VOLUNTARY CORPORATE GOVERNANCE DISCLOSURE PRACTICES OF...
Transcript of VOLUNTARY CORPORATE GOVERNANCE DISCLOSURE PRACTICES OF...
VOLUNTARY CORPORATE GOVERNANCE
DISCLOSURE PRACTICES OF SELECTED COMPANIES
This chapter deals with the voluntary corporate governance disclosure of the
listed sampled companies in addition to the corporate governance requirements as per
clause 49 of the listing agreement as prescribed by SEBI. The term “voluntary” denotes a
firm‟s adoption of corporate governance practices or standards in the absence of legal
requirement to do so (Anand, 2005).
Here for the purpose of our study, the term voluntary corporate governance stands
for “the governance practices followed by the companies at their own and disclosed in the
corporate governance section of the annual report in addition to what is required to be
followed or disclosed as per clause 49 of the listing agreement as prescribed by SEBI”.
6.1 Formation of Checklist
In order to study the voluntary corporate governance disclosure practices, over
and above the mandatory requirements, a checklist based on voluntary corporate
governance disclosure has been prepared (Annexure 3). A total number of 56 items have
been selected from the corporate governance section of the annual reports of companies
leading in the matter of voluntary corporate governance. Further, in order to be more
precise, all the items have been clubbed up under seven broad dimensions namely board
of directors, meetings and attendance, formation of committees, corporate governance
initiatives, reports of committees, shareholders and awards or accolades for corporate
governance. While framing up the checklist, only those items have been considered
which were disclosed by the companies in corporate governance section of the annual
reports in addition to the items stipulated in the clause 49 of the listing agreement.
6.2 Scoring of Items
Equal weightage method has been used to weight the items of checklist based on
voluntary governance. Score 1 has been assigned to the company for following a
particular item and 0 for otherwise.
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This chapter has been organised into two sections. Section I deals with the
company wise and industry wise analysis of voluntary corporate governance disclosure
score and section II throws light on the item wise voluntary corporate governance
disclosure score of the companies.
SECTION I
This section deals with the company wise and industry wise voluntary corporate
governance disclosure score. Company wise voluntary corporate governance disclosure
score has been arrived at as follows:
Voluntary Corporate Governance Disclosure
Score of a Company =
Total Score Gained By a Co. *100
Total No. of Items in the Checklist
For example: Infosys has followed 20 items in the year 2000-01 out of 56 items listed in
the checklist. So, its score will be computed as follows:
= 20
x100 56
= 35.71%
6.3 Company Wise and Industry Wise Analysis of Voluntary
Corporate Governance Disclosure
Table 6.1 shows the company wise and industry wise voluntary corporate
governance disclosure score for the period of five years i.e. from 2000-01 to 2004-05.
Industry wise analysis of voluntary corporate governance disclosure for each year is
given as follows:
1.) Disclosure for the Year 2000-01
The table 6.1 reveals that in case of power industry, Reliance Energy Ltd. occupies
first rank by disclosing 5.36% of items of checklist. Two companies namely Nevyeli
Lignite Power Ltd. and Tata Power Ltd. occupy the second rank by attaining same score of
3.57%. Similarly, from iron & steel industry, just three companies have been disclosing the
1.79% of items of checklist. In case of cement industry, maximum governance score has
been gained by Gujarat Ambuja Cement Ltd. (8.93%) followed by Madras Cement Ltd.
Voluntary Corporate Governance Disclosure Practices of Selected Companies
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and Mysore Cement Ltd. with equal disclosure score i.e. 5.36% and subsequently followed
by India Cement Ltd. and Shree Cement Ltd. with equal score of 3.57% and so on.
Similarly, from textiles industry, only four companies out of total of fourteen
have been disclosing the items of checklist. Reliance Industries Ltd. has been disclosing
5.36% of items of governance checklist and this company occupies first rank among all
the sampled companies in the textile industry. Arvind Mills Ltd., Bombay Dyeing &
Mfg Ltd., Indian Rayon & Industries Ltd. and Rajasthan Spinning & Wvng Mills Ltd.
have zero voluntary corporate governance disclosure score. In case of paper industry,
ITC Ltd. and Tamilnadu Newsprint & Paper Mills Ltd. have disclosed 5.36% of items
of checklist followed by Ballarpur Industries Ltd. (3.57%) and Pudumjee Pulp & Paper
Mills Ltd. (1.79%). On the other hand, maximum voluntary governance score has been
obtained by Dr. Reddy‟s Laboratories Ltd. (10.71%) from pharmaceuticals industry
followed by Ranbaxy Laboratories Ltd. (5.36%), Cadila Healthcare Ltd. (3.57%),
Nicholas Piramal India Ltd. (1.79%) and so on. So far as sugar industry is concerned,
Balrampur Chinni Mills Ltd., Bannari Aman Sugars Ltd., DCM Shriram Industries Ltd.
and Upper Ganges Sugar Mills Ltd. all have been disclosing 1.79% of the items of
checklist. Other companies namely EID-Parry (India) Ltd. and Oudh Sugars Ltd. have
not disclosed any item of checklist. Similarly, in case of automobile industry, Bajaj
Auto Ltd. has the highest voluntary corporate governance score i.e. 8.93% followed by
Ashok Leyland Ltd., Hero Honda Motors Ltd., LML Ltd. and Mahindra & Mahindra
Ltd. each of them recording the same score of 1.79%. Three companies from this
industry have not been disclosing even a single item of governance checklist and rests
of the companies have not implemented the provisions of the clause 49. In case of
software industry, maximum no. of items of checklist has been disclosed by Infosys
Technologies Ltd. (35.71%) followed by GTL Ltd. (17.86%), Pentamedia Graphics
Ltd. (8.93%), Polaris Software Lab Ltd. (5.36%), HCL Technologies Ltd. (3.57%),
Igate Global Solutions Ltd. (1.79%) and so on. Satyam Computer Services Ltd. has not
followed even a single item of checklist.
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Table: 6.1
Company Wise and Industry Wise Voluntary Corporate Governance Disclosure Score of the Sampled Companies
Sr. No Industry /Company Name 2000-01 (%)
Score
2001-02 (%)
Score
2002-03 (%)
Score
2003-04 (%)
Score
2004-05 (%)
Score
A) POWER
1 CESC Ltd. - - 1 1.79 1 1.79 1 1.79 2 3.57
2 DPSC Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00
3 Gujarat Industries & Power Ltd. - - 0 0.00 1 1.79 0 0.00 0 0.00
4 Jindal Steel & Power Ltd. - - 1 1.79 2 3.57 2 3.57 2 3.57
5 Nevyeli Lignite Power Ltd. 2 3.57 2 3.57 2 3.57 2 3.57 2 3.57
6 National Thermal Power Corporation Ltd. - - 2 3.57 6 10.71 8 14.29 12 21.43
7 Reliance Energy Ltd. 3 5.36 11 19.64 8 14.29 8 14.29 18 32.14
8 Tata Power Ltd. 2 3.57 2 3.57 3 5.36 3 5.36 3 5.36
9 Torrent Power AEC Ltd. - - 0 0.00 3 5.36 4 7.14 4 7.14
B) IRON & STEEL
10 Bhushan Steel & Strips Ltd. - - 1 1.79 2 3.57 3 5.36 3 5.36
11 Essar Steel Ltd. - - 1 1.79 1 1.79 0 0.00 0 0.00
12 Ispat Industries Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
13 Jayaswals Neco Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
14 JSW Steel Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
15 Mukand Ltd. 1 1.79 0 0.00 0 0.00 0 0.00 4 7.14
16 SAIL Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
17 Tata Sponge Iron Ltd. 1 1.79 0 0.00 0 0.00 0 0.00 1 1.79
18 Tata Steel Ltd. 1 1.79 2 3.57 2 3.57 3 5.36 9 16.07
19 Uttam Galva Steels Ltd. - - 2 3.57 2 3.57 2 3.57 2 3.57
C) CEMENT
20 ACC Cement Ltd. 1 1.79 3 5.36 4 7.14 5 8.93 5 8.93
21 Ambuja Cement Eastern Ltd. 1 1.79 2 3.57 2 3.57 2 3.57 3 5.36
22 Birla Corporation Ltd. - - 0 0.00 1 1.79 1 1.79 1 1.79
23 Chettinad Cement Corporation Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
24 Grasim Industries Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
Contd....
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25 Gujarat Ambuja Cement Ltd. 5 8.93 5 8.93 5 8.93 5 8.93 5 8.93
26 India Cement Ltd. 2 3.57 2 3.57 3 5.36 3 5.36 4 7.14
27 Kesoram Industries Ltd. 1 1.79 3 5.36 3 5.36 3 5.36 3 5.36
28 Madras Cement Ltd. 3 5.36 3 5.36 3 5.36 3 5.36 3 5.36
29 Mysore Cement Ltd. 3 5.36 3 5.36 3 5.36 4 7.14 4 7.14
30 Prism Cement Ltd. - - 1 1.79 2 3.57 2 3.57 2 3.57
31 Shree Cement Ltd. 2 3.57 3 5.36 2 3.57 2 3.57 2 3.57
D) TEXTILES
32 Alok Industries Ltd. 1 1.79 2 3.57 3 5.36 3 5.36 3 5.36
33 Arvind Mills Ltd. 0 0.00 0 0.00 4 7.14 4 7.14 4 7.14
34 Bombay Dyeing & Mfg Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 1 1.79
35 Century Enka Ltd. 1 1.79 1 1.79 3 5.36 3 5.36 3 5.36
36 Eskay K'N'It Ltd. - 0 0.00 0 0.00 0 0.00 0 0.00
37 Garden Silk Mills Ltd. - 0 0.00 1 1.79 5 8.93 6 10.71
38 Indian Rayon & Inds Ltd. 0 0.00 1 1.79 1 1.79 2 3.57 2 3.57
39 Indo Rama Synthetics Ltd. - 1 1.79 2 3.57 2 3.57 3 5.36
40 Mahavir Spinning Mills Ltd. - 0 0.00 0 0.00 1 1.79 1 1.79
41 Nahar Spinning Mills Ltd. 2 3.57 2 3.57 2 3.57 3 5.36 4 7.14
42 Rajasthan Spinning & Wvng Mills 0 0.00 5 8.93 5 8.93 7 12.50 7 12.50
43 Raymond Ltd. - 0 0.00 4 7.14 4 7.14 4 7.14
44 Reliance Industries Ltd. 3 5.36 3 5.36 6 10.71 6 10.71 7 12.50
45 S.Kumars Nationwide Ltd. - 4 7.14 4 7.14 4 7.14 4 7.14
E) PAPER
46 Andhra Pradesh Paper Mills Ltd. - - 0 0.00 1 1.79 1 1.79 1 1.79
47 Bajaj Hindustan Ltd. - 8 14.29 12 21.43 15 26.79 14 25.00
48 Ballarpur Industries Ltd. 2 3.57 3 5.36 3 5.36 5 8.93 3 5.36
49 Century Textiles & Industries Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
50 ITC Ltd. 3 5.36 3 5.36 11 19.64 12 21.43 11 19.64
51 JK Paper Ltd. 0 0.00 1 1.79 2 3.57 2 3.57 2 3.57
52 Orient Paper & Industries Ltd. - - 1 1.79 1 1.79 1 1.79 1 1.79
53 Pudumjee Pulp & Paper Mills Ltd. 1 1.79 1 1.79 1 1.79 1 1.79 1 1.79
54 Seshasayee Paper Board Ltd. - - 0 0.00 1 1.79 1 1.79 1 1.79
Contd....
