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´Satyam Vada Dharmam Charaµ

Forever speak the truth and follow the dharma

� Amit Koli 31

� Rindhu Kumari 32

� Noble Kurvilla 33

� Vijay Mane 34

� Sushant Mhamunkar 35

Prepared By:-



Governance Concept in µRamayana¶

To provide ³the maximum happiness for the maximum

number of people for the maximum period, based on the

principles of Dharma ± righteousness and moral values.´

- Ay odhy a Kand



An Indian Definition

� ³«fundamental objective of corporate governance isthe µenhancement of the long-term shareholder value

while at the same time protecting the interests of other stakeholders.´

± SEBI (Kumar Mangalam Birla) Report on

Corporate Governance, January, 2000



CorporateGovernance

What is Governance?

Purpose of corporate governance is to have a demonstrable

IMPACT on a corporation¶s FINANCIAL PERFORMANCE.

³Corporate Governance is the application of best managementpractices, Compliance of law in true letter and spirit andadherence to ethical standards for effective management and

distribution of wealth and discharge of social responsibility forsustainable development of all stakeholders´.

-The Institute of Company Secretaries of India



What is Corporate Governance?

� The Manner in which a Corporation is Run

± Achieving its Objectives

± Transparency of its Operations± Accountability & Reporting

± Good Corporate Citizenship

� The Processes & Operating Relationships that BestAchieve Organizational Goals.



F actors influencing corporate governance

1. The ownership structure

2. The structure of company boards

3. The financial structure

4. The institutional environment



Mechanisms of corporate governance

(1) Companies Act

(2) Securities law

(3) Discipline of the capital market

(4) Nominees on company boards



Corporate Governance in India ± A Background

� India was considered one of the poor countries at

independence.

� Its salient features were ±

- clearly defined rules governing listing, trading

& settlements,

- well developed equity culture & banking system.

- more endowed than other colonies in terms of

corporate laws & financial system.



Contd«

� The beginning of corporate developments in India were

marked by the managing agency system that contributed to the

birth of dispersed equity ownership.

� The turn towards socialism in the decades after independence

marked by the 1951 Industries (Development and Regulation)

Act 1956.

� Growing malpractices such as corruption , nepotism &

inefficiency became hallmark of Indian Corporate sector.



� Unlike South-East and East Asia, the corporate governance initiativein India was not triggered by any serious nationwide financial,banking and economic collapse

� The initiative in India was initially driven by an industry association,the Confederation of Indian Industry

± In December 1995, CII set up a task force to design a voluntarycode of corporate governance.

± The final draft of this code was widely circulated in 1997.

±

In April 1998, the code was released. It was called Desi rabl eCorporat e Governanc e: A Cod e.

± Between 1998 and 2000, over 25 leading companies voluntarilyfollowed the code: Bajaj Auto, Hindalco, Infosys, Dr. Reddy¶sLaboratories, Nicholas Piramal, Bharat Forge, BSES, HDFC, ICICIand many others

Brief history of corporate governance in India



� Following CII¶s initiative, the Securities and Exchange Board of India(SEBI) set up a committee under Kumar Mangalam Birla to design amandatory-cum-recommendatory code for listed companies

� The Birla Committee Report was approved by SEBI in December 2000

� Became mandatory for listed companies through the listingagreement, and implemented according to a rollout plan:

± 2000-01: All Group A companies of the BSE or those in the S&PCNX Nifty index« 80% of market cap.

± 2001-02: All companies with paid-up capital of Rs.100 million ormore or net worth of Rs.250 million or more.

± 2002-03: All companies with paid-up capital of Rs.30 million ormore

Contd«



� Following CII and SEBI, the Department of Company Affairs (DCA)modified the Companies Act, 1956 to incorporate specificcorporate governance provisions regarding independent directorsand audit committees.

� In 2001-02, certain accounting standards were modified to furtherimprove financial disclosures. These were:

± Disclosure of related party transactions.

± Disclosure of segment income: revenues, profits and capitalemployed.

± Deferred tax liabilities or assets.

± Consolidation of accounts.

� Initiatives are being taken to (i) account for ESOPs, (ii) furtherincrease disclosures, and (iii) put in place systems that can furtherstrengthen auditors¶ independence.

Contd«



Recent Misconducts: The List Goes On«

� Computer Associates:

± Artificially inflated revenue and improperly rewarded top

executives.

� CMS Energy:

± Overstated revenues in 2000 and 2001 thru µround trip¶ energy

trades?

