Corporate Governance in Tata Steel

8/2/2019 Corporate Governance in Tata Steel

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Definition

Governance can be defined as a control over each activity, which

will result in overall growth, if practiced properly. Governance is a setof rules stipulated for according due weightage to foster ethical

behaviour which would help in enhancing the reputation. Thus the

code of Governance is as applicable to individuals, the same is also

applicable to Corporate. As such Corporate Governance is nothing new

but to stipulate boundaries by law or by regulation for the benefit of

stakeholders.

Corporate Governance looks at the institutional and policy

framework for corporations - from their very beginnings, in

entrepreneurship, through their governance structures, company law,

privatisation, to market exit and insolvency. The integrity of

corporations, financial institutions and markets is particularly central to

the health of our economies and their stability

Introduction

Corporate governance has established itself globally as a

fundamental component of every corporates process. Far from the

amorphous existence corporate governance once entailed, it has evolved

into a firm set of guidelines, unerringly similar despite different cultures,

with the sole intent of ensuring that companies retain a firm commitment

to values and an ethical business conduct. Business leaders have always

emphasised that the key to corporate growth and long-term survival is


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adaptation to changing times. Corporate governance is one of those

instances where change is necessary. In fact, corporate governance should

be seen as an opportunity where companies can introduce better internal

controls, improve performance and ultimately increase public

understanding of the key activities and policies of their organisation.

Businesses have been quick to seize the opportunity and the secrecy of

boardrooms has given way to transparency laid out before investors and

scrutinised by independent directors.

Indias commitment to corporate governance is demonstrated by an

understanding that in a globalised world, capital flows to where it is best

protected and bypasses places where protection is limited or non-existent.Unlike some countries, efforts to compile a corporate governance code

were not precipitated by evidence of accounting or corporate

irregularities. Moreover, it was Indian industry that provided the impetus

towards a corporate governance code. Thus, when the Securities and

Exchange Board of India (SEBI) first introduced a corporate governance

code in 1999, it put India ahead of many others. The CLSA Asia Pacific

Markets and Asian Corporate Governance Association joint report in 2005

concludes that India ranks among the top three in terms of corporate

governance. Recognising that new international principles and best

practices now exist, in 2005, SEBI amended its corporate governance code,

or Clause 49 of the listing agreement, ensuring that Indian companies

match their business counterparts anywhere in the world. Such

meticulousness has brought numerous plaudits from investors as well as

the Institute of International Finance (IIF), Washington D.C., whose India

task force recently affirmed that Indian corporate governance norms

strengthen domestic capital formation and foreign portfolio investment.


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Tata steel company

Profile

Established in 1907, Tata Steel is Asia's first and India's largest private

sector steel company. Tata Steel is among the lowest cost producers of

steel in the world and one of the few select steel companies in the world

that is EVA+ (Economic Value Added).

Its captive raw material resources and the state-of-the-art 5 MTPA (million

tonne per annum) plant at Jamshedpur, in Jharkhand State, India give it acompetitive edge. Determined to be a major global steel player, Tata Steel

has recently included in its fold NatSteel, Asia (2 MTPA) and Millennium

Steel (1.7 MTPA) creating a manufacturing network

in eight markets in South East Asia and Pacific rim

countries. Soon the Jamshedpur plant will expand

its capacity from 5 MTPA to 7 MTPA by 2008. The

Company plans to enhance its capacity, manifold

through organic growth and investments. The

Company's wire manufacturing unit in Sri Lanka is

known as Lanka Special Steel, while the joint

venture in Thailand for limestone mining is known as Sila Eastern.


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Tata Steel's products are targeted at the quality conscious auto sector and

the burgeoning construction industry. With wire manufacturing facilities in

India, Sri Lanka and Thailand, the Company plans to emerge as a major

global player in the wire business.

