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A PROJECT REPORT ONCORPORATE GOVERNANCE IN TATA SUBMITTED TO:UNIVERSITY OF MUMBAI ACADEMIC YEAR(2015-16)SUBMITTED BY:PAYAL AMBHORE ROLL NO: 17M.COM PART-I (BUSINESS MANAGEMENT)(SEMESTER 2)

PROJECT GUIDE:PROF S.N.CHITALE VPMSK.G. JOSHI COLLEGE OF ARTS &N.G. BEDEKAR COLLEGE OF COMMERCE (THANE)

VIDYA PRASARAK MANDAL, THANEK. G. JOSHI COLLEGE OF ARTS &N. G. BEDEKAR COLLEGE OF COMMERCECERTIFICATEOFPROJECT WORKThis is certify thatMr. / Ms. _______________________________________________ OfM.Com. (BUSINESS MANAGEMENT ) Part.: ____ Semester :_____ Roll No. : _____ has undertaken & completed the project work titled _________________________________________________ during the academic year __________under the guidance of Mr. / Ms. ___________________________________Submitted on _____________ to this college in fulfillment of the curriculum of MASTER OF COMMERCE ( BUSINESS MANAGEMENT ) UNIVERSITY OF MUMBAI .This is a bonafide project work & the information presented is True & original to the best of our knowledge and belief .

PROJECT GUIDE EXTERNAL EXAMINER

DECLARATION

I PAYAL AMBHORE studying in MCOM Part-1 hereby declare that I have done a project on reference to CORPORATE GOVERNANCE IN TATA . As required by the university rules, I state that the work presented in this thesis is original in nature and to the best my knowledge, has not been submitted so far to any other university.Whenever references have been made to the work of others, it is clearly indicated in the sources of information in references

Student (PAYAL AMBHORE )

Place: ThaneDate:

ACKNOWLEDGEMENTIt gives me great pleasure to declare that my project on CORPORATE GOVERNANCE IN TATA have been prepared purely from the point of view of students requirements.This project covers all the information pertaining to CORPORATE GOVERNANCE IN TATA. I had tried my best to write project in simple and lucid manner. I have tried to avoid unnecessary discussions and details. At the same time it provides all the necessary information. I feel that it would be of immense help to the students as well as all others referring in updating their knowledge.I am indebted to our principal Dr. Mrs. Shakuntala A. Singh Madam for giving us such an awesome opportunity. I am also thankful to our coordinator Mr. D.M. Murdeshwar Sir and also librarian and my colleagues for their valuable support, co-operation and encouragement in completing my project.Special thanks to Prof. S.N.CHITALE my internal guide for this project for giving me expert guidance, full support and encouragement in completing my project successfully.I take this opportunity to thanks my parents for giving guidance and for their patience and understanding me while I am busy with my project work.Lastly I am thankful to God for giving me strength, spirit and also his blessings for completing my project successfully.

INDEX

SR NO.CONTENTSPAGE NO.

1.INTRODUCTION 6

2.PRINCIPLES 8

3.ADVANTAGES AND DISADVANTAGES 10

4.WHAT IS CORPORATE GOVERNANCE IN STRATEGIC MANAGEMENT 13

5.CORPORATE SOCIAL RESPONSIBILITY 14

6.COMPANY PROFILE 16

7.CORPORATE GOVERNANCE IN TATA 20

8.COMPANYS PHILOSOPHY 23

9.TATA CODE OF CONDUCT 27

10.WHY TATA QUALITY FOCUS ON CORPORATE GOVERNANCE 34

11.STRUCTURE OF CORPORATE GOVERNANCE IN TATA 42

12.CONCLUSION 44

13.BIBLIOGRAPHY 46

INTRODUCTION CORPORATE GOVERNANCE

The system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of the many stakeholders in a company - these include its shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.

Corporate social responsibility is the fastest-growing area of corporate governance. CSR is also sometimes called corporate conscience or sustainable business, as it functions as a self-check for the business' social performance.Corporate governance broadly refers to the mechanisms, processes and relations by which corporations are controlled and directed. Governance structures identify the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and includes the rules and procedures for making decisions in corporate affairs. Corporate governance includes the processes through which corporations' objectives are set and pursued in the context of the social, regulatory and market environment. Governance mechanisms include monitoring the actions, policies and decisions of corporations and their agents. Corporate governance practices are affected by attempts to align the interests of stakeholdersDefinition:-Corporate governance has also been defined as "a system of law and sound approaches by which corporations are directed and controlled focusing on the internal and external corporate structures with the intention of monitoring the actions of management and directors and thereby, mitigating agency risks which may stem from the misdeeds of corporate officers."Strategy: In order to work well, a corporate strategy needs to the reviewed, challenged, changed and updated regularly. Thats not just annual business planning and budgeting. Corporate governance broadly refers to the mechanisms, processes and relations by which corporations are controlled and directed. Governance structures identify the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and includes the rules and procedures for making decisions in corporate affair

PRINCIPLES OF CORPORATE GOVERNANCE

Shareholder recognition is key to maintaining a companys stock price. More often than not, however, small shareholders with little impact on the stock price are brushed aside to make way for the interests of majority shareholders and the executive board. Good corporate governance seeks to make sure that all shareholders get a voice at general meetings and are allowed to participate. Stakeholder interests should also be recognized by corporate governance. In particular, taking the time to address non-shareholder stakeholders can help your company establish a positive relationship with the community and the press. Board responsibilities must be clearly outlined to majority shareholders. All board members must be on the same page and share a similar vision for the future of the company. Ethical behavior violations in favor of higher profits can cause massive civil and legal problems down the road. Underpaying and abusing outsourced employees or skirting around lax environmental regulations can come back and bite the company hard if ignored. A code of conduct regarding ethical decisions should be established for all members of the board. Business transparency is the key to promoting shareholder trust. Financial records, earnings reports and forward guidance should all be clearly stated without exaggeration or creative accounting. Falsified financial records can cause your company to become a Ponzi scheme, and will be dealt with accordingly.

