Corporate Governance and Etihcs

Corporate Governance And Etihcs

Corporate misgovernance

• In new millenium several comanies in USA and else where faced collapse.

• Existing framework seems inadequate with the gigantic business conglomerates.

Corporate misgovernance in INDIA

• Increasing corruption in the government and its various services had kept the management of country’s industrial and business organizations above accountability for their misdeeds, encouraging them to indulged in more unethical practices.

Corporate misgovernance in INDIA

• First realize during BIG BULL, harshad mehta case.

• Involving lagre no’s of banks and resulting in the stock market nosediving for the first time.

• Preferential allotment scam where investors loose Rs 5000 Crore.

• Disappearance of companies during 1993-1994, when stock market shot up to 120 %, companies raised Rs25000 crore vanished and did not step back to their projects.

• Plantation companies scam Rs 50,000 crore• Non banking finance companies scam. etc

Corporate misgovernance in USA

• Worldcom improperly booked 3.8b in expenses, thus inflating profits.

• Bernie ebbers borrows $408 million from phone company to cover personal debts.

• Enron created outside partnerships that helped hide poor financial condition. Executive earned millions by selling company stock.

Reasons for misgovernance

• A closed economy.• Sheltered market.• Limited need and access to global

business.• Lack of competitive spirit.• Inefficient regulatory authority

framework.

Corporate Governance

• Problems that results from the separation of leadership.

• Focus upon: internal structure, rules of the board of directors, audit committees, discloser of information rules to shareholders and creditors, control of management.

Employees

Corporate Governance• Definition by corporate and

academic point.• Academic point.

Shareholders

Management

Board

Corporate Governance• Corporate point of view• Corporate governance deals with ways

in which suppliers of finance to corporation assure themselves of getting a return on their investment. How do the suppliers of finance get management to return some of the profits to them?

• How do they make sure that managers do not steal the capital they supply or invest it in bad projects?

• How do suppliers of finance control managers?

Corporate Governance MODEL

• Mc kinsey model.• The Market model.• Efficient, well developed equity

markets and dispersed ownership.• Developed nations.• US, UK, CANADA and AUSTRALIA.

SHAREHOLDERS INVIRONMENT

CAPITAL MARKET LIQUIDITY

INDEPENDENCE AND PERFORMANCE

TRANSPARENCY AND ACCOUNTABILITY

INS

TIT

UT

ION

AL

CO

NT

EX

TC

OR

PO

RA

TE

CO

NT

EX

TActive Equity market

Non-executiveMajorityboards

High discloser

Shareholderequity

Dispersed ownership

Aligned incentives

Active Takeover

market

SophisticatedInstitutionalownership

Corporate Governance MODEL

• Second version of Mc Kinsey model.• The control model• Underdeveloped equity markets,

concentrated (family) ownership, less share holder transparency and inadequate protection of minority and foreign shareholders

• ASIA, LATIN AMERICA, EAST EROPEAN NATIONS

SHAREHOLDERS INVIRONMENT

CAPITAL MARKET LIQUIDITY

INDEPENDENCE AND PERFORMANCE

TRANSPARENCY AND ACCOUNTABILITY

INS

TIT

UT

ION

AL

CO

NT

EX

TC

OR

PO

RA

TE

CO

NT

EX

TUnderdevelopedNew issue

market

Insider boards

LimitedDiscloser

Inadequate minority

protection

Concentrated ownership

IncentiveAligned with

Core shareholders

Limited takeover

market

Reliance on family, bank, public finance


• Sir adrian cadbury, chairman of cadbury committee.

• Experts at the organisation of economic co-operation and development OECD.

• All these definitions which are shareholder centric captures some of the most important concerns of government for society in general.

Corporate Governance• Management accountability.• Providing adequate investment to

management.• Disciplining and replacement of bad

management.• Enhancing corporate performance.• Transparency.• Shareholder activism.• Investor protection.• Improving access to capital markets.• Promoting long terms investments.• Encouraging innovations.

Governance Is More Than Just Board Processes And Procedures• It involves full set of relationship

between company’s management, its board, its shareholders and its other stakeholders, such as its employees and the community in which it is located.

• Poor governance ripples Russia and Asian markets.

• Cadbury code and CII code.• World bank, OECD, APEC-Asia pacific

economic co-operation.

OECD emphasis

• Rights of shareholders.• Equitable treatment of

shareholders.• Role of stakeholders in corporate

governance.• Discloser and transparency.• Responsibility of board.

