CORPORATE GOVERNANCE PRACTICE OF INDIAN COMPANIES – AN ASSESSMENT OF OECD PRINCIPLES AT GLOBAL PERSPECTIVE
Smriti Sharma Research Scholar, Dept. of Accountancy and Law, Faculty of Commerce, Dayalbagh Educational Institute, Dayalbagh Agra 282110 (
[email protected] )
Prof. Pravin Saxena Dept. of Accountancy and Law, Faculty of Commerce, Dayalbagh Educational Institute, Dayalbagh Agra 282110 (
[email protected] )
Dr. Nitin Kishore Saxena Visiting Faculty, DEC- Agra City Centre Dayalbagh Educational Institute, Agra (
[email protected] )
Electronic copy available at: http://ssrn.com/abstract=2279413
Abstract The corporate governance plays a major role in the integrity of businesses and markets and helps in maintaining vitality, growth and stability and leads to increase in economic efficiency. In India SEBI under its listing agreement clause 49 has laid down rules and regulations for effective corporate governance and lot of research has been carried out to evaluate the corporate governance practices of the Indian corporate. At global level Organization for Economic Cooperation and Development (OECD) has also framed principles of corporate governance which are non-binding and intended to assist member and non-member government to evaluate and improve the legal, institutional and regulatory framework of corporate governance. The principles of corporate governance as laid down by OECD can lead to examine the level of disclosure practices to corporate governance at global level of the Indian corporate. Hence, in this study an attempt has been made to examine and evaluate the level of the fulfillment towards the various principles of 30 BSE Sensex companies for the year 2010-11.The analysis reveals that the disclosure practice made by Indian company as per Clause – 49 are to a certain extent capable of meeting the various principles of OECD on Corporate Governance. The Study depicts that the principle on Role of Stakeholders in Corporate Governance has attained greater significance. The principle on Board Responsibilities and Disclosure and Transparency needs to be more emphasised by Indian companies for effective Corporate Governance practice at global level.
Keywords: Corporate governance, OECD principles, Disclosure practices
Electronic copy available at: http://ssrn.com/abstract=2279413
INTRODUCTION The scope of economic reform and development in India over the past two decades has been impressive. The country has opened up large parts of its economy and capital markets which has led in making their presence felt outside India through global mergers and acquisitions. The overwhelming majority of corporate India is well run, regulated and operates business in a sound and legal manner with an objective to establish higher standards of probity and corporate governance in the country. The Ministry of Corporate Affairs, (MCA) in India published a new set of "Corporate Governance Voluntary Guidelines 2009", designed to encourage companies to adopt better practices in the running of boards and board committees, the appointment and rotation of external auditors, and creating a whistle blowing mechanism. .These guidelines are being adopted as a set of good corporate governance practices which are being adopted by the companies in India on a continuous basis .The corporate governance practices as laid down by SEBI though being followed by the Indian companies on the regular basis cannot be considered as a benchmark at global level. Therefore it is utmost important to evaluate the effectiveness of corporate governance practices of the Indian companies on a set of principles which has widely gained acceptance all around the world. Hence in this paper an attempt has been made to analyze to what extent the corporate governance practice being followed by Indian corporate sector meet the principles of corporate governance principles as laid down by
Organization for Economic Cooperation and Development (OECD) which are
considered to be non-binding and intended to assist member and non-member government to evaluate and improve the legal, institutional and regulatory framework for corporate governance. In order to examine, measure and evaluate the current corporate governance practices of Indian corporate on the principles of OECD to find out as to what extent or level these principles are being adhered in their corporate governance disclosure practice the 10 companies listed on BSE Sensex as on 1 April 2010 has been randomly selected. The data for the period 2010-11 has been taken into consideration which has been collected from secondary sources. The adherence of OECD principles of corporate governance in Indian companies was examined with the help of a scorecard which was developed on the basis of survey questions based on the five basic principles of corporate governance of OECD. The Table 1 depicts the number of survey questions in each of the five principles and each of these principles were assigned individual weightage to determine the score.
