting in the financial statements including those drawn up giving segment wise break-up for
compliance of AS 17 (Segment Reporting).

4.3 Subsidiary Companies (Clause 49 III)

At least one independent director on the Board of Directors of the holding company shall be a director on
the Board of Directors of a material non-listed Indian subsidiary company.

Material non listed Indian subsidiary basically means that an unlisted subsidiary company whose net
worth exceeds 20% of the consolidated net worth of the listed company and its subsidiaries in the
preceding accounting year.

The Audit Committee of the listed holding company shall also review the financial statements, in
particular, the investments made by the unlisted subsidiary company.

It means that the subsidiary company should report its transactions to the holding company if it
exceeds 10% of the total revenue or total expenses or total assets or total liabilities which will be
reviewed by the holding company.

The minutes of the Board meetings of the unlisted subsidiary company shall be placed at the Board
meeting of the listed holding company. The management should periodically bring to the attention of the
Board of Directors of the listed holding company, a statement of all significant transactions and
arrangements entered into by the unlisted subsidiary company.

Where a listed holding company has a listed subsidiary which is itself a holding company, the above
provisions shall apply to the listed subsidiary insofar as its subsidiaries are concerned.

4.4 Disclosures (Clause 49 IV)

Basis of related party transactions Clause 49 (IVA)

A statement in summary form of transactions with related parties in the ordinary course of business

shall be placed periodically before the audit committee.

Details of material individual transactions with related parties which are not in the normal course of

business shall be placed before the audit committee.

Details of material individual transactions with related parties or others, which are not on an arms
length basis should be placed before the audit committee, together with Managements justification
for the same.

Interpretation:
A statement of all transactions with related parties shall be placed before the Audit Committee for formal
approval. If any transaction is not on an arms length basis, management is required to justify the same to
the Audit Committee.
Example: ICICI policy for RPT
Related party:
Related party with reference to the Bank means:

A director or his relative;

A key managerial personnel (KMP) or his relative;
A firm, in which a director, manager or his relative is a partner;
A private company in which a director or manager or his relative is a member or director;
A public company in which a director or manager is a director and holds along with his relatives,

more than two per cent of its paid-up share capital;

Anybody corporate whose board of directors, managing director or manager is accustomed to act in

accordance with the advice, directions or instructions of a director or manager;

Any person on whose advice, directions or instructions a director or manager is accustomed to act;
Any company which is a holding, subsidiary or an associate company of such company; or a

subsidiary of a holding company to which it is also a subsidiary;

A director other than an independent director or key managerial personnel of the holding company or
his relative with reference to a company (as per Companies (Meetings of Board and its Powers)
Rules, 2014);

Ordinary course of business:

Ordinary Course of Business includes but not limited to a term for activities that are necessary, normal,
and incidental to the business. These are common practices and customs of commercial transactions. The
ordinary course of business covers the usual transactions, customs and practices related to the business.
The following factors are indicative of a transaction being in the ordinary course of business:

The transaction is normal or otherwise unremarkable for the business.

The transaction is frequent/regular
The transaction is a source of income for the business
Transactions that are part of the standard industry practice, even though the Bank may not have done
it in the past.

These are not exhaustive criteria and the Bank will have to assess each transaction considering its specific
nature and circumstances.

Arms length basis:

In terms of the Companies Act, the expression arms length transaction means a transaction between two
related parties that is conducted as if they were unrelated, so that there is no conflict of interest.
A transaction with a related party will be considered to be on arms length basis if the key terms,
including pricing of the transaction, taken as a whole, are comparable with those of similar transactions if
they would have been undertaken with unrelated parties.
It may be noted that this policy framework, including the definitions above, is meant solely for the
purposes of compliance with related party transaction requirements under Companies Act, 2013 and
Clause 49 of the Listing Agreement. The above terms may have different connotations for other purposes
like disclosures in the financial statements, which are governed by applicable regulations, accounting
standards, regulatory guidelines etc.

Approval of related party transactions

A. Audit Committee
All the transactions which are identified as related party transactions should be preapproved by the Audit
Committee before entering into such transaction. The Audit Committee shall consider all relevant factors
while deliberating the related party transactions for its approval.

Any member of the Committee who has a potential interest in any related party transaction will rescue
himself and abstain from discussion and voting on the approval of the related party transaction. A related
party transaction which is (i) not in the ordinary course of business, or (ii) not at arms length price, would
require approval of the Board of Directors or of shareholders as discussed subsequently.
The Audit Committee may grant omnibus approval for related party transactions which are repetitive in
nature and subject to such criteria/conditions as mentioned under clause 49 and such other conditions as it
may consider necessary in line with this policy and in the interest of the Bank. Such omnibus approval
shall be valid for a period not exceeding one year and shall require fresh approval after the expiry of one
year.
Audit Committee shall review, on a quarterly basis, the details of related party transactions entered into
by the Bank pursuant to the omnibus approval. In connection with any review of a related party
transaction, the Committee has authority to modify or waive any procedural requirements of this policy.
A related party transaction entered into by the Bank, which is not under the omnibus approval or
otherwise pre-approved by the Committee, will be placed before the Committee for ratification.
B. Board of Directors
In case any related party transactions are referred by the Bank to the Board for its approval due to the
transaction being (i) not in the ordinary course of business, or (ii) not at an arms length price, the Board
will consider such factors as, nature of the transaction, material terms, the manner of determining the
pricing and the business rationale for entering into such transaction. On such consideration, the Board
may approve the transaction or may require such modifications to transaction terms as it deems
appropriate under the circumstances. Any member of the Board who has any interest in any related party
transaction will rescue himself and abstain from discussion and voting on the approval of the related party
transaction.
C. Shareholders

If a related party transaction is a material transaction as per clause 49, it shall require shareholders
approval through special resolution and the related parties shall abstain from voting on such
resolutions.

If a related party transactions is not in the ordinary course of business, or not at arms length price and
exceeds certain thresholds prescribed under the Companies Act, 2013, it shall require shareholders
approval by a resolution. In such a case, any member who is a related party having interest in the

transaction for which resolution being proposed, shall not vote on such resolution passed for
approving related party transaction.
However the shareholders approval is not required for the transactions entered into between the Bank and
its wholly owned subsidiaries whose accounts are consolidated with the Bank and placed before the
shareholders at the general meeting.
Reporting of related party transactions
Every contract or arrangement, which is required to be approved by the Board/shareholders under this
Policy, shall be referred to in the Boards report to the shareholders along with the justification for
entering into such contract or arrangement.

Disclosure of Accounting Treatment Clause 49 (IVB)

Where in the preparation of financial statements, a treatment different from that prescribed in an
Accounting Standard has been followed, the fact shall be disclosed in the financial statements, together
with the managements explanation as to why it believes such alternative treatment is more representative
of the true and fair view of the underlying business transaction in the Corporate Governance Report.
Interpretation:
Clause 49 requires that in case a company has followed a treatment different from that prescribed in an
Accounting Standards, the management of such company shall justify why they believe such alternative
treatment is more representative of the underlined business transactions. Management is also required to
clearly explain the alternative accounting treatment in the footnote of financial statements.
Example: IDFC
The Financial Statements of the Company have been prepared in accordance with Generally Accepted
Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards as specified
under Section of the Companies Act, 2013, Companies (Accounts) Rules 2014 and relevant provisions of
the Companies Act, 2013 / Companies Act, 1956, as applicable.

Board Disclosures Risk management Clause 49 (IVC)

The company through its Board of Directors shall constitute a Risk Management Committee. The Board
shall define the roles and responsibilities of the Risk Management Committee and may delegate
monitoring and reviewing of the risk management plan to the committee and such other functions as it
may deem fit

The majority of Committee shall consist of members of the Board of Directors.

Senior executives of the company may be members of the said Committee but the Chairman of the
Committee shall be a member of the Board of Directors.

