Final Term Paper of Business Environment on Corporate Governance PDF

8/8/2019 Final Term Paper of Business Environment on Corporate Governance PDF

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Corporate Governance has become an

important buzz word.

The infrastructure development in

Bengaluru city during the last 10 years and

its brief report, stating how infrastructure

development helps to promote business

activities.

Name: Tenzin Tselek

Course with code: M.com (3402)

Registration number: 11012624

Roll number: RS1010A012


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Introduction

The word Corporate Governance has become a "Buzzword" these days because of two

factors. The first is that after the collapse of the Soviet Union and the end of the cold war in

1990, it has become the conventional wisdom all over the world that market dynamics must

prevail in economic matters. The concept of government controlling the commanding heights

of the economy has been given up. This, in turn, has made the market the most decisive factor

in settling the economic issues.

Corporate Governance

First of all, I would like to throw a light on the corporate governance. It is a concept, ratherthan an individual instrument. It includes debate on the appropriate management and control

structures of a company. And in other words, the Corporate Governance is a set of process,

customs, policies, laws and institutions affecting the way a corporation is directed,

administered or controlled. It includes the rules relating to the power relations between

owners, the board of directors, management and the stakeholders such as employees,

suppliers, customers as well as the public at large.

Corporate governance also includes the relationships among the many players involved (the

stakeholders) and the goals for which the corporation is governed. The principal players are

the Shareholders, management and the board of directors. Other Stakeholders include

employees, suppliers, customers, banks and other regulators, the environment and the

community at large. And moreover corporate governance continuously look forward in

increasing the recognition which enables in sustaining the growth of their organization which

requires cooperation of all stakeholders. In this regard, the management needs to act as

trustees of the shareholders at large and prevent asymmetry of benefits between various

sections of shareholders, especially between the owner-managers and the rest of the

shareholders.


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Corporate governance; the multi- facet concepts

The Corporate Governance is a multi-faceted subject or in other words, corporate governance

is the multi-aspects subjected. An important concept of corporate governance deals withissues of accountability and fiduciary duty, essentially advocating the implementation of

guidelines and mechanisms to ensure good behaviour and protect shareholders. Another key

focus is the economic efficiency view; through which the corporate governance system

should aim in optimize economic results, with a strong emphasis on shareholder welfare. And

further, it is about promoting corporate fairness, transparency and accountability. In other

words, 'good corporate governance' is simply 'good business'.

So far as India is concerned, corporate governance initiatives have been

undertaken by the Ministry of Corporate Affairs (MCA) and the Securities and Exchange

Board of India (SEBI). The first formal regulatory framework for listed companies

specifically for corporate governance was established by the SEBI in February 2000,

following the recommendations of Kumarmangalam Birla Committee Report. It was

enshrined as Clause 49 of the Listing Agreement. Further, SEBI is maintaining the standards

of corporate governance through other laws like the Securities Contracts (Regulation) Act,

1956; Securities and Exchange Board of India Act, 1992; and Depositories Act, 1996. The

Ministry of Corporate Affairs had appointed a Naresh Chandra Committee on Corporate

Audit and Governance in 2002 in order to examine various corporate governance issues. It

made recommendations in two key aspects of corporate governance: financial and non-

financial disclosures: and independent auditing and board oversight of management. It is

making all efforts to bring transparency in the structure of corporate governance through the

enactment of Companies Act and its amendments. The fundamental causes for the corporate

burdens are more complex. Accounting, or, more accurately, the misuse of accounting, wasnot the main problem. Rather the uncontrolled pursuit of flawed strategies, coupled with

greed on the part of many, were the real reasons for the downfall of household names and

previous stock market favourites.

So broadly, corporate governance ensures the following things:

Adequate disclosures and effective decision making to achieve corporate objectives;

Transparency in business transactions;

Statutory and legal compliances;


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Protection of shareholder interests;

Commitment to values and ethical conduct of business.

In other words, corporate governance is the acceptance by management of the inalienable

rights of shareholders as the true owners of the corporation and of their own role as trustees

on behalf of the shareholders. It deals with conducting the affairs of a company such that

there is fairness to all stakeholders and that its actions benefit the greatest number of

stakeholders. In this regard, the management needs to prevent asymmetry of benefits between

various sections of shareholders, especially between the owner-managers and the rest of the

shareholders.

It is about commitment to values, about ethical business conduct and about making adistinction between personal and corporate funds in the management of a company. Ethical

dilemmas arise from conflicting interests of the parties involved. In this regard, managers

make decisions based on a set of principles influenced by the values, context and culture of

the organization. Ethical leadership is good for business as the organization is seen to conduct

its business in line with the expectations of all stakeholders.

Objectives of Corporate governance

The aim of "Good Corporate Governance" is to ensure commitment of the board in managing

the company in a transparent manner for maximizing long-term value of the company for its

shareholders and all other partners. It integrates all the participants involved in a process,

which is economic, and at the same time social.

The fundamental objective of corporate governance is to enhance shareholders' value and

protect the interests of other stakeholders by improving the corporate performance and

accountability. Hence it harmonizes the need for a company to strike a balance at all times

between the need to enhance shareholders' wealth whilst not in any way being detrimental to

the interests of the other stakeholders in the company. Further, its objective is to generate an

environment of trust and confidence amongst those having competing and conflicting

interests.


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It is integral to the very existence of a company and strengthens investor's confidence by

ensuring company's commitment to higher growth and profits. Broadly, it seeks to achieve

the following objectives:

A properly structured board capable of taking independent and objective decisions is

in place at the helm of affairs;

The board is balance as regards the representation of adequate number of non-

executive and independent directors who will take care of their interests and well-

being of all the stakeholders;

The board adopts transparent procedures and practices and arrives at decisions on the

strength of adequate information;

The board has an effective machinery to sub serve the concerns of stakeholders;

The board keeps the shareholders informed of relevant developments impacting the

company;

The board effectively and regularly monitors the functioning of the management

team;

The board remains in effective control of the affairs of the company at all times.