Table 1 Questionnaire Topic Area and Score Allocation S.No.
Principles of OECD
No. of Question
1.
Rights of shareholders
22
Weightage Score 20
2.
Equitable treatment of shareholders
12
20
3.
The role of stakeholders in Corporate Governance
11
10
4.
Disclosure & Transparency
33
25
5.
Board Responsibility
33
25
Each survey questions of the various principles were then examined to find out the level of fulfilment or information disclosed in the corporate governance report or in other reports or information provided by the company. For this purpose each question was examined on the basis of information provided into three categories as Adequate, Better and Best. These categories were allotted marks as ‘0’ for only adequate information.’0.5’ marks for better information and ‘1’ for best available information in respect to the survey questions. Each survey question in the respective principle were assigned some weight (see annexure) out of the total weight assigned to the basic principle. The individual weight of the respective question was multiplied by the marks gained by the question on the basis of disclosure to arrive at the corporate governance score. The corporate governance score attained by each question of the respective principle was then summed up to arrive at the total corporate governance score of the basic principle. This process was followed for each of the basic principle. The corporate governance score thus arrived for each company has been used to analyse to what level the OECD principles are being fulfilled by the Indian Companies to check the level of disclosure in global perspective. Each of these principles have been analysed in detail herewith.
An Assessment of Corporate Governance Principles by Selected Companies as laid down by OECD The principles in brief are as follows: 1. Rights of Shareholders- The corporate governance framework should protect shareholders’ right. These rights are as follows: ·
Right to obtain registration and transfer of shares
·
Right to obtain information on a timely and regular basis
·
Right to participate and vote in shareholder’s meeting
·
Right to elect board members on the board
2. Equitable Treatment of Shareholders- The corporate governance framework should ensure equitable treatment of all shareholders including minority and foreign shareholders. All the shareholders should have the opportunity to obtain effective redress for violation of their rights. Generally accepted features of the equitable treatment of shareholders are: laws that define “insiders”;the requirement that insiders disclose their transactions; laws that explicitly define penalties, including fines and imprisonment, for the violation of insider trading regulations; and a legal and regulatory framework that requires disclosure of related party transactions. 3. Role of Stakeholders in Corporate Governance- The corporate governance framework should recognize the rights of stakeholders as established by law and encourage active co-operation between corporations and stockholders in creating wealth, jobs and sustainable / financially sound enterprises. Four main factors are generally considered in assessing the role of corporate stakeholders· · ·
·
The availability of employee stock ownership plans(ESOPs) or other long-term employee incentive plans. The disclosure of details of employees’ safety and welfare; The according of first priority to employees’ wages and benefits in the event of insolvency; and the disclosure of any event related to environmental issues.
4. Disclosure and Transparency-.A corporate governance framework should ensure that timely and accurate disclosure is made about all material matters regarding the corporation such as financial situation, performance, ownership and governance of companies. Features of an acceptable system of corporate disclosure and transparency include the provision of an annual report that includes general information on the company and its main business, audited annual financial and accounts, the basis of remuneration of board members, consolidated financial reports, and information on the structure and practice of corporate governance within the firm. In addition, director’s shareholdings and transactions in the company’s stock need to be disclosed, and the company’s financial statements must be audited externally.
5. Responsibilities of the Board-The responsibilities of the board of directors should include·
Strategic guidance,
·
Annual budget formulation,
·
Major capital expenditure,
·
Selection, compensation and monitoring of key executives.
v
Rights of Shareholders
The Rights of Shareholders have been analyzed by considering 22 questions in the areas of rights defined, rights disclosed, participation in AGM and takeover rules.
Table 2 LEVEL OF DISCLOSURE AS REGARD TO THE RIGHTS OF SHAREHOLDERS SNo. Survey Question 1.
2.
3.
4.
5
6.
7.
8.
9. 10.
11.
12.
13.
