1. 1. Hemwati Nandan Bahuguna Garhwal University (A Central University) SCHOOL OF COMMERCE PRESENTED BY RITU BHARTI 20500118 M.Com 4th sem CO-ODINATOR : PROF. R.C DANGWAL SIR
2. 2. 1. Introduction 2. Review Of Literature 3. Pillars Of Corporate Governance 4. Objective Of Study 5. Committee Involved 6. Mandatory Authorities 7. Clause 49 8. Mandatory Disclosure 9. Non Mandatory Compliance 10. Data Collection 11. Infosys 12. Limitations 13. Suggestions 14. Conclusion
3. 3. Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled .Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed.
4. 4. Meaning Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. Definition Corporate governance is the set of processes, customs, policies, laws and institution affecting the way a corporation is directed, administered or controlled.
5. 5. Accountability Fundamental Pillars of Corporate Governance Corporate Governance Transparency Responsibility Fairness Source: Malaysian Institute of Corporate Governance
6. 6. Accountability Clarifying governance roles & responsibilities, and supporting voluntary efforts to ensure the alignment of managerial and shareholder interests and monitoring by the board of directors capable of objectivity and sound judgment. Transparency Requiring timely disclosure of adequate information concerning corporate financial performance.
7. 7. Responsibility Ensuring that corporations comply with relevant laws and regulations that reflect the societys values. Fairness Ensuring the protection of shareholders rights and the enforceability of contracts with service/resource providers.
8. 8. Economic Regulation Authority, Perth, Australia;Open University, Ho Chi Minh City, Vietnam. Evidence from previous empirical studies from academic literature has sought to confirm the effect of corporate governance on a firms performance. A literature review from relevant academic studies has indicated the following characteristics applied to corporate governance such as: (i) board size; (ii) presence of female board members; (iii) duality of the CEO; (iv) education level of board members; (v) board working experience; (vi) independent directors; (vii) board compensation; (viii) board ownership; and (ix) block holders. American Law Institute (ALI) . ALI has proposed an independent board of directors whose function is to moniter as opposed to manage. Under the ALI proposals ,the board would focus on auditing functions ,reviewing management ,operations ,staffing ,and execution ,to assess the competency of the CEO and seniors staff of an organisation.
9. 9. Corporate governance is holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society. The incentive to corporations is to achieve their corporate aims and to attract investment. The incentive for states is to strengthen their economics and discourage fraud and mismanagement. - Sir Adrian Cadbury, Corporate Governance: A Framework for Implementation
10. 10. 1. To discuss the concept of CORPORATE GOVERNANCE. 2. To know about its authorities and history . 3. To know about the benefits and limitations of CORPORATE GOVERNANCE. 4. To know about its key constituents. 5. To know about CORPORATE GOVERNANCE mechanism. 6. To study CORPORATE GOVERNANCE in INFOSYS.
11. 11. Securities Exchange Board of India, known as SEBI mandates Corporate Governance in listing agreement. 13
12. 12. 14 Listed Companies. Why only listed companies? Why not other companies?
13. 13. SCAMS in Secondary market Pre Y2K scams: 1. Harshad Mehta scam year 1992 2. NBFC Companies Scam- year 1995-1998 3. CRB Finance and Mutual Funds Scam of Year 1995-1997 4. Plantations Company scam- year 1997-1999 5. Vanishing Companys Scam year 1995-1999 6. Name Changing Scam year 1999-2000 7. Dot Com. Company Scam year 1999 2000 8. US-64 Disaster Gadbud of year 1997-1998 9. Ketan parekh Scam year 1999 2001 10. UTI Fiasco Gadbad year 1994 2000 15
14. 14. After effects of such scams: Loss to the exchequer. Loss of faith by Stake holders. Loss of faith by Share holders. Thus in order to mitigate further losses, SEBI came up with Corporate Governance also called Clause 49. Effects of CG: Transparency in working of the company. Loss to exchequers were minimized. Faith of Stake holders and share holders restored. 16
15. 15. First Corporate Governance was drafted by Confederation of Indian Industry (CII) in the year 1998. It was a voluntary code, since it was not recognized by any statutory authority. Subsequently the Statutory Authorities felt that under Indian conditions a statutory rather than a voluntary code would be more purposeful, and meaningful. First Committee on Corporate Governance was set: Kumara mangalam Birla Committee - 1999 17
16. 16. 18 ROLE OF THE COMMITTEE to suggest suitable amendments to the listing agreement executed by the stock exchanges with the companies and any other measures to improve the standards of corporate governance in the listed companies, in areas such as continuous disclosure of material information, both financial and non-financial, manner and frequency of such disclosures, responsibilities of independent and outside directors; to draft a code of corporate best practices; and to suggest safeguards to be instituted within the companies to deal with insider information and insider trading
17. 17. enhancement of shareholder value, keeping in view the interests of other stakeholder Stakeholders: includes suppliers, customers, creditors, the bankers, the employees of the company, the government and the society at large. 19
18. 18. 20 Purpose: Review of Corporate Governance Code. Reason: Improve Corporate Governance standards in India. Perspective: (a) to evaluate the adequacy of the existing practices. (b) to further improve the existing practices.