ADVANTAGES AND DISADVANTAGES OF CORPORATE GOVERNANCE

ADVANTAGES: Good corporate governance ensures corporate success and economic growth. Strong corporate governance maintains investors confidence, as a result of which, company can raise capital efficiently and effectively It lowers the capital cost. There is a positive impact on the share price. It provides proper inducement to the owners as well as managers to achieve objectives that are in interests of the shareholders and the organization. Good corporate governance also minimizes wastages, corruption, risks and mismanagement. It helps in brand formation and development. It ensures organization in managed in a manner that fits the best interests of all.

DISADVANTAGES:

Corporate governance is one of the law's most intensely regulated fields. This is because corporations are privately owned but are treated as independent legal entities, rendering their assets vulnerable to a variety of potential abuses. Corporate governance is generally governed by state law, although the federal government has also enacted legislation to curb abuses.Ownership-Management SeparationThe officers and directors who run the day-to-day affairs of a corporation and makemost of its policy decisions are not necessarily shareholders. This can become a problem in large, publicly traded corporations. If no shareholder holds a controlling interest in the corporation, and most shareholders vote by proxy, the corporation's assets are controlled by the board of directors and the officers. The separation of ownership and management can lead to a conflict of interest between management's duty to maximize shareholder value and its interest in maximizing its own income. A CEO, for example, might be paid a large bonus even as the corporation approaches bankruptcy.

Illegal Insider TradingThe term "corporate insiders" refers to corporate officers, directors and employees because they may have access to confidential, non-public information about the corporation that might affect the value of its shares. Corporate insiders are not strictly prohibited from trading corporate shares but must report these trades to the Securities and Exchange Commission. Illegal insider trading occurs when a shareholder, while in possession of confidential information relevant to the future value of his shares, sells shares to a buyer without access to this information. Illegal insider trading can also be committed by a shareholder not directly affiliated with the corporation, such as an outside auditor, a government regulator or a relative of a corporate insider. Because access to confidential corporate information can be widely dispersed, laws against insider trading can be difficult to enforce.Misleading Financial StatementsThere are many ways to present factually accurate information on a financial statement in a manner that is misleading to investors -- by, for example, selling property from a parent company to a subsidiary to maximize parent company revenues. It is also possible to present factually incorrect information that is difficult to detect by establishing complex networks of subsidiaries and cross-shareholdings.Costs of RegulationThe abuse of corporate governance has triggered the enactment of a large body of state and federal laws designed to prevent such abuses from recurring. Compliance with these laws can be burdensome and expensive for corporations. For example, the Securities and Exchange Act of 1933 requires companies seeking to list on astockexchange to make such extensive disclosures to potential investors that compliance can cost hundreds of thousands of dollars. More recently, the Sarbanes-Oxley Act of 2002 requires corporations to establish extensive systems of internal controls to ensure that their financial statements are both factually accurate and non-misleading.

what is aCorporate Governance Policy?.A Corporate Governance policy deals with prevention or mitigation of the conflict of interests ofstakeholders. It guarantees that an enterprise is directed and controlled in a responsible, professional, and transparent manner with the purpose of safeguarding its long-term success. It is intended to increase the confidence of shareholders and capital-market investors. An important theme of the policy is the nature and extent of accountability of people in the business, and mechanisms that try to decrease the principal agent problem. The directors, senior management andemployees must adhere to the Corporate Governance Policy of the Company.

WHAT IS CORPORATE GOVERNANCE IN STRATEGIC MANAGEMENT?Corporate governance has become a buzz word in the business management field. Owners of businesses of all sizes are employing the concepts of corporate governance to develop a strategic plan for operations. This includes systems and procedures designed to structure authority, balance responsibility and provide accountability to stakeholders at all levels. In essence, corporate governance is about balancing profitability with sustainability.External StakeholdersRecognizing your external stakeholders is an important part of corporate governance. External stakeholders include customers, suppliers, vendors and the community -- all of those people who fall outside the internal workings of your business. Strategically managing your relationships with external stakeholders is essential because these people place high value on a business' ability to offer high quality and fairly priced products and services. The old adage to "keep your customers happy and they'll keep coming back" is a wise approach to managing stakeholder expectations.Internal StakeholdersOn the flip side, a business' corporate governance structure must also incorporate a focus on its internal stakeholders. These are the individuals within the business that have a direct impact on its daily operations, such as employees, the Board of Directors and the management. Building strategic relationships with these people is important for ensuring the long-term success of the business including its profitability. The key is to keep your internal stakeholders informed and motivated; they should want the business to be the best it can be and they should always have the external stakeholders' interests in mindCORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility is the fastest-growing area of corporate governance. CSR is also sometimes called corporate conscience or sustainable business, as it functions as a self-check for the business' social performance. A socially responsibility business integrates legal conduct with ethical standards and furthermore recognizes its place in the broader community. Small businesses are particularly encouraged to adopt strategic CSR policies that increase their visibility in the community. This can happen by investing in a local school program or non-profit organization, by donating to a charitable cause or by sponsoring a little league team. The goal of CSR is to embrace responsibility for your business' impact on the environmental, social and community issues that affect both your internal and external stakeholders

Strategy & Corporate GovernanceTo maintain corporate stability, you need a robust structure with the correct checks, balances, accountability and transparency. Our experienced team who have all held the top positions in large organisations can help you achieve that through an in-depth governance review and health check.We can review and test existing structures and procedures and we can help ensure all board committee members or trustees are clear about their roles.That includes their role in defining and setting strategy, monitoring performance, ensuring compliance with the law and being challenging yet supportive of the executive management and staff.