The overall endeavour of the board should be to take the organisation forward so as to

maximize long term value and shareholders' wealth.

Its benefit and limitation

The concept of corporate governance has been attracting public attention for quite some time.

It has been finding wide acceptance for its relevance and importance to the industry and

economy. It contributes not only to the efficiency of a business enterprise, but also, to thegrowth and progress of a country's economy. Progressively, firms have voluntarily put in

place systems of good corporate governance for the following reasons:

1. Several studies in India and abroad have indicated that markets and investors

take notice of well managed companies and respond positively to them. Such

companies have a system of good corporate governance in place, which allows

sufficient freedom to the board and management to take decisions towards the


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progress of their companies and to innovate, while remaining within the framework of

effective accountability.

2. In today's globalised world, corporations need to access global pools of capital as well

as attract and retain the best human capital from various parts of the world. Under

such a scenario, unless a corporation embraces and demonstrates ethical conduct, it

will not be able to succeed.

3. The credibility offered by good corporate governance procedures also helps maintain

the confidence of investors both foreign and domestic to attract more long-term

capital. This will ultimately induce more stable sources of financing.

4. A corporation is a congregation of various stakeholders, like customers, employees,

investors, vendor partners, government and society. Its growth requires the

cooperation of all the stakeholders. Hence it imperative for a corporation to be fair

and transparent to all its stakeholders in all its transactions by adhering to the best

corporate governance practices.

5. Good Corporate Governance standards add considerable value to the operational

performance of a company by:

a) improving strategic thinking at the top through induction of independent

directors who bring in experience and new ideas;

b) rationalizing the management and constant monitoring of risk that a firm faces

globally;

c) limiting the liability of top management and directors by carefully articulating

the decision making process;

d) Assuring the integrity of financial reports, etc.

It also has a long term reputational effects among key stakeholders, both internally and

externally.

6. Also, the instances of financial crisis have brought the subject of corporate

governance to the surface. They have shifted the emphasis on compliance with

substance, rather than form, and brought to sharper focus the need for intellectual

honesty and integrity. This is because financial and non-financial disclosures made by

any firm are only as good and honest as the people behind them.

7. Good governance system, demonstrated by adoption of good corporate governance

practices, builds confidence amongst stakeholders as well as prospective stakeholders.


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Investors are willing to pay higher prices to the corporates demonstrating strict

adherence to internally accepted norms of corporate governance.

8. Effective governance reduces perceived risks, consequently reduces cost of capital

and enables board of directors to take quick and better decisions which ultimately

improves bottom line of the corporates.

9. Adoption of good corporate governance practices provides long term sustenance and

strengthens stakeholders' relationship.

10.A good corporate citizen becomes an icon and enjoys a position of respects.

11.Potential stakeholders aspire to enter into relationships with enterprises whose

governance credentials are exemplary.

12.Adoption of good corporate governance practices provides stability and growth to the

enterprise.

Effectiveness of corporate governance system cannot merely be legislated by law neither can

any system of corporate governance be static. As competition increases, the environment in

which firms operate also changes and in such a dynamic environment the systems of

corporate governance also need to evolve. Failure to implement good governance procedures

has a cost in terms of a significant risk premium when competing for scarce capital in today's

public markets.

Future prospects of corporate governance

The issues of governance, accountability and transparency in the affairs of the company, as

well as about the rights of shareholders and role of Board of Directors have never been so

prominent as it is today. The corporate governance has come to assume a centre stage in the

Board room discussions.

India has become one of the fastest emerging nations to have aligned itself with the

international trends in Corporate Governance. As a result, Indian companies have

increasingly been able to access to newer and larger markets around the world; as well as able

to acquire more businesses. The response of the Government and regulators has also been

admirably quick to meet the challenges of corporate delinquency. But, as the global


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environment changing continuously, there is a greater need of adopting and sustaining good

corporate governance practices for value creation and building corporations of the future.

It is true that the 'corporate governance' has no unique structure or design and is largely

considered ambiguous. There is still lack of awareness about its various issues, like, quality

and frequency of financial and managerial disclosure, compliance with the code of best

practice, roles and responsibilities of Board of Directories, shareholders rights, etc. There

have been many instances of failure and scams in the corporate sector, like collusion between

companies and their accounting firms, presence of weak or ineffective internal audits, lack of

required skills by managers, lack of proper disclosures, non-compliance with standards, etc.

As a result, both management and auditors have come under greater scrutiny.

But, with the integration of Indian economy with global markets, industrialists and corporates

in the country are being increasingly asked to adopt better and transparent corporate

practices. The degree to which corporations observe basic principles of good corporate

governance is an increasingly important factor for taking key investment decisions. If

companies are to reap the full benefits of the global capital market, capture efficiency gains,

benefit by economies of scale and attract long term capital, adoption of corporate governance

standards must be credible, consistent, coherent and inspiring.

Quality of corporate governance primarily depends on following factors, namely:- integrity of

the management; ability of the Board; adequacy of the processes; commitment level of

individual Board members; quality of corporate reporting; participation of stakeholders in the

management; etc. Since this is an important element affecting the long-term financial health

of companies, good governance framework also calls for effective legal and institutional

environment, business ethics and awareness of the environmental and societal interests.

Hence, in the years to come, corporate governance will become more relevant and a more

acceptable practice worldwide. This is easily evident from the various activities undertaken

by many companies in framing and enforcing codes of conduct and honest business practices;

following more stringent norms for financial and non-financial disclosures, as mandated by

law; accepting higher and appropriate accounting standards; enforcing tax reforms coupled

with deregulation and competition; etc.

