C.G. Narayan Murthy Committee Report
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Transcript of C.G. Narayan Murthy Committee Report
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REPORT OF THE SEBI COMMITTEE ON CORPORATE GOVERNANCE(N.NARYANMURTHY- CHAIRMAN)( 8 Feb. 2003 )TERMS OF REFERENCE- To review the performance of corporate governance- To review the role of companies in responding to rumours and other price sensitive information circulating in the market, in order to enhance the transparency and integrity of the market.
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RECOMMENDATIONSAUDIT COMMITTES1- Review of information by Audit Committees (Mandatory)2- Financial Literacy of members of Audit Committee (Mandatory)AUDIT REPORTS AND AUDIT QUALIFICATIONS3- Disclosure of accounting treatment (Mandatory)4- Audit Qualifications ( Non mandatory)RELATED PARTY TRANSACTIONS5- Basis for Related Party Transactions (Mandatory)6- Definition of Related Party Transactions (Mandatory)
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RECOMMENDATIONSRISK MANAGEMENT7- Board disclosures (Mandatory)8- Training of Board members (Non-mandatory) PROCEEDS FROM INITIAL PUBLIC OFFERINGS (IPO)9- Use of Proceeds (Mandatory)CODE OF CONDUCT10- Written code for executive management (Mandatory)NOMINEE DIRECTORS11- Exclusion of Nominee Directors from the definition of Independent directors (Mandatory)
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RECOMMENDATIONSNON-EXECUTIVE DIRECTOR COMPENSATION12- Limits on Compensation paid on Independent directors (Mandatory)INDEPENDENT DIRECTORS13- Definition of Independent DirectorsWHISTLE BLOWER POLICY14- Internal Policy on Access to Audit Committee (Mandatory)15- Whistle Blower Policy (Mandatory)
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RECOMMENDATIONSSUBSIDIARY COMPANIES16- Audit Committee Requirements (Mandatory)REAL TIME DISCLOSURESEvaluation of Board Performance17- Mechanism of evaluating non executive board members (Non mandatory)Analyst Report18- SEBI should make the rules on disclosures of Analyst Report (Mandatory)
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RECOMMENDATIONSRECOMMENDATIONS OF NARESH CHANDRA COMMITTEE19- Disclosure of Contingent Liabilities20- CEO/COO Certification21- Definition of Independent Director ( All Mandatory)
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OTHER SUGGESTIONSHARMONISATIONREMOVAL OF INDEPENDENT DIRECTORDISGORGEMENT OF PROFITSTERMS OF OFFICE OF NON-EXECUTIVE DIRECTORSCORPORATE GOVERNANCE RATINGSMEDIA SCRUTINYIMPLEMENTATION END NOTE
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OTHER RECOMMENDATIONS28- DCAs office29- Miscellaneous - Random scrutiny of audited accounts - Internal code of ethics - Research on corporate governance30- Audit firms
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RECOMMENDATIONSTRAINING OF DIRECTORS9- Need based training programmes/seminars/workshops to acquaint the directors with the emerging developments/challenges facing the banking sector,10- Separate the office of chairman and managing director,11- Sufficiently long tenures of whole time directors,12- Undertaking from every director for discharging their responsibilities to the best of their abilities.
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RECOMMENDATIONS
REMUNERATION TO DIRECTORS
13- Existing level of remuneration is inadequate, should be increased and may include stock-options,
PROHIBITION- SEC. 20 OF B.R ACT, 1949
14- Prohibition (Sec.20 of BR Act) on lending to companies in which a director is interested, should go away.
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RECOMMENDATIONSINFORMATION FLOW TO/FROM THE BOARD15- Reviews dealing with various performance areas to be put up to the Supervisory Committee of the Board and a summary of each review to the Board for scrutiny & action,16- Minutes to be recorded in uniform & formalised manner.
COMPANY SECRETARY17- Qualified Company Secretary to be appointed in all banks, and should also have a Compliance Officer reporting to the Secretary
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RECOMMENDATIONSCOMMITTEES OF THE BOARD18- a) Supervisory Committee b) Audit Committee c) Nomination Committee d) Shareholders Redressal Committee e) Risk Management CommitteeDISCLOSURES AND TRANSPARENCY19- a) Progress made in putting in place a progressive risk management system, b) Exposure to related entities c) Conformity with Corporate Governance standard
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RECOMMENDATIONSREVIEW OF IMPLEMENTATION
20- Banks to evolve a strategy for implementation of the recommended standard of Corporate Governance. Reviews after 12 months or 6 months as deemed appropriate.