KUMAR MANAGALAM BIRLA COMMITTEE ,1999

GROUP MEMBERS

GAURAV ALMALMRIDULA KHANNANITIN BANSALPRAVEEN KUMARRAJ KUMARSAIF AHMAD

KUMAR MANGALAM BIRLA KUMAR MANGALAM BIRLA COMMITTEE,1999COMMITTEE,1999

Second major initiative taken by SEBI on 7th May’1999.

Appointment of committee under chairmanship of Mr. Kumar Mangalam Birla.

The Committee made 25 recommendations, 19 of them were `mandatory‘.

WHY WAS THE COMMITTEE FORMED?

Primary objective was to view corporate governance from perspective of investors & shareholders.

To promote and raise the standards of corporate governance.

To improve corporate governance standards in listed companies in areas such as -

Disclosure of material information(financial & non-financial) Responsibilities of independent & non-independent directors To draft a code of corporate best practice To suggest safeguards to be instituted within companies to deal with insider trading and insider information

Names of the Members of the committee

Shri Kumar Mangalam Birla, Chairman, Aditya Birla group

Chairman of the Committee1. Shri Rohit Bhagat, Country Head, Boston Consulting Group2. Dr. J Bhagwati, Jt. Secretary, Ministry of Finance.3. Shri Samir Biswas, Regional Director, Western Region, Department of Company AffairsGovernment of India4. Shri S.P. Chhajed, President of Institute of Chartered Accountants of India5. Shri Virender Ganda, Ex-President of Institute of Company Secretaries of India6. Dr. Sumantra Ghoshal, Professor of Strategic Management, London Business School7. Shri Vijay Kalantri, President, All India Association of Industries8. Shri Pratip Kar, Executive Director, SEBI — Member Secretary9.Shri Y. H. Malegam, Managing Partner, S.B. Billimoria & Co

Names of the Members of the committee

Shri Kumar Mangalam Birla, Chairman, Aditya Birla group

Chairman of the Committee1. Shri Rohit Bhagat, Country Head, Boston Consulting Group2. Dr. J Bhagwati, Jt. Secretary, Ministry of Finance.3. Shri Samir Biswas, Regional Director, Western Region, Department of Company AffairsGovernment of India4. Shri S.P. Chhajed, President of Institute of Chartered Accountants of India5. Shri Virender Ganda, Ex-President of Institute of Company Secretaries of India6. Dr. Sumantra Ghoshal, Professor of Strategic Management, London Business School7. Shri Vijay Kalantri, President, All India Association of Industries8. Shri Pratip Kar, Executive Director, SEBI — Member Secretary9.Shri Y. H. Malegam, Managing Partner, S.B. Billimoria & Co

Contd…..

10.Shri N. R. Narayana Murthy, Chairman and Managing Director, Infosys Technologies Ltd.11.Shri A K Narayanan, President of Tamil Nadu Investor Association12.Shri Kamal Parekh, Ex-President, Calcutta Stock Exchange 13.Dr. R. H. Patil, Managing Director, National Stock Exchange Ltd.14.Shri Anand Rathi, President of the Stock Exchange, Mumbai15.Ms D.N. Raval, Executive Director, SEBI16.Shri Rajesh Shah, Former President of Confederation of Indian Industries.17.Shri L K Singhvi, Sr. Executive Director, SEBI18.Shri S. S. Sodhi, Executive Director, Delhi Stock Exchange

RECOMMENDATIONS OF KUMAR MANGALAM BIRLA COMMITTEE Mandatory recommendations

Aplies to listed companies of paid up capital of Rs. 3 crores .

Composition of Board of Directors - optimum combination of Executive & Non- Executive directors(at least 50%).

Audit Committee- With 3 independent directors, with 1 having financial and accounting knowledge.

Remuneration committee – Disclosure in annual report relating to all elements of remuneration package of directors like salary, bonus, ESOPs, pension, benefits.

MANDATORY RECOMMENDATIONS (contd…)

Participation of Director- shall not be a member of more than 10 committees & shall not act as chairman of more than 5 committees across all the companies.

Disclosure- Management discussion & analysis report covering industry structure, opportunities, threats, internal control system.

Information sharing with shareholders.

Board procedures- At least 4 meetings in a year, to review operational plans, capital budgets & quarterly results.

MANDATORY RECOMMENDATIONS (contd…)

Participation of Director- shall not be a member of more than 10 committees & shall not act as chairman of more than 5 committees across all the companies.

Disclosure- Management discussion & analysis report covering industry structure, opportunities, threats, internal control system.

Information sharing with shareholders.

Board procedures- At least 4 meetings in a year, to review operational plans, capital budgets & quarterly results.

NON - MANDATORY RECOMMENDATIONS

NON - MANDATORY RECOMMENDATIONS

Role Of Chairman - effective participation of all members

Remuneration Committee Of Board – credibility & transparency

Ballot system -Shareholders' Right For Receiving Half Yearly Financial Performance Postal Ballot Covering Critical Matters Like Alteration In Memorandum Etc

Sale -Of Whole Or Substantial Part Of The Undertaking Corporate Restructuring Further Issue Of Capital Venturing Into New Businesses

COMPARISON OF CII & KMBC COMPARISON OF CII & KMBC RECOMMENDATIONSRECOMMENDATIONSCOMPARISON OF CII & KMBC COMPARISON OF CII & KMBC RECOMMENDATIONSRECOMMENDATIONS

CII Code recommendations (1997)

Birla Committeerecommendations (2000)

a) For a listed company with turnover exceeding Rs.100 crores, if the Chairman is also the MD, at least half of the board should be Independent directors, else at least 30% .

b) No single person should hold directorships in more than 10 listed companies.

c) Non-executive directors should be competent and active and have clearly defined responsibilities like in the Audit Committee.

a)For a company with an executive Chairman, at least half of the board should be independent directors¨, else at least one-third.

b) Maximum of 10 directorships and 5 chairmanships per person.

c) Audit Committee: A board must have an qualified and independent audit committee, of minimum 3 members, all non-executive, with at least one having financial and accountingKnowledge.

(contd….)(contd….)

CII KMBC

d) Consolidation of group accounts should be optional and subject to FI’s and IT department’s assessment norms. If a company consolidates, no need to annex subsidiary accounts but the definition of “group” should include parent and subsidiaries.

d) Companies should provide consolidated accounts for subsidiaries where they havemajority shareholding.

e)Remuneration-Committee:The remuneration committee should decide remuneration packages for executive directors. It should have at least 3 directors, all no executive and be chaired by an independent director.

CONCLUDING REMARKSCONCLUDING REMARKS By and large, Indian listed companies have been legally mandated to follow fairly strict standards of corporate governance and disclosure

Indian corporate sector regulators and companies have been quick to incorporate some of the best international corporate governance and disclosure practices

The need of the day is more training… of directors, audit committee members and senior executives of companies

The challenge is to design and sustain a system that imbibes the spirit of corporate governance… and not merely the letter of the law

BIBLIOGRAPHY

http://www.nfcgindia.org/krbirla1999.htm www.business.gov.inhttp://www.sebi.gov.in/commreport/corpgov.jsp 27/

Handbook on International Corporate Governance - Chris A. Mallin.Article on “Corporate governance vs. Corporate crime”- S. N. Mahapatra W & Sanjay Pandey

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