StrategyIn order to work well, a corporate strategy needs to the reviewed, challenged, changed and updated regularly. Thats not just annual business planning and budgeting.Corporate governance broadly refers to the mechanisms, processes and relations by which corporations are controlled and directed. Governance structures identify the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and includes the rules and procedures for making decisions in corporate affairs.

COMPANY PROFILETata Groupis an Indian Multinationalconglomerate company headquartered inMumbai, Maharashtra, India.It encompasses seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. Tata Group was founded in 1868 byJamsetji Tataas a trading company. It has operations in more than 80 countries across six continents. Tata Group has over 100 operating companies with each of them operating independently. Out of them 32 are publicly listed.The major Tata companies areTata Steel,Tata Motors,Tata Consultancy Services(TCS),Tata Power,Tata Chemicals,Tata Global Beverages,Tata Teleservices,Titan Industries,Tata CommunicationsandTaj Hotels.The combined market capitalization of all the 32 listed Tata companies was INR 8.4 Trillion ($141.27 billion) as of July 2014.Tata receives more than 58% of its revenue from outside India.

The Tata Group is owned primarily by various charitable trusts (established by Jamsetji Tata's sons at his behest) that maintain a majority stake in the holding company. The current chairman of the Tata group isCyrus Pallonji Mistry, who took over fromRatan Tatain 2012.Tata Sonsis the promoter of all key Tata companies and holds the bulk of shareholding in these companies. The chairman of Tata Sons has traditionally been the chairman of the Tata group. About 66% of the Equity (finance)of Tata Sons is held by philanthropic trusts endowed by members of theTata family.The Tata Group and its companies & enterprises is perceived to be India's best-known global brand within and outside the country as per anASSOCHAMsurvey.The 2009, annual survey by the Reputation Institute ranked Tata Group as the 11th most reputable company in the world.The survey included 600 global companies. The Tata Group has helped establish and finance numerous quality research, educational and cultural institutes in India.The group was awarded theCarnegie Medal of Philanthropyin 2007 in recognition of its long history of philanthropic activities.The international brand consultancyBrand Financehas ranked the over $100-billion conglomerate, Tata Group, as 39th most valuable brand in the world.The most recent Global 500 report by Brand Finance shows that despite the controversies, Tata Group's brand value has soared to $15.08billion for the current year compared to $11.2billion last year in 2010.In 2009 the Tata Group was ranked 11 in the world's top 100 reputable companies by Forbes MagazineIn 2011 and 2012, Tata was ranked as India's second most trusted brand byThe Brand Trust ReportIn 2013,The Brand Trust Report,ranked Tata as India's fifth most trusted brand. In 2014 Tata was ranked third Most Trusted Brand by the same report. In a 2011 investor poll conducted by equity research firm Equity master, TATA Group was voted as the most trustworthy among the Indian corporate houses. Over 61% of the respondents "showed their confidence in the Tata Group". The Tata Group retained its "Most Trustworthy" status in the 2012 edition of the poll. In 2000, its Dewas division was awarded theRajiv Gandhi National Quality Award.[Subsidiaries and Joint VenturesTILs largest subsidiary, Tata Africa Holdings has served as the flag bearer of the Tata Group in the continent since 1977 and is headquartered in South Africa. It has facilitated several business collaborations and has successfully created a niche for the Tata brand, its values and commitment to the larger community.Through subsidiaries and joint ventures worldwide, we also have business interests in luxury hotels, bus body building, logistics, vehicle assembly and trailer manufacturing facilities.Corporate SustainabilityAt TIL, we are deeply committed to being a proactive and responsible member of the community and the environment in which we are present. Stringent goals for the reduction of carbon footprint and greenhouse gases in our leather plant and other facilities, coupled with initiatives for empowering local communities in equal measure, drive our long-term sustainability agenda. Winner of several prestigious national awards and international certifications for environment and quality, TIL is also a signatory to the UN Global Compact.

Corporate Governance for us means to consistently strive to bring more accountability to the entire spectrum of stakeholders while creating wealth legally and ethically. TataLimited(formerlyTELCO)isanIndian multinational automotive corporation headquartered in Mumbai, India. It started its journey in 1945 and is a part of the Tata Group, the company founded by Jamsedji Tata. Tata Motors Limited is India's largest automobile company, with consolidated net sales of $27 billion in 2010-11 and net profit of over $1.7 billion in the year ended March 31, 2011. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company has over 53,100 employees who are guided by the vision to be ''best in the manner in which Tata operates best in the products it delivers and best in its value system and ethics.'' Tata Motors surpassed Reliance to win the coveted title of 'India's most valuable brand' in an annual survey conducted by Brand Finance and The Economic Times in 2010. Tata Motors was ranked as India's 3rdMost Reputed Car manufacturer in the Reputation Benchmark Study - Auto (Cars) Sector, launched in2012.The company was ranked 359th globally in Fortune Global 500list in 2011.

Transparency: To maintain the highest standards of transparency in all aspects of our interactions and dealings.Compliances: To comply with all the laws and regulations applicable to the company.Ethical conduct: To conduct the affairs of the company in an ethical manner.