HOME WORK -1RESPONSIBILITY:

KARANBIR

CG In Banking Sector

• Bank failure in west.• Weakness in banking sector leads to

financial instability.• Lyon G-7 summit in june 1996.• IMF and world bank.• Basel committee on banking

supervision.

Issues in corporate governance1.Distinguishing the roles of board

and management• By or under the direction of board.• Board occupies key position

between shareholders (owners) and company’s management ( day 2 day managers)

Issues in corporate governance

• Select, decide the remuneration and evaluate on a regular basis, when necessary the CEO.

• Oversee the conduct of company business.• Review and where necessary, approve the

company financial objectives and major corporate plan and objectives.

• Render advice and counsel.• Identify and recommend candidates for board

of directors.• Comply with laws and regulations.• All other functions required by law to be

performed.


2.Composition of the board and related issues

No. of directors of diff kinds.BORAD OF DIRECTORS

EXECUTIVE DIRECTORS NON EXECUTIVE DIRECTOS

INDEPENDENT DIRECTORSAFFILATED DIRECTORS

NOMINEE


3. Separation of the roles of the CEO and chairperson

4. Should the board of directors have committees.

Appointment of special committeesNominationRemunerationauditing


5. Appointment of the board and director’s re-election.

6. Directors and executive’s remuneration.

7. Discloser and audit.8. Protection of shareholder rights and

their expectation.9. Dialog with institutional shareholders.10.Should investor have a say in making

a company “socially responsible corporate citizen”?.

Benefits Of Good Corporate Governance To A Corporation

• Creation and enhancement of a corporation’s competitive advantage

• Enabling a corporation perform efficiently by preventing fraud and malpractices.

• Providing protection to shareholders interest.

• Enhancing the valuation of an enterprise.

• Ensuring compliance with laws and regulations.

Theory In Corporate Governance

AGENCY THEORY• Adam smith who identified an agency

problem(managerial negligence and profusion).• Shareholders (owners)- principals-they define

objective of the company.• Agents-management who pursue such objectives.• Chief executive desire and shareholders long term

investment.• Mismatch objective leads to agency problem.• Cost inflicted by such dissonance is the agency cost.


AGENCY THEORYTwo broad mechanism that reduce agency cost

and improve performance are:• Fair and accurate financial disclosures• Efficient and independent board of directors


Stewardship theory:• Managers are trustworthy and attach significant

value to their personal reputation• Managers are steward whose motives are aligned

with the objectives of principles.• Steward behavior will not depart from the interests

of his/her organization.• Control can be counterproductive, because it

undermines the pro-organisational behavior of the steward by lowering his/her motivation.


Behavioral difference between agency and stewardship theories

• Agent and steward• Agency- sociological and psychological• Steward- individualistic, opportunistic and self servingWith regard to psychological mechanisms Agency theory states that motivation resolves around lower

order and extrinsic needsSteward theory states it resolves around higher order and

intrinsic needs


Stakeholder theory:• Interest of all groups- employees, customers,

dealers, government and society.• Ethics of cares• Ethics of fiduciary relationship• Theory of property rights• Criticised mainly because not applicable in practice

by corporations


Sociological theory• Focus on board composition• Implication of power and wealth distribution• Financial reporting• Problems of interlocking dictatorship and

concentration in privilege class to equity and social progress

• Socio-economic objective of corporations


The role of the management is to run the enterprise while the role of the board is to see that it is being run well and in the right direction. Corporate governance system vary around the world. Scholars suggest 3 broad versions.

Anglo American Model

Unitary board model/ Anglo-SaxonCorporate governance in America, Britain,

Canada, Australia

Shareholder

Creditors

company

Officers(managers)

Board of directorssupervisors

Regulation/legal system

stakeholders

Appoints and supervise

manageStake in

Monitor& regulates

elect

Lien on

Anglo American Model

• Ownership is equally divided between individual and institutional shareholders.

• Directors are rarely independent of management.

• Run by professional managers who have negligible ownership stake.

• Most institution investors are reluctant activists.

• Discloser norms.

German Model

• Two tier boar model• Upper boards supervises the executive board on

behalf of stakeholders and it is typically social oriented.

• Shareholders do not dictate the governance mechanism.

• Shareholder elects 50% of members of supervisory board and rest is by labor unions, ensuring they enjoy share in governance.