However, inapt application of corporate governance requirements can adversely affect the

relationship amongst participants of the governance system. As owners of equity, institutional


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investors are increasingly demanding a decisive role in corporate governance. Individual

shareholders, who usually do not exercise governance rights, are highly concerned about

getting fair treatment from controlling shareholders and management. Creditors, especially

banks, play a key role in governance systems, and serve as external monitors over corporate

performance. Employees and other stakeholders also play an important role in contributing to

the long term success and performance of the corporation. Thus, it is necessary to apply

governance practices in a right manner for better growth of a company.

The Strategic Failures

The companies often fail to understand the relevant business drivers when they expand intonew products or geographical markets, leading to poor strategic decisions. The board of

directors did not understand how the derivatives market worked, and therefore did not

comprehend the risks associated with it. Often a lack of adequate due diligence, whether

building a new plant or making an acquisition, exacerbates problems.

Over Expansion Driven by Greed

The companies are frustrated by their inability to grow organically sufficiently quickly, turn

to acquisitions. Despite many empirical academic studies showing that less than half of all

acquisitions deliver the sought-after or promised returns, this tendency shows little sign of

abating. High achievers, such as top executives, are particularly ambitious and eager for more

power and wealth. CEO's have every incentive to grow their companies. Since the quickest

way to grow a company is often by acquisition, the greed CEO's needed little encouragement

to embark on a spending spree. Very often, the desired synergies are ephemeral, and the

integration costs far exceed the anticipated benefits. Furthermore, cultural differences and

lack of management capacity often add to the problems.

The Domination of CEOs

The CEOs are the individuals usually emerge after a period of successful management. The

company becomes packed with like-minded executives who owe their position to (usually)

him and are reluctant to challenge his judgement. A complacent board, lulled by past

achievements, stops scrutinizing detailed performance indicators and falls into the habit of

rubber-stamping the CEO's decisions. With no challenges and critics within the company, the


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dominant CEO may begin, perhaps unconsciously, to behave as though it is his own creation.

Shareholders and the board became irrelevant. Seduced by the prospects of yet more power

and wealth and with his strong belief in his own infallibility, he goes all out for growth.

The Failure in Control of Corporate Governance

The blurred reporting lines leave holes in control systems. Dispersed departments add to the

problems: it is more difficult to pool knowledge of goings on when departments do not work

closely together. Remote operations, far from head office, are often difficult to manage since

head office is heavily reliant on local management and cannot always judge whether correct

and sufficient information has been transmitted. This is particularly a problem with new or

unfamiliar operations. A fundamental contributor to control failure is a weak, or ineffective,

internal audits with the objective of uncovering potential cost savings, rather than financial

audits with the objective of uncovering potential cost savings, rather than financial audits

with the objectives of safeguarding company assets. A CFO without a professional

accounting qualification is a significant additional risk factor. Bankers, or for the matter

MBAs do not have the broad range of skills to oversee the finances of a large company and

certainly not ones as complex. In many cases in appropriate financial structures have played a

part? Thereafter companies suffered under heavy debt burdens and manipulated their

accounts to disguise the effects of this illogical behaviour.

Independent Directors

A board is supposed to provide a non-partisan judgement of the senior management's action

and strategic proposals and to look after the interests of shareholders. Directors with strong

financial or other links to the company may well find their judgement clouded. Even where

directors were formerly classified as independent, they may not have been so independent

after all. Many audit committee members have too little financial expertise, making it

difficult for them to understand complex accounting matters. Instead, they have tended to go

through the motions of reviewing controls rather than undertaking a much more detailed

study, which would involve posing challenging questions.

Complacency

A background of raising share prices and earnings may have lulled boards into thinking that

all was well, that management was doing its job and may explain, if not excuse, the "handsoff" approach that many adopted in the late 1990s. But once share prices started to fall and


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the companies came under pressure, there was no excuse for directors to sit back. Many

boards failed to question management; failed to assess their competence. The directors have

not had the necessary knowledge or specific industry experience required to make an

effective contribution and in most cases have allowed themselves to be dominated by CEO.

This must be wrong. The CEO should be the servant of the shareholders and board

Suggestions and Opinions

Corporations are the prominent players in the global markets. They are mainly responsible for

generating majority of economic activities in the world, ranging from goods and services to

capital and resources. The essence of corporate governance is in promoting and maintaining

integrity, transparency and accountability in the management of the company as well as in

manifestation of the values, principles and policies of a corporation.

Many efforts are being made, both at the Centre and the State level, to promote adoption of

good corporate governance practices, which are the integral element for doing and managing

business. However, the concepts and principles of good governance are still not clearly

known to the Indian business set up.

Hence, there is a greater need to increase awareness among entrepreneurs about the various

aspects of corporate governance. There are some of the areas that need special attention,

namely:-

A. Quality of audit, which is at the root of effective corporate governance;

B. Role of Board of Directors as well as accountability of the CEOs and CFOs;

C. Quality and effectiveness of the legal, administrative and regulatory framework; etc.

That is, it is necessary to provide the corporates desired level of comfort in compliance with

the code, principles and requirements of corporate governance; as well as provide relevant

information to all stakeholders regarding the performance, policies and procedures of the

company in a transparent manner. There should be proper financial and non-financial

disclosures by the companies, such as, about remuneration package, financial reporting,

auditing, internal controls, etc.


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To reduce the Burdens of the Corporate Governance

At practical level, the chairman should set the agenda for board meeting, in

consultation with the CEO, and appropriate papers should be sent out to directors in good

time so that they can properly prepare for the meeting, which would make for more

constructive use of time.