CORPORATE GOVERNANCE AT TATA

Corporate Governance for us means to consistently strive to bring more accountability to the entire spectrum of stakeholders while creating wealth legally and ethicallyTata group, philosophy of corporate governance is founded upon a rich legacy of fair, ethical and transparent governance practices. Through the Governance mechanism in the Company, the Board along with its Committees undertakes its fiduciary responsibilities to all its stakeholders by ensuring transparency, fair play and independence in its decision making. The Corporate Governance philosophy at Tata Motors has been further strengthened with the implementation of theTata Business Excellence Model as a means to driveexcellence, the Balanced Scorecard methodology for tracking progress on long term strategic objectives and the Tata Code of Conduct which articulates the values, ethics and business principles and serves as a guide to the Company, its directors and employees and an appropriate mechanism to report any concern pertaining to non-adherence to the said Code and addressing the same is also in place. The Company is in compliance with the requirements ofCorporate Governance under Clause 49 of the Listing Agreement with the Indian Stock Exchanges. Riskmanagement and internal control functions have been geared up to meet the progressive governance standards.

Environmental PerformanceTata Motors has taken measures to reduce its packaging footprint by either using sustainable packaging (replacing wood with metal) or reusing existing packaging (recycling wood). It recycles close to 69% of the woodpackaging thus eliminating use of fresh wood.Tata Motors is heavily investing in the research anddevelopment in order to develop low Carbon, fuels saving technologies which will help reducegreenhouse gas emissions.The company has been actively partnering with NGOs on regional resource agency basis in order to organize programs for creating environmental awareness followed by field action at the local , regional and national level.The company continues to increase water use efficiency through implementation of advanced technology such as rain water harvesting and generation of awareness amongst employees. The efforts have resulted into total water withdrawal of close to 19% inthe past 2 years.Tata Motors has made significant investments to effectively monitor air emissions from its production facilities including an on-line monitoring and alarm system for incinerator emissions

Social PerformanceTata Motors being a socially conscious company develops programs for the benefit of the communities. Their contributions have been in the fields of health, education and employability across the societies. Health:Healthcare provided to nearly 300,000 people annually.Over 300 low cost toilets built per annum.Sanitation drives conducted with participation of over 40,000 villagers in over 50villages.Amritdhura Project implemented to provide safe drinking water to 100 villages in next three years.Smoke efficient chullahs installed in over 200 village households to curb respiratory problems.5,000 women treated in anemia treatment camps. EducationInfrastructure and facility up-gradation benefitting 50,000 students annually.Teachers training for more than 2,000 primary school teachers.Extra-curricular activities for nearly 7,000 students.Nearly 500 students supported through scholarships annually. Employabilitytechnical and vocational training provided to nearly 7,000 people.Adopted 21 it is under public-private partnership schemes.Over 1,500 women benefited through SHGs and over 150 SHGs formed and sustainedAwards and AccoladesTata Motors has received Golden Peacock Award for excellence in Corporate Governance for the year 2011.The Company, in 2011 won the Srishti G-Cube Awards for Good Green Governance in Manufacturing - Engineering category, CVBU Pune was the winner, Jamshedpur Plant was declared ''runner up'', and Pantnagar Plant received a ''certificate of commendation''Tata Motors won Sword of Honour for Pant Nagar Plant which is reflection of high standards ofhealth and safety, performance and demonstration of safety leadership, in all phases of operations of the plant.Tata Motors won the Greentech Environment Silver Award for outstanding achievement in Environment Managemen

COMPANY'S PHILOSOPHY ON CORPORATE GOVERNANCE

TATA's principal purpose is to improve the quality of life of the communities it serves. The values and ideals, the way that it functions, helps it do that. As a Tata Company, the Company's philosophy on Corporate Governance is founded upon a rich legacy of fair, ethical and transparent governance practices, many of which were in place even before they were mandated by adopting highest standards of professionalism, honesty, integrity and ethical behavior. As a global organization, the Corporate Governance practices followed by the Company and its subsidiaries are compatible with international standards and best practices. Through the Governance mechanism in the Company, the Board along with its Committees undertakes its fiduciary responsibilities to all its stakeholders by ensuring transparency, fair play and independence in its decision making.The Corporate Governance philosophy is further strengthened with the adherence to the Tata Business Excellence Model as a means to drive excellence, the Balanced Scorecard methodology for tracking progress on long term strategic objectives and the Tata Code of Conduct which articulates the values, ethics and business principle sand serves as the ethical road map for the Company, its directors and employees supplemented with an appropriate mechanism to report any concern pertaining to non-adherence to the said Code. The Company is in full compliance with the requirements of Corporate Governance under Clause 49 of the Listing Agreement with the Indian Stock Exchanges ("the Listing Agreement"). The Company's Depositary Programme is listed on the New York Stock Exchange and the Company also complies with US regulations as applicable to Foreign Private Issuers (non-US listed companies)which cast upon the Board of Directors and the Audit Committee, onerous responsibilities to improve the Company's operating efficiencies. Risk management and internal control processes focusareas continue to meet the progressive governance standards.As a good corporate governance practice, the Company has voluntarily undertaken an Audit by M/s Parikh & Associates, Practising Company Secretaries, of the secretarial records anddocuments for the period under review in respect of compliance with the Companies Act, 1956 ("The Act"), Listing Agreement with the Indian Stock Exchanges and the applicable regulations and guidelines issued by Securities and Exchange Board of India.