Example: Thakkers Developers Ltd

Risk Management Policy
The Clause 49 of the Listing Agreement mandates every Company to constitute a Risk Management
Committee. The Company has laid down a robust Risk Management Policy, defining Risk profiles
involving Strategic, Technological, Operational, Financial, Liquidity, Organisational, and Legal and
Regulatory risks within a well-defined framework. The Risk management Policy acts as an enabler of
growth for the Company by helping its businesses to identify the inherent risks, assess, evaluate and
monitor these risks continuously and undertake effective steps to manage these risks.

Purpose
The Risk Management Committee is a group of people charged with development and overseeing an
organisations risk management programme. The Committee has three primary responsibilities

Identify the organisations exposures,

Develop a risk control programme, and

Establish a risk financing strategy

Company employees full time professional risk managers to co-ordinate such risk management activities
as loss control efforts, claims, reporting, insurance purchasing and safety programme implementation.
The Company also consults outside advisors to assist in creating risk management programme.

Responsibility of the Committee

The risk management committee is responsible for all phase of the Companys Risk Management
programme

from

development

through

responsibilities include the following:

implementations

and

monitoring.

The

Committees

Developing, for board approval, Companys risk management policy that affirms the Companys
commitment to safeguard its assets.

Establishing the Companys risk management goal (For example improving client safety, reducing the
number of accidents, and reducing the insurance cost).

Recommending alternative risk financing alternatives

Communicating the Companys risk management plan and loss control procedures to the board of
directors, employees, volunteers, clients and the public.

Selecting an insurance advisor ( A broker, agent or consultant ) and negotiating insurance agreements

Overseeing loss prevention and control activities.

Providing an annual risk management report to the Board of directors.

Constitution of the Committee

The Risk Management Committee is headed by Shri Nishant Rajendra Thakker, Director and comprises
of other Directors of the Company as members, who periodically review the robustness of the Risk
Management frame work. The periodical update on the risk management practices and mitigation plan of
the Company and subsidiaries are presented to the Audit Committee and Board of Directors.
The Members of the Risk Management Committee are:
Shri. Mukesh Kantilal Thakkar - Director
Shri. Narendra Manohardas Thakker - Director
Shri. Rajendra Manohardas Thakker - Managing Director
Shri. Jitendra Manohardas Thakker - Director

Working
The Committee oversees the risk management aspect of the Companys working and develops a risk
management plan in consultation with the Board of directors, senior executives and external advisors as

well as consultants. The committee compares the working with the risk management plan prepared and
takes the necessary steps for differences, if any.

Review
The Audit Committee and Board of Directors of the Company periodically review such updates and
findings and suggest areas where internal controls and risk management practices can be improved.

Proceeds from public issues, rights issues etc. Clause 49 (IVD)

When money is raised through an issue (public issues, rights issues, preferential issues etc.), it shall
disclose to the Audit Committee, the uses / applications of funds by major category (capital expenditure,
sales and marketing, working capital, etc), on a quarterly basis as a part of their quarterly declaration of
financial results. Further, on an annual basis, the company shall prepare a statement of funds utilized for
purposes other than those stated in the offer document/prospectus/notice and place it before the audit
committee. Such disclosure shall be made only till such time that the full money raised through the issue
has been fully spent. This statement shall be certified by the statutory auditors of the company. The audit
committee shall make appropriate recommendations to the Board to take up steps in this matter.

Remuneration of Directors Clause 49 (IVE)

All pecuniary relationship or transactions of the non-executive directors vis--vis the company shall

be disclosed in the Annual Report.

Further the following disclosures on the remuneration of directors shall be made in the section on the
Corporate Governance of the Annual Report:
o All elements of remuneration package of individual directors summarized under major

groups, such as salary, benefits, bonuses, stock options, pension etc.

Details of fixed component and performance linked incentives, along with the

o
o

performance criteria.
Service contracts, notice period, severance fees.
Stock option details, if any and whether issued at a discount as well as the period over

which accrued and over which exercisable.

The company shall publish its criteria of making payments to non-executive directors in its annual
report. Alternatively, this may be put up on the companys website and reference drawn thereto in the

annual report.
The company shall disclose the number of shares and convertible instruments held by non-executive

directors in the annual report.

Non-executive directors shall be required to disclose their shareholding (both own or held by / for
other persons on a beneficial basis) in the listed company in which they are proposed to be appointed

as directors, prior to their appointment. These details should be disclosed in the notice to the general
meeting called for appointment of such director

Example: IDFC
The Board at its meeting combined the Nomination Committee and Compensation Committee which was
named as Nomination & Remuneration Committee ("NRC"). The NRC of IDFC comprised four
Directors, three of whom are IDs and Executive Chairman of the Company. The Committee met two
times during FY15: on June 3, 2014 and January 29, 2015. The quorum for any meeting of this
Committee is two members.
The role of the committee includes the following:

Formulation of the criteria for determining qualifications, positive attributes and independence of a
Director and recommend to the Board a policy, relating to the remuneration of the Directors, Key

Managerial Personnel and other employees;

Formulation of criteria for evaluation of IDs and the Board;
Devising a policy on Board diversity;
Identifying persons who are qualified to become Directors and who may be appointed in senior
management in accordance with the criteria laid down, and recommend to the Board their

appointment and removal;

Succession planning of the Board of Directors and SMP.

The details of the evaluation criteria form part of the Annual Report.
IDFC pays remuneration to EDs by way of salary, perquisites and retirement benefits (fixed component)
and a variable component based on the recommendation of the NRC and approval of the Board and the
Shareholders of the Company, which is separately disclosed in the financial statements. The remuneration
paid to EDs is determined keeping in view the industry benchmark and the relative performance of the
Company vis--vis industry performance. The minutes of the Committee are reviewed by the Board.
The Non-Executive Directors (NEDs) are paid remuneration by way of commission and sitting fees.

PaRtiCULaRs PRoPoseD amoUNt

( PeR aNNUm)
Fixed Remuneration for member of the Board
1,050,000
Chairman of the Board
1,050,000
Chairman of the Audit Committee
300,000
Chairman of Other Committees
150,000

Member of the Audit Committee

150,000
Member of Other Committees
75,000
Variable remuneration (Depending on attendance at Board Meetings)
450,000

Management Clause 49 (IVF)

As part of the directors report or as an addition thereto, a Management Discussion and Analysis
report should form part of the Annual Report to the shareholders. This Management Discussion &
Analysis should include discussion on the following matters within the limits set by the companys
competitive position:
o Industry structure and developments.
o Opportunities and Threats.
o Segmentwise or product-wise performance.
o Outlook
o Risks and concerns.
o Internal control systems and their adequacy.
o Discussion on financial performance with respect to operational performance.
o Material developments in Human Resources / Industrial Relations front, including

number of people employed.

Senior management shall make disclosures to the board relating to all material financial and
commercial transactions, where they have personal interest, that may have a potential conflict with
the interest of the company at large (for e.g. dealing in company shares, commercial dealings with
bodies, which have shareholding of management and their relatives etc.)

Explanation: For this purpose, the term "senior management" shall mean personnel of the company who
are members of its core management team excluding the Board of Directors). This would also include all
members of management one level below the executive directors including all functional heads.

Shareholders Clause 49 (IVG)

In case of the appointment of a new director or re-appointment of a director the shareholders must be
provided with the following information:
o A brief resume of the director;
o Nature of his expertise in specific functional areas;

Names of companies in which the person also holds the directorship and the membership of

Committees of the Board; and

o Shareholding of non-executive directors as stated in Clause 49 (IV) (E) (v) above
Quarterly results and presentations made by the company to analysts shall be put on companys website, or shall be sent in such a form so as to enable the stock exchange on which the company is listed

to put it on its own web-site.