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55 Shreyan Industries Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00
56 Sirpur Paper Mills Ltd. - - 3 5.36 4 7.14 5 8.93 5 8.93
57 Star Paper Mills Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00
58 Tamilnadu Newsprint & Paper Mills Ltd. 3 5.36 1 1.79 1 1.79 1 1.79 1 1.79
59 West Coast Paper Mills Ltd. - - 1 1.79 1 1.79 1 1.79 1 1.79
F) PHARMACEUTICALS
60 Alembic Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
61 Aurobindo Pharma Ltd. - - 2 3.57 4 7.14 4 7.14 2 3.57
62 Aventis Pharma Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00
63 Cadila Healthcare Ltd. 2 3.57 2 3.57 1 1.79 1 1.79 2 3.57
64 Dr. Reddy‟s Laboratories Ltd. 6 10.71 5 8.93 8 14.29 11 19.64 14 25.00
65 GlaxoSmithKline Ltd. 0 0.00 2 3.57 2 3.57 2 3.57 0 0.00
66 IPCA Laboratories Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
67 Lupin Ltd. 0 0.00 1 1.79 1 1.79 5 8.93 4 7.14
68 Nicholas Piramal India Ltd. 1 1.79 1 1.79 1 1.79 1 1.79 5 8.93
69 Orchid Chemicals & Pharmaceuticals Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 1 1.79
70 Ranbaxy Laboratories Ltd. 3 5.36 3 5.36 3 5.36 3 5.36 3 5.36
71 Sun Pharmaceuticals Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
72 Torrent Pharma Ltd. 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
73 Wockhardt Ltd. 1 1.79 1 1.79 0 0.00 1 1.79 1 1.79
G) SUGAR
74 Andhra Sugars Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00
75 Balrampur Chinni Mills Ltd. 1 1.79 1 1.79 2 3.57 2 3.57 2 3.57
76 Bannari Amman Sugars Ltd. 1 1.79 1 1.79 1 1.79 1 1.79 1 1.79
77 DCM Shriram Industries Ltd. 1 1.79 0 0.00 - - 0 0.00 0 0.00
78 EID_ Parry India Ltd. 0 0.00 1 1.79 2 3.57 7 12.50 8 14.29
79 Jeypore Sugar Ltd. - - 1 1.79 1 1.79 1 1.79 1 1.79
80 Oudh Sugars Ltd. 0 0.00 1 1.79 3 5.36 5 8.93 5 8.93
81 Sakthi Sugars Ltd. - - 0 0.00 0 0.00 1 1.79 1 1.79
82 Saraswati Industrial Syndicate Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00
83 Simbhaoli Sugar Mills Ltd. - - 2 3.57 3 5.36 2 3.57 2 3.57
84 Ugar Sugar Works Ltd. - - 0 0.00 0 0.00 0 0.00 1 1.79
85 Upper Ganges Sugar Mills Ltd. 1 1.79 0 0.00 1 1.79 3 5.36 4 7.14
Contd....
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H) AUTOMOBILE
86 Ashok Leyland Ltd. 1 1.79 2 3.57 2 3.57 2 3.57 3 5.36
87 Atul Auto Ltd. - - - - 0 0.00 0 0.00 0 0.00
88 Bajaj Auto Ltd. 5 8.93 7 12.50 7 12.50 7 12.50 7 12.50
89 Eicher Motors Ltd. - - 4 7.14 4 7.14 4 7.14 4 7.14
90 Force Motors Ltd. - - 0 0.00 1 1.79 1 1.79 1 1.79
91 Hero Hondo Motors Ltd. 1 1.79 1 1.79 2 3.57 3 5.36 2 3.57
92 Hindustan Motors Ltd. - - 1 1.79 1 1.79 1 1.79 1 1.79
93 Kinetic Motor Co. Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00
94 LML Ltd. 1 1.79 1 1.79 0 0.00 - - 1 1.79
95 Mahindra & Mahindra Ltd. 1 1.79 2 3.57 3 5.36 3 5.36 3 5.36
96 Maruti Udyog Ltd. - - - - - - 2 3.57 2 3.57
97 Scooters India Ltd. 0 0.00 1 1.79 1 1.79 1 1.79 1 1.79
98 Swaraj Mazda Ltd. - - 0 0.00 0 0.00 0 0.00 0 0.00
99 Tata Motors Ltd. 0 0.00 2 3.57 5 8.93 4 7.14 5 8.93
100 TVS Motor Co. Ltd. 0 0.00 1 1.79 1 1.79 2 3.57 2 3.57
I) SOFTWARE
101 GTL Ltd. 10 17.86 5 8.93 10 17.86 8 14.29 8 14.29
102 HCL Technologies Ltd. 2 3.57 2 3.57 1 1.79 1 1.79 1 1.79
103 IFLEX Solutions Ltd. - - 1 1.79 1 1.79 1 1.79 1 1.79
104 Igate Global Solutions Ltd. 1 1.79 2 3.57 0 0.00 2 3.57 4 7.14
105 Infosys Technologies Ltd. 20 35.71 13 23.21 16 28.57 19 33.93 24 42.86
106 Larsen & Toubro Ltd. 0 0.00 0 0.00 1 1.79 1 1.79 2 3.57
107 Mascon Global Ltd. - - 1 1.79 0 0.00 1 1.79 0 0.00
108 Pentamedia Graphics Ltd. 5 8.93 5 8.93 1 1.79 1 1.79 2 3.57
109 Polaris Software Lab Ltd. 3 5.36 3 5.36 3 5.36 5 8.93 9 16.07
110 Rolta India Ltd. 1 1.79 - - 3 5.36 3 5.36 3 5.36
111 Satyam Computer Services Ltd. 0 0.00 0 0.00 1 1.79 0 0.00 0 0.00
112 Wipro Ltd. 1 1.79 1 1.79 1 1.79 4 7.14 4 7.14
Source: Compiled and Computed from the Corporate Governance Section of the Annual Reports of the Companies Under Study
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2.) Disclosure for the year 2001-02
The table 6.1 depicts that Reliance Energy Ltd. has disclosed maximum no. of
items given in the checklist i.e. 19.64% in case of power industry.Tata Power Ltd.
(3.57%), Nevyeli Lignite Power Ltd. and NTPC Ltd. have occupied the second rank by
recording the same score of 3.57% and so on. Similarly, in case of iron & steel
industry, Tata Steel Ltd. and Uttam Galva Steel Ltd. have disclosed equal no. of items
of checklist i.e. 3.57%. While on the other hand, Ispat Industries Ltd., Jayaswals Neco
Ltd., JSW Steel Ltd., Mukand Ltd., SAIL Ltd. and Tata Sponge Iron Ltd. have not
disclosed even a single item of governance checklist. In case of cement industry,
maximum governance score has been obtained by Gujarat Ambuja Cement Ltd.
(8.93%). On the other hand, ACC Cement Ltd., Kesoram Industries Ltd., Madras
Cement Ltd., Mysore Cement Ltd. and Shree Cement Ltd. have been disclosing 5.36%
of items of checklist.
In case of textiles industry, Rajasthan Spinning & Wvng Mills Ltd. has
disclosed maximum no. of items i.e. 8.93% followed by S. Kumar‟s Nationwide Ltd.
(7.14%), Reliance Industries Ltd. (5.36%), Alok Industries Ltd. (3.57%) and so on. So
far as paper industry is concerned, Bajaj Hindustan Ltd. has the highest voluntary
governance score i.e. 14.29% followed by Ballarpur Industries Ltd., ITC Ltd. and
Sirpur Paper Mills Ltd. by attaining same score of 5.36% and so on. In case of
pharmaceutical industry, maximum voluntary governance score has been gained by Dr.
Reddy‟s Laboratories Ltd. (8.93%) followed by Ranbaxy Laboratories Ltd. (5.36%) and
subsequently followed by Aurobindo Pharma Ltd., Cadila Healthcare Ltd and
GlaxoSmithKline Ltd. with equal score of 3.57% and so on. From sugar industry,
Simbhaoli Sugar Mills Ltd. has occupied first rank by disclosing 3.57% of items of
checklist. On the other hand, Balrampur Chinni Mills Ltd., Bannari Aman Sugars Ltd.
and EID-Parry (India) Ltd. all have been disclosing 1.79% of items of checklist and so
on. In case of automobile industry, Bajaj Auto Ltd. has disclosed maximum no. of items
of checklist i.e. 12.50% followed by Eicher Motors Ltd. (7.14%) and subsequently
followed by Mahindra & Mahindra Ltd. and Ashok Leyland Ltd. recording the same
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195
score of 3.57% and so on. Infosys Technologies Ltd. occupies first rank in case of
software industry by disclosing 23.21% of items of checklist followed by GTL Ltd. and
Pentamedia Graphics Ltd. with equal score of 8.93%, Polaris Software Lab Ltd.
(5.36%) and so on.
3.) Disclosure for the year 2002-03
The table 6.1 reveals that in case of power industry, Reliance Energy Ltd. has
disclosed maximum no. of items of checklist i.e. 14.29% followed by NTPC Ltd.
(10.71%), Tata Power Ltd. (5.36%) and Torrent Power AEC Ltd. recorded the same score
of 5.36% and so on. So far as iron & steel industry is concerned, just four companies
have disclosed the few items of checklist. Bhushan Steel & Strips Ltd., Tata Steel Ltd.
and Uttam Galva Steels Ltd. each have disclosed the 3.57% of items of checklist. On the
other hand, Essar Steel Ltd. has disclosed 1.79% of the items of governance checklist. In
case of cement industry, maximum voluntary corporate governance score has been gained
by Gujarat Ambuja Cement Ltd. (8.93%). On the other hand, Chettinad Cement
Corporation Ltd. and Grasim Industries Ltd. have not been disclosing even a single item
of voluntary corporate governance checklist.