BOARD OF DIRECTORSThe Board of Directors along with its Committees provides leadership and guidance to the Company's management and directs, supervises and controls the performance of the Company. The Board currently comprises of twelve Directors out of which nine Directors (75%) are Non Executive Directors. The Company has a Non Executive Chairman and the six Independent Directors comprise at least one half of the total strength of the Board. All the Independent Directors have confirmed that they meet the 'independence' criteria as mentioned under Clause 49 of the Listing Agreement.None of the Directors on the Company's Board is a Member of more than ten Committees and Chairman of more than five Committees(Committees being, Audit Committee and Investors' Grievance Committee) across all the Indian Public limited companies in which he is a Director. All the Directors have made necessary disclosures regarding Committee positions held by them in other companies and do not hold the office of Director in more than fifteen public companies. None of the Directors of the Company are related to each other. All Non Executive Directors, excluding the 'Steel Director' (Tata Steel representative), are liable to retire by rotation. The appointment of the Managing Director and Executive Directors including the tenure and terms of remuneration are also approved by the members at the first meeting after their appointment.The required information as enumerated in Annexure IA to Clause 49 of the Listing Agreement is made available to the Board of Directors for discussions and consideration at Board Meetings. The Board reviews the declaration made by the Managing Director regarding compliance with all applicable laws on a quarterly basis as also steps taken to remediate instances of non-compliance. The Managing Director and the Chief Financial Officer (CFO) have certified to the Board in accordance with Clause 49 V of the Listing Agreement pertaining to CEO and CFO certification for the Financial Year ended March 31, 2013.During the year under review, nine Board Meetings were held on April 10, 2012, May 29, 2012, July 13, 2012, August 9, 2012, October 16, 2012, November 7, 2012, December 13, 2012, February 14, 2013 and March 28, 2013. The maximum time-gap between any two consecutive meetings did not exceed four months.In the 175th year of birth of our visionary founder Mr. J. N. Tata, we pay homage to him, for it was he who laid the foundation for good governance and made it an integral part of our business culture. Corporate Governance is concerned with maintaining the right balance between economic and social goals and between individual and community goals. As a Tata Company, righteous Corporate Governance is the way of life and the way we do our business, encompassing every day's activities and is enshrined as a part of our way of working.For your Company, good corporate governance is a synonym for sound management, transparency and disclosure, encompassing good corporate practices, procedures, standards and implicit rules which propel a company to take sound decisions, thus maximizing long-term shareholder value without compromising on integrity, social obligations and regulatory compliances. As a Company with a strong sense of values and commitment, Tata Power believes that profitability must go hand in hand with a sense of responsibility towards all stakeholders. This is an integral part of Tata Power's business philosophy. The cardinal principles such as independence, accountability, responsibility, transparency, trusteeship and disclosure serve as means for implementing the philosophy of Corporate Governance.This philosophy has been sought to be strengthened through the Tata Code of Conduct, the Tata Business Excellence Model and the Tata Code of Conduct for Prevention of Insider Trading and Code of Corporate Disclosure Practices, which form guidelines for "Leadership with Trust". The Company is committed to focus its energies and resources in creating and positively leveraging shareholders' wealth, and at the same time, safeguard the interests of all stakeholders. This is our path to sustainable and profitable existence and growth.In addition to these, the Company has also adopted the requirements of Corporate Governance under Clause 49 of the Listing Agreements with the Stock Exchanges.

TATA CODE OF CONDUCTThe fountainhead of the corporate governance of the Tata Power Company is the Tata Code of Conduct. The Company is committed to abide by it, in its letter and spirit. And the Company has earned the Tata Brand name by virtue of this commitment. It draws its strength from the five Tata values: Integrity Understanding Excellence Unity ResponsibilityIn Tata parlance they stand for IntegrityWe must conduct Your business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny.UnderstandingWe must be caring, showing respect, compassion and humanity for Your colleagues and customers around the world, and always working for the benefit of India.ExcellenceWe must constantly strive to achieve the highest possible standards in Your day-to-day work and in the quality of the goods and services we provide.UnityWe must work cohesively with Your colleagues across the group and with Your customers and partners around the world, building strong relationships, based on tolerance, understanding and mutual cooperation.ResponsibilityWe must continue to be responsible, sensitive to the countries, communities and environments in which we work, always ensuring that what comes from the people goes back to the people many times over.The name of TATA says it all. It encompasses the lowest common Tata denominator the way others see the Tata Group. Trust Acceptability Transparency AccountabilityManagement PracticesFor consistency and faithful implementation of the corporate objectives of Tata Power, the Board has followed certain management practices even prior to the same being made mandatory, viz., Constitution of an Audit Committee, Remuneration Committee, etc.

Leadership In Business EthicsCorporate governance is a mechanism not only to ensure accountability but also demonstrate responsibility. The Tata group believes corporate governance and ethics are strong pillars of excellence, and consider them as fundamental elements of its cherished heritage. As a values driven organisation, the Tata group places importance on integrity, understanding, excellence, unity and responsibility. While the Tata Code of Conduct (TCoC) serves as a guide to employees on values, ethics \and business principles they need to follow, at a professional level, Tata Quality Management Services facilitates understanding and implementation of these very values and the TCoC, with a reference manual for Management of Business Ethics (MBE).

The concept of business ethics necessitates a set of standards by which a corporate entity regulates its behaviour in terms of what is legitimate and acceptable in the pursuit of its corporate goals.

Evoking trust among stakeholders simplifies decision-making for them in the context of the business, thereby generating goodwill for the company. Globally, the realisation that goodwill is essential for the longevity of corporations has emerged only recently, as articulated in The King Report on Corporate Governance, 2002. The experience of the Tata group shows, however, that such goodwill has held Tata enterprises in good stead for over 140 years.

Need for the Code'Trust' evolves out of past experiences and future expectations. Today, Tata companies and their employees are faced with new challenges in building on the trust traditionally placed in group companies, due to increasing competitive pressures, rising expectations of stakeholders, spiralling aspirations of individuals and communities, and the lag in the fulfilment of such aspirations. Against this backdrop, to ensure that this trust is continuously reinforced, the need to formalise the high standards of behaviour expected from employees and companies assumes renewed significance.