14.
15.
1
2
Does the company offer other ownership rights 0.8335 0.8335 beyond voting? Is the policy on the directors' remuneration 1.667 1.667 disclosed to the shareholders? How is the directors' remuneration 1.667 1.667 presented to the shareholders? Does the company allow shareholders to elect 1.667 1.667 board members individually? Nomination of directors providing 0.417 0.417 their names and background Is there adequate information on the external auditor? Are their name(s), profile, 0.2085 0.2085 detail of fees and other engagements with the company (tax, consulting, etc.) provided? Dividend policy, in providing the amount and 0.417 0.417 explanation. Does the information statement have an 0.417 0.417 executive summary? Voting method and vote 0.417 0.417 counting system Issues and Motions Agreements arrived during the meeting;
3
4
5
6
7
8
9
0.8335 0.8335
0.8335
0.8335
0.8335
0.8335 0.8335 0.8335
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.2085 0.2085
0.2085
0.2085
0
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0
0
0
0
0
0
0
0
0.2085 0.2085
10
0
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0.417
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
at
Corporate acts which were approved or 0 disapproved by the stockholders Did the Chairman of the Board attend the last two 1.667 AGMs Did the CEO/Managing Director attend at least 1.667 one of the last two AGMs? Is a name list of board 1.667 members attending the
0.8335
0.8335 0.8335
0.8335
0.8335
1.667
0.8335 0.8335
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
AGM available? Is there a record of 16. answers and questions? 0.833 Is there a record of resolutions in the 0.833 minutes? Did the Chairman of the 18. Audit Committee attend 0.556 the last two AGMs? 17.
Did the Chairman of the Compensation /Remuneration / 19. 0.556 Governance Committee attends the last two AGMs? Did the Chairman of the Committee 0.278 20. Nomination attend the last two AGMs? Do Board members collectively own more 21. 0.833 than 25% of outstanding shares? What is the proportion of outstanding shares that 22. are considered "free 0.833 float"?
TOTAL (out of 20)
0.833
0.833
0.833
0.833
0.833
0
0.833
0.833
0
0.833
0.833
0.833
0.833
0.833
0
0.833
0.833
0
0.278
0.278
0.278
0.278
0.278
0.556
0.278
0.278
0.556
0.556
0.556
0.556
0.556
0.556
0.278
0.556
0.556
0.278
0
0
0
0
0
0.278
0
0
0.278
0.833
0
0
0
0
0.833
0
0
0.833
0.833
0.833
0.833
0.833
0.833
0.833
0.833
0.833
0.833
17.851 16.4615 15.2115 15.2115 15.2115 15.2115 15.2815 15.2115 15.211 15.2815
The Table 2 highlights that there were full disclosures by all the companies as regard to ownerships rights beyond voting, director’s remuneration, election of board members, explanation of dividend policy, attendance of Chairman and CEO in the last AGM, nomination of directors providing their names and background. Partial disclosures have been made in the area of vote method and counting system, adequate information on the external auditors, attendance of chairman of nomination committee and compensation committee, outstanding shares. There was no disclosure by any of the company as regard to corporate acts and agreements arrived at the meetings, agreements arrived at the meeting. The score for this principle ranges between 15.2115 to17.851. v
Equitable treatment of shareholders The 12 survey questions in this section were related to voting rights for shareholders, shareholders conflicts, proxy voting and AGM procedures.
Table 3 LEVEL OF DISCLOSURE AS REGARD TO EQUITABLE TREATMENT OF SHAREHOLDERS S. NO 1.