Similarly, from textiles industry, Reliance Industries Ltd. has been disclosing
maximum no. of items of governance checklist i.e. 10.71% followed by Rajasthan
Spinning & Wvng Mills Ltd. (8.93%) and subsequently followed by Arvind Mills Ltd.
and Raymond Ltd. recording the same score of 7.14%, Century Enka Ltd. (5.36%) and so
on. In case of paper industry, Bajaj Hindustan Ltd. occupies first rank by disclosing
21.43% of items of checklist followed by ITC Ltd. (19.64%), Sirpur Paper Mills Ltd.
(7.14%), Ballarpur Industries Ltd. (5.36%) and so on. Similarly, in case of
pharmaceutical industry, Dr. Reddy‟s Laboratories Ltd. has the highest governance score
i.e. 14.29% followed by Aurobindo Pharma Ltd. (7.14%), Ranbaxy Laboratories Ltd.
(5.36%), GlaxoSmithKline Ltd. (3.57%) and so on. From sugar industry, Oudh Sugars
Ltd. and Simbhaoli Sugar Mills Ltd. have disclosed the maximum no. of items of
governance checklist i.e. 5.36%. While on the other hand, Sakthi Sugars Ltd., Andhra
Sugars Ltd., Saraswati Industrial Syndicate Ltd. and Ugar Sugar Works Ltd. have not
disclosed even a single item of governance checklist. In case of automobile industry,
Bajaj Auto Ltd. has disclosed maximum no. of items of governance checklist i.e. 12.50%
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followed by Tata Motors Ltd. (8.93%), Eicher Motors Ltd. (7.14%), Mahindra &
Mahindra Ltd. (5.36%) and so on. Again Infosys Technologies Ltd. like the earlier years
has occupied the first rank by disclosing 28.57% of items of governance checklist
followed by GTL Ltd. (17.86%), Polaris Software Lab Ltd. and Rolta India Ltd. recorded
the same score of 5.36% and so on.
4.) Disclosure for the year 2003-04
The table 6.1 shows that Reliance Energy Ltd. and NTPC Ltd. have gained the
highest governance score i.e. 14.29% in case of power industry followed by Torrent
Power AEC Ltd. (7.14%), Tata Power Ltd. (5.36%), Jindal Steel & Power Ltd. (3.57%)
and so on. In case of iron & steel industry, Bhushan Steel & Strips Ltd. and Tata Steel
Ltd. have the highest voluntary governance score i.e. 5.36% followed by just a single
company i.e. Uttam Galva Steel Ltd. (3.57%). Similarly, in case of cement industry,
ACC Cement Ltd. and Gujarat Ambuja Cement Ltd. have been disclosing the maximum
no. of items of governance checklist i.e. 8.93% followed by Mysore Cement Ltd.
(7.14%) and subsequently followed by India Cement Ltd. and Kesoram Industries Ltd.
by recording the same score of 5.36% and so on.
In case of textiles industry, Rajasthan Spinning & Wvng Mills Ltd. has
disclosed the maximum no. of items of governance checklist i.e. 12.50% followed by
Reliance Industries Ltd. (10.71%), Garden Silk Mills Ltd. (8.93%) and subsequently
followed by Arvind Mills Ltd. and Raymond Ltd. by disclosing 7.14% of items of
checklist and so on. In case of paper industry, maximum no. of items have been
disclosed by Bajaj Hindustan Ltd. (26.79%) followed by ITC Ltd. (21.43%) and
subsequently followed by Ballarpur Industries Ltd. and Sirpur Paper Mills Ltd.
(8.93%), and so on. In case of pharmaceutical industry, Dr. Reddy‟s Laboratories Ltd.
has been disclosing the maximum no. of items of governance checklist i.e. 19.64%
followed by Lupin Ltd. (8.93%), Aurobindo Pharma Ltd. (7.14%), Ranbaxy
Laboratories Ltd. (5.36%) and so on. Similarly, from sugar industry, EID-Parry (India)
Ltd. has disclosed the maximum no. of items of governance checklist i.e. 12.50%
followed by Oudh Sugar Works Ltd. (8.93%), Upper Ganges Sugar Mills Ltd. (5.36%),
Balrampur Chinni Mills Ltd. (3.57%) and so on. In case of automobile industry, Bajaj
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Auto Ltd. occupies first rank by disclosing 12.50% of items of governance checklist.
Two companies namely Tata Motors Ltd. and Eicher Motors Ltd. have been occupying
the second rank by attaining the same score of 7.14% followed by Mahindra &
Mahindra Ltd. and Hero Honda Motors Ltd. each of them disclosed 5.36% of items of
checklist and so on. Again like the earlier years, Infosys Technologies Ltd. occupies the
first rank in case of software industry by disclosing 33.93% of items of checklist
followed by GTL Ltd. (14.29%), Polaris Software Lab Ltd. (8.93%), Wipro Ltd.
(7.14%), Rolta India Ltd. (5.36%) and so on.
5.) Disclosure for the year 2004-05
The table 6.1 reveals that Reliance Energy Ltd. has disclosed maximum no. of
items given in the checklist i.e. 32.14% from power industry followed by NTPC Ltd.
(21.43%), Torrent Power AEC Ltd. (7.14%), Tata Power Ltd. (5.36%) and so on. So far
as iron & steel industry is concerned, Tata Steel Ltd. has been disclosing the 16.07% of
items of checklist followed by Mukand Ltd. (7.14%), Bhushan Steel & Strips Ltd.
(5.36%), Uttam Galva Steel Ltd. (3.57%), Tata Sponge Iron Ltd. (1.79%) and so on.
Similarly, in case of cement industry, ACC Cement Ltd. and Gujarat Ambuja
Cement Ltd. have obtained the highest governance score by disclosing 8.93% of items of
checklist. On the other hand, Chettinad Cement Corporation Ltd. and Grasim Industries
Ltd. have not disclosed even a single item of checklist. In case of textiles industry,
Rajasthan Spinning & Wvng Mills Ltd. and Reliance Industries Ltd. have gained the
highest governance score i.e. 12.50% followed by Garden Silk Mills Ltd. (10.71%) and
subsequently followed by Arvind Mills Ltd., Nahar Spinning Mills Ltd. and S. Kumar‟s
Nationwide Ltd. by recording the same score of 7.14% and so on. In case of paper
industry, Bajaj Hindustan Ltd. has the highest governance score i.e. 25% followed by
ITC Ltd. (19.64%), Sirpur Paper Mills Ltd. (8.93%), Ballarpur Industries Ltd. (5.36%),
JK Paper Ltd. (3.57%) and so on. Similarly, in case of pharmaceutical industry, Dr.
Reddy‟s Laboratories Ltd. has occupied the first rank by disclosing 25% of items of
checklist followed by Nicholas Piramal India Ltd. (8.93%), Lupin Ltd. (7.14%), Ranbaxy
Laboratories Ltd. (5.36%), Cadila Healthcare Ltd. (3.57%) and so on. In case of sugar
industry, EID- Parry (India) Ltd. has been disclosing 14.29% of items of governance
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checklist followed by Oudh Sugar Works Ltd. (8.93%), Upper Ganges Sugar Mills Ltd.
(7.14%), Simbhaoli Sugar Mills Ltd. (3.57%) and so on. In case of automobile industry,
Bajaj Auto Ltd. like the previous years has attained the highest governance score
(12.50%) followed by Tata Motors Ltd. (8.93%), Eicher Motors Ltd.(7.14%) Ashok
Leyland Ltd. (5.36%) and so on. Infosys Technologies Ltd. has occupied the first rank by
disclosing 42.86% of items of checklist followed by Polaris Software Lab Ltd.
(16.07%), GTL Ltd. (14.29%), Igate Global Solutions Ltd. (7.14%), Wipro Ltd.
(7.14%) and so on.
6.3.1 Industry Wise Classification of Voluntary Corporate Governance Disclosure
Score
The table 6.1.1 reveals the industry wise mean disclosure score, standard
deviation and coefficient of variation of the sampled companies. In the year 2000-01,
maximum mean disclosure score has been gained by software industry i.e. 7.68 and
minimum has been gained by iron & steel industry i.e. 0.89. Similarly, standard
deviation is higher in case of software industry. It means that there are more
variations in the disclosure of the items from average disclosure score of the
companies. In case of sugar industry, the value of standard deviation is minimum i.e.
0.92. Coefficient of variation is the highest in case of pharmaceutical industry while it
is the lowest in case of power industry. Coefficient of variation (CV) measures the
standard deviation relative to the mean in percentages (Sharma 2005, p. 165).
The table 6.1.1 shows that for the year 2001-02, mean disclosure score is again
the highest in case of software industry but as compared to the previous year, a
decline has been observed in its mean value. On the other hand, minimum mean
disclosure score has been gained by iron and steel industry, same as the previous year.
So far as the standard deviation is concerned, the highest figure belongs to software
industry and it reveals the 6.45% of variation in items from the disclosure score of
companies. Minimum value of S.D. belongs to iron and steel industry i.e. 1.51.
Coefficient of variation is the highest in case of sugar industry i.e. 186.69% while it is
the lowest in case of cement industry i.e. 75% and indicates the large variation of
standard deviation from mean value.