• Supervisory board appoints and monitors the management board

German Model

Supervisory board

shareholderEmployees and

Labor unions

Management board(including

labor relation officer)

Company

manage

Appoint 50%

Appoint & supervise

Appoint 50%

Appoint 50%

Own

Japanese Model

• Business network model• Boards tends to be large• Predominantly executive and often ritualistic.• President who consult both supervisory board

and the executive management.• Importance of lending bank.• Shareholders and lending bank together

appoints the board of directors and president.

Japanese Model

Supervisory board

Main bankShareholders

President

Executive managementPrimarily board of directors

Company

Appoint Provides managers, monitor, act in emergencies

Ratifies president decisions

Manages

Providesmanagers

Consult

Provides loans

Own

Own

Indian Model

• Governed by the company’s Act of 1965• Which follow UK model• Private companies is mostly held or

dominated by a founder, his family and associates.

• India has adopted the key tenets of the Anglo American external and internal control mechanism after economic liberlisation.

Indian Model

HOMEWORK:Draw Indian model on your notebooks in next

class.

Obligation To Society

• National interest • Political non-alignment• Legal compliance• Rule of law• Honest and ethical• Corporate citizen• Ethical behavior• Social concerns• CSR• Environment- friendliness• Healthy and safe working

environment

• Competition• Trusteeship• Accountability• Effectiveness and efficiency• Timely responsiveness• Corporation should uphold the fair

name of the country

Obligation To Investors

• Towards shareholders• Measures promoting transparency and

informed shareholder participation• Transparency• Financial reporting and records

Obligation To Employees

• Fair employment practices• Equal opportunities employer• Encouraging whistle blowing• Humane treatment• Participation• Empowerment• Equity and inclusiveness• Participative and collaborative environment

Obligation To Customers

• Quality of products and services• Products at affordable prices• Unwavering commitment to customer

satisfaction

Managerial Obligation

• Protecting company’s assets• Behavior towards government agencies• Control• Consensus oriented• Gifts and donations• Role and responsibility of corporate board and

directors• Direction and management must be distinguished• Managing and whole time directions

Cadbury Committee On Corporate Governance

• Objective “to help raise the standards of corporate governance and level of confidence in financial reporting and auditing by setting out clearly what it sees as the perspective responsibilities of those involved and what it believes is expected of them”.


• Code of best practices• Listed on London stock exchange• 19 recommendations• Relating to board of directors, non

executive directors, executive directors, reporting and controlling


Relating to board of directors• Board should meet regularly, retain full control

and monitor• Division of responsibility, balance of power.• Non executive directors should have skill and

knowledge and in right numbers• Formal schedule of matters• Take independent professional advice at the

company’s expense• All directors should have access to the advice

and services of the company secretary, removal also.


Relating to non executive directors• Non executive members should bring an

independent judgment to bear on issues of strategy, performance, resources, key appointments and standard of conduct.

• Independent of the management and any other business and relationship, fee reflect the time they commit to the work they are assigned.

• Appointment and reappointment.• Selection through formal procedure.


Relating to executive directors• Directors service should not

exceeds 3 years without shareholders approval.

• Clear and full discloser of their salary and other incomes.

• Pay should be according to remuneration committee inclusive of non executive directors.


Reporting and controls• Boards duty to present a balanced and

understandable assessment of the company.• Board should insure that an objective and

professional relationship is maintained with the auditors.

• Board should established an audit committee with at least 3 non executive directors.

• Directors should explain their responsibilities.• Should report on the effectiveness of the

company’s system to internal control• Should report that the business is going

concern

Paul Ruthman Committee

• Controversial point of cadbury committee.

• Practicality• The effectiveness of company’s

system of internal control• Extensions of directors

responsibility

THE GRRENBURY COMMITTEE 1995

• Established to identify good practices of confederation of British industry CBI

• Directors remuneration and prepare code of such practices used in public limited company

• Accountability and level of directors pay• Proper allocations of responsibility, directors

remuneration, proper reporting to shareholders, greater transparency

4 sections• Remuneration committee• Disclosures• Remuneration policy• Service contracts and compensation

The Hampel Committee 1995

• To promote high standards of CG both to protect investors and Enhance the standing of companies in LSE

• Developed further cadbury committee report

• Auditors should report privately to directors

• Directors maintain and review all controls• Internal audit function importance • Introduced combined code of cadbury

and greenbury

The Turnbull Committee 1999

• Established by the institute of chartered accountants in England and Wales ICAEW

• Stress put on combined code on internal control

• Provide guidance to implement combined codes

• Annual internal audit importance• Board of directors confirm the existence

of procedures for evaluating and managing key risk function

World Bank on CG• Earliest international organization to

study and suggest the guidelines for CG• Their report on CG recognize the

complexity of the concept Focuses on• Transparency• Accountability• Fairness• ResponsibilityThat are universal in application

OECD Principles• One of the earliest non government

organization to work on and spell out principle and practices of CG and their goal to attain long term shareholder Value.