A board committee under the chairmanship of a non-executive director shall be formed to specifically
look into the redressal of shareholder and investors complaints like transfer of shares, non-receipt of
balance sheet, non-receipt of declared dividends etc. This Committee shall be designated as

Shareholders/Inv estors Grievance Committee.

To expedite the process of share transfers, the Board of the company shall delegate the power of share
transfer to an officer or a committee or to the registrar and share transfer agents. The delegated
authority shall attend to share transfer formalities at least once in a fortnight.

Interpretation:

When a new director is to be appointed or re-appointed the shareholder of the company should be
provided information of his background, his expertise in specific functional areas, if he holds the
same or other position in any company, non-executive directors would disclose their shareholding.

Quarterly results should be disclosed either on the companys website or should be sent to the stock
exchange on which it is listed.

A shareholders/investors grievance committee should be form with a non-executive director as

chairman to look after issues and complaints of the shareholders like transfer of shares, non-receipt of
balance sheet, non-receipt of declared dividends etc.

For faster transfer of shares the power should be delegated to an officer or a committee or share
transfer agent, etc.

Example: HCL Technologies Limited

The Company provides the requisite information to its shareholders, as prescribed in Clause 49 of the

Listing Agreement, in case of appointment of a new director or re-appointment of a director.

The quarterly results and presentations made by the Company to analysts are being sent to the stock

exchanges, where the shares of the Company are listed, from time to time.
The Company has formed the Shareholders Committee consisting of the following members:

a) Mr. Subroto Bhattacharya (Chairman), (Independent Director)

b) Mr. Shiv Nadar
c) Mr. Vineet Nayar
d) Mr. Manish Anand, Company Secretary is acting as the compliance officer of the Company.
The Shareholders Committee undertakes the following activities:
o

To review and take all necessary actions for redressal of investors grievances and complaints as

may be required in the interests of the investors.

o To approve requests for dematerialisations, split and duplicate shares.
In order to expedite the process of share transfers, the Board has delegated the power of share transfer
to the officer(s) of the Company.

4.5 CEO/CFO certification Clause 49 (V)

The CEO, i.e. the Managing Director or Manager appointed in terms of the Companies Act, 1956 and the
CFO i.e. the whole-time Finance Director or any other person heading the finance function discharging
that function shall certify to the Board that:

They have reviewed financial statements and the cash flow statement for the year and that to the best
of their knowledge and belief:
o these statements do not contain any materially untrue statement or omit any material fact or
o

contain statements that might be misleading;

these statements together present a true and fair view of the companys affairs and are in

compliance with existing accounting standards, applicable laws and regulations.

There are, to the best of their knowledge and belief, no transactions entered into by the company

during the year which are fraudulent, illegal or violative of the companys code of conduct.
They accept responsibility for establishing and maintaining internal controls and that they have
evaluated the effectiveness of the internal control systems of the company and they have disclosed to
the auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if
any, of which they are aware and the steps they have taken or propose to take to rectify these

deficiencies.
They have indicated to the auditors and the Audit committee
o significant changes in internal control during the year;
o significant changes in accounting policies during the year and that the same have been
disclosed in the notes to the financial statements; and

instances of significant fraud of which they have become aware and the involvement therein,
if any, of the management or an employee having a significant role in the companys internal
control system

4.6 Report on Corporate Governance Clause 49 (VI)

There shall be a separate section on Corporate Governance in the Annual Reports of company, with a
detailed compliance report on Corporate Governance. Non-compliance of any mandatory requirement
of this clause with reasons thereof and the extent to which the non-mandatory requirements have been

adopted should be specifically highlighted.

The companies shall submit a quarterly compliance report to the stock exchanges within 15 days from
the close of quarter. The report shall be signed either by the Compliance Officer or the Chief
Executive Officer of the company.

4.7 Compliance Clause 49 (VII)

The company shall obtain a certificate from either the auditors or practicing company secretaries
regarding compliance of conditions of corporate governance as stipulated in this clause and annex the
certificate with the directors report, which is sent annually to all the shareholders of the company.
The same certificate shall also be sent to the Stock Exchanges along with the annual report filed by

the company.
The non-mandatory requirements may be implemented as per the discretion of the company.
However, the disclosures of the compliance with mandatory requirements and adoption (and
compliance) / non-adoption of the non-mandatory requirements shall be made in the section on
corporate governance of the Annual Report.

Annexure I A
Information to be placed before Board of Directors

Annual operating plans and budgets and any updates.

Capital budgets and any updates.
Quarterly results for the company and its operating divisions or business segments.
Minutes of meetings of audit committee and other committees of the board.
The information on recruitment and remuneration of senior officers just below the board level,

including appointment or removal of Chief Financial Officer and the Company Secretary.
Show cause, demand, prosecution notices and penalty notices which are materially important
Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems.
Any material default in financial obligations to and by the company, or substantial non-payment for

goods sold by the company.

Any issue, which involves possible public or product liability claims of substantial nature, including
any judgement or order which, may have passed strictures on the conduct of the company or taken an

adverse view regarding another enterprise that can have negative implications on the company.
Details of any joint venture or collaboration agreement.
Transactions that involve substantial payment towards goodwill, brand equity, or intellectual property.
Significant labour problems and their proposed solutions. Any significant development in Human
Resources/ Industrial Relations front like signing of wage agreement, implementation of Voluntary

Retirement Scheme etc.

Sale of material nature, of investments, subsidiaries, assets, which is not in normal course of business.
Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks

of adverse exchange rate movement, if material.

Non-compliance of any regulatory, statutory or listing requirements and shareholders service such as
non-payment of dividend, delay in share transfer etc.

CHAPTER - 5 Case Study: TATA Power

The Company Secretaries of awardee companies, CS J S Amitabh, Company Secretary, RURAL
ELECTRIFICATION CORPORATION LIMITED & CS H M Mistry, Company Secretary, TATA
POWER COMPANY LIMITED were also honoured for their contribution in adhering to good corporate
governance practices. Certificate of Recognition for Excellence in Corporate Governance were presented
to other Top Five Companies (in Alphabetical order):
1. CMC Limited
2. Hindustan Petroleum Corporation limited
3. ICICI Bank Limited
4. Oil and Natural Gas Corporation Ltd.
5. Persistent Systems Limited
In pursuit of excellence and to identify, foster and reward the culture of evolving globally acceptable
standards of corporate governance among Indian Companies, the ICSI National Awards for Excellence
in Corporate Governance was instituted by the ICSI in the year 2001, to recognise and honour the best
governed companies as per five key parameters viz. Board Structure and Processes, Transparency and
Disclosure Compliances, Stakeholders Value Enhancement, Corporate Social Responsibility (CSR) and
Sustainability.

Analysis of TATA Power Good Governance:

Particulars

Clause of Compliance
Listing
Status
Remarks
agreement Yes/No

I. Board of Directors

49 I

(A)Composition of Board 49(IA)

(B)Non-executive
Directors compensation & 49 (IB)
disclosures

Yes

11 member board, 2 ED & 9 NEDs, out of

9 NEDs, 6 are independent directors

Yes

None of the NEDs have any pecuniary

relation with the company other than fees
and commission pre decided by the
shareholders

(C)Other provisions as to
Board and Committees

49 (IC)

Yes

(D)Code of Conduct

49 (ID)

Yes

II. Audit Committee

49 (II)

1. 8 Board meetings were held during the

year, gap between 2 meetings did not
exceed 120 days
2. Meeting the criteria of being a member
in not more than 10 committee and a
chairman of not more than 5 committee.
The company has adopted Tata Code of
Conduct (TCOC) for all its employees
including MDs and EDs

(A)Qualified &
Independent Audit
Committee

49 (IIA)

Yes

Auditors/directors are independent &

NEDs, have financial management
expertise & are financially literate and
renowned practitioners.