While attempting to strike a balance between aspirations, value conflicts, competitive and performance pressures, one should be guided by the Tata values of integrity, understanding, excellence, unity and responsibility.

TowardsInstitutionalisingEthicsOrganisational challenges in institutionalising ethics:- Diverse socio-cultural environment.- Increasing competitive pressure.- Diverse regulatory environment.- Diverse enforcement environment.- Diverse value systems.- Entry into new sectors with different types of ethical concerns.- Very high performance expectations.- Rapid performance delivery.- Very high employee turnover.The pull from competitive pressures and challenges need to be circumvented with Tata values. In pursuit of this objective, the group has articulated and deployed the Tata Code of Conduct (TCoC). This reference manual provides broad based and non-prescriptive guidance to implement the TCoC across Group enterprises.

It has been designed to enable Tata companies to embark on the path of ethical corporate and personal conduct, by ensuring the alignment of individual and corporate conduct with the requirements of the TCoC.

Applicability of the CodeThis manual has adopted a systems approach towards embedding the Code. It aims:

- To guide Tata companies in addressing current and future challenges.- To provide optional approaches to prevention; detection; correction; and assurance.- To establish the relevance of the Code in day-to-day work undertaken by employees.- To set out the suggested roles and responsibilities of: -The board of directors in embedding the Code in Tata companies. -The senior leadership team in ensuring adherence to the Code. -Ethics counsellors in deploying the Code and taking charge of the process for management of concerns. -Employees in ensuring personal and corporate compliance with the clauses of the Code.

Who should follow the CodeThe TCoC is applicable to:

- Each and every Tata company's directors and employees.- Each and every subsidiary including their directors and employees.- All third parties representing a Tata company (consultants, agents, sales representatives, distributors, independent contractors, etc).Tata Quality takes corporate governance very seriously. Tata Quality ensures that all group companies meet the highest corporate governance criteria, so that they can not only meet the expectations of customers, stakeholders, employees and partners, but also remain profitable enterprises.

The Executive Committee of Tata Quality made a commitment to the Group Chairman to include corporate governance in TBEM in an organised manner. To have a strong corporate governance process within the Tata group, Tata Quality conducted a pilot study on two group companies in 2003 on the basis of criteria specifically designed to assess the corporate governance related processes. To make the process more meaningful and comprehensive, the team set up for the task examined not only the Malcolm Baldrige criteria, but also various other models/methodologies for assessment on compliance to corporate governance. Post the pilot assessment, the Steering Committee, which was set up specifically for the purpose, deliberated the findings and assessment methodology in detail. In 2005, Tata Quality decided to conduct corporate government assessment for more group companies according to the modified criteria, which included changes made so far in the Malcolm Baldrige criteria.

WHY TATA QUALITY FOCUSES ON CORPORATE GOVERNANCE

According to a World Bank report, "A company remains a key component of modern society. In fact, in many respects, companies have become a more immediate presence to many citizens and modern democracies than either the Government or other organs of society". Proper governance of companies is as crucial for sustained public trust (investors, customers, suppliers, partners, employees, regulators, community, etc.) and wealth generation as is proper governance of countries for socio economic development.

Corporate governance is increasingly being seen not just as a mechanism to ensure accountability (where one is liable to render an account) but also as a mechanism to demonstrate responsibility (where one is liable to be called to account). Where formerly Boards sought only a "legal" license to operate, today Boards also demand a 'social license' to operate.

The emphasis today is on balancing the need forperformance(short run) andconformance(to the expectations of various other stakeholder groups). This can be achieved only through adoption of an inclusive approach where relevant stakeholder groups are identified and engaged on a continual basis. The current governance paradigm, where transparency is inversely proportional to trust, is untenable simply because infinite transparency does not guarantee high trust. There is thus a need for a paradigm shift and graduation to a new paradigm, wherein trust is built through a process of stakeholder engagement (being aware of, sensitive and responsive to stakeholder concerns) or involvement. This is a paradigm that has a direct relationship between public trust and engagement, where higher is the level of engagement, more is the public trust.

In the changed paradigm, good governance encompasses not just Board Practices but also a clear demonstration of commitment to social responsibility, business ethics and balancing value for all stakeholders.Corporate governance is considered an important instrument of investor protection, and it is therefore a priority on SEBI's agenda. SEBI has been constantly working towards improving the level of corporate governance in the country and in view of the stage of development of the capital market, SEBI considers it imperative that the adoption of globally acceptable practices of corporate governance be accelerated in India. This would ensure that Indian investors are in no way less informed and protected as compared to their counterparts in the best-developed capital markets and economies of the world.

These events have highlighted the need for ethical governance and management, and the need to look beyond mere systems and procedures. This will ensure compliance with corporate governance codes, in substance and not merely in form.It is a term as amorphous in definition as it is prevalent through lip service, but the essence of corporate governance remains uncomplicated enough: ethical business behaviour in every sphere and with all constituents. This crystal-clear characterisation has been the bedrock on which Tata companies have built their businesses.

Honesty, as the British writer John Ruskin noted, can never be based on policy. Corporate houses cannot mandate ethical business behaviour any more than the weather bureau can summon rain or shine. But they can ingrain it in the character of the organisation through tradition, value systems and a commitment to the letter as much as the spirit of laws and regulations. This is what the Tatas have endeavoured to do in the 100-plus years of their existence.Corporate governance as practised by Tata enterprises translates into being fair and civic-minded, fulfilling their duties to the entire spectrum of stakeholders, and, most importantly, making integrity an article of faith across all operations. There is nothing serendipitous about how this has come to be.The Tata adherence to ethical business conduct is rooted in the vision of its founder, Jamsetji Tata, for whom the end of entrepreneurial triumph was always secondary to the means by which it was achieved. We do not claim to be more unselfish, more generous or more philanthropic than other people, he wrote at the turn of the 20thcentury, but we think we started on sound and straightforward business principles, considering the interests of the shareholders our own, and the health and welfare of the employees the sure foundation of our success.