Major elements• The right of shareholders• Equitable treatment to shareholders• The role of stakeholder in CG• Discloser and transparency• The responsibility of board

Mc Kinsey Survey On CG

• International management consultant organization.

• Conducted a survey with a sample size of 188 companies from 6 countries.

• INDIA , MALAYSIA, MEXICO, SOUTH KOREA , TAIWAN AND TURKEY

• To determine the correlation between good CG and valuation of the company

Mc Kinsey Survey On CG

• Increase financial performance• Transparency of dealing• Increasing investors confidenceParameters for CG• Accountability: transparent ownership,

board size, board accountability• Discloser and transparency• Shareholders equity: one share on vote

Sarbanes Oxley act 2002• Scandals • The Act calls for protection to those

who have the courage to bring frauds to the attention of those who have to handle frauds.

• It ensures that such things are not left to the individuals who may or may not choose to reveal them.

• The SOX Act is a sincere attempt to address all the issues associated with corporate failure to achieve quality governance and to restore investors confidence

Sarbanes Oxley act 2002Provisions :• Establishment of public company accounting

oversight board PCAOB• Audit committee • Conflict of interest- 1 year after preceding• Audit partner rotation- once after 5 years• Improve influence on conduct of audits• Prohibition of non audit services• CEOs and CFOs required to affirm financials• Loans to directors• Attorneys• Securities analysis• penalities

Indian Committees And Guidelines

• Developments all over the world • Influence from UK• After Cadbury Committee report it

was studied by CII, Associated chambers of commerce, SEBI

Working Group On the Companies Act, 1996

• Review the Act in light of modern requirements

• Aspiration of investors• Globalization of economy• Liberalisation• Bill was introduced in rajya sabha

on 14th august 1997


Financial disclosers recommended by the group• Directors remuneration and commission should be a part of

directors report• Cost incurred in using the services of other group companies• Listed co. must give reportA review on operation yearlyShare in total turnoverMarket condition Future aspects• Use of each funds generated from shares and debentures• Debt exposure disclosure• Foreign exchange outflow• Financial statements pertaining fixed and current assets and

long term liabilities• Leased assets• Any inappropriate treatment in balance sheet in directors

report


Non Financial disclosers recommended by the group

• Comprehensive report on directors relatives-either employee or directors

• Register maintenance for directors interest• AGM members inspection at any time• Loans to directors details• Secretarial compliance certificate in concern to returns

file• According to companies Act

Narayana Murthy Committee Report ,2003

• Disclosure of contingent liabilities• Certifications by CEOs and CFOs• Definition of independent directors• Independence of audit committeeshomework

Rights To Share Holders• Right to obtain Copies of MOA & AOA• Right to have certificate of shares held by him within 3 years of

allotment• Right to transfer his share or interests in the company(AOA)• Right to appeal company law board if refuses• He has the preferential right to purchase shares on pro rata

basis• Right to apply to the company law board• For the rectification of register of members• He has the right to apply to the court to have variation or

abrogation to his right set aside by the court• Right to inspect the registers, index of members, annual

returns, etc.• He is entitled to receive notice of general meeting and to

attend and vote in the meeting either in person or by proxy • He is entitled to receive a copy of the statutory report• He is entitled to receive a copy of the annual report of

directors, annual accounts and auditors reports.

Rights To Share Holders• He has the right to participate in the appointment of auditors

and elections of directors at the AGM.• He has the right to AGM by writing letter to company law board• He can make application to company law board to convene an

extraordinary general meeting of the company where it is impractical to call such meeting

• He is entitled to have copies of minutes of general meetings.• He has the right to participate in declaration of dividend and

receive on duly date.• He has the right to demand poll• He has the right to apply to the company law board for

investigation of affairs of the company.• He has the right to remove a director even before the expiry of

the terms of director office• He has the right to make an application to company law board

for any oppression and mismanagement.• He can make a petition to the high court for winding up of

factory.• He has the right towards any surplus assets of the company

Investors Problems And Protection

• Investor protection is associated with effective corporate governance.