(B)Meeting of Audit
Committee

49 (IIB)

Yes

Audit committee met 12 times during the

year.

Yes

Met all the criteria

(C)Powers of Audit

49 (IIC)

Committee

(D)Role of Audit
Committee

49 II(D)

(E)Review of Information
49 (IIE)
by Audit Committee

Yes

Met all the criteria

Yes

Review is done by the board and head of

internal audit by adopting Tata code of
conduct (TCOC) for prevention of insider
trading & code of corporate disclosure
practices

III. Subsidiary Companies 49 (III)

IV. Disclosures

49 (IV)

(A)Basis of related party

transactions

49 (IV A) Yes

There are no related party transactions

which have potential conflict of interest
with the company at large

(B)Board Disclosures

49 (IV B) Yes

Risk Management Committee

(C)Proceeds from public

issues, rights issues ,
preferential issues etc.

49 (IV C) -

(D)Remuneration of
Directors

49 (IV D) Yes

Sitting fees and commission adequately

paid

(E)Management

49 (IV E) Yes

Management discussion & analysis is

published in the annual report

49 (IV F) Yes

All decisions related to appointment of

directors, publishing analyst presentation
on website is in compliance with the
clause.

(F)Shareholders

V.CEO/CFO Certification 49 (V)

VI. Report on Corporate

Governance

VII. Compliance

49 (VI)

49 (VII)

Yes

Certified by authorities

Yes

Every year company publishes separate

section on corporate governance in annual
report.
Delloite Haskins & sell llc has approved
the CG report of Tata power. All conditions
related to compliance have been met.

Stakeholder Engagement in TATA Power

Value Creation through Stakeholders
Strategic partnerships create significant and sustainable value for the stakeholders. Partnering has proved
to be a powerful business tool for dealing with the ever changing business needs and markets dynamics.
Competitive advantage is gained by an organisations ability to harness the collective knowledge and to
bring forth customised and collaborative solutions with the help of its stakeholders. Operating in the
Power Sector entails a lot of responsibilities, with respect to regulators, customers, employees,
environment, and the communities in which Tata Power operates. In order to make this journey smooth
and achievable, the Company has identified key players to achieve meaningful success with desired
synergies and has partnered across the entire value chain of the operations. Tata Power believes that
symbiotic relations with stakeholders must be propagated in a manner that helps for continuous
performance improvements, leading to mutual benefit and has extended this facilitation and dialogue to
all stakeholders.

Suppliers
At Tata Power, the Suppliers are seen as a valuable source of knowledge and resource. Supplier
engagement and relationship management is paramount to Tata Power as a good buyer-seller relationship
is a win-win situation in the long run. To achieve the same, Tata Power conducts Supplier Meets to
discuss various issues, including business scenarios, new innovations, their concerns and any other
information pertinent to the business. The management has maintained an open-door policy for suppliers
and dealers.
In FY14, three vendor meets were organised across locations. It began with the Partners Meet for Eastern
region, at Jojobera, wherein, the suppliers related to other operating plants, including Jojobera, Haldia,
Maithon, and Kalinganagar were invited. The second Partners Meet was organised in Mumbai. In this
meet interactions with the important key service providers and the Affirmative Action delegates was done
and they encouraged business entrepreneurs from socially disadvantaged communities, through mentoring
and inclusion in supply chain, on the basis of equal merit. The third meet was organised at Trombay for
vendors under Affirmative Action category and other service providers. Tata Power reaffirms that its
competitiveness is interlinked with the wellbeing of all sections of the society.

Community
Communities around Tata Power stations are the key stakeholders which are engaged for various
community development activities. Most of these activities have been initiated to improve economic
conditions keeping MDGs in mind and enables access to basic health services and primary education,
promoting sustainable agriculture practices, providing access to portable water, etc. Some of the activities
initiated besides working on the thrust areas are as follows.
Flood Relief - Gopalpur, Odisha and its adjoining areas got severely hit by cyclone Phailin. As a part of a
self realised intervention, the Tata Relief Committee (TRC) mobilised its relief and rehabilitation
operations in the Cyclone affected areas of Ganjam district. Under the banner of TRC, both Tata Power
and Tata Steel initiated steps for immediate restoration of power and water supply in the Ganjam district,
to cater to the emergency requirement for human life. Five Diesel Generators were provided by Tata
Power to the district administration, which facilitated restoration of power. Tata Power also provided
5,000 Solar Lanterns to the affected areas of the district. These solar lanterns, certainly illuminated lives
of the people.
Shraddhanand Orphanage - A batch of 34 Graduate Engineer Trainees (GETs) underwent rigorous
training for two months at National Power Training Institute (NPTI), Nagpur and took a self-driven
initiative at the nearby Shraddhanand Orphanage. Celebrating the receipt of the first paycheque of their
lives, they found something amiss. This void in the celebration was filled when they decided to spend
some quality time at the nearby orphanage and also donated a token amount from their salary. With
regular visits and interactions with the authorities and the children, GETs zeroed down on an RO water
purifier which they got installed with their contribution.
Samriddhi - Under the livelihood initiatives, Tata Power has been an enabling a Sustainable Agriculture
Program targeting local landless labour and marginalized farmers. The objective of sustainable agriculture
program is to promote appropriate technology, which would help them improving their livelihood and
earnings. Under Samridhi, a total of 1005 farmers were covered. Few activities which were taken under
Samridhi are as follows.
Selection and Treatment of Seed and Soil Testing
Nutrient rich raised bed nurseries
Land Preparation and Water management
Systematic Rice Intensification (SRI )

 Introduction of Agriculture Eco-System analysis (ASEA)

Integrated pest control management.
Eventually a Sustainable Package of Practices (POP) for the Kharif and Rabi crops were developed. New
crops were introduced, involving less labour, better yield enhancement, and gave good market returns.
Package of practice promoted for Kharif crops resulted in the following outcomes;
Change from traditional agriculture to new best practices, for enhancing productivity
Make agriculture a profitable business
Develop and promote the best POP for each crop
Introduction of new cash crops
Introduction of Kisan Sheti Shala (KSS), a farmer School.
The benefits of this program were mainly to 18 villages of Maval and Karjat Taluka, Raigad district,
including 1005 farmers in 2013, as against 510 farmers in 2012. The main benefit was the reduction in
investment cost (cost of seeds, fertilisers), as traditional method requires 40 Kg of seeds per acre, whereas
POP recommends 5 Kg of seeds only. The yield increased by 67% and cumulative income rose to _ 53
lakhs to these villages in last Kharif season, against no income in the previous years. Sustainable
agriculture program helps to maintain the ecological balance between natural resources and its impact on
the climate and environment, through optimum utilisation of natural resources.
In another intervention under Samridhi, around 40 farmers from nine villages of Bhivpuri, were provided
with fingerlings. This social initiative of Tata Power promoted the aquaculture activities by providing
Katla fish fingerlings for enhancing livelihood options in community managed water bodies. The
initiative has a projected income of 40,000-50,000 with a low gestation period.

Customers
Club Enerji - Along with Energy Conservation, Tata Power is sensitising students about resource
conservation, and effects of CO2 emissions through Club Enerji initiative since 2007. The Club has
launched Civic and Moral Values program, as values are the foundations that make Responsible Citizens.
Club Enerji has sensitised 6000 students in 12 schools, across Mumbai. Encouraged by the response, not
just from schools, but also parents, the Club has expanded over the years and is now present in 11 cities
across India. The Club has reached out to more than 400 schools across India, sensitised more than 5.2
million citizens, has more than 95,000 Energy Champions and 1,41,000 Energy Ambassadors. Club Enerji

provides the ground for citizens to share and expand their understanding, and bring about a chain reaction
that can significantly help in conserving natural resources.
Energy Audits - Energy Audit is a program that determines inefficiencies in equipments/appliances/unit
operations to establish a complete energy balance of the system. The results of the audit help to introduce
cost-effective energy measures into operations. Tata Power conducted special Energy Audits targeting its
industrial and commercial consumers in Mumbai. Under this program, the customers premise is audited
by a certified Energy Audit agency and recommendations are provided by the energy auditors for
achieving reduction in energy consumption. Tata Power has so far carried out these audits for over 100
consumers and cumulatively provided recommendations for reduction of over 18 MUs. Major Consumers
such as M&M, American School, SBI, Tata Communication, Goregaon Sport Club, JP Morgan, and many
more have availed these Energy audits and have benefited by implementing the recommendations
provided during these audits.

