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CII Committee Report

(Lesson-10C: BECG)

Prof. C. Anand Faculty IBS, Hyderabad

Contents This deals with:1. Origin 2. Recommendations of the Committee

1. Origin Confederation of Indian Industry (CII) took initiative to draft some CG codes. A national task force on CG was set up in 1996 under the Chairmanship of Rahul Bajaj, ex-President of CII and CMD of Bajaj Auto Ltd. The Committees recommendations were well received.

2. Recommendations of the Committee

Following are the recommendations:The full board should meet a minimum of 6 times a year, preferably at an interval of 2 months. A listed co. with turnover of Rs.100 crore and above shall have professionally competent, independent nonexecutive directors and constitute at least 30% of the board if chairman is non-executive Chairman and at least 50% if chairman and MD is the same person. No single person shall hold directorships in more than 10 cos., excluding directorships in subsidiaries/associate cos., subject to some restrictions. Non-EDs shall play a material role in decision making and maximizing shareholder value.





2. Recommendations of the Committee

5. For securing better effort from Non-EDs, cos. shall pay 1% commission (1%-3%) on net profits for their professional inputs. 6. For reappointment of directors, their previous attendance record (minimum of 50%) should be seen. 7. Key information that must be reported to Board must include: Annual operating plans & budgets; capital, man power and overhead budgets, qly results, IA reports, show cause notices, fatal/serious accidents, defaults, joint ventures, labor problems, forex exposures. 8. Audit Committees should be set up within 2 months for cos. with turnover of Rs.100 crore and paid-up capital of Rs.20 cr or more. Listed cos. must give information on high, low and monthly average share prices in a major stock exchanges. 5

2. Recommendations of the Committee (contd)

9. Consolidation of group accounts are optional; groups include parent and subsidiary companies. 10. Major SEs should insist upon compliance certificate by CEO and CFO stating management is responsible. 11. Govt. must allow far greater funding to corp. sector against security of shares and other paper. 12. Nominee Directors should be appointed by FIs only in the events of serious and systematic debt default. 13. Cos. shall divulge in the prospectus the credit ratings of previous Rating Agencies also, besides the current one. 14. Cos. which default on fixed deposits shall not be allowed to accept further deposits and make inter-corporate loans and investments. 15. There should be reduction in no. of cos. where nominee directors were appointed by FIs based on FIs holdings 6 in these companies. *The End*