Survey Question For the same class of shares,
does
the
1
2
3
4
5
6
7
8
9
10
0
0
0
0
0
0
0
0
0
0
principle of one share one vote apply? Does the company have any 2.
mechanism
allows
that
minority
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
shareholders to influence board composition? Has there been any case of 3.
insider
trading
involving
company
directors
and
management in the past two years? Has
the
company
established a system to prevent 4.
the
use
material
of
inside
information and inform all employees, management, and board members of this system? Has
there
been
any
complaint/dispute/ 5.
problem
regarding
related-party transaction in the past two years? Does the company have a policy 6.
that
requires
management to disclose related-party transaction? Are the nature and extent of
7.
transactions
affiliated
and
with related
parties communicated to shareholders annually? Is the company a part of an
economic
group
where the parent / 8.
controlling also
shareholder
controls
key
suppliers, customers, and/or
similar
businesses? Does 9.
facilitate proxy?
the
company voting
by
Does 10.
the
notice
to
shareholders specify the documents
required
to
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
1.667
0.833
0.833
0.833 5
1.667
0.833
5
1.667
0.833
5
5
5
14.169
14.169
14.169
15.003
15.003
14.169
14.169
give proxy? Is there any requirement 11.
for a proxy appointment to be Notarized? How
many
advance 12.
days does
in the
company send out notice of
general
1.667
shareholder
0.833 5
1.667
meetings?
TOTAL (out of 20)
15.003
14.169
15.003
Table above shows that all the selected companies have provided full disclosures by giving material information to the board, information related to proxy voting and
proxy forms, insider trading,
management to disclose related-party transactions and disclosure of general shareholders meeting. None of the companies were disclosing information related to principle of one share one vote, extent of transactions with affiliated and related-parties and
part of an economic group where the parent/
controlling shareholder also controls key suppliers, customers, and similar businesses. The scores of this principle ranges between 14.1695 to 15.003. v Role of Stakeholders In this section 11 questions were considered for evaluating the principle which were related to recognition of rights of the stakeholders
Table 4 LEVEL OF DISCLOSURE AS REGARD TO THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE S. N o 1.
2.
3.
Survey Question Does the company explicitly mention the safety and welfare of its employees? Does the company provide an ESOP (Employee Share Option Program), or other long-term employee incentive plan linked to shareholder value catreion, to employees? Does the company provide a retirement plan/fund or its equivalent for its employees?
1
2
3
4
5
6
7
8
9
10
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0
0.909
0.909
0.909
0
0.909
0.909
0
0
4.
5.
6.
7.
8.
9.
10 .
11 .
Does the company provide a continuing training program for its employees? Does the company explicitly mention the role of customers? Does the company explicitly mention the role of suppliers/business partners? Does the company explicitly mention its obligations to shareholders? Does the company explicitly mention its obligations to creditors? Does the company explicitly mention environmental issues in its public communication? Does the company explicitly mention its broader obligations to society and / or the community? Does the company disclose pending legal and tax proceedings, tax assessment notices and voluntary assessment program a ailments that it considers to be potentially material to its business?
TOTAL (out of 10)
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.454
0.909
0.909
0.909
0.454
0.909
0.909
0.454
0.454
0.454
0.454
0.454
0.454
0
0.454
0
0
0.454
0.454
0.454
0.454
0.454
0.454
0.454
0.454
0.454
0.454
0.454
0.454
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
0.909
9.089
7.725
9.089
9.089
8.635
7.725
8.635
8.635
7.725
7.725
It can be summarized from the table above that full disclosures were made as regard to proper arrangement of safety and welfare programs for the employees of the companies, employee share option program given to the employees of the companies, proper training imparted to the employees, explicitly mention of role of customers and suppliers/business partners and explicitly mention its obligations to society. Partial disclosures were made in the area of environmental issues and obligations to creditors and retirement plan for the employees. The score of this principle varies between 7..725 to 9.089. v Disclosure & Transparency 33 survey questions in this section were examined which were related to material information and audit process .
Table 5 LEVEL OF DISCLOSURE AS REGARD TO DISCLOSURE AND TRANSPARENCY S No.
Survey Question
1
2
3
4
5
6
7
8
9
10
0.481
0.481
0.481
0
0
0.481
0
0
0
0.481
0.24
0
0.24
0
0
0.24
0
0
0
0.24
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
Are management’s shareholdings disclosed?