Shareholders
Tata Power extends its value of contributing to the environment, to its shareholders. Various steps have
been initiated to comply with this belief of the Company. The following measures wore undertaken:
The electronic mode is used for sharing the Agenda papers with the Directors. The Directors have been
provided with iPads to view the Agenda online, which completely avoids the use of paper for printing
bulky Agenda paper.
Shareholders are consistently requested to opt for the Annual Reports in Electronic Mode
An abridged version of the Annual Report is printed, which conserves paper
100% recycled paper is used for printing reports
Shareholders are urged to hold shares in electronic mode by availing the Demat option.
Employees
In line with value Care, Tata Power introduced an initiative under the brand name Greenolution. The
name Greenolution is a fusion of two concepts - Green and Evolution; it signifies the processes and
initiatives that Tata Power undertakes towards ensuring a greener planet. The objective is to make a green
way of living. The employees contributed through various green initiatives, towards impacting the
environment positively. To recognise these initiatives and encourage others to contribute, this initiative
was introduced. It is participative, engaging, responsible, evolving and energetic. Its intent is to lead the

efforts towards a greener world, not just internally, but also externally, through education, engagement
and ensuring participation.
Green Heros - One who shares his/her ideas to help Tata Power reduce its carbon footprint and also
volunteers for green initiatives are identified as Green Heroes under Greenolution. These are Tata Power's
ambassadors of eco-awareness, with specific targets to initiate the green cause. They also increase
momentum, by motivating others to actively participate. The impetus comes from Tata Power employees,
Club Enerji members and the Tata Power customers who are willing to take responsibilities, proactively.
The key programs that run under Greenolution by Green Heroes are
Implementation of 100% recycled paper usage
Tree plantation
Saving water at plants, offices
Saving fuel, through carpooling
Waste management
Energy conservation and efficiency initiatives
Reducing air travel and using webcast/video conferencing facilities
Participation in Clean Your City drives and campaigns.
Oorja Samvardhan Diwas - Tata Power Club Enerji organised Oorja Samvardhan Divas, wherein wives
of employees volunteered to give a session on energy conservation in schools. The initiative involved
close to 100 volunteers; sensitised 6500 students in 40 schools.
Bachcha Party - On the occasion of Children's day, an event called Baccha Party was organised across
various divisions. The kids of employees were invited in the Company premises and given a feel of the
Company.
Employee Engagement Action Planning - The overall engagement score at Tata Power through the
Employee Engagement model under Aon-Hewitt is 66%. The process of Engagement Action Planning
(EAP) is in place and the action planning workshops are delivered at three levels: Individual Manager
Level, Department Level and Voices (officers and staff).
MDs Communication Meet - It is a two-way communication channel for the employees across the Tata
Power. It facilitates formal and informal communication with the Senior Leadership team. The webcast is
based on specific themes/issues/key events /financial results. The event starts with the MD addressing the

employees. The address is then followed by an interactive Q&A session wherein the employees from all
divisions are given a chance to interact. This is held six times a year and allows discussions and
meaningful exchange of ideas.

Employee Review: TATA Power vs. Reliance Energy

TATA Power

Sample Size 20

Good

Reliance Energy

Poor

Good

Poor

Work Environment
Salary
Growth

19
8
9

1
12
11

2
7
5

18
13
15

Work life balance

18

17

Less
Stress

More

Less

17

Recommend

More

71%

47%

TATA P ower
20
18
16
14
12
10
8
6
4
2
0

Work Environment

Salary

Growth

Good

Work Life Balance

Poor

Reliance Energy
20
18
16
14
12
10
8
6
4
2
0

Work Environment

Good

Salary

Growth

Work Life Balance

Poor

*Source: Glassdoor

16

Stress in TATA Power

More; 3

Less; 17

Stress in Reliance Energy

Less; 4

More; 16

Recommendation
Recommendation
80%
70% 71%
60%
50%

47%

40%
30%
20%
10%
0%

T AT A P o w e r

Re l i a n c e E n e r g y

CHAPTER 6 Comparison between India &

Brazil
Particulars

Brazil

India

Charitable & Political

The organization can contribute

The organization can contribute

Contributions

any amount for charitable &

only Rs 50000 or 5% of its

Political purpose but it is

average net profits during the 3

mandatory for them to disclose

financial years immediately

the entire amount.

preceding the date of

The minimum no. of Board of

contribution.
The company should have min 1

Directors is 3 with at least 2

Female Board of Member as well

members possessing experience

as an optimum combination of

in Finance.

executive & non-executive (at

The minimum members of board

least 50%) Directors.

The minimum members of board

of directors are 3. However, both

of directors are 2 for pvt co. and

CVM and IBGC recommend

3 for public co. The max allowed

every company to have 5 to 10

are 15 out of which at least one

technically qualified members.

of them need to be staying in

Board Membership

Board Size

India.
Commitment & Limits on Other
Board Service
Chairman

Independent Directors

CEO/Chairman/Director

The Chairman may serve as

The Chairman may serve as

Board member of 2 other boards,

Board member of 5 boards

at most

simultaneously, at most.

The Independent Directors may

The Independent Directors may

serve at 5 listed companies, at

serve at 7 listed companies, at

most.

most

A CEO and a Chairman should

A whole time Director in any

not chair the Board of another

listed company can serve as an

organization (except at third

independent director in not more

sector entities), unless it is an

than three listed companies.

associated company, or a
company in the same group.
Separation of Chairman & CEO

The chairman of the board of

The Securities and Exchange

directors and the chief executive

Board of India (SEBI)

officer shall not be the same

recommends that Separate

person as per the

Chairman and CEO roles are

recommendation of the CVM.

desirable, but not mandatory. In

this context, both these roles can
be undertaken by the same

Board Meetings & Agenda

Audit Committee Meeting

Board meetings should not be

person.
The Board shall meet at least

more frequent than once a month.

four times a year, with a

It is up to the discretion of

maximum time gap of one

Chairman when to conduct the

hundred and twenty days

meetings.
The Audit committee should

between any two meetings.

The Audit committee should

meet regularly. There is no fix

meet at least 4 times in a year

time interval or no of times the

and the time gap between 2

meeting has to take place.

meetings should not be more

than 4 months.

CHAPTER 7 Case Study: Aravind Eye

Hospitals

7.1 INTRODUCTION
Aravind Eye Hospitals is a hospital chain in India. It was founded by Dr. Govindappa Venkataswamy at
Madurai, Tamil Nadu in 1976. Aravind Eye Care System is the largest eye care centre in the world,
treating over 2.8 million patients a year in India, and globally renown for providing world-class treatment
to the rural poor. It has grown into a network of eye hospitals and has had a major impact in
eradicating cataract related blindness in India. Aravind has treated more than 32 million patients and
performed 4 million surgeries, the majority of them being cheap or free making it the worlds largest and
most productive eye-care service group. Aravind comprises several hospitals, dozens of eye clinics, a
research foundation, a manufacturing centre for ophthalmic products, an eye bank and a resource training
centre to spread its model. The model of Aravind Eye Care hospitals has been applauded and has become
a subject for numerous case studies across the world for nearly 40 years.
Today, in addition to the hospital in Madurai, there are four other Aravind Eye Hospitals in Theni,
Tirunelveli, Coimbatore, and Puducherry, with a combined total of 4100 beds. With less than 1% of
Indias ophthalmic manpower, Aravind Eye Hospitals account for 5% of the ophthalmic surgeries
performed within India. The unique fee system and effective management, enables Aravind Eye Hospitals
to provide free eye care to 60% of its patients.