Voluntary Corporate Governance Disclosure Practices of Selected Companies
199
Table: 6.1.1
Industry Wise Classification of Voluntary Corporate Governance Disclosure Score of the Sampled Companies
S.No. Industry Mean (X) Standard Deviation (σ)
Coefficient of Variation (cv) 100 x X
σ
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
Average
(X)
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
Average
( σ)
2000-
01
2001-
02
2002-
03
2003-04 2004-
05
Average
(cv)
I. Power 4.17 3.77 5.16 5.56 8.53 5.44 1.03 6.15 4.59 5.46 10.93 5.63 24.7 163.1
3
88.9 98.2 128.1
3
100.61
II. Iron & Steel 0.89 1.07 1.25 1.43 3.39 1.61 0.98 1.51 1.69 2.35 5.15 2.34 110 141.1
2
135.2 164.33 151.9 140.51
III. Cement 3.22 3.72 4.16 4.46 4.76 4.06 2.77 2.79 2.67 2.99 3.07 2.86 86 75 64.18 67 64.5 71.34
IV. Textiles 1.56 2.42 4.46 5.61 6.25 4.06 2.01 2.93 3.48 3.69 3.82 3.19 128.8
5
121.0
7
78.03 65.77 61.12 90.97
V. Paper 2.68 1.92 3.57 4.12 3.71 3.2 2.46 2.12 5.26 5.98 5.38 4.24 91.79 110.4 147.3
4
145.15 145.0
1
127.94
VI. Pharmaceutical 2.11 2.17 2.75 3.57 4.08 2.94 3.37 2.64 4.16 5.47 6.69 4.47 159.7 121.6
6
151.2
7
153.22 163.9
7
149.96
VII. Sugar 1.19 2.06 3.43 5.08 5.36 3.42 0.92 3.85 5.76 7.54 7.22 5.06 77.31 186.8
9
167.9
3
148.42 134.7
0
143.05
VIII. Automobiles 2.01 3.02 3.45 3.57 3.81 3.17 2.93 3.45 3.80 3.51 3.56 3.45 145.7
7
114.2
4
110.14 98.32 93.44 112.38
IX. Software 7.68 5.06 5.6 6.8 8.6 6.75 11.23 6.45 8.67 9.44 11.94 9.55 146.2
2
127.4
7
154.8 138.8
2
138.8
4
141.23
Voluntary Corporate Governance Disclosure Practices of Selected Companies
200
Overall
Industries‟
Average
2.83 2.8 3.76 4.46 5.38 3.07 3.54 4.45 5.16 6.42 107.8 128.9
9
121.97 119.9 120.1
8
Source: Computed from Disclosure Score as Given in Table 6.1
Voluntary Corporate Governance Disclosure Practices of Selected Companies
201
As revealed by table 6.1.1, mean disclosure score is again highest for the year
2002-03 in case of software industry (5.6) followed by power (5.16), textiles (4.46),
cement (4.16), paper (3.57), automobiles (3.45), sugar (3.43), pharmaceuticals (2.75)
and iron & steel (1.25). Standard deviation is higher in case of software industry
followed by sugar (5.76), paper (5.26), power (4.59), pharmaceuticals (4.16),
automobiles (3.80), textiles (3.48), cement (2.67) and iron & steel (1.69). Coefficient
of variation is larger in case of sugar industry indicating 167.93% of variation in
standard deviation from its mean value followed by software (154.8), pharma
(151.27), paper (147.54), iron & steel (135.2), automobiles (110.14), power (88.9)
and textiles (78.03).
The table 6.1.1 reveals that for the year 2003-04, mean disclosure score is
again maximum in case of software industry (6.8) followed by textiles (5.61), power
(5.56), sugar (5.08), cement (4.46), paper (4.1), pharmaceuticals and automobiles
each have been recording the same score of 3.57 and subsequently followed by iron &
steel (1.43). On the other hand, standard deviation is the highest in case of software
industry (9.44) followed by sugar (7.54), paper (5.98), pharmaceutical (5.47), power
(5.46), textiles (3.69), automobiles (3.51), cement (2.99) and iron & Steel (2.35).
Coefficient of variation is the highest in case of iron & steel industry (164.33) while it
is the lowest in case of textiles industry (65.77).
Similarly, for the year 2004-05, the table 6.1.1 reveals that mean disclosure score
is maximum in case of software industry (8.6) followed by power (8.53), textiles (6.25),
sugar (5.36), cement (4.76), pharmaceuticals (4.08), automobiles (3.81), paper (3.71) and
iron & steel (3.39). While standard deviation is also higher in case of software (11.94)
followed by power (10.93), sugar (7.22), pharmaceutical (6.69), paper (5.38), iron & steel
(5.15), textiles (3.82), automobiles (3.56) and cement (3.07). Coefficient of variation is
the highest in case of pharmaceutical industry (163.97) followed by iron & steel (151.9),
paper (145.01), software (138.84), sugar (134.70), power (128.13), automobiles (93.44),
cement (64.5) and textiles (61.12).
From the above analysis, it has been concluded that there is overall increase in
the mean disclosure score from 2.83 in the year 2000-01 to 5.38 in the year 2004-05.
Voluntary Corporate Governance Disclosure Practices of Selected Companies
202
Similarly, the standard deviation is also showing an increasing trend from 3.07 in the
year 2000-01 to 6.42 in the year 2004-05. It means that the companies are disclosing
more the voluntary corporate governance items over a period of time but with
significant variations. Software industry occupies the first rank so far as average score
for the period of five years is concerned, same as for the standard deviation also.
Average coefficient of variation of this industry is 141.23. Similar is the case with the
power industry also. It occupies the second rank so far as the mean value for the
period of five years is concerned. Standard deviation of this industry is also high.
Coefficient of variation for power industry is 100.61. Textiles and cement industries
occupy 3rd
and 4th
rank so far as mean disclosures scores are concerned but standard
deviations of these two industries are low as compared to others. Sugar industry
occupies 5th
rank by having 3.42 mean value and standard deviation of this industry is
5.06. Similarly, for the paper industry, mean value for the period of five years stands
at 3.2 and its standard deviation is 4.24 while automobile industry has mean
disclosure score of 3.17 and its standard deviation stands at 3.45. Again mean
disclosure score of pharmaceutical industry is the lowest i.e. 2.94 but its standard
deviation is 4.47 which is comparatively higher and revealing the negative
association. Coefficient of variation of pharma industry is 149.96. Mean disclosure
score of iron & steel industry is 1.61 and its standard deviation is 2.34.
In order to see the significance of difference among the disclosure score of
industries, Kruskal- Wallis H Test has been applied. The following table shows the
results of the above mentioned test.
Table: 6.1.2
Results of Kruskal-Wallis Test H
Year(s) 2000-01 2001-02 2002-03 2003-04 2004-05
Chi-Square 12.84 12.11 12.94 12.56 9.96
df 8 8 8 8 8
Significance .117 .146 .114 .128 .267
Source: Computed from the Disclosure Score as Given in Table 61.1
Voluntary Corporate Governance Disclosure Practices of Selected Companies
203
Table 6.1.2 reveals that there is no significant difference among the disclosure
score of the industries over a period of five years. It means that all the industries are
disclosing the items of voluntary corporate governance checklist almost at equivalent
level.
6.3.2 Company Wise Analysis of Voluntary Corporate Governance
Disclosure Score
The year wise and company wise analysis of voluntary corporate governance
disclosure score have been given as follows:
1) Disclosure for the year 2000-01
Table 6.1 reveals that in the year 2000-01, Infosys Technologies Ltd. has
disclosed the maximum information and has the highest voluntary corporate
governance disclosure score i.e. 36% followed by GTL Ltd. (17.86%), Dr. Reddy‟s
Laboratories Ltd. (10.71%), Pentamedia Graphics Ltd., Bajaj Auto Ltd, and Gujarat
Ambuja Cements Ltd. recorded the same score of 8.93% and subsequently followed
by Polaris Software Lab Ltd., Reliance Industries Ltd., Tamilnadu Newsprint and
Paper Mills Ltd, ITC. Ltd., Madras Cements Ltd., Mysore Cements Ltd., Ranbaxy
Laboratories Ltd. and Reliance Energy Ltd. each have attained the same score of
5.36% and so on. A few companies in the sample are not disclosing the governance
practices beyond the mandatory requirements. Larsen and Toubro Ltd., Satyam
Computers Services Ltd., Arvind Mills Ltd., Bombay Dyeing and Mfg Ltd., Indian
Rayon and Industries Ltd., EID Parry (India) Ltd., etc., all are having zero voluntary
corporate governance disclosure score. A few companies in the sample are those on
which clause 49 is not applicable for the year 2000-01. So, those companies have
been excluded from the analysis for the year 2000-01.
2) Disclosure for the year 2001-02,
As revealed by table 6.1, maximum voluntary governance score has been
obtained by Infosys Technologies Ltd. (23.21%) but the percentage of i tems disclosed
Voluntary Corporate Governance Disclosure Practices of Selected Companies
204
is less as compared to the previous year. Reliance Energy Ltd. occupies the second
rank by disclosing 19.64% of items followed by Bajaj Hindustan Ltd. (14.29%), Bajaj
Auto Ltd. (12.50%), Pentamedia Graphics Ltd., Rajasthan Spinning and Weaving
Mills Ltd., Gujarat Ambuja Cement Ltd., and Dr. Reddy‟s Lab. Ltd. each recorded the
same score of 8.93% and so on. On the other hand, Larsen and Toubro Ltd., Arvind
Mills Ltd., Mahavir Spinning Mills Ltd., Satyam Computer Services Ltd., Raymond
Ltd., Garden Silk Mills Ltd., Eskay KN‟I‟T Ltd., Bombay Dyeing and Mfg. Ltd. have
not reported any item of checklist.
3) Disclosure for the year 2002-03
The table 6.1 reveals that Infosys Technologies Ltd. has occupied the first
rank by securing 28.6% followed by Bajaj Hindustan Ltd. (21.43%), ITC Ltd.
(19.64%), GTL Ltd. (17.86%), Dr. Reddy Lab. Ltd. and Reliance Energy Ltd. each
recorded the same score of 14.29% and subsequently followed by Bajaj Auto Ltd.
(12.50%) and so on. On the other hand, Igate Global Solutions Ltd., Mascon Global
Ltd., Mahavir Spinning Mills Ltd., Eskay KN‟IT Ltd., Bombay Dyeing and Mfg Ltd.,
Saraswati Industrial Syndicate Ltd., etc., are not following even a single item of
checklist.
4) Disclosure for the year 2003-04
Similarly, for the year 2003-04, the table 6.1 shows that the first rank has been
occupied by Infosys Technologies Ltd. by disclosing 34% of items of checklist followed
by Bajaj Hindustan Ltd. (27%), ITC Ltd. (21.43%), Dr. Reddy‟s Laboratories Ltd.
(19.64%), GTL Ltd., Reliance Energy Ltd. and NTPC Ltd. each recording the same score
i.e. 14.29% and subsequently followed by Rajasthan Spinning and Weaving Mills Ltd.,
EID-Parry (India) Ltd. and Bajaj Auto Ltd. each of them disclosing 12.50% of items of
checklist and so on. On the other hand, Satyam Computer Services Ltd., Eskay KN‟IT
Ltd., Bombay Dyeing and Mfg Ltd., Saraswati Industrial Syndicate Ltd., Andhra Sugars
Ltd., Star Paper Mills Ltd., etc., have not reported any item of checklist.