That foundation was built on a collection of values that have since become implicit in the functioning of Tata companies. Complementing the unwritten rules underpinning the Tata way of doing business is a growing catalogue of explicit policies, the most notable among these being the Tata code of conduct, a comprehensive template of ethical behaviour that guides the actions and decisions of Tata employees. Crucial as the explicit is, it is the implicit that truly defines, and constantly reinforces, the Tata edifice. Values and beliefs are more vital in this context than structures and systems.Tata Sons Chairman Ratan Tatas views on the issue are illuminating. Speaking in an interview, he said: Business, as I have seen it, places one great demand on you: it needs you to impose a framework of ethics, values, fairness and objectivity on yourself at all times. It is easy not to do this; you cannot impose it on yourself forcibly because it has to become an integral part of you. What has to go through your mind at the time of every decision, or most decisions, is: does this stand the test of public scrutiny? As you think the decision through, you have to automatically feel that this is wrong, incorrect, or unfairThe leadership with trust philosophy that has come to play such a vital role in how the world perceives Tata companies is all the more remarkable given the climate of unparalleled public distrust of people in positions of authority, whether in business or politics. Protecting this trust from the fallibilities of individuals and institutions is, for Tata enterprises, an obligation rather than a burden. From here stems the Tata conviction that, while openness, transparency and accountability, the pious sentinels of corporate governance, are crucial, they cannot override what actually occupies the heart of good governance: credibility, trust and integrity.Making honesty your strongest business ally is no trifling task. The culture of fraudulence that pervades our times means that no one can be assumed to be entirely immune from contagion. It follows that, as with justice, business organisations dont just have to do the right thing; they have to be seen as being above board in all their dealings. The Tata handling of the Tata Finance affair is representative of how the organisation has striven to stay true to this ideal, even while it was getting hammered by all and sundry.JJ Irani, the former managing director of Tata Steel and currently director, Tata Sons, has a commonsensical take on the scandal. You can never guard against a dishonest person, he says. I believe it is human nature that some people are basically honest and some people are basically dishonest; the rest, a very large number, sit on the fence. In the case of Tata Finance, one person decided to be dishonest. It is to the credit of the Tatas that we pursued that person. We did not try to sweep it under the carpet and we ensured that no depositor and I was one of them suffered.The troubles at Tata Finance alerted the Tatas to the need for processes to prevent such scams from erupting again. Says Ishaat Hussain, director, Tata Sons, There were not enough checks and balances then; now we have controls and processes. We have an active audit committee in place, chaired by an independent director. We have strengthened the internal auditing function and supplemented it with external auditors. Chief financial officers of Tata companies now have a direct reporting line to [the Tata headquarters]. We also have a corporate assurance department; there is far more accountabilityThe explicit component of the Tata corporate governance rubric includes an ethics counsellor in every Tata company and an overarching ethics council. Governance issues are dealt with by senior executives, and companies have the freedom to settle matters internally. Frivolous complaints keep coming, but then, as the wise woman said, to enjoy the rainbow you have to put up with the rain. The Tata ethics council comes into the picture only when a company, or board, refers a case. We dont make a brouhaha about complaints, says Mr Irani. Most often, cases are of a small financial matter. If somebody is found guilty in such matters, he or she is asked to resign. The prime concern is making sure nobody suffers.The ethics code in Tata companies covers much more than financial dealings. There is the question of customers, of suppliers and vendors, of quality in products and services, and of satisfying shareholders. A whole lot of these heads come under the umbrella of the Tata Business Excellence Model, a framework that helps Tata companies achieve their business objectives through specific processes. The recently initiated effort to reduce the greenhouse gas emissions of its top five companies and bring them on par with global benchmarks highlights another aspect of the Tata commitment being conscientious about the threat posed by climate change and environmental degradation.