19. 19. 21 Listing Agreement as on date has 55 Clauses. Clause 49 deals with Corporate Governance. Corporate Governance Mandatory Disclosures Non Mandatory Disclosures
20. 20. 22 I. Board of Directors II. Audit Committee III. Subsidiary Companies IV. Disclosures V. CEO/CFO Certification VI. Report of Corporate Governance VII. Compliance
21. 21. Criteria to be an Independent Director No pecuniary material relationship with Company, Promoters, Directors, Senior Management, Holding, subsidiary or associate Company. Is not a relative of any of the Directors. Is/was not an employee of the company or was partner of audit firm or legal firm which has pecuniary interest in the past 3 years. Is not a substantial shareholder, i.e. not more than 2% shareholding. Is not less than 21 years old. 23
22. 22. Board Meeting Frequency: Four times a year. Maximum gap of Four Months only. No. of Directorships/Chairmanships: Member of not more than 10 Committees and cannot be Chairman of more than 5 committees. Code of Conduct: Board shall draft a Code of Conduct and shall be applicable to all Board Members and Senior Management. It shall be posted on the Website of the Company. Information to be made available to the Board As per Annexure I A given . 24
23. 23. A Sub Committee of the Board. Members should be Financially Literate. Chairman of Audit Committee to be Independent. Company Secretary to be the Secretary to the Committee. Audit Committee Meeting Frequency: Four times a year, with maximum gap of Four Months . 25
24. 24. Overview Financials Statements Quarterly and Annual. Review performance of the company Appoint & re-appoint Statutory and Internal Auditors Approval of appointment of CFO 26
25. 25. Material Non-Listed Indian Subsidiary Atleast one independent director of Holding company to be in subsidiary company. Audit Committee of Holding company to review financials of Subsidiary company. Minutes of Subsidiary to be placed before Board of Holding Listed company. 27
26. 26. A. Basis of Related Party Transactions. B. Disclosure of Accounting Treatment. C. Board Disclosure Risk Management. D. Proceeds from Public, Rights, Preferential Issues. E. Remuneration of Directors. F. Management. G. Shareholder. 28
27. 27. CEO- Managing Director and CFO Director/Head Finance shall submit a certificate to the Board on following: Reviewed financials statement and it contains no untrue or misleading statements. Financial Statements present true and fair view. They accept responsibility for establishing and maintaining Internal control for financial report and rectifying deficiencies, if any. 29
28. 28. Annual Report should contain a separate section on Corporate Governance with detailed compliance report. Format as per Annexure I-C given . Quarterly Compliance certificate should be submitted to Stock Exchange. Format as per Annexure I-B given . 30
29. 29. A Certificate from either the Auditor or a Practicing Company Secretary on compliance of conditions of corporate Governance should form part of Directors Report. 31
30. 30. There are certain Non- mandatory provisions in this clause, which can be implemented at the discretion of the Company. Details of which are available in Annexure I D as given . 32
31. 31. Secondary data. Study of this topic is based upon secondary data collection of the regarding topic of the presentation. Sources : 1. Books 2. Research papers 3. Websites 4. wikipedia
32. 32. Infosys Technologies is a leading Information Technology (IT) company which provides end- to-end business solutions that leverage technology. Infosys serves the client globally and as one of the pioneers in strategic offshore outsourcing of software services, it has leveraged the global trend of offshore outsourcing.