� Dynegy:

± Transactions to cut taxes and artificially increase cash flow ?

� Kmart:

± Suspected improper accounting for vendor allowances

� Lucent Technologies:± Adjusted fiscal 2000 revenues by $679 million.

� Several more names, respected world-over:

± AOL Time Warner, Bristol-Myers, Elan,Halliburton, ImClone

Systems, Microstrategy, Mirant, Network Associates, Reliant

Resources, Vivendi Universal, Xcel Energy, Xerox.



Corporate Mis-Governance



Driving Forces of CG in India

1)1) Unethical Business PracticesUnethical Business Practices±± Security ScamsSecurity Scams ------HarshadHarshad MehthaMehtha Security ScamSecurity Scam

�� Equity allotments at discount rates to the controllingEquity allotments at discount rates to the controllinggroupsgroups

�� Disappearance of Companies (1993Disappearance of Companies (1993--94)94) -- around 4,000around 4,000

�� companies with 25,000companies with 25,000 crorescrores without starting businesswithout starting business

±± Misdeed of CompaniesMisdeed of Companies

�� Plantation, Sheep rearing, etc.Plantation, Sheep rearing, etc.

2)2) Impact of GlobalizationImpact of Globalization±± Integration with Foreign MarketIntegration with Foreign Market

±± Foreign Investors expectationsForeign Investors expectations±± New Business OpportunitiesNew Business Opportunities ------ IT & ITES, BPO etc.,IT & ITES, BPO etc.,

±± New Capital formationNew Capital formation ±± FII, FDIFII, FDI

3)3) Impact of Impact of PrivatisationPrivatisation±± New structure of ownershipNew structure of ownership

±± Multinational CompaniesMultinational Companies



Economic

An Enterprise¶s Triple Effect on Society

BusinessImpact

Sustainable Development Equal Opportunities

Waste Control Education &

Culture

Emissions Community

Regeneration

Energy Use Human Rights

Product Employee

Life-cycle Volunteers

Product Wealth Productive Ethical

Value Generation Employment Trading



&



Infosys Technologies: The Best among Indian

Corporates

� As per the Credit Lyonnais Securities Analysis (CLSA), thecorporate governance ratings of the Software firms are higherthan those of other Indian firms.

� Infosys, based in Bangalore, is a publicly held, ISO 9001 certifiedcompany offering information technology consulting & software

services.

� The software offered include application development, E-Commerce & Internet Consulting, Software Maintenance.

� Respected across the country, with very strong systems, highethical values & a nurturing working atmosphere.

� Net income of US 1,155 million and revenue of US 4,176 million.

� At present having US 20.4 billion market capitalisation.



Achievements

� Voted as the Best Managed Company in Asia.

� Biggest exporters of Software.

� First to follow the US Generally AcceptedAccounting Principles before going for Nasdaqlisting in 1991.

� Championed CorporateGovernance in India.



Narayana Murthy¶s Global Strategy

1) Global Delivery Model ± Producing where it is most costef fective to produce & selling where it is most profitable tosell.

2) Moving up the Value Chain ± Getting involved in asof tware development project at the earliest stage of its lifecycle.

3) PSPD Model ± Predictability of Revenues, Sustainability of Revenues, Profitability, De-risking.



Best Governed Companies

ICSI National Award for Excellence in

CorporateGovernance



Concluding Observations

�� Code of CG should be redesigned to reflect international bestCode of CG should be redesigned to reflect international bestpracticespractices

�� Stringent enforcement of LawStringent enforcement of Law

�� More effective coordination and cooperation between SEBI, DCAMore effective coordination and cooperation between SEBI, DCA

�� CG mechanism should be flexible and suitableCG mechanism should be flexible and suitable

�� Overall ethical values in all segments should be promoted forOverall ethical values in all segments should be promoted foreffectiveeffective

�� accounting, auditing, disclosure and transparent system.accounting, auditing, disclosure and transparent system.



W INNING

EMPLOYEES

W INNING

EMPLOYEES

GRO W ING

INVESTORS

GRO W ING

INVESTORS

DELIGHTED

CUSTOMERS

DELIGHTED

CUSTOMERS

TRUSTED

SUPPLIERS

TRUSTED

SUPPLIERS

SATISFIED

GOVERNMENT AND

REGULATORS

SATISFIED

GOVERNMENT AND

REGULATORS

HAPPY

SOCIETY

HAPPY

SOCIETY

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