Many Tata companies have also adopted guidelines laid down by the Global Reporting Initiative (GRI), an independent body that is part of the United Nations. GRI has what is known as the triple bottom line (TBL) approach: financial, social and environmental. Companies following its guidelines have to report their performance on these three parameters. We have a person designated to help Tata companies prepare these TBL reports, says Mr Irani, himself a member of the initiative. GRI has rules and methodologies for nearly everything under the business sun, but Mr Irani, for one, still prefers the Tata way of managing by example and precedent. Good corporate governance is a matter of conforming to accepted practice, he says.One area in which there has been a significant change from accepted practice is in the attitude to shareholders. A constituency once taken almost for granted now has been accorded criticality. Similar is the status afforded to customers and, in a wider context, to quality.According to the Tata lexicon, good governance has to stretch way beyond staying on the right side of the law and it has to come from faith rather than force. Yes, we have a code of conduct, but ethical behaviour cannot be enforced by diktats and through written documents, says Kishor Chaukar, managing director of Tata Industries. You have theBible,theBhagwad Gita,theKoran; they all tell you how to behave. Doesnt help. The penal code is clear about what constitutes criminal behaviour, but that hasnt stopped the burglaries, the rapes and the murders.An ingrained sense of ethical business conduct has been the cornerstone of the Tata way of corporate governance. Rules and regulations certainly have a place in this scheme, but they supplement rather than supplant the traditional values on which Tata companies have been shaped. The stories in this section about ethics, business excellence, safety and financial propriety show how good governance has taken root in Tata organisations. Theres nothing amorphous about that.Long before corporate governance became a buzzword in industry circles, Tata Steel was following the letter and spirit of the rules that define ethical business behaviourCompanies learned long back that having the complete cooperation and participation of their employees meant improved efficiencies and, consequently, superior products. Now they have begun understanding that a strong commitment from investors and other stakeholders can lead to similar payoffs for the organisation. Both are elements of a corporate governance template which demands that broad-based systems of accountability be built into the spinal structures of companies. Government regulations can be a guide, at best, in this process. More important is a culture of self-policing.Tata Steel has imbibed this culture better than most. Much before the business world woke up to the importance of evolving a 'method' for corporate governance, Tata Steel had already been practising its substance. It is no surprise, therefore, that theministry of finance, Government of India, awarded the company the national award for excellence in corporate governance in 2000. Two years later Tata Steel bagged the golden peacock award for excellence in corporate governance and corporate social responsibility from the Institute of Directors, an apex association of company directors.Deputy managing director AN Singh defines the Tata Steel approach thus: "Corporate governance is the ethical and responsible behaviour of a corporation towards its owners, its shareholders, but it has a fallout effect on other constituents too." Tata Steel has engaged all its stakeholders a broad category that includes employees, regulators, the communities in and around the areas where it operates, and shareholders at every stage of its evolution. The shareholders, though they are the farthest away and the most fragmented, remain at the heart of the company."We have to ensure a transparent and fair administration so that the money the shareholders put in is safe and productive," says Mr Singh. To ensure this Tata Steel has a three-pronged governance structure that provides for checks and balances throughout its operation.

STRUCTURE OF CORPORATE GOVERNANCE IN TATAThe first layer of this structure is the law of the land. Statutes on the number of non-executive and independent directors, board procedure, and terms of office are followed with rigour. Tata Steel's balance sheet is certified as fair and true by its chief executive officer and its chief finance officer, and the company also submits a report on various corporate governance parameters. It has mandated committees for audit, remuneration for directors and investor grievances. Tata Steel's investor grievance committee, which looks into complaints about transfer of shares, receipt of balance sheet and dividends, meets twice or thrice a year and checks if all issues have been resolved satisfactorily.The second tier of Tata Steel's corporate governance edifice is based on the Tata code of conduct, a comprehensive set of tenets that all Tata employees have to adhere to. The code goes way beyond government-mandated regulations. For example, the offices of non-executive chairman and managing director are separated in Tata companies, even though the law does not require this. The Tata code explicitly prohibits insider trading and sets out disclosure practices that help shareholders take informed decisions. This ensures that the interests of shareholders are put above all else and that people inside the company conduct their personal securities transactions in an ethical manner.Tata Steel has an ethics and compliance committee, as stipulated by the code, and this comprises, among other things, labour welfare measures like the eight-hour working day, leave with pay, provident fund, gratuity and profit sharing.The rules implicit in Tata Steel's proactive workday ethos have been around for many years. The company never meddles in the share market. It invites a social audit every 10 years, in which an independent authority checks if it has functioned responsibly and ethically with all its stakeholders. Tata Steel recently adopted the Social Accountability (SA) 8000 standard, which promotes responsible behaviour towards labour supplied by its contractors. It has also set up apex committees for management, business excellence, safety, research and development, information technology, etc.

To ensure that a culture of self-motivated ethics percolates to the rank and file, Tata Steel lays plenty of emphasis on communication, the third layer of its corporate governance structure. The office of the ethics counsellor executes this vision. Says ethics counsellor Rekha Seal, "We manage with trust. We start with the given that everyone is honest, but if we find that someone has flouted rules we take decisive and immediate action. This is important because trust is the foundation of our name and our brand."

CONCLUSIONCorporate governance philosophies differ around the world. However, with a few relatively minor exceptions, there exists a broad consensus on the elements of good corporate governance. It is widely understood that the most effective aspects of good corporate governance include:a strong board of directors, independent of management and with sufficient expertise to oversee corporate management on behalf of the companys shareholders;management compensation oversight, such as a compensation committee comprised of independent directors, to prevent opportunistic behaviour by management and help link management compensation to corporate performance;strong corporation laws and regulations designed to protect the rights of shareholders;extensive public disclosure requirements, including both financial and non-financial reporting designed to give shareholders and potential investors an accurate, timely and thorough picture of the companys performance and liabilities; anda robust independent audit function, with sufficiently thorough procedures to confirm the accuracy of a public companys financial disclosure statements and overseen by a board committee comprised of independent directors, or by some other mechanism independent of management.Furthermore, these aspects of good corporate governance must be made credible by strong government and private-sector enforcement mechanisms. Government regulators and law enforcement agencies must have the resources and legal authority to conduct thorough investigations of potential wrongdoing and self-dealing by corporate management. And regulators and law enforcement agencies must aggressively investigate and prosecute managerial and corporate wrongdoing on a constant, ongoing basis, not just when a major scandal arises. Likewise, corporate compliance officers must have the powers they need to ensure that all corporate employees (including senior management) comply with the law and abide by the companys internal corporate governance requirements. Other corporate governance gatekeepers such as lawyers and outside auditors must be bound by a strong code of ethics and abide by the laws and professional requirements which apply to their profession. Without such aggressive overlapping enforcement mechanisms, even the best corporate governance standards can be undermined.Despite the consensus, there remain differences in the degree of implementation, and until all markets converge their requirements on the highest quality corporate governance standards, investors will express different degrees of confidence in different markets, and markets and issuers demonstrating the highest standards will continue to attract investors on the most favourable terms. In short, the best public companies will continue to view strong corporate governance as an investment well worth making.

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