An effective board which reviews strategy plans and questions management

thoroughly should act, at the very least, as a brake on poor decision-making and at best be a

positive force, using its wider vision experience, to direct the company onto the most

profitable path.

As part of a necessary system of checks and balances, the roles of chairman and CEOshould be separate in all cases. Each has a separate and distinct contribution to make

furthermore, a retiring CEO should not step up to the chairman position as that risks

emasculating or at least overshadowing the new incumbent.

A competent audit committee is essential to ensure that the appropriate internal

controls are in place and working adequately; to ensure that companys financial statements

give a true and fair view of the company's affairs; and to appoint, oversee and, if necessary,

remove external auditors.

Re-Align Executive Compensation

The granting of share options, which are just a one-way bet, should be avoided or, at the very

least, expensed immediately. A better incentive scheme would involve restrictive shares

whose value can go down as well as up. Any share awards should be conditional on their

being held for a minimum of a year after the beneficiary (CEO or other senior executive) has

left the company (apart from any sale necessary to pay tax on the award) or, if still with the

company, until a suitable period, perhaps three years, has elapsed. Company perks such as

private use of aeroplanes should be disclosed in annual reports at their pre-tax value.

Epilogue

The passing of legislation will do little to prevent future failures (while in the process

undeservedly enriching the very accounting firms who were, in part, culpable in the recent


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disasters), as it cannot address the underlying causes. What directors, managers and others

need to remember is that ethics matter and must be demonstrated from the top; That it is

better to manage market expectations rather than to manage earnings to meet expectation; and

that it is false economy to scrimp on information and control systems. None of this will

prevent companies pursuing flawed strategies or making poor acquisitions. Nor will it rein in

the overly ambitious and greedy CEO unless there is a strong, knowledgeable and

challenging board.

Economy of Bangalore

Bengaluru (also known as Bangalore) evolved into a manufacturing hub for heavy industries

such as Hindustan Aeronautics Limited, Indian Telephone Industries (ITI), Hindustan

Machine Tools and Bharat Electronics Limited (BEL) after India gained independence from

Great Britain in 1947. In the past three decades, the establishment and success of high

technology firms in Bengaluru has led to the growth of Information Technology (IT) in India.

IT firms in Bangalore employ about 35% of India's pool of 10 lakh (1 million) IT

professionals and account for the highest IT-related exports in the country. One of the

important factors spurring Bengaluru's growth was heavy central government investment in

Bengaluru's public sector industries, partially because it is geographically out-of-reach from

India's rivals Pakistan and China. This led to the concentration of technical and scientific

navigator in Bengaluru, and is a factor in leading the "IT revolution" in Bengaluru.

Karnataka's political leaders such as D. Devaraj Urs, Ramakrishna Hegde, Gundu Rao,

Veerappa Moily, J. H. Patel and S.M. Krishna each played a pivotal role in the development

of Information Technology and Business Process Outsourcing (BPO) in Bengaluru. When R.

K. Baliga, Founder of the Electronics City proposed the concept of developing the electronic

city in the early 1970s it was met with skepticism but Chief Minister D. Devaraj Urs at that

time supported him and approved the project. This initial seed investment by the Karnataka

State Government in 1976 laid the foundation for the Electronics City.

Silicon Valley of India

The Silicon Valley of India is a nickname of the Indian city of Bengaluru. The name signifiesBengaluru's status as a hub for information technology (IT) companies in India and is a


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comparative reference to the original Silicon Valley, based around Santa Clara Valley,

California, a major hub for IT companies in the United States. Bengaluru, however, is located

on a plateau and not in a valley; the use of the term in reference to Bengaluru is not truly

toponymous. One of earliest mentions of this sobriquet occurred in late 1980s in the Indian

Express.[2] The more prevalent application of the nickname Bengaluru began in the 1990s[3]

based on a concentration of firms specialising in Research and Development (R&D),

electronics and software production.

The Electronics City was the brainchild of R. K. Baliga, the first Chairman and Managing

Director Karnataka State Electronics Development Corporation, a government owned agency

aimed at expanding the electronics industry in the state of Karnataka established in 1976.

Baliga proposed the concept of developing the electronic city in the 1970s. The agency

purchased 335 acres (1.36 km2) of land 18 km south of Bengaluru for its Electronics City

project, which was meant to establish an industrial park in Bengaluru. Notwithstanding

complaints by the industrial park's tenants on the condition of the roads, power and water

availability, KEONICS claimed initially that the title of Silicon Valley of India belonged to

the city's Electronics City campus.[3] As part of its promotion of this concept, KEONICS

distributed reprints of an article entitled Can Bengaluru become India's Silicon Valley" that

first appeared in "Plus: The Total Computer Magazine".

The article made references to studies of Bengaluru published by United States Agency for

International Development (USAID) that favourably evaluated Bengaluru's capacity to grow

into a high technology hub, similar to the Silicon Valley. The publication also published

interviews with IT industry professionals on the state of the IT industry in Bengaluru and

their perceptions of what lay ahead in the future. Selected quotes from the interviews

included:

If the Centre looks at Bengaluru to be made into Silicon Valley, it would certainly become

the Silicon Valley; If you are talking of a Silicon Valley kind of atmosphere, then Bengaluru

already has it, but if you are talking of a product a day, then we are far from it; Bengaluru is

certainly emerging as a software and R&D subcontracting centre for multinationals; It is not

an unreasonable comparison to make between Bengaluru city and Silicon Valley; Bengaluru

has the ingredients to become Silicon Valley... It is probably the only city in India that could

become one.[3]


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The turn of the millennium witnessed the growth of internet based technologies which

resulted in the dotcom boom. Bengaluru's IT industry grew during this period with the

establishment of local and foreign IT companies. In 2001, BusinessWeek published an article

entitled "India's Silicon Valley" which traced the growth of the IT industry in India and

particularly in Bengaluru. The use of the term "Silicon Valley of India" to refer to Bengaluru

grew in local media and as time progressed, in international media too. An article entitled "Is

the Next Silicon Valley Taking Root in Bangalore?" appeared in the New York Times in

2006[4] Indeed, some articles in the western media wondered if the original Silicon Valley

would one day be functionally replaced by Bangalore[5]

Shashi Tharoor has suggested that in place of the clich of Silicon Valley of India, Silicon

Plateau of India would be appropriate.