• He invested hard earn money and have expectation

• Capital growth• Mismatch occurs with expectation and

final outcome of company• Reasons of such outcome of company

Relationship Between Investor Protection And Cg

• CG lies in designing and putting in place mechanisms such as

DisclosuresMonitoringOversightCorrective systemTo align the objective of two as

closely as possible and minimise agency problems

CG Through Legal Protection Of Investors

• Impact of investors protection on ownership and control of firms

• Impact of investors protection on the development of financial markets

• Banks and corporate governance

Investor Protection In India• Scandals of 1990’s• Ketan parekh scam 2001• UTI crisis 1998 and 2001• Computer technologyHouse holds investors survey of society for capital

market research and development SCMRD, • Report unsatisfactory experience with equity

markets• 80% say no confidence on companies

management• 55% shows little or no confidence on the market

regulator or SEBI• Most preferred savings are….•

NK mittal committees on investor protection

• Specific demand for an Act to protect investors.

• Establishment of judicial forum• Investor education and protection fund

in under companies Act Should shift to SEBI.

• SEBI should be the only regulator• SEBI should require all IPO’s to be

insured under third party• SEBI Act 1992 should be amended• The securities contracts Act 1956 should

be amended.

Problems Of Investors In India

• Against member broker of stock exchange

• Against companies listed for trading on stock exchange

• Complaints against financial intermediaries

Law Enforcement For Investors Protection

• Company’s level• Stock broker level• Stock exchanges• Regulatory agenciesInvestor grievances and guidance division

SEBIDepartment of company affairsDepartment of economic affairsRBIConsumer courts and court of Law

Nature of complaints• Complaints regarding delay in refund• Complaints regarding delay in transfer of shares• Complaints regarding refusal of transfer of shares• Complaints regarding problems of odd lots• Complaints regarding take over bid• Complaints regarding insider trading, rigging, and

other malpractices• Complaints regarding delay and non payments of

interest/ fixed deposits of companies• Complaints regarding delay and non payment of

dues or non delivery of shares by brokers• Complaints regarding non supply of debenture

trust deed, Refusal to inspection

Concept of CG and Stakeholder

• Stake holders as human being in business

Investor

Supplier

Lender

Government

Customer

Society

Employee Value addition

FinancialResources

Goods and servicesFixed assets

3 A’s to make life for everyone

• Acceptability• Availability• Affordability

CG Mechanism And Overview

4 P’s of corporate governance:People PurposeProcessPerformance

CG Mechanism And Overview

Wealth creation

Wealth Management Wealth

distribution

•Gross value added •Economic value added•Earning per share•Market price per share•Return on investment

•Dividend to investors•Timely payments to vendors•Employee benefits and security•Fair price for customers•Payments of Govt Dues•Investment in corporation socialresponsibility

•Functional performanceImprovement•Insurance and risks management•Technology up gradation•Optimum utilization ofInstalled capacity•Research and development•HRM

Bankruptcy in INDIABankruptcy is legally declared in ability or

impairment ability of an individual or organization to pay their creditors or is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start.

Purpose of bankruptcy :• To give an honest start to debtors life,

by reliving him from most of the debts• To repay creditors in an orderly manner

to the extent that the debtor has the mean available for payment

Insolvency

• Insolvency is a financial condition experienced by a person or business entity when their assets no longer exceeds their liabilities, commonly referred to as balance sheet insolvency or when person or entity can no longer meet its debt obligation when they come due, commonly referred as to cash flow insolvency

Corporate bankruptcy in INDIA

Indian post independence industrial policies

• Import substitution • Industrial licensing • Limited private ownership• Deregulation• Foreign competition• Existing legal, political, social system

Bankruptcy system

• High courts • The company law board• The board for industrial and

financial reconstruction BIFR• Debt recovery tribunals DRT’s

Companies Act 1956

• High court• Company law Board• Department of company affairs• Voluntary liquidation by creditors• Involuntary liquidation by court

Sick Industrial Companies Act, 1985

• BIFR• The process is applicable only for

industrial companies that have been registered for more then five years and have accumulated losses at the end of any year greater then their net worth.