Values:

Trusteeship

Integrity

Respect for the individual

Credibility

Excellence

Key Enterprise Processes:

Leadership

Strategic Planning & Risk Management

Market Development

Investment Management

Human Resources

Improvement & Change Management

Order Generation

Operation & Fulfillment

Supply Management

Research & Development

Information Management


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Social Responsibility & Corporate Services

Corporate Social Responsibility Policy:

Tata Steel believes that the primary purpose of a business is to improvethe quality of life of people.

Tata Steel will volunteer its resources, to the extent it can reasonably

afford, to sustain and improve healthy and prosperous environment and to

improve the quality of life of the people of the areas in which it operates

Social Accountability Policy:

Tata Steel, in accordance with its founding principles, will continue to

improve the quality of life of its employees and the communities it serves.

Tata Steel will conduct its business ever mindful of its social

accountability, respecting applicable laws and with regard for human

dignity.

Tata Steel will positively impact and influence its partners in fostering a

sense of social commitment for their stakeholders.


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Corporate governance

Defined by a deeply rooted set of values and beliefs, corporate

governance in the Tata Group rests on the twin pillars of trust and

integrity.

Corporate governance as practice by TATA group Translate into

being fair and civic Minded, fulfilling its duties to entire spectrum of stake

holders, and most importantly making Integrity an article of faith across all

its operations.


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Corporate governance in tata steel

The company believes that good corporate practices enable the board to

direct and control the affairs of a company in an efficient manner and to

achieve its ultimate goal of maximising shareholders value. Realising this,the company has adopted many practices over the last few years, even

when there were no mandatory requirements in this regard. As a result, a

number of provisions regarding Corporate Governance prescribed by the

Listing Agreement have already been complied with and steps are being

taken to comply with the balance provision within the current financial

year.

The Internal Audit Department reports, on a quarterly basis, any

significant findings to the Audit committee, which comprises of three non-

executive Director: Mr. P.K Kaul - Chairman, Mr. S. M. Palia and Mr. Ishaat

Hussain - Members. The committee met three times during the year to

review the audit observation, adequacy of actions taken and followed up

implementation of corrective actions.

The committee also met the company's statutory Auditors to ascertain

their views on the adequacy of internal control systems in the company.

The committee submits an annual report of its observation to the Board of

Directors. The company has adopted the Tata Code of Conduct which

entitles it to use the Tata Brand name. All the officers of the company have


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pledged compliance with the code of conduct which prescribes a manner in

which the employees will conduct the company's business.

Code of Conduct for Non-Executive Directors

Non-Executive Directors of a company will always act in the interest of the

company and ensure that any other business or personal association whichthey may have, does not involve any conflict of interest with the

operations of the company and his role therein.

Non-Executive Directors will comply with all applicable laws and

regulations of all the relevant regulatory and other authorities as may be

applicable to such Directors in their individual capacities.

Non-Executive Directors will safeguard the confidentiality of allinformation received by them by virtue of their position.


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The Companys Corporate Governance Philosophy

The Company believes in adopting the best practices in the areas of

Corporate Governance. Even in a fiercely competitive business

environment, the Management and Employees of the Company are

committed to uphold the core values of transparency, integrity, honesty

and accountability which are fundamental to the Tata Group.

During the year, the Company has fine-tuned its corporate practices so as

to bring them in line with the revised Clause 49 of the listing agreements.

The Company adopted the Tata Code of Conduct for Non-ExecutiveDirectors and the Whistle Blower Policy as prescribed in the revised

Clause.

The Company will continue to focus its resources, strengths and strategies

for creation and safeguarding of shareholders wealth and at the same

time protect the interests of all its shareholders.

Board of Directors

The Company has a Non-Executive Chairman and the number of

Independent Directors is more than one-third of the total number of

Directors. The number of Non-Executive Directors (NEDs) is more than 50%

of the total number of Directors.

None of the Directors on the Board is a Member on more than 10

Committees and Chairman of more than 5 Committees (as specified in

Clause 49), across all the companies in which he is a Director. The

necessary disclosures regarding Committee positions have been made by

the Directors.