Infrastructure in Bangalore

Aerospace and Aviation industries

The Sukhoi-30MKI is a dual-role fighter that is manufactured under license of Sukhoiby

Bengaluru-based Hindustan Aeronautics Limited for the Indian Air Force.

Long before Bengaluru was called the Silicon Valley of India, the city made its name as

headquarters to some of the largest public sector heavy industries of India. The Hindustan

Aeronautics Limited (HAL) headquarters was based in Bengaluru, and was dedicated to

research and development activities for indigenous fighter aircraft for the Indian Air Force.

With over 9,500 employees, it is one of the largest public sector employers in Bengaluru.

Today, HAL manufactures, under license, various fighter aircraft for the Indian Air Force

(IAF) including Sukhoi 30 Flankers and Jaguars. HAL also develops indigenous products for

the IAF such as HAL Tejas, HAL Dhruv and HAL HF-24 Marut.

The National Aerospace Laboratories (NAL) is also headquartered in Bengaluru and is

dedicated to the development of civil aviation technologies. Incorporated in 1960, NAL often

works in conjunction with the HAL and has staff strength of over 1,300 employees. NAL also

investigates aircraft malfeasance.


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A 1,000-acre (4.0 km2) special economic zone for the aerospace industry is being setup near

the Bengaluru International Airport. Bengaluru is also home to large domestic airlines -

Simplify Deccan and Kingfisher Airlines.

Manufacturing Industries

Other heavy industries in Bengaluru include Bharat Electronics Limited, Bharat Heavy

Electricals Limited (BHEL), Indian Telephone Industries (ITI), Bharat Earth Movers Limited

(BEML), Hindustan Machine Tools (HMT) and Hindustan Motors (HM).

Bengaluru is also becoming a destination for the automotive industry. Toyota has a

manufacturing plant in Bengaluru while Daihatsu is planning on building a factory soon.Hindustan Motors also has a manufacturing facility in Bengaluru as does Volvo Trucks.

Bengaluru houses many small and medium scale industries in its Peenya industrial area that

claimed to be one of the biggest in Asia 30-years ago.

Space technology

In June 1972, the Government of India set up the Space Commission and Department of

Space (DOS). India's premier space research organization, the ISRO was created under the

DOS and headquartered in Bengaluru. The main objective of ISRO includes development of

satellites and launch vehicles. Aryabhata, India's first satellite was developed and

successfully launched by ISRO. Since then, the organization has successfully launched

numerous other satellites such as Bhaskara, Rohini, APPLE, and the INSAT series, and

successfully deployed PSLVs and GSLVs. ISRO also heads India's ambitious moon program.

Information Technology

Infosys Technologies headquarters

Bengaluru is called the 'Silicon Valley of India' due to the large number of information

technology companies located there. Many multinational corporations, especially computerhardware and software giants, have operations in Bengaluru.


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Bengaluru's IT industry is divided into two main "clusters"[7] Electronics City and

Whitefield. New clusters in Bellandur and Challaghatta have emerged in the last few years

along the Outer and Inner Ring Roads and in C. V. Raman Nagar near Old Madras Road.

Electronics City, located in the southern outskirts of Bengaluru, is an industrial park spread

over 330 acres (1.3 km2). Electronics City was formed in 1978.[8]3M, Hewlett Packard and

Siemens are some of Electronic City's clients. Infosys and Wipro, India's second and third

largest software companies, are headquartered in Electronics City. The Software Technology

Parks of India, Bengaluru (STPI) was started at Electronics City in 1991 by the Ministry of

Information Technology. STPI Bengaluru counts among the premier and oldest Internet

Service Providers (ISP) in India. It was the first centre to be Internet-enabled in India. Nortel

Networks is a prominent client of STPI Bengaluru.

Whitefield cluster is home to the International Technology Park Bengaluru. It was created as

a result of a joint venture between India and Singapore in January 1994. It is a large facility,

comprising 6 buildingsDiscoverer, Innovator, Creator, Explorer, Inventor and Navigator.

The 7th building, belonging to TCS, is in the process of being built. The Export Promotion

Zone (EPIP) in Whitefield provides campus facilities for SAP, iGATE, Dell, TCS, Unisys,

Delphi, Huawei, Oracle, Perot Systems. Captive centres of Tesco, Shell, Aviva, GM,

Schneider Electric, GE and DaimlerChrysler are also located in Whitefield. Flowserve, a

100% subsidiary of Flowserve Corp (NYSE:FLS) also has a Manufacturing Plant and R&D

centre located in EPIP Area.

The Inner Ring Road cluster near the HAL Airport in Challaghatta includes Dell, Microsoft,

IBM, Yahoo, NetApp, McAfee, Bearing Point, Fidelity, ANZ, LG, Covansys, Synergy, PSI

Data, Target, Misys, Dendrite, Sasken, BPL Sanyo, Open Silicon and Lenovo.

The Bellandur Outer Ring Road cluster houses Accenture, Intel, Aricent, Symbol, Cadence,

Cisco, Nokia, Honeywell, ARM, Cummins, JP Morgan Chase, Oracle, Logica CMG and i2

Technologies.

