BECG.L 10.CG Committees

8/13/2019 BECG.L 10.CG Committees

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Corporate Governance

Committees(Lesson-10: BECG)

Prof. C. Anand

Facut! " #B$% &!dera'ad


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Contents

This deals with:-

1. Introduction to Corporate Governance

Committees

2. Indian Committees

3. Foreign Committees


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1. Introduction to CorporateGovernance Committees (CGCs

Codes: Codes are a set o! written rules" which areaccepted as general principles which state how people ina particular organi#ation or a countr$ should %ehave.

&egulations: ' regulation is an o!!icial rule that la$

down how things should %e done. CGCs have developed several CG codes and regulations

which are intended to control" guide or manage the%ehavior or conduct o! individuals wor)ing incorporates*organi#ations.


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Important &eports on CG pu%lished %$ CG Committees:'. Indian Committees:

1. +umara ,angalam irla Committee

2. Gangul$ Committee

3. aresh Chandra Committee

/. CII Committee

. Foreign Committees:

1. 0C Committee2. Cad%ur$ Committee

C. Companies 'ct (egal Framewor) !or CG


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1. +umara ,angalam irla Committee

&eport (+,C&

+, Committee was instituted %$ 4I in 1555 to suggest

measures to promote and raise the standards o! CG in

India.

0%6ectives:

1. To suggest amendments to listing agreements %$ cos.

with 4s and other measures and improving CG in listed

cos. regarding disclosures and responsi%ilities o!

independent*outside directors.

2. ra!t a code o! %est practices.

3. To suggest sa!eguards within cos. to deal with insider

in!ormation and insider trading.


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&ecommendations o! +,C &eport

+,C identi!ied the shareholders" oard 7 ,gmt.as the constituents that have a )e$ role to pla$ inCG and tried to identi!$ their roles 7responsi%ilities in ensuring e!!ective CG. Its

important recommendations are as !ollows:-

1. oard should have an optimum com%ination o!%oth 8ecutive and on-8ecutive irectors andat least 9; o! oard should comprise on-s

and one-third o! oard should comprise o!independent directors where Chairman is non-e8ecutive and at least hal! o! the oard should %eindependent in case o! 8ecutive Chairman.


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(Contd.

2. '


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(Contd.

>. 'll co. related in!ormation li)e


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(Contd.

11. FIs can have nominees on the %oards o! %orrower cos." to

protect their interests as creditors. The ominee irectors

should ta)e an active interest in the activities o! the oard

and assume e


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Cad%ur$ Committee &eport (CC&

Ander the Chairmanship o! 'drian Cad%ur$ (,a$ 1551"a committee was set up %$ Financial &eporting Council"

ondon 4toc) 8change to loo) into the !inancial aspects

o! Corporate Governance. It su%mitted its report on ,a$

2>" 1552" whose recommendations are as !ollows:-

1. There should %e separation o! roles o! Chairman and C.

2. on-e8ecutive directors should act independentl$ while

giving 6udgments on issues o! strateg$" per!ormance"

allocation ! resources and designing codes o! conduct.

3. ,a6orit$ o! directors should %e independent non-

e8ecutive directors and should not have an$ !inancial

interests in the compan$.


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Cad%ur$ Committee &eport (contd.

/. The directors term should not e8ceed 3 $ears" which can%e e8tended with shareholders approval.

9. There should %e !ull transparenc$ relating to directorsemoluments. There should %e a 6udicious mi8 o! salar$ andper!ormance related pa$.

=. ' &emuneration Committee made o! !ull$ or largel$ o!non-e8ecutive directors" should decide on the pa$ o! thee8ecutive directors.

>. The interim compan$ report should give the %alance sheetin!ormation and %e reviewed %$ the auditor.

?. There should %e a pro!essional and o%6ective relationship%etween the %oard and e8ecutives.


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Cad%ur$ Committee &eport (contd.

1. In!ormation regarding the audit !ee should %emade pu%lic and there should %e regular rotation

o! auditors.

The recommendations o! CC& were widel$ accepted

%$ the corporates in A+ and the$ %ecame a

re!erence point !or man$ other committees" which

were set up %$ various governments all over theworld.


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0C &eport &ecommendations (0&&

EC is an internationa or*ani+ation foreconomic co-operation and deveopment. #n,une% 1% t/e EC constituted an Ad-/ocas Force on CG% 2it/ e! representatives froma mem'er countries% and ot/er internationaor*ani+ations incudin* 3ord Ban% andprovided recommendations (principes) primari!aimed at *overnments% 'ut aso provided*uidance to $Es% investors% private

corporations% nationa commissions oncorporate *overnance as t/e! dea 2it/ 'estpractices% istin* re4uirements and codes ofconduct. /e principes '! EC fa into 5'road areas.


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0C &eport &ecommendations (Contd.

1. Ensurin* t/e 'asis for an effective CG

6. /e ri*/ts of s/are/oders and e!o2ners/ip functions

7. /e e4uita'e treatment of s/are/oders

8. /e roe of stae/oders

9.

iscosure and transparenc!5. /e responsi'iit! of t/e 'oard


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1. Ensurin* t/e 'asis for an effective CG:

(For promotin* transparent and efficient marets%'e consistent 2it/ rue of a2% and for articuatin*

t/e division of responsi'iit! amon* different

supervisor!% re*uator! and enforcement aut/orit!)

2. /e ri*/ts of s/are/oders and e! o2ners/ip

functions:

(CG s/a protect and faciitate t/e eercise of s/are-

/oders; ri*/ts)

7. /e e4uita'e treatment of s/are/oders: ( CG s/a ensure e4uita'e treatment of a s/are-

/oders incudin* minorit!% forei*n s/are/oders

incudin* redressa for vioation of t/eir ri*/ts)

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8. /e roe of stae/oders:

(CG s/a reco*ni+e ri*/ts of stae/oders"

cooperation 'et2een stae/oders and corporation)

9. iscosure and transparenc!:

(ime! and accurate discosures as to a materiamatters fina situation% performance% o2ners/ip and

*overnance)

5.


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/us t/e a'ove 5 principes advocate for t/e

foo2in* t/ree:-(1) For sound financia s!stem

(ii) Basis for cooperation 'et2een EC and >on-

EC countries

(iii) o underpin t/e CG component of 3ord Ban%and #?F reports on t/e o'servance on $tandards

and Codes (

BECG.L 10.CG Committees

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