MISSION:
To eliminate needless blindness

By providing compassionate and high quality eye care for all Hospital Services
Through extending the reach of quality eye care to the poor and needy through active

community involvement, screening camps, and IT enabled Vision Centres in rural areas.
Community outreach
By developing ophthalmic human resource
Education and Training
By providing evidence through research and envolving methods to translate existing evidence and

knowledge into effective action

AMRF research
through teaching, training, capacity building, advocacy, research and publications

LAICO
by making high quality ophthalmic products affordable and accessible worldwide
Aurolab
by reducing corneal blindness through eye banking activities, training, research and public
awareness programme
Eye bank

SERVICES:

HOSPITAL SERVICES
Started in 1976 as an 11 bed hospital in Madurai, Aravind now has branches at Theni, Tirunelveli,
Coimbatore, Pondicherry, Dindigul and Tirupur. The hospitals provide high quality and affordable
services to the rich and poor alike, yet be financially self-supporting. They have well equipped speciality
clinics with comprehensive support facilities.
In the year ending March 2015, 3.5 million outpatients were treated and over 401,000 surgeries were
performed.
To reach out to the rural Tamil Nadu Aravind has established its primary eye care facility named, vision
centres. The community eye clinics take care of the ophthalmic needs of a semi urban population.

OUTREACH AT ARAVIND
An integral part of AECS is its community outreach programmes which take eye care service to the
doorstep of the community. In the year ending March 2013, 2,841 camps were conducted through which
554,413 patients were screened and 90,547 patients underwent surgery.
These camps also serve to educate the local community on eye care. Towards this end, several
comprehensive eye care programmes are organised.

EDUCATION AND TRAINING

Aravind Eye Care System is a collaborating centre for the World Health Organization with a mandate to
design and offer training programmes to eye care personnel at different professional levels, from around
the world, in the development and implementation of efficient and sustainable eye care programme.
Aravinds training programmes cater to all levels of ophthalmic personnel these are intended not only
for ophthalmologists but also for ophthalmic technicians, opticians, clinical assistants, outreach
coordinators and health care managers. Aravind offers several structured training programmes.

AMRF-RESEARCH
The research activities at Aravind reflect Aravind's commitment to finding new ways to reduce the burden
of blindness. The combination of high clinical load, extensive community participation, and access to a
large network of eye hospitals provides ideal opportunities for conducting clinical, laboratory, populationbased studies and social and health systems research.

LAICO
LAICO, established in 1992 with the support of the Lions Club International SightFirst Programme and
Seva Sight Programme, is Asia's first international training facility for blindness prevention workers from
India and other parts of the world. It contributes to improving the quality of eye care services through
teaching, training, research and consultancy.

AUROLAB
Aurolab, the manufacturing division of Aravind Eye Hospital, supplies high quality ophthalmic
consumables at affordable prices to developing countries. Though its primary focus is on ophthalmic
industry, Aurolab is also diversifying into related health care areas where its existing capabilities can be

leveraged, such as cardiovasular sutures, microsurgical hand sutures, antiseptics and disinfectant solutions
etc.
Today Aurolab manufactures a wide range of ophthalmic consumables like intraocular lenses,
pharmaceutical products like eye drops, surgical adjuncts like sutures and blades and also ophthalmic
instruments and specialty products. Aurolab products are exported to 120 countries around the world and
acoounts for a total of 7.8% of global share of intraocular lenses.

VISION CENTRE
The model of a vision centre emerges from Vision 2020 The Right to Sight, a global initiative of
International Agency of Prevention of Blindness (IAPB a global machinery working across the world
for the prevention of avoidable blindness). IAPB proposes a four tier pyramid model to provide eye care,
suggesting vision centres at the primary level. Aligning with this initiative, Government of India is
planning to set up atleast 20,000 vision centres across the country. Being one of the forerunners in
experimented alternate approaches, Aravind Eye Hospital has set up 35 such vision centers across Tamil
Nadu.

Each vision centre covers a rural population of 50,000 achieving remarkable penetration into the
community up to 40% in the first year itself. The centres are equipped with basic ophthalmic equipment

like Slit Lamp, Streak Retinoscope, Direct Ophthalmoscope, Trial sets, Tonometer, Basic sterilizers, BP
apparatus and 90D Lens and a computer with a digital camera (in the place of webcam) and internet
connectivity. A vision centre is managed by a well trained ophthalmic assistant performing slit lamp
examination, refraction, treating minor ailments, counselling etc. All the patients examined at the vision
centre are consulted with the ophthalmologist at Aravind Eye Hospital. Patients requiring procedural
intervention are referred to the Aravind Eye Hospital.

ARAVIND BUSINESS MODEL

ARAVIND EYE
HOSPITAL

DONATIONS

MEDICAL
RESEARCH
FOUNDATION

7.2 BUSINESS MODEL

Approximately 50% of eye surgeries at Aravind are conducted for free or below cost, while 50% are
performed above cost without compromising on the quality of eye care delivered on either side of the
price range. The cost for the poor, which typically includes a two-night stay at the hospital and medication

for a month, is 750 rupees mainly to cover the cost of the lens implanted in the eye. The same or similar
procedure in the other section of the hospital that caters to wealthier individuals could be high. The price
differential is largely to do with the type of lens inserted in the eye and categories of admission rooms.
Patients who are unable to pay for their surgery are given basic hard lens and stay in a general ward with
other patients with a mat on the floor while paying patients have the option to choose from a menu of soft
lenses and other categories of rooms. Aravind is not dependent on donors, its highly efficient operations
coupled with its pricing structure allow the hospitals to maintain significant profit margins primarily
through their revenue. Despite increased interest from donor organizations, Aravind does not plan on
compromising the current model, which has proven sustainable. Aravind also makes investments into
educational and training programs especially designed to teach people with minimal skills from a wide
range of backgrounds.

7.2 CORE PRINCIPLES

Execution

Market
developm
ent

Aravin
d Eye
care

Quality

Sustaina
blity

Market Development: Process of converting a need in to a demand and in the process we get a
significant percentage of this to our own facilities.

Execution: Excellence in execution of ensuring a high level of efficiency in providing the treatment,
including outpatient services and surgeries.

Quality: The aim is to ensure that the patient regardless of whether he is a free or a private patient gets
value for his investment in money or time.

Sustainability: The principle is of sustainability wherein the prices are not so much based on what it
costs us but on how much the various economic strata of the community can afford to pay. They work
backwards to contain the costs within these estimates. This leads to not just financial viability but a higher
order of management, as well as inculcating a certain culture in the organization.

7.3 FACTORS KEY TO SUCCESS OF ARAVIND EYE CARE HOSPITALS

A. OPERATIONAL EFFICIENCY
Aravind attained operational efficiency by setting up two surgical stations side by side, with the surgeon
positions between both tables, assisted by a swivelling microscope and two sets of paramedics. For each
patient, there is a nursing paramedic who hands over the sterilized instruments and implants to the doctor,
focuses the microscope and bandages the patient. There is a second nurse, referred to as the running
nurse, which replaces all the used surgical instruments with sterilized ones and wheels the patient in and
out of the operating theatre. With the aid of these two assistants, the Aravind doctors are able to briskly
perform operations within ten to twelve minutes of each other, completing about five surgeries in one
hour, compared to the average eye surgeon who would perform one or two within the same hour with an
assistant nurse.