Bagmane Tech Park located in C. V. Raman Nagar off Old Madras Road, houses Oracle

(formerly i-flex Solutions), Motorola, Texas Instruments, Samsung, Dell and Cognizant,

among other companies. Old Madras Road also hosts C-DAC,one of the premier Govt of

India's IT R&D institute.


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Manyata Technology Park is a SEZ (special economy zone) in Nagawara along the outer ring

road where many MNCs have put office. IBM, Philips, NXP, Alcatel-Lucent, Nokia-

Siemens, Cognizant Technology Solutions are some of the major companies in this area.

In August 2005, the Bengaluru Forum for IT (BFIT), which consists of 18 major

multinational IT firms including Sun Microsystems, Texas Instruments, Philips, Novell,

vMoksha, Synopsis, Hewlett-Packard and Motorola, threatened to boycott the Bengaluru IT

convention. The proposed boycott was designed to indicate the displeasure of local and

international technology companies with the city's lack of progress on the infrastructural

front. Increasingly, new IT centres are being built away from this city due to long inner-city

commute times, poor infrastructure, high land and labour costs, increasing environmental

problems and labour retention issues.

Biotechnology

Biocon, headquartered in Bengaluru, is one of India's largest biotechnology companies.

Biotechnology is a rapidly expanding field in the city. Bengaluru accounts for at least 97 of

the approximately 240 biotechnology companies in India. Interest in Bengaluru as a base forbiotechnology companies stems from Karnataka's comprehensive biotechnology policy,

described by the Karnataka Vision Group on Biotechnology.[9] In 2003-2004, Karnataka

attracted the maximum venture capital funding for biotechnology in the country - $8 million.

Biocon, headquartered in Bengaluru, is the nation's leading biotechnology company and

ranks 16th in the world in revenues.

Institute of Bioinformatics and Applied Biotechnology (IBAB), initiated by Biotechnology

vision group, ICICI and Biocon (located at ITPL) is trying to shape revolutionary scientists in

the field.

Like the software industry which initially drew most of its workforce from the local public

sector engineering industries, the biotechnology industry had access to talent from the

National Centre of Biological Sciences (NCBS) and the Indian Institute of Science (IISc).

And Indian Biotechnology Research Organisation (IBRO) is recently under process of

development to boost Biotechnology Growth in India, providing the Advanced Research and


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Talent pool to India from IBRO, whose mission and vision is Research and Development in

Biotechnology to make India as a Global Leader in Biotechnology.

Other Major Biotechnology company based out of Bengaluru is Advanta India.

Other industries

Bengaluru accounts for 70% of all rose exports from India and leads in floriculture business.

Karuturi Global Limited located in Bengaluru is world's largest grower of cut roses.

Some of the other major companies headquartered in Bengaluru are: Canara Bank, United

Breweries Group and GMR Group

A majority of the 3500 crore silk industry in India is headquartered in Karnataka State,

particularly in the North Bengaluru regions of Muddenahalli, Kanivenarayanapura, and

Doddaballapura the upcoming sites of a 70 crore "Silk City".[12] Muddenahalli-

Kanivenarayanapura, in the outskirts of Bengaluru, are the sites of the upcoming Sri Sathya

Sai Baba University and College of Medicine, Indian Institute of Technology Muddenahalli,

and 600 crore Visvesvaraya Institute of Advanced Technology.[12][13][14] Devanahalli is

set to be the site of a 9500 crore Devonahalli Business Park, near the Bengaluru International

Airport.[15] These developments are set to contribute significantly to Bengaluru's economy

by creating jobs, expanding educational opportunities, and spurring infrastructure.

. Business and Bangalore-Engineered for growth

The cantonment history of Bangalore is long lost.

Bangalore developed its Engineering Educational Institutions over the last century and

formed the Hindustan Machine Tools, Bharat Electronics Limited and Indian Telephone

Industries. In the private sector, Motor Industries Company better knew as MICO the

automotive components manufacturer, a subsidiary of Robert Bosch GmbH of Germany and

WIDIA the machine tool manufacturer. These companies employing together over 50,000

skilled employees developed their old economy products with great success. However, the


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last ten years-possibly less-have seen the emergence of the new economy. Bangalore is

leading the country in the development of software companies of world class. The two stars

are Infosys Technologies and WIPRO. These companies have drawn from the same source-

the excellent educational centres of Bangalore. Where the engineering companies looked

primarily for male employees, the new software companies have opened up a whole new

field of opportunity for the women employees- their percentage in the software companies

being as high as 25%. These companies have also through their rapid growth developed a

number of highly rewarded employees through their generous stock option schemes. A first

in India and an important part in the democratization process of industrial ownership in India.

Bangalore is also a leader in exports to different parts of the world. Its textile exports,

especially silk are very high and account for a large portion of state revenue. Due to a large

number of granite quarries in and around the city granite exports are also very high. Then

there is sandalwood and agarbattis (incense sticks) that are also thriving businesses and

international exports. Clearly, these are areas of high growth that will see significant

developments in the years to come.

Bangalore sees this rapid growth cause some problems-affluence bringing heavy pressure on

the infrastructure-in particular the roads over-burdened with a range of new cars and two-

wheelers. But the corporate citizens of Bangalore have been a concerned lot and support the

development of infrastructure with an active State Government leadership.

It is imaginable that the next phase of development in Bangalore will marry both software

and engineering hardware skills to produce intelligent products like the new generation of

white and brown goods, electronic controlled components to make cars and driving safe and

more economical.

Bangalore has the foundation to be the industrial leader in India for the new millennium.