Voluntary Corporate Governance Disclosure Practices of Selected Companies
205
5) Disclosure for the year 2004-05
The table 6.1 reveals that for the year 2004-05, Infosys Technologies Ltd. has
been disclosing the maximum number of items given in the checklist i.e. 42.86%
followed by Reliance Energy Ltd. (32.14), Bajaj Hindustan Ltd. and Dr. Reddy‟s
Laboratories Ltd each have same disclosure score i.e. 25% and subsequently followed
by NTPC Ltd. (21.43%), ITC Ltd. (19.64%), Polaris Software Lab. Ltd. (16.07%) and
so on. On the other hand, Mascon Global Ltd., Satyam Computer Services Ltd., Eskay
KN„IT Ltd., Saraswati Industrial Syndicate Ltd., Andhra Sugars Ltd., DCM Shriram
Industries Ltd., etc., have not been disclosing anything else in addition to the
requirements of clause 49 of the listing agreement.
It emerges from the above analysis that a few companies in the software
industry have been disclosing the maximum information of voluntary corporate
governance checklist. Infosys Technologies Ltd. has been leading among all the
sampled companies by occupying first rank for the entire period of study. Hence, it
can be named as a good governed company. So far as the paper industry is
concerned, Bajaj Hindustan Ltd. and ITC Ltd. have been performing well. Similarly,
in case of automobile industry, Bajaj Auto Ltd. has been disclosing the maximum
information with respect to voluntary governance items as compared to other
companies in the same industry. In case of iron and steel industry, Tata Steel Ltd. has
been showing the improvement in the voluntary governance disclosure score over a
period of time. In case of pharmaceuticals industry, Dr. Reddy‟s Laboratories Ltd. has
been performing well by disclosing maximum information of checklist while on the
other hand, Ranbaxy Lab Ltd. has constant disclosure score for the entire period of
study.
So far as power industry is concerned, Reliance Energy Ltd. has been showing
significant improvement in the disclosure score. It occupied fifth rank in the year
2000-01 which shifted to second rank in the year 2004-05. NTPC Ltd. has also been
showing improvement in its disclosure score in the year 2004-05 by securing fourth
rank among all the sampled companies.
Voluntary Corporate Governance Disclosure Practices of Selected Companies
206
6.3.3 Extent of Variation in Voluntary Corporate Governance Disclosure Score
The table 6.1.3 reveals the extent of variation in the voluntary corporate
disclosure governance disclosure score of the companies for a period of five years
under study.
Table: 6.1.3
Extent of Variation in Voluntary Corporate
Governance Disclosure Score
Disclosure Score
(Range in %)
No. of Companies Percentage of No. of Cos.
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
Nil 24 40 32 30 27 35.3 36.7 29.35 27 24
1-10 41 65 68 70 71 60.3 59.6 62.23 63 63
11-20 2 3 7 8 9 3 2.7 6.4 7.2 8
21-30 0 1 2 2 3 0 1 2 1.8 3
31-40 1 0 0 1 1 1.4 0 0 1 1
41-50 0 0 0 0 1 0 0 0 0 1
51 or above 0 0 0 0 0 0 0 0 0 0
Total 68 109 109 111 112 100 100 100 100 100
Source: Computed from Disclosure Score as Given in Table 6.1
The above table reveals that 43 companies in the year 2000-01 have been
disclosing the voluntary corporate governance items in the range of up to 20%. There is
one such company i.e. Infosys Technology Ltd. which has gained maximum voluntary
governance score i.e. 36% in the year 2000-01. 24 (35%) sampled companies are of such
types which have been disclosing the corporate governance practices as per clause 49 of
the listing agreement but voluntary governance scores of these companies are zero. The
above table also reveals that 59.6% of the companies have been disclosing the voluntary
corporate governance items in the range of 1-10% in the year 2001-02. Again only one
such company i.e. Infosys Technologies Ltd. has been disclosing the voluntary
governance information in the range of 21-30%. 40 sampled companies have been just
following the requirements of clause 49 of the listing agreement. Again for the year
2002-03, 62.23% of the companies have been disclosing in the range of 1-10% but an
increase has been observed in the number of companies disclosing in the range of 11-
Voluntary Corporate Governance Disclosure Practices of Selected Companies
207
20%. Infosys Technologies Ltd. and Bajaj Hindustan Ltd. have been disclosing the
maximum information in the range of 21-30%. For the year 2003-04, a slight increase in
the disclosure score has been observed and 63% of the companies have been disclosing
the voluntary information in the range of 1-10%. There is also increase in the number of
companies disclosing in the range of 11-20%. Maximum disclosure has been made by
Infosys Technologies Ltd. in the range of 31-40%. Similarly, for the year 2004-05, 63%
of the companies have been disclosing in the range of 1-10%. Again maximum disclosure
has been made by Infosys Technologies Ltd. in the range of 41-50%. 24% of the sampled
companies have not been disclosing even a single item of checklist. An increase in the
range of disclosure score has been observed in the year 2004-05 to some extent.
So, it has been concluded from above analysis that there is a slight increase in the
disclosure score over a period of time. But still, overall voluntary governance disclosure
score is less than 50% of items. Further, wide variations have been observed in the voluntary
corporate governance disclosure score of the companies over a period of five years.
SECTION II
This section deals with the item wise voluntary corporate governance disclosure
score of the companies under study. The item wise disclosure score have been arrived at
as follows:
Item Wise Voluntary Governance
Disclosure Score =
No. of Companies Following a Particular Item x 100
Total No. of Sampled Companies
6.4 Item Wise Voluntary Corporate Governance Disclosure Score of
the Companies
Table 6.2 reveals the item wise voluntary corporate governance disclosure score of
the sampled companies. The details of item wise voluntary corporate governance
disclosure score the sampled companies have been given as follows:
A) Board of Directors: This head covers nine items. On the basis of mean value
(8.46) as revealed by table 6.2, the maximum no. of companies have been disclosing the
information regarding the „functions of the board‟ followed by „relationships with other
directors‟ (3.85), date of appointment of directors (3.78), retirement age or tenure of
Voluntary Corporate Governance Disclosure Practices of Selected Companies
208
directors ( 3.66), board membership criteria (2.88), shareholdings of the directors (1.44),
appointment of lead independent director (1.19), training of board members (0.65) and
mechanism for evaluating the performance of non-executive director (0.18).
Details of individual item wise disclosure are as follow:-
a) Functions of the Board
This item includes functions as well as responsibilities of the board. Functions of
the board can be defined as planning, formulating corporate strategy, monitoring, control,
external contacts, acquisitions, etc. The table 6.2 reveals that in the year 2000-01, only
13.24% of companies were disclosing this information which has decreased to 7.14% for
the year 2004-05.
b) Board Membership Criteria
This item deals with the expected skills, experience and talent of the board
members to manage the firm. Board member should be expert in strategy formulation,
financial matters, technology, etc., in order to run the corporation in this competitive
world. The table 6.2 reveals that 4.41% of sampled companies have been providing the
information for the year 2000-01 which has decreased to 1.79% for the year 2004-05.
c) Date of Appointment of Directors
Again a very few companies have been mentioning the date of appointment of the
directors in the corporate governance section of the annual reports. The table 6.2 reveals
that 4.4% of the sampled companies have been disclosing this information for the year
2000-01 which has decreased to 3.57% in 2004-05. So, variation in disclosure score has
been observed for this sub category.
d) Appointment of Lead Independent Director
Lead independent director is a director who leads the group of independent
directors and works as a liaison between the chairman, managing director and the
independent directors on the board. He also finalizes the meetings‟ agendas and
schedules along with the chairman and chief executive officer. The table 6.2 reveals that
1.47% of the sampled companies have appointed lead independent directors on the board
for the year 2000-01 which has increased to 2.68% for the year 2004-05.
Voluntary Corporate Governance Disclosure Practices of Selected Companies
210
Table 6.2
Item Wise Voluntary Corporate Governance Disclosure Score of the Companies
S.No. Items 2000-01 (%)
Score
2001-02 (%)
Score
2002-03 (%)
Score
2003-04 (%)
Score
2004-05 (%)
Score
Average
(%)
A) Board of Directors
a) Functions of the Board 9 13.24 8 7.34 9 8.26 7 6.31 8 7.14 8.46
b) Board Membership Criteria 3 4.41 4 3.67 3 2.75 2 1.80 2 1.79 2.88
c) Date of Appointment of Directors 3 4.41 4 3.67 3 2.75 5 4.50 4 3.57 3.78
d) Appointment of Lead Independent Director 1 1.47 0 0.00 0 0.00 2 1.80 3 2.68 1.19
e) Training of Board Members 1 1.47 0 0.00 0 0.00 0 0.00 2 1.79 0.65
f) Retirement Age or Tenure of Directors 2 2.94 3 2.75 4 3.67 4 3.60 6 5.36 3.66
g) Mechanism for Evaluating the Performance of
Non executive Directors
0 0.00 0 0.00 0 0.00 0 0.00 1 0.89 0.18
h) Relationship with Other Directors 2 2.94 5 4.59 4 3.67 5 4.50 4 3.57 3.85
i) Shareholdings of the Directors 0 0.00 1 0.92 1 0.92 2 1.80 4 3.57 1.44
B) Meetings and Attendance
a) Information on Scheduling and Selection of
Agenda Items
3 4.41 3 2.75 2 1.83 2 1.80 1 0.89 2.34
b) Duration of Board Meetings 1 1.47 0 0.00 1 0.92 1 0.90 2 1.79 1.01
c) Duration of Gap Between Two Board or
Committee Meetings
0 0.00 0 0.00 1 0.92 1 0.90 1 0.89 0.54
d) Procedure of Board or Committee Meetings 2 2.94 3 2.75 3 2.75 4 3.60 3 2.68 2.95
e) Individual Attendance Record of Directors at
Board or Committee Meetings
3 4.41 10 9.17 8 7.34 9 8.11 7 6.25 7.06
Contd....