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BOARD OF DIRECTORS

(As on 06th October, 2006)

Mr R N Tata (Chairman)

Mr Nusli N Wadia

Mr S M Palia

Mr P K Kaul (Financial Institutions' Nominee)

Mr Suresh Krishna

Mr Ishaat Hussain

Dr Jamshed J Irani

Mr Subodh Bhargava

Mr B Muthuraman(Managing Director)

Dr T Mukherjee (Deputy Managing Director Steel)

A N Singh (Deputy Managing Director

Corporate Services)

Remuneration Policy

The Company while deciding the remuneration package of the senior

management members takes into

consideration the following items :

a) employment scenario
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b) remuneration package of the industry and

c) remuneration package of the managerial talent of other industries.

The annual variable pay of senior managers is linked to the performance of

the Company in general and their individual performance for the relevant

year measured against specific Key Result Areas, which are aligned to the

Companys objectives.

The Non-Executive Directors (NEDs) are paid remuneration by way of

Commission and Sitting Fees. In terms of the shareholders approval

obtained at the AGM held on 19th July, 2001, the Commission is paid at a

rate not exceeding 1% per annum of the profits of the Company (computed

in accordance with Section 309(5) of the Companies Act, 1956). The

distribution of Commission amongst the NEDs is placed before the Board.

The Commission is distributed on the basis of their attendance and

contribution at the Board and certain Committee Meetings as well as time

spent on operational matters other than at the meetings.

The Company pays sitting fees of Rs. 10,000 per meeting to the NEDs for

attending the meetings of the Board, Committee of the Board and AuditCommittee. For other meetings, the Company continues to pay to the NEDs

sitting fees of Rs. 5,000 per meeting.

The Company pays remuneration by way of salary, perquisites and

allowances (fixed component) and commission (variable component) to

Managing and Whole-time Directors. Salary is paid within the range

approved by the Shareholders. Annual increments effective 1st April each

year, as recommended by the Remuneration Committee, are approved by

the Board. The ceiling on perquisites and allowances as a percentage of

salary, is fixed by the


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Board. Within the prescribed ceiling, the perquisites package is approved

by the Remuneration Committee.

Commission is calculated with reference to net profits of the Company in a

particular financial year and is determined by the Board of Directors at the

end of the financial year based on the recommendations of the

Remuneration Committee, subject to overall ceilings stipulated in Sections

198 and 309 of the Companies Act, 1956. Specific amount payable to such

directors is based on the performance criteria laid down by the Board

which broadly takes into account the profits earned by the Company for

the year.

Shareholders' Committee

An Investors Grievance Committee was constituted on 23rd March, 2000

to specifically look into the redressal of Investors complaints like transfer

of shares, non-receipt of balance sheet and non-receipt of declared

dividend, etc. One meeting of the Investors Grievance Committee was held

on 23rd March, 2006.

Committees

In addition to the above Committees, the Board has constituted 3 more

Committees, viz. Committee of the Board, Committee of Directors and the

Ethics and Compliance Committee.


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The terms of reference of the Committee of the Board (COB) are to approve

capital expenditure schemes and donations within the stipulated limits and

to recommend to the Board, capital budgets and other major capital

schemes, to consider new businesses, acquisitions, divestments, changes

in organisational structure and also to periodically review the Companys

business plans and future strategies. The composition of the COB and

details of the meetings attended by the Directors are given below :

Names of Members No. of Meetings attended

during the year 2005-06

Mr. R. N. Tata, Chairman 6

Mr. Nusli N. Wadia, Member 4

Mr. S.M. Palia, Member 7

Mr. Ishaat Hussain, Member* 3

Dr. J.J. Irani, Member 8

Mr. B. Muthuraman, Member 8

The Committee of Directors has been constituted to approve of

certain routine matters such as Opening and Closing of Bank Accounts of

the Company, to grant limited Powers of Attorney to the Officers of the

Company, to appoint proxies to attend general meetings on behalf of the

Company etc. The Members of this Committee are Mr. R.N. Tata

(Chairman), Mr. Ishaat Hussain and Dr. J.J. Irani. The business of the

Committee is transacted by passing Circular Resolutions which are placed

before the Board at its next meeting.