Bangalore Development Authority (BDA)

Bangalore Development Authority is the Planning Authority for Bangalore Metropolitan

area. As a Planning Authority, BDA has to prepare the Comprehensive Development Plan

(CDP) for Bangalore Metropolitan area. CDP will be revised once in ten years as per section


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25 of the Karnataka Town and Country Planning Act 1961. The first Comprehensive

Development Plan for Bangalore Metropolitan area was approved on 12.10.1984.

Subsequently Revised CDP was approved on 05.01.1995 which is still in force. The total

jurisdiction of BDA as per Revised CDP is 1279 Sq. Kms. area. Out of this, the Green Belt

area covers 682 Sq. Kms. The conurbation area (urbanisable area) is 597 Sq. Kms. including

spotted development. Out of this conurbation area, about 225 Sq. Kms. areas is the Bangalore

Mahanagara Palike area. BDA has now taken up re-revision of CDP, which is under progress.

Metropolitan area of BDA covers the following taluks as per 1995 Revised CDP.

Bangalore North, Bangalore South, Bangalore East (Now called), Anekal (Part), Hoskote

(Part)

Devanahalli (Part) Magadi (Part) and Nelamangala (Part)

The main activities of the section are as follows:

Preparation of Comprehensive Development Plan for the Bangalore Metropolitan

Area.

BDA is the Planning Authority for Bangalore Metropolitan Area. Comprehensive

Development Plan will be revised once in 10 years as per section 25 of K.T. & C.P. Act

1961. The first Comprehensive Development Plan for Bangalore Metropolitan Area was

prepared and approved on 12.10.1984. Subsequently Revised Comprehensive Development

Plan was approved on 05.01.1995 which is still in force. As per Section of 25 KT & CP Act

1961. BDA has taken up revision of Comprehensive Development Plan which is under active

progress.

Preparation of schemes and layouts plans for BDA schemes.

After acquisition of lands by BDA, Town Planning Section will prepare for BDA lands under

section 16(d) of BDA Act 1976. At present Authority has taken up Arkavathy scheme

providing for 20,000 sites.


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Approval of residential Industrial & Commercial Layouts in favour of House Building Co -

Operative Society (HBCS) / Institutions and individuals and also approval of development

plan for Group Housing Scheme.

After receipt of applications from HBCS, individuals and institutions, proposal will be

examined as scrutinised with reference to the Zoning of Land use regulations of RCDP and

also land use of RCDP. No Objection Certificates from BWSSB, Bescom, and Pollution

Control Board are required in addition to other documents such as ownership conversion of

land etc. Likewise authority also receives application for approval of development of plan for

group Housing. In this case if it is more than Ground + Four and above Floors, No Objection

Certificates from Air Port Authority, Telecom (BSNL) Fire-force are required in addition to

BWSSB and KPTCL. No Objection Certificates. Both layout and Development Plan are

considered as per norms are as prescribed in the Zoning Regulations.

Change of Land Use.

Authority receives applications for change of land use from Residential to Commercial,Industrial to Residential, Public and Semi Public to Residential etc. This application will be

processed under section 14: A of KTCP Act 1961. Objection from the public will be invited

from calling objections, if any within16 days from the notification published in the New

Papers. After this subject will be placed before the Committee for taking a decision. The

cases which are approved by the Committee will be sent to the Government for according

approval for Change in Land Use. After seeking Government Approval, a necessary fee is to

be collected and Commencement Certificate will be issued.

Scrutiny of Multi Dwelling Apartments.

Town Planning Section furnishes opinion for sanctioning Multi Dwelling Apartments when

cases referred by the Engineering Section.

Approval of Bifurcation & Amalgamation of Plots.

Approval granted as per the provisions of Zoning Regulations.

Furnishing Technical opinion on planning matters to various other sections of


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BDA, Government department, agencies, and town Planning Section furnishes opinion in

respect of Town Planning matters, both within the state and outside the State Government

and other agencies.

Second Revision of comprehensive development plan:

Under Section 25 of the KTCP Act, 1961 Revision of Comprehensive Development Plan

(CDP) activity is periodic, once in ten years. The CDP of Bangalore, which was originally

prepared and approved by Government in 1984 and later revised (first revision) and approved

in 1995, needs second revision based on up to date physical developments and trends in

growth of the Metropolis. Also, it is mandatory, under Section 25 of the KTCP Act to revisethe CDP within 10 years after it is approved by Government.

Accurate, comprehensive and scientifically prepared base maps at different scales were

necessary to commence the work on Second Revision to CDP. For this purpose Government

in December 1998 approved the proposal of BDA for getting maps prepared from Aerial

Photography by the NRSA of Hyderabad. NRSA had delivered first proof plots at scale

1:2,000 by July 2002. The proof plots were checked and returned to NRSA. NRSA was to

effect corrections to maps and deliver second proof plots. Digital data and hard copies of the

corrected maps are adequate to carry out planning surveys and planning studies. Therefore,

work on Second Revision to CDP could commence from April, 2003. For the second revision

of CDP and other services under the Indo - French Protocol, arrangement was being made to

engage a French consultant. In this connection, a Memorandum of Understanding was signed

in February 2003 with the BDA and M/S Strategic Conseil Etudes (SCE) consortium

comprising the City Government of Paris (APUR) - the Greater Paris Development and

Planning Authorities (IAURIF), the Sorbonne University and the Group 8; in the presence of

French Prime Minister and the Hon'ble Chief Minister of Karnataka.

The commercial contract was finalised and signed on the 2nd of June 2003, officially

launching the MSDI project, comprising among other activities, the 95 CDP revisions.

To tackle the CDP revision exercise in the time frame and legal frame work (section 25 of the

KTCP Act), four main components have been initiated in parallel:

a. A holistic data collection process among the main private and public stakeholders.