Voluntary Corporate Governance Disclosure Practices of Selected Companies
211
C) Formation of Committees
a) Corporate Governance Committee 1 1.47 1 0.92 1 0.92 2 1.80 3 2.68 1.56
b) Ethics or Compliance Committee 0 0.00 0 0.00 2 1.83 2 1.80 3 2.68 1.26
c) Nomination Committee 2 2.94 2 1.83 4 3.67 5 4.50 5 4.46 3.48
d) Investment Committee 3 4.41 5 4.59 6 5.50 6 5.41 6 5.36 5.05
e) Committee of Directors 17 25.00 26 23.85 25 22.94 26 23.42 25 22.32 23.51
f) Management Committee 4 5.88 9 8.26 11 10.09 13 11.71 13 11.61 9.51
g) Research and Development Committee 1 1.47 2 1.83 2 1.83 2 1.80 2 1.79 1.75
h) Finance Committee 1 1.47 6 5.50 6 5.50 6 5.41 7 6.25 4.83
i) Health, Safety and Environment Committee 2 2.94 1 0.92 1 0.92 1 0.90 2 1.79 1.49
j) Project Monitoring Committee 2 2.94 3 2.75 3 2.75 4 3.60 5 4.46 3.30
k) Strategy Committee 0 0.00 0 0.00 0 0.00 1 0.90 1 0.89 0.36
l) Risk Management Committee 0 0.00 0 0.00 0 0.00 0 0.00 4 3.57 0.71
m) Miscellaneous 13 19.12 19 17.43 20 18.35 23 20.72 26 23.21 19.77
D) Corporate Governance Initiatives
a) Whistle Blower Policy 0 0.00 0 0.00 0 0.00 0 0.00 8 7.14 1.43
b) Code of Conduct for Directors or Senior
Management Personnel
1 1.47 1 0.92 1 0.92 2 1.80 9 8.04 2.63
c) Corporate Governance Rating 1 1.47 1 0.92 2 1.83 3 2.75 2 1.79 1.74
d) Succession Planning 1 1.47 1 0.92 1 0.92 1 0.90 1 0.89 1.02
e) Insider Trading Code 3 4.41 8 7.34 22 20.18 24 21.62 27 24.11 15.53
E) Reports’ of Committees
a) Compliance Report on Cadbury Committee‟s
Recommendations
2 2.94 1 0.92 1 0.92 1 0.90 1 0.89 1.31
Contd....
Voluntary Corporate Governance Disclosure Practices of Selected Companies
212
b) Compliance Report on Blue Ribbon
Committee‟s Recommendations
2 2.94 3 2.75 1 0.92 1 0.90 1 0.89 1.68
c) Compliance of OECD Principles on Corporate
Governance
0 0.00 0 0.00 0 0.00 1 0.90 1 0.89 0.36
d) Euro Shareholders Corporate Governance
Guidelines
1 1.47 1 0.92 1 0.92 1 0.90 1 0.89 1.02
e) Compensation Committee Report 1 1.47 1 0.92 1 0.92 2 1.80 2 1.79 1.38
f) Nomination Committee Report 2 2.94 0 0.00 1 0.92 0 0.00 0 0.00 0.77
g) Audit Committee Report 2 2.94 1 0.92 1 0.92 3 2.70 2 1.79 1.85
h) Investors Grievance Committee Report 2 2.94 0 0.00 2 1.83 1 0.90 1 0.89 1.31
i) Compliance with Naresh Chandra
Committee‟s Recommendations
1 1.47 0 0.00 1 0.92 2 1.80 2 1.79 1.20
j) Compliance with Narayana Murthy‟s Code on
Corporate Governance
0 0.00 0 0.00 0 0.00 2 1.80 2 1.79 0.72
k) CEO and CFO Certification on Financial
Statements
0 0.00 0 0.00 0 0.00 0 0.00 1 0.89 0.18
l) Miscellaneous 4 5.88 2 1.83 5 4.59 3 2.70 5 4.46 3.89
F) Shareholders
a) Dividend History of the Company 3 4.41 4 3.67 6 5.50 7 6.31 8 7.14 5.41
b) Information on Unclaimed Dividends 5 7.35 10 9.17 18 16.51 24 21.62 27 24.11 15.75
c) Top Ten Shareholders of the Company 1 1.47 3 2.75 5 4.59 6 5.41 6 5.36 3.91
d) List of Persons Holding More than 1% Shares 0 0.00 0 0.00 1 0.92 1 0.90 2 1.79 0.72
e) Changes in Equity Share Capital During the
Year
1 1.47 1 0.92 1 0.92 1 0.90 2 1.79 1.20
f) Paid Up Equity Share Capital History 2 2.94 3 2.75 2 1.83 4 3.60 4 3.57 2.94
Contd....
Voluntary Corporate Governance Disclosure Practices of Selected Companies
213
g) List of Investors Service Centers 2 2.94 3 2.75 2 1.83 1 0.90 0 0.00 1.69
h) Shareholders‟ Satisfaction Survey 1 1.47 2 1.83 2 1.83 2 1.80 4 3.57 2.10
i) Submission of Information to SEBI Edifar
System
2 2.94 3 2.75 20 18.35 26 23.42 31 27.68 15.03
j) Electronic Clearing Service (ECS) Mandate 3 4.41 6 5.50 10 9.17 15 13.51 16 14.29 9.38
k) Nomination Facility 3 4.41 6 5.50 9 8.26 11 9.91 13 11.61 7.94
G) Award or Accolades for Corporate
Governance
2 2.94 0 0.00 0 0.00 1 0.90 2 1.79 1.13
Source: Compiled and Computed from the Annual Reports of the Companies Under Study
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e) Training of Board Members
This item reveals any type of training provided to the directors after their
induction on the board. Various presentations are made by the executive directors to
make the non-executive directors and independent directors familiarize about the
company‟s strategy, operations, board procedure, etc. The table 6.2 depicts that 1.47% of
the sampled companies are giving this information for the year 2000-01 which has
increased to 1.79% for the year 2004-05.
f) Retirement Age or Tenure of Directors
The table 6.2 reveals that in the year 2000-01, just 2.94% of the sampled
companies have been disclosing this information in corporate governance section which
has increased to 5.36% for the year 2004-05.
g) Mechanism for Evaluating the Performance of Non- executive Directors
This item includes the criteria to be followed by the board for evaluating the
performance of non-executive directors. The board generally evaluates the performance
of non-executive or independent directors on the basis of certain pre-defined criterion
each year. As per the table 6.2 till the year 2003-04, not even a single company has
disclosed the information about this item. For the year 2004-05, 0.89% of the sampled
companies have been following this item.
h) Relationships with Other Directors
This item provides the information related to relationship of promoter, executive
and non-executive directors with each other. The table 6.2 reveals that 2.94% of the
sampled companies have been disclosing the information about this item for the year
2000-01, 4.59% in 2001-02, 3.67% for 2002-03, 4.5% for 2003-04 and 3.57% for the
year 2004-05.
i) Shareholdings’ of the Directors
Shareholdings of the directors mean the total number of shares held in that
particular company. The table 6.2 depicts that for year 2001-02, 0.92% of the sampled
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companies have been giving information in corporate governance section of the report
which has increased to 3.6% in for year 2004-05.
B) Meetings and Attendance
This head covers five items. On the basis of average (7.06) as revealed by table
6.2, maximum no. of companies have been disclosing the information regarding the
„individual attendance record of directors at the board or committee meetings‟ followed
by „procedure of board and committee meetings‟ (2.95), „information on scheduling and
selection of agenda items‟ (2.34), „duration of board meetings‟ (1.01) and „duration of
gap between two board or committee meetings‟ (0.54).
The details of individual item wise disclosure are as follow:
a) Information on Scheduling and Selection of Agenda Items
This item deals with the setting up of agenda items by company secretary in
consultation with chairman and lead independent director. According to table 6.2, 4.4%
of the sampled companies are providing information about this item for the year 2000-01,
2.75% for 2001-02 1.83% for 2002-03, 1.80% for 2003-04 and just 0.89% for the year
2004-05.
b) Duration of Board Meetings
This item implies the total length of time (in hrs or minutes) from the start of the
meeting till its conclusion. The table 6.2 shows that 1.47% of the sampled companies
have been giving information for this item for the year 2000-01 which has increased to
1.79% for the year 2004-05.
c) Duration of Gap between Two Board or Committee Meetings
This item implies the time gap in days or months between two board or committee
meetings. The table 6.2 reveals that 0.92% of the sampled companies have been
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providing this information for the year 2002-03 which has decreased to 0.89% for the
year 2004-05.
d) Procedure of Board and Committee Meetings
The table 6.2 reveals that 2.94% of the sampled companies have been disclosing
the information about this item for the year 2000-01. For the years 2001-02 and 2002-03,
2.75% of the companies are providing the information which has increased to 3.6% for
the year 2003-04. Further, a declining trend has been observed in the disclosure of this
item for the year 2004-05 i.e. 2.68%.
e) Individual Attendance Record of Directors at Board or Committee Meetings
This item reveals the presence or absence of each director at each board or
committee meetings. The table 6.2 depicts that the disclosure score of this item is varying
from 4.4% for the year 2000-01 to 6.25% for the year 2004-05. For the year 2001-02,
9.17% of the sampled companies have been disclosing this item in the corporate
governance section of the annual report.
C) Formation of Committees
This head covers thirteen items. The table 6.2 reveals that most of the companies
on the basis of average (23.5) are having „committee of directors‟ followed by
„miscellaneous committees‟ (19.78), „management committee‟ (9.51), „investment
committee‟ (5.05), „finance committee‟ (4.83), „nomination committee‟ (3.4), „project
monitoring committee‟ (3.3), „research & development (R&D) committee‟ (1.74),
„corporate governance committee‟ (1.56), „health, safety and environment committee‟
(1.48), „ethics or compliance committee‟ (1.26), „risk management committee‟ (0.71) and
„strategy committee‟ (0.36).
The details of individual item wise disclosure are as follow:
a) Corporate Governance Committee
This committee generally reviews the corporate governance policies of the
companies. The table 6.2 reveals that for the year 2000-01, just a single company has
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formed this committee. For the year 2004-05, the total no. of three companies from
sample has formed this committee.
b) Ethics or Compliance Committee
The table 6.2 reveals that for the year 2002-03, 1.83% of the sampled companies
have formed this committee which has increased to 2.68% for the year 2004-05.
c) Nomination Committee
The main function of this committee is to select or recommend to the board the
names of the nominee directors to be appointed or re-appointed in the ensuing annual
general meeting. Nomination committee also oversees the performance evaluation
process of directors, recommends the termination of directors and oversees the
governance structure of board and committees. The table 6.2 reveals that 2.94% of the
sampled companies have formed nomination committee for the year 2000-01 which has
increased to 4.46% for the year 2004-05.
d) Investment Committee
This committee deals with the major investment or capital decisions. It reviews
the co‟s major investment proposals. As revealed by table 6.2, 4.4% of the sampled
companies have been disclosing this item for the year 2000-01 which has increased to
5.36% for the year 2004-05. On the whole, varying disclosure score has been observed
for this item over a period of time.
e) Committee of Directors
This committee basically deals with the granting of powers of attorney to the
officers of the company to appoint proxies to attend the general meetings on behalf of the
company, etc. According to table 6.2, the most of the companies i.e. 25% have formed
this committee for the year 2000-01. In further years, the percentage of follow up of this
item has been showing the decreasing trend. For the year 2004-05, 22.3% of the
companies have been providing this information in corporate governance section of the
annual report.