0
0
0
0
0
0
0
0
0
0
Does the company have a ownership 5. dispersed structure?
0
0
0
0
0
0
0
0
0
0
6. Financial performance
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
Business operations, competitive position, and 7. other non-financial Matters
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0
0
0
0
0
0
0
0
0
0
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
0
0
0
0
0
0
0
0
0
0
1.
Breakdown shareholdings
2.
Is it easy to identify beneficial ownership?
Are 3. shareholdings disclosed? 4.
8.
Board background
9.
Basis of the remuneration
of
directors'
member Board
10. Operating risks 11.
Identification Independent Directors
of
Board meeting attendance 12. of individual directors Does the company have a policy requiring full disclosure of details 13. of related-party transactions in public communications? Is there any statement requesting directors to 14. report their transactions of the company shares? Does the company have an internal audit operation 15. established as a separate unit in the company? Does the internal auditor 16. report to the board audit committee? Does the internal audit function provide an independent evaluation 17. of the internal control processes of the company? Does the company perform an annual audit using SEC 18. accredited external auditors?
Is the financial report disclosed in a timely 19. manner during the past year? Are there any accounting qualifications in the audited financial 20. statements apart from the Qualification on Uncertainty of Situation?
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
1.923
0
0
0
0
0
0
0
0
0
0
21. Business operation
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
22. Financial statements
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
23. Press release
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
24. Shareholding structure
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
25. Organization structure
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0
0
0
0
0
0
0
0
0
0
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0.24
0
0
0
0
0
0
0
0
0
0
30. Annual report
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
31. Company website
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
32. Analyst briefing
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
0.481
14.418
12.255 14.418 11.774
11.774
14.418 13.697 11.774 13.697 14.418
26.
Corporate group structure (N/A for a company that does not belong to corporate grouping
27.
Downloadable report
28.
Notice to call shareholders' meeting
annual
Does the company provide contact details for a specific Investor Relations 29. person or unit that is easily accessible to outside investors?
33.
Press conference(s) press briefing(s)
TOTAL (out of 25)
/
It can be concluded from the above table that full disclosures were made in the area of meeting of individual directors, business operations, financial statements, press release, board member background, board remuneration, operating risks, board meeting attendance, disclosure of details of related party transactions, shareholding structure, organization structure, timely disclosure of annual reports, downloadable annual reports etc. Partial disclosures were made as regard to breakdown of shareholdings, beneficial ownerships. None of the company giving information related to requesting directors to report their transaction, management shareholdings, dispersed ownership structure, annual SEC accredited by external auditors, corporate grouping, specific investor relation. The scores of this section lie between 11.774 to 14.418. v Board Responsibilities In this section 33 questions were examined which were related to monitoring and control, conflict of interest and board composition.
Table 6 LEVEL OF DISCLOSURE AS REGARD TO BOARD RESPONSIBILITY S No.
Survey Question
1
2
3
4
5
6
7
8
9
10
1.
Does the company have its own written Corporate Governance Manual that clearly 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 describes its value system and board responsibilities?
1.316
2.
Does the Board of Directors provide code of ethics or statement of business conduct for all 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 directors and employees?
1.316
3.
Does the company vision/mission/values?
1.316
4.
Does the PSE have any evidence of noncompliance of the company with PSE rules and regulations in the last year?
5.
Attendance
0.263 0.263 0.263 0.263 0.263 0.263 0.263 0.263 0.263
0.263
6.
Internal control
0.263 0.263 0.263 0.263 0.263 0.263 0.263 0.263 0.263
0.263
7.
Proposed auditors
0.263 0.263 0.263 0.263 0.263 0.263 0.263 0.263 0.263
0.263
8.
Financial report review
0.263 0.263 0.263 0.263 0.263 0.263 0.263 0.263 0.263
0.263
9.