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b. A comprehensive ground Existing Land Use Survey including the CMC's and the BCC

areas

c. "Urban diagnosis" and furnishing the "scientific" elements for 2020 "Bangalore vision"

d. The mapping and data consolidation activities, comprising of the preparation of the spatial

data for urban planning and city management perspectives (data modelling, detailed data base

and GIS design, etc.)

City diagnostic surveys have been completed by the consultant which covers major areas like

population structure, urban pattern, social development, socio-economic matters, housing,

civic amenities, infrastructure, traffic and transportation and institutional efficiency etc.

The map supplied by the NRSA in the scale of 1:2000 comprising of 699 tiles which was

delivered to the consultants have been corrected for Geometrical consistency and

standardization and all the maps are made GIS enabled.

In addition, ward maps have been prepared for all the CMCs after collecting data from the

concerned CMCs.

The complete integration of survey numbers along with the existing village boundaries has

been completed and exact boundaries of all the administrative limits of CMCs within BDA

limits are marked. The digital version of the existing land use is prepared for all the

agglomeration areas covering an extent of more than 500 sq.km

Establishment of Survey Control Points:

Scientifically prepared large-scale topographical maps have reference to the World Geodetic

System. Maps need updating by survey for new developments after the survey (Aerial

Photography) for initial mapping. To carryout field survey manually, reference points, which

are connected to the reference for initial mapping are required. For this purpose, the

Authority had constructed during the year 2000, 600 survey monuments with specified

metallic markers. The position of the points, with reference to the World Geodetic System in

terms of co-ordinates was to be determined using Global Position System (GPS) receivers by

observing satellites. This work had been entrusted to the Survey of India considering the

technical, operational and cost parameters. The Survey of India has commenced the


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reconnaissance work in December 2002. GPS observation work was commenced on Jan. 27,

2003 and was completed for 510 points in the first week of March 2003. The second phase of

work to fix additional control points to fill up gap areas and to re-establish disturbed points

was taken up by BDA in June 2003 and additional points were fixed. Survey of India

completed the GPS and Levelling work in October 2003. The final data for a total of 714

survey control points covering the entire Bangalore Metropolitan Area has been received

from Survey of India in November 2003.

Airfield Environmental Management Committee:

1. Government vide its order no. HUD 98 TTP 80 dt. 26.08.1980 has constituted a Committeefor Airfield Environmental Management under the Chairmanship of the Chairman, BDA. For

this Committee the Town Planner Member of the Authority is the Member Secretary. Now,

the Government is pleased to reconstitute the Committee for Environmental Management of

Bangalore Airfields including the areas of the proposed International Airport at Devanahalli

vide Govt. Order No. UDD 115 BEM RUPRA 2002 Bangalore dated 12th August 2002.

Newly reconstituted committee held its 1st meeting on 7.9.2002 under the chairmanship of

BDA Chairman.

As per the proceedings of the meeting, it was decided to write to the Government to include

the a. Commissioner, BDA; b. Commissioner, BMRDA; c. Chairman, BIAAPA; d. Chief

Manager (Air Traffic Control), HAL, Bangalore and e. Principal Secretary to Govt. Animal

Husbandry Dept. as members in the committee. And it was felt that a Sub-Committee may be

set up to look into the implementation of all the decisions taken in the past meetings.

The sub-committee conducted a meeting and joint inspection of problematic areas around

HAL Airport on 7.5.2003 under the leadership of Sri Rin Sanga, the Chairman, BDA and

Airfield Environment Management Committee. The concerned authorities were intimated to

take appropriate action. This Committee is conducting meetings from time to time in addition

to above all.

2. Within the LPA, land use violations are being identified and in such cases suitable action is

being initiated under K.TCP Act 1961.


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3. Technical opinion is being furnished by the Town Planning Section to the Government,

local bodies and to other agencies as and when referred to.

Warning to land developers

The land owners /developers are hereby warned not to form unauthorised layouts in the

Bangalore Metropolitan Area and cheat the public. Formation of unauthorised layouts

without approval by BDA will attract penalty as well as imprisonment on conviction under

the KTCP Act 1961. Further, BDA is constrained to acquire the lands where such

unauthorised layouts are formed.

Conclusion

Nowadays, corporate governance has become an important subject. It is common that the

minority investors rarely attend the meeting where it is pretty clear as to who has the power

to implement changes. In the capital market, large investment banks particularly, foreign

institutional investors perform the function of making a judgement about the company and its

management. There is a strong incentives for corporate management s themselves to adopt

transparent processes and good governance practices. They have sought to cultivate an image

of being honest with their investors and of being concerned about the shareholder value

maximization. The situation is changing in India and the more progressive companies are

voluntarily accepting tougher accounting standards and more independent directors than are

mandated by law. They are also adopting more healthy governance practices.

In India, the Confederation of Indian industry took the lead in

framing a desirable code of conduct in corporate governance in April 1998. This was

followed by the recommendations of the Kumar Mangalam Birla committee on corporate

governance appointed by the securities exchange board of India (SEBI). The recommendation

was enshrined in Clause 49 of the listing agreement of every Indian stock exchange. An

important decision taken in this regard in India is that all listed companies should have 50%,

independent directors on their board. In addition, the department of company affairs,

government of India had constituted a nine member committee under the chairmanship of Mr


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Naresh Chandra, the former Indian ambassador to the US, to examine various corporate

governance issues, and the major recommendation have been implemented.

Reference

www.business.gov.in

www.bda.in

Business Environment by Justin Paul
http://www.business.gov.in/http://www.business.gov.in/http://www.bda.in/http://www.bda.in/http://www.bda.in/http://www.business.gov.in/

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