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f) Management Committee
This committee consists of all the executive directors on the board. The main
functions of this committee are to frame up the capital or other major budgets of the
organization and to give the necessary directions to the functional heads for the effective
or efficient functioning of the organization. The table 6.2 shows that 5.9% of the sampled
companies have formed management committee in the year 2000-01 which has increased
to 11.6% for the year 2004-05.
g) Research and Development Committee
This committee has been generally formed by the pharmaceutical companies. The
table 6.2 shows that for the year 2000-01, 1.47% of the sampled companies have set up
this committee which has increased to 1.79% for the year 2004-05.
h) Finance Committee
This committee recommends to the board the major capital structure changes,
issue of securities, cash management, reviewing certain long term and short term
investments, etc. The table 6.2 reveals that 1.47% of sampled companies have formed
this committee in the year 2000-01 which has increased to 6.25% for the year 2004-05.
i) Health, Safety and Environment Committee
This committee is generally formed under the social responsibility concept of the
firm. The table 6.2 reveals that 2.94% of the sampled companies have set up this
committee for the year 2000-01 which has decreased to 1.79% for the year 2004-05.
j) Project Monitoring Committee
This committee makes the decisions about the major projects of the company. The
table 6.2 shows that 2.94% of the sampled companies have been disclosing this item in
the corporate governance section of the annual report for the year 2000-01 which has
increased to 4.46% for the year 2004-05.
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k) Strategy Committee
This committee works closely with the management to frame the new or modify
the existing corporate strategy. It also reviews the implementation process and further
monitors the execution of the developed strategy. Dr. Reddy‟s Laboratories Ltd. has
formed this committee for the years 2003-04 and 2004-05.
l) Risk Management Committee
This committee generally reviews the external or internal risk levels of the
company and frames up the policies to manage the risk attached to the company. The
table 6.2 reveals that 3.6% of the sampled companies have formed this committee in the
year 2004-05.
m) Miscellaneous
This sub head covers the committees other than those mentioned above.
Miscellaneous committees include GDR committee, science committee, executive
committee, management councils, operations committee, debenture or share allotment
committee, committee for initial public offering of equity shares, pricing committee for
contracts, forex committee, sub committee for resource mobilization, committee for
purchase, committee for investor servicing, etc. The table 6.2 reveals that 19.12% of the
sampled companies have formed these miscellaneous committees for the year 2000-01.
The disclosure of this item has been varying over a period of time. For the year 2004-05,
23.21% of the sampled companies have formed a few of these committees
D) Corporate Governance Initiatives
This head covers five items and maximum disclosure on the basis of an average as
revealed by table 6.2, is for the item named as „insider trading code‟ (15.53) followed by
„code of conduct for directors or senior management personnel‟ (2.63), „corporate
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governance rating‟ (1.74)‟, „whistle blower policy‟ (1.43) and „succession planning‟
(1.02). Item wise voluntary disclosure is as follows:
a) Whistle Blower Policy
“Whistle Blowing can be defined as the release of information by a member or
former member of an organization that is evidence of illegal and/or immoral conduct in
the organization that is not in the public interest” (Boatright, 2008, p.106 ). In other
words, it is a mechanism generally set up for employees to report any unethical
behaviour, fraud, violation of policies or code by superiors to top management personnel.
Whistle Blower is ensured job security by top personnel in the future. Now this provision
has become mandatory part of the revised clause 49 of the listing agreement. According
to table 6.2, 8 companies (7.14%) have been disclosing this item for the year 2004-05.
b) Code of Conduct for Directors or Senior Management Personnel
Code of conduct is a written document that outlines various principles or policies
to be followed by various personnel in the organization. The table 6.2 shows that 1.47%
of companies have been disclosing this item in the year 2000-01 which has increased to
8.04% for the year 2004-05. Now the disclosure of this voluntary item has become
mandatory for the companies as per revised clause 49 of the listing agreement.
c) Corporate Governance Rating
Corporate governance rating is generally conducted by the various rating agencies
like ICRA, ICSI, CRISIL, S&P, etc. ICSI conducts corporate governance rating every
year and then nominates top 50 companies on the basis of rating for the „Award of
Excellence in Corporate Governance‟. The table 6.2 reveals that just one company has
been providing information regarding the corporate governance rating in the year 2000-
01. The number of companies has increased to 2 in the year 2004-05. In order to attract
more foreign capital, the companies should go voluntary for corporate governance rating.
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d) Succession Planning
Succession planning is generally done by the companies to meet any unexpected
occurrence regarding the vacant posts of the chairman, CEO, CFO or some other senior
management personnel. Again just one company has been found providing this
information for the entire period of study.
e) Insider Trading Code
Insiders are the managers or retired managers of the organization who are holding
the share price sensitive as well as any other crucial information about company‟s
strategies or policies. In order to prevent the insiders to go for unethical practices, SEBI
has made mandatory for the companies to adopt insider trading code. The table 6.2
reveals that for the year 2000-01, 4.41% of the sampled companies have been disclosing
this information in the corporate governance section of the annual report, which has
increased to 24.11% for the year 2004-05.
E) Reports’ of Committees
This head covers twelve items. The table 6.2 reveals that on the basis of average,
most of the companies have been disclosing the information under „miscellaneous‟
category followed by „audit committee report‟ (1.85), „compliance report on Blue Ribbon
committee‟s recommendations‟ (1.68), „compensation committee report‟ (1.38), „report
on Cadbury committee‟s recommendations‟ (1.31), „investors grievance committee
report‟ (1.31), „compliance with Naresh Chandra committee‟s recommendations‟ (1.19),
„Euro shareholders corporate governance guidelines‟ (1.02),„nomination committee
report‟, (0.77),„compliance with Narayana Murthy‟s code on corporate governance‟
(0.72), „compliance with OECD principles on corporate governance‟ (0.36) and „CEO
and CFO certification on financial statements‟ (0.18).
The details of item wise voluntary disclosure are as follow:
a) Compliance Report on Cadbury Committee’s Recommendations
This committee was set up by London Stock Exchange under the chairmanship of
Sir Adrian Cadbury in May 1991 to give the recommendations to improve the system of
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internal financial controls. The report of this committee was published in the year 1992.
According to table 6.2, this item has been disclosed by 2 companies for the year 2000-01.
For the rest of the years, just a single company has been disclosing this item.
b) Compliance Report on Blue Ribbon Committee’s Recommendations
The recommendations of the Blue Ribbon Committee generally focused on audit
committee, its formation, members, meetings, etc. The table 6.2 reveals that 2.94% of the
sampled companies are giving the information regarding the extent to which they are
complying with the recommendations of Blue Ribbon Committee. For the year 2000-01,
2.94% of the sampled companies have been disclosing the compliance report of Blue
Ribbon Committee‟s Recommendations which ultimately reduced to 0.89% in the year
2004-05.
c) Compliance of OECD Principles on Corporate Governance
This organization (OECD) has developed certain principles of corporate
governance to be followed by the companies. Just one company in our sample i.e. Infosys
Technologies Ltd. has been disclosing the compliance with the OECD principles of
corporate governance in the years 2003-2004 and 2004-05.
d) Euro Shareholders’ Corporate Governance Guidelines
Euro shareholders‟ is the confederation of European shareholders associations. Its
principles are based on the OECD principles of corporate governance. Only one company
i.e. Infosys Technologies Ltd. has been disclosing its compliance with the Euro
shareholders corporate governance guidelines for the entire period of study.
e) Compensation Committee Report
The report of this committee generally certifies the performance of executive
directors as well as grant of performance incentives to them. The table 6.2 depicts that for
the year 2000-01, 1.47% of the sampled companies have been disclosing this information
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in corporate governance section of annual report which has increased to 1.79% in the
year 2004-05.
f) Nomination Committee Report
The report of this committee certifies the retirement, appointment or re-
appointment of directors. The table 6.2 shows that for the year 2000-01, 2.94% of the
sampled companies have been disclosing this information in corporate governance
section which has reduced to zero level in the year 2004-05.
g) Audit Committee Report
The report of this committee basically certifies the status of independent director,
internal control system of management, adoption of accounting policies or standards,
accuracy or inaccuracy of financial statements, etc. The table 6.2 reveals that 2.94% of
sampled companies have been disclosing this information in the corporate governance
section of annual report in the year 2000-01. For the year 2004-05, only 1.79% of
companies have provided this information. A variation in disclosure score has been
observed for this item over a period of 5 years.
h) Investors Grievance Committee Report
The report of this committee certifies that all type of investors‟ grievances have
been redressed within the stipulated time framework. The table 6.2 shows that 2.94% of
sampled companies have been providing the investor grievance committee report in the
corporate governance section for the year 2000-01 which has reduced to 0.89% for the
year 2004-05.
i) Compliance with Naresh Chandra Committee’s Recommendations
The table 6.2 reveals that 1.47% of the sampled companies have been disclosing
the compliance with recommendations of Naresh Chandra Committee for the year 2000-
01. Further in the year 2004-05, 1.79% of the sampled companies have been disclosing
this item.
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j) Compliance with Narayana Murthy’s Code on Corporate Governance
The table 6.2 reveals that 1.8% of sampled companies in the years 2003-04 and
2004-05 have been showing their compliance with Narayana Murthy‟s code on corporate
governance. These companies have started adopting the few recommendations of code
before its mandatory implementation by SEBI.
k) CEO and CFO Certification on Financial Statements
Just a single company in the year 2004-05 has disclosed the report of CEO and
CFO on certification of financial statements. Now the disclosure of this item has become
mandatory under revised clause 49 of the listing agreement.
l) Miscellaneous
This head includes the compliance reports of other committees such as
„compliance with findings and recommendations of the Conference Board Commission
on Public Trust and Private Enterprises in the US‟, „United Nations Global Compact
Programme‟, „company‟s secretary responsibility statement‟, „compliance with
Greenburry committee recommendations‟, „report of Deloittee Haskin on corporate
governance‟, etc. 5.88% of sampled companies have been following the
recommendations of these committees and disclosing the same in corporate governance
section of annual report. The variations have been observed in the disclosure of this item
in further years. 4.46% of the companies have been disclosing this item in the year 2004-
05.