Legal compliance Have board members participated in the training on Corporate Governance?. Have senior management executives attended training on Corporate Governance? What is the attendance performance of the board members during the past 12 months? Does the company provide a risk management policy? Does the company clearly distinguish the roles and responsibilities of the board and management? Does the board conduct an annual self assessment?
0.263 0.263 0.263 0.263 0.263 0.263 0.263 0.263 0.263
0.263
10. 11. 12. 13. 14. 15.
have
Does the company conduct 16. performance assessment CEO/President? 17.
corporate
an annual of the
1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316
0
0
0
0
0
0
0
0
0
0.658 0.658
0
0.658 0.658
0
0.658 0.658 0.658
0
0.658 0.658
0
0.658 0.658
0
0.658 0.658 0.658
0
0.658 0.658 0.658 0.658 0.658 0.658 0.658 0.658 0.658
0.658
1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316
1.316
1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316
1.316
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Does the firm report board meeting attendance 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 of individual directors?
18. Is the Chairman a non-executive director?
0
1.316
1.316
19. Charter/ Role and responsibilities
0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089
0.089
20. Profile / Qualifications
0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089
0.089
21. Independence
0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089
0.089
0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089
0.089
23. Performance / Meeting Attendance
0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089
0.089
24. Charter/Role and Responsibilities
0.146 0.146
0.146
22.
25.
Is the Chairman of independent director?
the
Committee
Is the Committee composed of a majority of independent directors
26. Performance / Meeting Attendance
0
an
1.316
0
0
1.316
0
0
0
0
0.146
0
0
0
1.316
0.146
0
0.146 0.146 0.146 0.146 0.146 0.146 0.146 0.146 0.146 0
0
0
0
0
0
0
0
0
0.146 0
27. Charter/Role and Responsibilities 28.
0.146 0.146 0.146 0.146 0.146 0.146 0.146
0
0
0
Is the Committee composed of a majority of 0.146 0.146 0.146 0.146 0.146 0.146 0.146 independent directors?
0
0
0
0
0
0
29. Performance / Meeting Attendance 30.
0.146 0.146 0.146 0.146 0.146 0.146 0.146
How many board members are independent 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 directors?
1.316
Does company state in its Annual Report the definition of "independence" for identifying 31. independent directors in public communications?
0
0
0
0
0
0
0
0
0
0
Does the board conduct assessment of what skills and training the directors need?
0
0
0
0
0
0
0
0
0
0
32.
Does the Company have a separate statement by the Board of Directors describing their 33. 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 1.316 responsibilities in reviewing the firm's financial statement?
TOTAL (out of 25)
14.992 16.308 13.53 16.162 14.846 13.676 14.846 14.554 15.724 14.554
The above table states that full disclosures were made in the area of information related to code of ethics for directors and employees, disclosure of corporate governance manual, existence of risk management policy, proper attendance of board meetings, adequate information as regard to audit committee, compensation committee and nomination committee and provide separate section for board of director’s report. Partial disclosures were made as regard to board members and senior executive’s participation in the training on corporate governance; chairman a non-executive director, charter/ role, performance/meetings of compensation and nomination committee etc. None of the company making disclosures in the area of need of skills and training of directors, definition of independence for identifying independent directors in public communication, annual self assessment of board and CEO/President. The score of the above principle varies between 13.53 to16.162. On the basis of the above discussion and scores calculated in the proceeding tables the overall corporate governance scores obtained by the sample companies on the OECD principle has been summarized and on the basis of the scores determined ranking of the company has been done which has sincerely adhered to the above principles and also principles has been ranked in order of significance in respect to which larger disclosure has been made.
TABLE 7 Overall Score of Principles of Corporate Governance PRINCIPLES OF OECD S.NO COMPANY NAME
1.316
PART-I PART-II (20)* (20)*
1. 2. 3. 4. 5. 6.
REL LTD ACC DLF JP. HOUSING DEVE BHEL
17.85 16.46 15.21 15.21 15.21 15.21
15.00 14.16 15.00 14.16 14.16 14.16
7.