33. 33. Infosys was founded on 2 July 1981 by seven entrepreneurs, N. R Narayana Murthy , Nandan Nilekani ,Krishna Gopalakrishanan, S.D. Shibhulal K Dinesh and with N.S Raghvan . The company was incorporated as "Infosys Consultants Pvt Ltd." in Model Colony, Pune as the registered office.
34. 34. He was one of the six founders who started Infosys with a small investment of Rs. 10,000 and nurtured the organization to a world-class company currently valued at Rs. 50,000 crores ($10.75 billion). His biggest legacy will be the dreams and confidence his companys success has fostered in a whole generation of middle-class India.
35. 35. N R Narayan Murthy Chairman & Chief Mentor. S D Shibulal- Director & COO. Srinath Batni- Director. S Gopalakrishnan- Managing Director & CEO. K Dinesh- Director.
36. 36. Dr. Vishal Sikka takes over as the CEO and MD from S.D. Shibulal. Revenue crosses 50,000 crore in rupee terms. Board decides to increase the dividend pay-out ratio to up to 40% of post-tax profits. Cash and cash equivalents (including Available-for-sale financial assets and certificates of deposit) cross 5 billion in dollar terms.
37. 37. Application Development & Maintenance, Corporate Performance Management, Enterprise Quality Services Infrastructure Services
38. 38. Aerospace & Defense Automotive Banking and Capital Markets High Technology Insurance Resources Energy Healthcare
39. 39. Physical Sciences. Mathematical Sciences. Life Sciences. Social Sciences and Economics. Engineering Sciences.
40. 40. New productions and key techniques- Successful launches need to drive early consumer adoption and managing repeat demand is contingent on coordinated and to meet shopper needs. Barriers to successful products Products must be in at target levels by the time consumer and trade promotions are executed.
41. 41. Internal Governance Internal Control of Organisation External Governance Monitoring Systems of International Agencies, National Regulatory Agencies, Professional Institutes, Industry Associations & NGO Result Appropriate Accountability & Responsibility to Stakeholders
42. 42. Corporate governance is about maximizing shareholder value legally, ethically and on a sustainable basis. At Infosys, the goal of corporate governance is to ensure fairness for every stakeholder our customers, investors, vendor-partners, the community, and the governments of the countries in which we operate. We believe that sound corporate governance is critical in enhancing and retaining investor trust. It is a reflection of our culture, our policies, our relationship with stakeholders and our commitment to values. Accordingly, we always seek to ensure that our performance is driven by integrity. Our Board exercises its fiduciary responsibilities in the widest sense of the term. Our disclosures seek to attain the best practices in international corporate governance. We also endeavor to enhance long-term shareholder value and respect minority rights in all our business decisions.
43. 43. Investment Information and Credit Rating Agency ( ICRA) and the Credit Rating Information Services of India Limited (CRISIL) and have been awarded a rating of Corporate Governance Rating 1 (CGR 1) and Governance and Value Creation Level 1 (GVC Level 1) rating respectively.
44. 44. 2015 Infosys has been honored with the first place in Best CFO, Best corporate governance and Most committed to paying good dividends categories at Asia's Best Companies 2015 awards for India, organized by FinanceAsia. Infosys also received the second and the third places in Best investor relations and Best CEO categories, respectively. 2014 Infosys has won the 2014 Asia IP Elite Award. Infosys has won the 2014 Thomson Reuters India Innovation Award in the Hi-Tech Corporate category. Etc.
45. 45. I. Primary data is not used. II. Lack of appropriate sources and knowledge for research methodology. III. Practically not evaluated due to lack of primary data.
46. 46. 1. Corporate governance should be done globally on international basis. 2. Corporate governance implications should be done for international markets also. 3. For progressive growth of firms in india firms should voluntarily opt for good corporate governance. 4. Need for recruitment and selection of good manager in domestic corporations who possesses all good qualities and knowledge regarding corporate governance skills .
47. 47. Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society. (Sir Adrian Cadbury, UK, Commission Report: Corporate Governance 1992)