Average number of operations performed by each surgeons annually

THAILAND
INDONESIA
No of surgeries

ARAVIND
BANGLADESH
INDIA
0

500

1000

1500

2000

2500

*source- Mckinsey health report

Aravind hospitals Patient fee structure

Consulting fee
Poor patients
Paying Patient

Amt
0 (free)
Rs.50

Cataract surgery with

Intraocular lens (IOL)
Poor patients
Subsidized rate
Regular rate
Phaco-surgery

Amt
Rs.0
Rs.750
Rs.3500-6000
Rs.600012000

*source:Aravind publications
B. FINANCIAL VIABILITY
SURGERIES(2014-15)

ANALYSIS

TOTAL

1.Paying
198423
2.Subsidized
110290
3.Free (Screening camps)
92816
4.TOTAL
401529
Percentage share in total surgeries (2014-15)

23

1. Last year 2013-14, around 3.3 million

outpatients were handled and 380,000 surgeries
were performed across all Aravind eye hospitals.
2. In 2013-14, 50% of surgeries were either free
or deeply subsidized.
3. In the year 2014-15, 3.5 million outpatients
were handled and 4, 01,529 surgeries were
performed.

4. The percentage share data has remained same

50

compared to previous year.

27

PAYING

C.TELEMEDICINE

5. An important part of its business model is

multitiered pricing or cross subsidization. Fee
from paying patients ranges from Rs 3500-6000,
excluding the hospital stay, but it performs 50%
SUBSIDIZED of FREE
its operation free of charge or deeply
subsidized including patients from poorest of the
poor background (Pop)

In an effort to reach 70% of Indias population that lives in rural areas, Aravinds administrators came up
with the concept of establishing village vision centers where patients could receive basic eye care backed
up by online videoconferencing with doctors at the hospitals. The concept of telemedicine was not as
successful as it could have been at inception as there were no Internet service providers in some areas,
and in areas where there were providers, service was not only very expensive, but it was too slow for
effective videoconferencing, with typical dial-up speeds of 35 kbps. Subsequently, Aravind partnered with
researchers at the University of California, Berkeley, and an Intel Corporation in 2006 to develop a new
technology for low-cost rural connectivity. This telemedicine projects was based on Wi-Fi wireless
networks in order to allow eye specialists at Aravind interview and examine patients in five remote
clinics, also known as vision centers across the state via high-quality video conference. Regular wi-fi has
a connectivity range of about 200 feet, which makes it ill-suited for long distance networking, which led
to the development of the UC Berkley team to develop the software to overcome the limitations. The
speed of this technology is about 100 times faster than dial-up speeds and carry 100 times as far as regular
Wi-Fi. The technology allows anyone with about 510 for a pair of small computers with directional
antennas to network with another location within 50 miles and in line of sight. If there happens to be a hill
in the way, a couple more antennas at the high spot can relay the signal between stations. Once the main
hospital facility within 50 miles has high-speed networking and the initial system installed, theres a little
ongoing cost of operation which requires little power and can also run off solar. Each rural vision centre is
staffed by a single nurse trained in eye care who uses the UC Berkeley designed computer network and
attends to the patients first, then spends about five minutes on a web camera consulting with an Aravind
doctor. Upon examination via teleconference, if the Aravind doctor determines that a closer examination
or surgery is required, the patient is given a hospital appointment. This was first set up at the Aravind
Hospital in Theni, in the state of Tamil Nadu, with high speed links to three vision centres (rural clinics),
who see/screen an average of 1,500 patients each month. At the vision centres, patients are able to receive
glasses, medicine or remote diagnosis for serious problems that would have otherwise required hospital
appointments. Approximately 5-10% of the patients, which is an estimated 100 people monthly,
experience significant improvement in their sight. The UC Berkley team installed the first long-distance
Wi-Fi system in a vision centre in the village of Ambasamudram, about seven miles from the Aravind
hospital in Theni. The following two vision centres where the system was installed was done jointly by
the Berkley team, Aravind and local vendors while subsequent installations have been done solely by
Aravind staff and vendors with no assistance from Berkeley.

D. SKILL TRAINING
Aravind transfer routine tasks to lower-skilled personnel who have been properly trained to undertake
preoperative tasks and serve as assistants to the surgeons and doctors, who as a result are able to focus
solely on their areas of technical expertise. Aravind has trained village girls (some of whom only have
high school diplomas), to become ophthalmic paramedics, they constitute 64% of Aravinds workforce
and perform tasks such as admitting patients, maintaining medical records, and assisting doctors. Strict
division of labour and development of new specialized roles have contributed to reduced costs for
providing quality eye care at Aravind.

E.ARAVIND EYE BANK .

Started in 1998 at Madurai with just a collection of 253 eyes, now the eye banks across the Aravind
Hospitals procure more than 4000 eyes and perform about 1400 corneal transplants annually. Eye balls
which cannot be used for transplants are effectively used for various research and development
programmes.
Aravind Eye Banks have a distinct advantage of having links with numerous voluntary organisations like
Lions clubs, Rotary clubs and other NGOs for its outreach activities. With the adequate training from the
Eye Bank, these clubs also perform the activities of the Eye Donation centres and contribute to the Eye
Bank by procuring Eyes. At present the eye bank has 35 collection centres in 12 districts of Tamilnadu.
Almost, 80% of the eyes collected by the eye bank are through these collection centers.

EYE BANK
ACTIVITIES
PROCUREMENT
,PROCESSING
AND
DISTRIBUTION

TRAINING

AWARNESS

Eyes procured in the last five years

6000
5568
5000
4789
4000

4386
4075
3779

3000

2000

1000

0
2010-11

2011-12

2012-13

2013-14

2014-15

*Aravind hospitals activity report 2014-15

Location
Madhurai
Coimbatore
Pondicherry
Tirunelveli
Total

Eyes procured
2019
1885
1004
660
5568

Eyes utilized for surgery

1125
687
322
254
2388

Out of 5568 eyes procured, 2388 have been utilized for surgery in the year 2014-15. There is
16.27 % of growth in eyes procurement from the past year. From the last few years Aravind has
been indulged into public awareness campaigns like distributing pamphlets, lecture series in
educational institutions, clubs, voluntary organisations and service organisations. Volunteers
have been actively involved in educating the rural masses to understand the relevance and

importance of eye donations. Active networking with medical colleges has helped to gain
knowledge transfer on issues revolving eye donation. Penetration into new areas would help
them to achieve their targets for eye donations.

7.3 COMMUNITY OUTREACH MODEL

Medical teams from each hospital reach patients in rural areas by conducting free eye camps.
Patients are screened for various eye diseases; those who require cataract surgery are transported
to the base hospital, treated, returned to the camp site and followed up after four weeks all free of
cost. Various steps involved in an eye camp are as follows:

FIG 1.1 PROCESS FLOW OF COMMUNTIY OUTREACH

PROGRAMME

Patient
Registra
tion

Final
Exam

Counsel
ling

Prelimn
ary
vision
test

Refracti
on

Optical
Services

Prelimn
ary
Exam

Tension
and
duct
exam

1. Patient registration: The camp team, composed of ophthalmologists and paramedical staff,
proceed to the campsite. With support from local community, local volunteers (usually students with
legible handwriting) record the patient details - name, age and address - in the OP register and case sheet.
Patients are given identity cards, which may be used for any future follow-up .

2. Preliminary vision test: Preliminary vision test is performed by ophthalmic assistants. Vision
charts, such as the Snellen (in the local language) and E type charts, are used.

3. Preliminary examination: Ophthalmologists perform the preliminary examination. Clinical

conditions such as external eye infections, vision loss caused by nutritional deficiency and the incurably
blind are examined. After this basic examination with the help of torch light and direct ophthalmoscope,
the patients are directed to further steps.