• Board of directors have to fill application within 60 days with BIFR

Time Bound Restructuring Or Liquidation Guidelines

Step 1.Company can refer to the tribunal within 180 days of coming

to know of the relevant facts giving to rise to cause of such references or within 60 days of final adoption of accounts

Step 2.Tribunal appoints an operating agency to conduct as initial

exploration of whether the sick industry should be reconstructed or if so how.

Tribunal will appoint a directorStep3.Director report to tribunalStep 4.Operating agency will prepare a restructuring planStep 5.Modification and changes as suggestion and objection

receives from relevant parties

Role Of Auditors• Lack of truthfulness of reports• Transparency• Window dressing • Manipulation of profits and losses• Unexplainable expenditures• Poor performance etcRole of auditor who are expected to certify the

veracity of accounts maintained by company for the benefits of all stakeholders of the company including fair and transparent governance leaves to be a desired.

Audit

• Objective Of Audit• Types of audit Financial statement auditsCompliance auditsOperational auditsAn auditor is a representative of the

shareholders, forming a link between government agencies, stockholders, investors and creditors.

Types Of Auditor

• Internal auditors• Independent auditors• Government auditors

Duties Of An AuditorDefined under section 227(1A) of the companies Act 1956

• Whether loans and advances made by the company on the basis of security have been properly secured.

• Whether transaction of the company which are represented merely by book entries are not prejudicial to the interest of the company

• Where the company is not an investment company within the meaning of section 372 or a banking company, whether so much of the assets of the company as consist of shares, debentures, and other securities have been sold at a price less than that at which they were purchased by the company

• Whether loans and advances made by the company have been shown as deposits.

Duties Of An AuditorDefined under section 227(1A) of the companies Act 1956• Whether personal expenses have been charge to

revenue accountIn other words auditor is responsible for• Verifying that the statement of accounts are drawn up

on the basis of the books of business• Verifying that the statement of accounts are drawn up

on the basis of the books exhibit a true and fair state of affairs of the business

• Confirming that the management has not exceeded the financial/ administrative powers vested in it by the articles of association of the company and /or resolution of shareholders

Responsibilities Of AuditorsAs per standard auditing practices (2),• He is responsible for forming and expressing his

opinion on the financial statements.• He determine whether the relevant information

is properly disclosed in the financial statements by comparing the financial statements with the underlying accounting records and others source data.

• He has to insure that his work involves exercise of judgment

• He is not expected to perform duties which fall outside the scope of his competence.

Banks And Corporate Governance

• Merchant banking• NBFC• NABARD• IDBI• EXIM bankProtecting the interest of depositors

becomes a matter of paramount importance to banks

Managerial misadventures in banksRegulating banks more tightly

CG in Banks

• Banking become more complex and diversified

• Even regulated set up is there, countries had faced a lot mis governance over a period of time

• Protecting the interest of depositors

• Large number of depositors in India

Sound Corporate Governance Practices

• Establishing strategic objectives and a set of corporate values that are communicated throughout the banking organization

• Setting and enforcing clear lines of responsibility and accountability Through out the organization

• Ensuring that board members are qualified for their positions, have a clear understanding of their role in corporate governance and are not subject to undue influence from management or outside concerns

• Ensuring that there is a appropriate oversight by senior management

• Effectively utilising the work conducted by internal and external auditors, in recognition of the important control function they provide

• Ensuring that compensation approaches are consistent with the banks ethical values, objectives, strategy and control environment

• Conducting corporate governance in a transparent mannerIASC- international accounting standards committee

Ganguly Committee Recommendations

Working group of directors of banks financial institutions, known as the ganguly committee

• Board should be more contemporarily professional by inducting technical and specially qualified personnel

• Directors should fulfill certain “fit and proper” norms• Certain criteria adopted for public sector banks such as

the age of director being between 35 and 65, that he/she should not be a member of parliament, state legislature etc and may adopted for private bank also

• Selection of directors could be by a nomination committee of the board. RBI also might compile a list of eligible candidate

• The banks may enter into a “deed of covenant” with every non executive director, delineating his /her responsibilities and making him/her abide by them

• Need based training should be imparted to the directors to equip them govern the banks properly

Ganguly Committee Recommendations

Ganguly committee has suggested the formation of committees of the board

Nomination committeeAudit committeeShareholder redressal committeeSupervisory committeeRisk management committee

Corporate Governance and Etihcs

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Transcript of Corporate Governance and Etihcs