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Ethics and Compliance Committee

In accordance with the Securities and Exchange Board of India (Prohibition

of Insider Trading) Regulations, 1992, as amended (the Regulations), the

Board of Directors of the Company adopted the Tata Code of Conduct for

Prevention of Insider Trading and Code of Corporate Disclosure Practices

(the Code) to be followed by Directors, Officers and other Employees. The

Code is based on the principle that Directors, Officers and Employees of a

Tata Company owe a fiduciary duty to, among others, the shareholders of

the Company to place the interest of the shareholders above their own and

conduct their personal securities transactions in a manner that does not

create any conflict of interest situation. The Code also seeks to ensure

timely and adequate disclosure of Price Sensitive Information to the

investor community by the Company to enable them to take informed

investment decisions with regard to the Companys securities. In terms of

the said Code, a Committee has been constituted on 30th May, 2002, called

Ethics and Compliance Committee.

The Board has also appointed the Vice President (Finance) as the

Compliance Officer to ensure compliance and effective implementation of

the Regulations and also the Code across the Company.One meeting of the

Ethics and Compliance Committee was held on 23rd March, 2006.

During the year under review, the Compliance Officer submitted Monthly

Committee Report of the Tata Code of Conduct for Prevention of Insider

Trading to the Board of Directors.


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Disclosures

i) The Board has received disclosures from key managerial personnel

relating to material, financial and

commercial transactions where they and/or their relatives have personal

interest. There are no materially significant related party transactions

which have potential conflict with the interest of the Company at large.

ii) The Company has complied with the requirements of the Stock

Exchanges, SEBI and other statutory authorities on all matters relating tocapital markets during the last three years. No penalties or strictures have

been imposed on the Company by the Stock Exchange, SEBI or other

statutory authorities relating to the above.

iii) The Company has adopted a Whistle Blower Policy and has established

the necessary mechanism in line with clause 7 of the Annexure I D to

Clause 49 of the Listing Agreement with the Stock Exchanges, for

employees to report concerns about unethical behaviour. No personnel has

been denied access to the Ethics Counsellor/Chairman of the Audit

Committee.

iv) The Company has fulfilled the following non-mandatory requirements as

prescribed in Annexure I D to Clause 49 of the Listing Agreement with the

Stock Exchanges :

a) The Company has set up a Remuneration Committee.


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b) A half-yearly declaration of financial performance including a summary

of the significant events in the six-months period was sent to every

shareholder.

c) The Company has moved towards a regime of unqualified financial

statements.

Secretarial Audit

A qualified practicing Company Secretary carried out a secretarial audit to

reconcile the total admitted capital with National Securities Depository

Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and

the total issued and listed capital. The audit confirms that the total

issued/paid up capital is in agreement with the total number of shares in

physical form and the total number of dematerialized shares held with

NSDL and CDSL.

Certificate

To the Members of

TATA STEEL LIMITED


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We have examined the compliance of conditions of Corporate

Governance by Tata Steel Limited, for the year ended on 31st March, 2006,

as stipulated in Clause 49 of the Listing Agreement of the said Company

with stock exchanges.

The compliance of conditions of Corporate Governance is the

responsibility of the management. Our examination has been limited to a

review of the procedures and implementations thereof adopted by the

Company for ensuring compliance with the conditions of Corporate

Governance as stipulated in the said Clause. It is neither an audit nor an

expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the

explanations given to us and the representations made by the Directors

and the management, we certify that the Company has complied with the

conditions of Corporate Governance as stipulated in Clause 49 of the above

mentioned Listing Agreement.

We further state that such compliance is neither an assurance as to

the future viability of the Company nor of the efficiency or effectiveness

with which the management has conducted the affairs of the Company.

For

S.B. BILLIMORIA & CO.

Chartered Accountants

CharteredAccountants


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A.K. MAHINDRA UDAYAN SEN

Membership No : 10296 Membership No : 31220

Mumbai : 18th May, 2006

Corporate Governance in Tata Steel

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