4. Tension and duct examination: Patients above the age of 40 have their intraocular pressure tested.
Senior level ophthalmic assistants administer topical anaesthetic drops and measure the intraocular
pressure with a Schiotz tonometer. Lacrimal passage is also tested by syringing for the patients with
cataract in operable condition. Facilities for the patients to lie on, additional benches for waiting patients,
and adequate lighting are ensured.

5. Refraction: Refraction is performed on patients who have refractive errors, presbyopia, outdated
glasses, or pseudo-aphakia. This process occurs in a simple, prefabricated, dark cubicle which is equipped
with one or more foldaway partitions, trial lens sets, and mirrors. Well-trained ophthalmic technicians
conduct refraction while volunteers control the patient flow.

6.Final examination: Senior Ophthalmologists evaluate the test findings, perform the final
examination (which includes fundus examination on needy patients), review the patient records, make the
final diagnoses and prescribe required management which could be , medication, eye glass prescription,
surgery or treatment. (In a small camp, one doctor conducts both the preliminary and the final
examination.)

7. Counselling: Patients advised for surgery or further specialty interventions are educated by the
counsellors to uptake the relevant eye care. Patients who are advised for cataract surgery undergo blood

pressure measurement and sugar test. Those who fit for surgery are counselled at the campsite are
registered in Inpatients register and transported to the base hospital for surgery. These patients receive
surgery, postoperative care, meals, and round-trip transportation all free of cost.

8. Optical Services: Opticians (sales person and technicians from optical division) also attend the
screening camp as part of the medical team. A set of frames and required indent of power glasses are
taken to the camp venue. Patients advised to wear eye glasses may use this opportunity as it is available at
affordable price and receive eye glasses in the camp venue itself. The optician finishes the lens on a
grinding machine, mounts the lens in the frames chosen by the patient.

1.2 Community outreach Statistics

FREE EYE CAMPS
1.Comprehensive eye camps
2.Diabetic Retinopathy camps
3.Refraction camps
4.School children screening camps
5. Paedetric eye screening
6.Mobile van screening
7.Vision centres
8.Community centres
9.Outpatients examined in camps

TOTAL

TOTAL
347053
39417
50602
91893
8420
27275
396007
164996
564660
35,22,527
*Source-Aravind eye activity reports 2014-15

CHAPTER 8 Case Study: Interview Sarpanch

(Vadgaon)
GOOD GOVERNANCE IN VADGAON: A DEVELOPMENT PARADIGM

VILLAGE PROFILE
Vadgaon village is situated in Pen taluka of Raigad district of Maharashtra state. The population of
vadgaon is 2200(approx.). The social profile of village include Marathas & Agri communities. Due to
presence of industries in vicinity, only 20% of people are engaged in Agriculture as their primary
occupation. Majority of population (80%) is engaged in skilled & unskilled sector. Presence of
industries like JSW steel has increased their scope of employment. This has led to rapid urbanization
of Pen taluka, where infrastructure, education & market access has benefitted the people of vadgaon.
People participation in development is key for economic and social progress. Mobilization and
awareness among people of vadgaon is because of efforts taken by Sarpanch of the village. Equity is
given primary importance while implementation of schemes at the village level. Combination of
efforts taken by Sarpanch and people has led to holistic development of village.

Objectives
1. To understand key socio-economic issues prevailing in the village and its impact on governance
2. To critically analyze the last mile delivery of public services

Research Methodology
1. Telephonic interview with key village resource person (Eg. Sarpanch)
2. Secondary data from various govt departments

Analysis of governance related issues

1. Agriculture
Production of vaal (Field Beans) is one the activities taken by the people in the village. Very few are
involved in agriculture compared to majority. Mainly Adivasi groups are indulged into production of Vaal.
Last year they produced 70-75 Kgs of Vaal in the village, the prices vary around Rs.70-100 depending
upon the quality and negotiation power of the person. Vaal is a crop which doesnt require high input cost
compared to other vegetables. Input cost being low, it becomes remunerative for farmer to actively
engage into production and also the region is water resourced due to the efforts taken by the people and
their sarpanch in demanding their rights.

MNREGA related issues

One of the major planks of rapid poverty reduction in the Eleventh Five Year Plan is the successful
implementation of National Rural Employment Guarantee Act (NREGA) in majority of the states of
India. The Act, passed by the Parliament in August 2005, is a path-breaking legislation as it guarantees
wage employment on public works to any adult who is willing to do unskilled manual work for 100 days
in a year at minimum wages as prescribed in the Minimum Wages Act, 1948. Asset creation was the main
objective of MNREGA, though it has partially succeeded in creating assets around the village. We
identified the factors leading to inefficiency in the scheme.

FACTORS
1. Labour rate

COMMENTS
Rapid Urbanization of the area has attracted masses to migrate to cities in search
of livelihood opportunities. Pen taluka being 20kms from Vadgoan village,
people flock to city to work in construction related works. The average labour
rate for unskilled work is Rs.400 per day and the Government backed scheme
provides Rs.128 per day which is far below the market rate and this leads to
labour-wage mismatch. Due to unavailability of labour, the scheme is less
attractive for residents of vadgaon village.

2.Pressure from

Despite of such poor response to the scheme, earmarking of funds every year

government

leads to leakage and poor asset quality. If we look at Pan-India level, there is
widespread criticism of massive corruption in MNREGA. While probing the
status of scheme, we found that implementation was in a half-hearted manner.
Revision of wages can be one of the solutions which can be worked in consensus

3. Education

with government to make the scheme attractive for the people.

The school in Vadgaon, started in 2001, has been primarily established to engage
the Adivasi children in the area. Primary education till 4th standard is provided
there. Children prefer to join the developed and better schools in the city of Pen,
which is a few kms away, for further education. Vadgaon village has higher
literacy rate compared to Maharashtra. In 2011, literacy rate of Vadgaon village
was 86.97 % compared to 82.34 % of Maharashtra. In Vadgaon male literacy

4. Water

stands at 89.11 % while female literacy rate was 84.65 %.

Just a few years ago, Vadgaon faced a lot of water scarcity as the small Moti
Lake they relied on started drying up. The whole village planned to build a path
for the flowing water so as to increase the water content of the farms. Some

farmers have given up their land for this project and have been compensated for
the same. Bunds have been made so that the water seeps into the soil. This has
enabled the farmers to grow two crops a year.

5. Women

Special importance is given to women health and medical drives are held at
regular intervals. Vadgaon became the first village in the whole Pen taluka for
building a gym especially for women. Also there is a library in the village to
cultivate a habit of reading among them. Currently, there are 13 Self Help
Groups of which 3 are of the Adivasi women. The Zilla Parishad provide Rs. 2.5
5 lakhs per villages for animal husbandry. In Vadgaon, the Gram Panchayat
lends money to the SHGs who plan to buy goats for breeding. Typically, 10 goats
are given to a group, the breeding of which can enable them to earn a minimum
of Rs. 20,000 by selling the kids after a year. Also sheep breeding is done in the
village but on a smaller scale.

6. Health

One of the key components of the National Rural Health Mission is to provide
every village in the country with a trained female community health activist
ASHA or Accredited Social Health Activist. Selected from the village itself and
accountable to it, the ASHA is trained to work as an interface between the
community and the public health system. The appointed ASHA in Vadgaon is
given the responsibility of the children in the Aanganvadis. Malnutrition has
been completely abolished from the village because of proper execution of this
plan. Since no hospital exists in the village, ASHA has to also accompany the
women of the village to the city during their health check-ups and is the primary
assistance during child birth.

Future plans for the village

The most important project right now is aimed at sustaining during the increasing water shortage
year on year. The Moti Lake is an important source of water right now and they plan on
increasing its depth by a few feet to increase its capacity. Also they plan on increasing the
number of SHGs in the village so that more number of women are independent.

BIBLIOGRAPHY