L& T
15.28
15.00
CGPARTCompany PART-IV PART-V SCOR III Rank (25)* (25)* E (10)* (100)* 9.08 14.41 14.99 71.33 1 7.72 12.25 16.30 66.89 4 9.08 14.41 13.53 67.23 3 9.08 11.77 16.16 66.38 5 8.63 11.77 14.84 64.61 10 7.72 14.41 13.67 65.17 8 8.63
13.69
14.84
67.44
2
8.
BHARTI ARTEL
15.21
15.00
8.63
11.77
14.55
65.16
9
REL COM 9. 15.21 RANBAXY LAB 10. 15.28 DISCLOSURE LEVEL (%) 78% RANK OF THE PRINCIPLE 2
14.16 14.16 72% 3
7.72 7.72 84% 1
13.69 14.41 53% 4
15.7 2 14.55 53% 4
66.5 66.12
7 6
The Table 7 summarizes the fact that overall corporate governance score of all the selected companies lies between 64.61% to 71.33%.It can be observed that among the Indian companies REL is more significantly compiling with the principles of OECD. The remaining Indian companies are also making a fair disclosures as regard to Corporate Governance. However on evaluating the various principles (OECD) it can be seen that the principle on Role of Stakeholders in Corporate Governance has attained greater significance and principle on Board Responsibilities and Disclosure and Transparency needs greater attention by all the companies. _______________________________
References & Bibliography · · · · · · ·
Das, S.C (2009), Corporate Governance in India- An Evaluation, PHI Learning Private Limited, New Delhi. Stephen Y L Cheung and Hasung Jang (2006), Scorecard on Corporate Governance in East Asia, CIGI Working Papers ( Issue – 13) The Cadbury Committee of Corporate Governance , The Report of the Committee of the Financial Aspects of Corporate Governance. Organization for Economic Co- Operation and Development(OECD), White paper on Corporate Governance in Asia (Paris, OECD) Principles of Corporate Governance: A report by OECD Task force on Corporate Governance (1999) www. Icdcenter.org www. oecd.org.
Annexure - 1 Question Number
1. 2. 3. 4. 5 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33.
PART I-
PART-II
PART-III
PART 1V-
PART V-
THE RIGHTS OF SHAREHOLDERS (20%)
EQUITABLE TREATMENT OF SHAREHOLDERS (20%)
THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE (10%)
DISCLOSURE & TRANSPARENCY (25 %)
BOARD RESPONSIBILITY (25%)
Weight
Weight
Weight
Weight
Weight
1.667% 1.667% 1.667% 1.667% 0.417% 0.417% 0.417% 0.417% 0.417% 0.417% 0.417% 0.417% 1.667% 1.667% 1.667% 0.833% 0.833% 0.556% 0.556% 0.556% 0.833% 0.833%
1.667% 1.667% 1.667% 1.667% 1.667% 1.667% 1.667% 1.667% 1.667% 1.667% 1.667% 1.667%
0.909% 0.909% 0.909% 0.909% 0.909% 0.909% 0.909% 0.909% 0.909% 0.909% 0.909%
0.481% 0.481% 0.481% 0.481% 1.923% 0.240% 0.240% 0.240% 0.240% 0.240% 0.240% 0.240% 0.240% 1.923% 1.923% 1.923% 1.923% 1.923% 1.923% 1.923% 0.240% 0.240% 0.240% 0.240% 0.240% 0.240% 0.240% 0.240% 1.923% 0.481% 0.481% 0.481% 0.481%
1.316% 1.316% 1.316% 1.316% 0.263% 0.263% 0.263% 0.263% 0.263% 1.316% 1.316% 1.316% 1.316% 1.316% 1.316% 1.316% 1.316% 1.316% 0.089% 0.089% 0.089% 0.089% 0.089% 0.146% 0.146% 0.146% 0.146% 0.146% 0.146% 1.316% 1.316% 1.316% 1.316%