F) Shareholders
This head covers eleven items and deals with the information related to
shareholders. Maximum no. of companies on the basis of average as revealed by table 6.2
have been disclosing the „information on „unclaimed dividends‟ (15.75) followed by „
submission of information to SEBI Edifar system‟ (15.03), „electronic clearing service
(ECS) mandate‟ (9.38), „nomination facility‟ (7.94) „dividend history of the company‟
(5.41), „top ten shareholders of the company‟ (3.91), „history of paid up equity share
capital of the company‟ (2.94), „shareholders‟ satisfaction survey‟ (2.1),„list of investors‟
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service centers‟ (1.68) and „list of persons holding more than 1% shares of the company‟
(.722).
The details of item wise disclosure are as follow:
a) Dividend History of the Company
The table 6.2 reveals that 4.41% of the sampled companies in the year 2000-01
have provided the dividend history of the company for last few years which has increased
to 7.14% in the year 2004-05.
b) Information on Unclaimed Dividends
This item deals with the amount of dividend remaining unclaimed by the investors
for at least seven years. The table 6.2 reveals that 7.35% of the sampled companies are
providing the details of unclaimed dividends in the year 2000-01. An increase in the
disclosure of this item has been observed as 9.17%, 16.5%, 21.62%, 24.11% of the
companies have been providing this information in the years 2001-02, 2002-03, 2003-04,
2004-05 respectively.
c) Top Ten Shareholders of the Company
The table 6.2 reveals that 1.47% of the sampled companies have been disclosing
this information in the year 2000-01 which has increased to 2.75%, 4.59%, 5.41% in the
years 2000-01, 2001-02, 02-03, 03-04 and further reduced to 5.36% in the year 2004-05.
d) List of Persons Holding More Than 1% shares
The table 6.2 shows that 0.92%, 0.90% and 1.79% of the sampled companies have
been disclosing this information for the years 2002-03, 03-04 and 04-05 respectively.
e) Changes in Equity Share Capital during the Year
The table 6.2 reveals that 1.47%, 0.92%, 0.92%, 0.90% and 1.79% of the sampled
companies in the years 2000-01, 01-02, 02-03, 03-04 and 04-05 respectively have been
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226
giving the information to the shareholders regarding any type of changes made in equity
share capital during a particular financial year.
f) History of Paid Up Equity Share Capital
The table 6.2 reveals that 2.94% of the sampled companies in the year 2000-01
have been disclosing the information regarding the amount of paid up equity share capital
during the last 7, 10 or 15 years. This figure has increased to 3.57% for the year 2004-05.
g) List of Investors’ Service Centers
The table 6.2 reveals that 2.94% of the sampled companies for the year 2000-01,
have been providing the information regarding the investors‟ service centers i.e. where
investors can approach for any type of queries or assistance from the companies. 2.75%,
1.83% and 0.90% of the companies have been disclosing this information for the years
2001-02, 02-03 and 03-04 respectively.
h) Shareholders’ Satisfaction Survey
Shareholders‟ satisfaction survey is generally conducted by the companies to
judge the satisfaction level of shareholders. Questionnaire is administered to the
shareholders along with the annual reports. The table 6.2 reveals that1.47% of the
sampled companies have been providing this information for the year 2000-01 which has
increased to 3.57% for the year 2004-05. This is considered to be a good practice adopted
by the companies as the companies can frame up their future strategies or policies as per
the expectations of the shareholders.
i) Submission of Information to SEBI Edifar System
It is mandatory for the companies to file with the SEBI, the annual report,
corporate governance compliance report, shareholding pattern, etc. SEBI has created a
separate link i.e. Electronic Data Information Filing and Retrieval System (EDIFAR) to
post the relevant information submitted by the co. The table 6.2 depicts that 2.94% of the
sampled companies in the year 2000-01 have been filing with SEBI the required
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227
statements. The percentage of the companies has increased to 18.35%, 23.42% and
27.68% for the years 2002-03, 03-04 and 04-05 respectively.
j) Electronic Clearing Service (ECS) Mandate
This item basically deals with the opening up of bank accounts by the
shareholders with their depositories and crediting of dividend amount in their respective
accounts by the companies. The table 6.2 reveals that 4.41% of the sampled companies
have been informing their shareholders regarding ECS mandate in the corporate
governance section of annual report which has increased to 5.50%, 9.1%, 13.51% and
14.29% for the years 2001-02, 2002-03, 03-04 and 04-05 respectively.
k) Nomination Facility
The table 6.2 reveals that 4.41% of the sampled companies have been providing
the information to the shareholders regarding the nomination facility offered as well as its
procedure. An increase has been observed in the percentage of its follow-up in the
subsequent years.
G) Awards or Accolades
The table 6.2 shows that 2.94%, 0.90% and 1.79% of the sampled companies for
the years 2000-01, 03-04 and 04-05 respectively have won awards for adopting the best
corporate governance practices.
6.4.1 Overall Item Wise Voluntary Corporate Governance Disclosure Score of the
Companies
The table 6.2.1 reveals the mean, standard deviation and co-efficient of variation
of items categorized into 7 heads namely board of directors, meetings and attendance,
formation of committees, corporate governance initiatives, reports of committees,
shareholders and others.
Overall item wise mean disclosure in the year 2000-01 is 3.018. It indicates that
the sampled companies have been just disclosing 3% of the items given in the voluntary
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corporate governance checklist. Mean disclosure score is maximum i.e. 5.20 with respect
to „formation of committees‟ whereas minimum disclosure score has been observed in
case of „corporate governance initiatives‟ i.e. 1.76. S.D. and CV are maximum i.e. 7.77
and 149.92 respectively under the heading of „formation of committees‟. This implies the
greater variation of the items under this category.
The table 6.2.1 shows that in the year 2001-02, mean disclosure score is
maximum i.e. 5.22 with respect to „formation of committees‟ followed by „shareholders‟
(3.41), „meetings and attendance‟ (2.93), „board of directors‟ (2.55), „corporate
governance initiatives‟ (2.02), „reports‟ of committees‟ (0.688) and „others‟ (0). Overall
mean disclosure score is 2.40, indicating that the sampled companies have been
disclosing just 2.40% of items given in voluntary corporate governance checklist. S.D is
maximum i.e. 7.38 under the heading „formation of committees‟ and hence, implies the
greater variation in items. C.V. is the highest in case of „corporate governance initiatives‟
and „committees‟ i.e. 148.51 and 141.38 respectively.
In the year 2002-03, it has been observed from overall item wise mean disclosure
score (3.3) given in table 6.2.1 that the sampled companies have been disclosing 3.3% of
items given in voluntary corporate governance checklist. Mean disclosure score is
maximum i.e. 6.34 with respect to „shareholders‟ followed by „formation of committees‟
(5.72), „corporate governance initiatives‟ (4.77), „meetings and attendance‟ (2.75), „board
of directors‟ (2.45), „reports of committees‟ (1.07) and „others‟ (0). S.D and CV are
higher under the heading „corporate governance initiatives‟ i.e. 8.64 and 181.13. This
reveals the greater variations of items given in the checklist under this heading.
The table 6.2.1 shows that in the year 2003-04, the item wise mean disclosure
score is maximum in case of „shareholders‟ (8.02) followed by „formation of committees‟
(6.30), „corporate governance initiatives‟ (5.40), „meetings & attendance‟ (3.06), „board
of directors‟ (2.70), „reports‟ of committees‟ (1.27) and „others‟ (.90). S.D. and CV are
maximum i.e. 9.12 and 168.89 with respect to „corporate governance initiatives‟. This
shows the larger variations in the items under this heading. Overall item wise mean
disclosure score is 3.95.
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Table: 6.2.1
Overall Item Wise Voluntary Corporate Governance Disclosure Score of the Companies
S.No. Items 2000-01 2001-02 2002-03 2003-04 2004-05
Mean cv X cv X cv X cv X cv
1. Board of
Directors 3.43 4.03 117.49 2.55 2.54 99.61 2.45 2.67 108.98 2.70 2.16 80 3.37 1.93 57.27
2. Meetings and
Attendance
2.65 1.92 72.45 2.93 3.75 127.98 2.75 2.67 97.09 3.06 3.02 98.69 2.5 2.22 86.8
3. Formation of
Committees
5.20 7.77 149.42 5.22 7.38 141.38 5.71 7.24 126.57 6.30 7.64 121.26 7 7.50 107.14
4. Corporate
Governance
Initiatives
1.76 1.61 91.477 2.02 3 148.51 4.77 8.64 181.13 5.40 9.12 168.89 8.49 9.33 111.20
5. Reports‟ of
Committees 2.082 1.71 82.132 0.688 0.88 127.91 1.07 1.23 114.95 1.27 0.89 70.55 1.41 1.107 78.51
6. Shareholders 3.07 2.02 65.79 3.41 2.53 74.19 6.34 6.19 97.62 8.02 8.22 102.49 9.17 9.34 101.85
7. Awards or
Accolades
2.94 0 0 0 0 0 0 0 0.90 0 0 1.79 0 0
Overall Mean
Disclosure
3.018 2.40 3.3 3.95 4.8
Source: Computed from Disclosure Score as Given in Table 6.2
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Similarly, the table 6.2.1 reveals that overall item wise mean disclosure score of
the sampled companies is 4.8. It depicts that the companies have been disclosing 4.8% of
items given in the voluntary corporate governance checklist. Mean disclosure score is
maximum with respect to „shareholders‟ (9.17) followed by „corporate governance
initiatives‟ (8.49), „ formation of committees‟ (7), „board of directors‟ (3.37), „meetings
& attendance‟ (2.5), „others‟ (1.79) and „reports of committees‟ (1.41). S.D is the highest
with respect to „shareholders‟ (9.34) and „corporate governance initiatives‟ (9.33). This
implies the larger variations in the items under these two headings as compared to other
heads of the checklist. CV is the highest under the heading „corporate governance
initiatives‟.
On the whole, it can be concluded from the above analysis that though there is
slight improvement in the mean disclosure score over a period of time except for the year
2001-02 yet the disclosure score is considered to be very low. Mean disclosure score
even ranges up to 5% level which can be assumed as a weak disclosure. It emerges that
the companies are not paying more attention to adopt the practices other than those as
required by law.
6.5 Summary: It emerges from the above analysis that there are variations in the
disclosure of items over a period of time. Maximum no. of companies have been
disclosing the information regarding the „committee of directors‟, „insider trading code‟,
„submission of information to SEBI Electronic Data Filing and Retrieval System‟,
„electronic clearing service mandate‟, functions of the board, etc. On the other hand, a
very few companies have been paying attention to provide the „training to its board
members‟. Moreover, companies are also silent on the information regarding the
„mechanisms for evaluating the performance of non-executive directors‟. So far as
formation of committees is concerned, the companies must form strategy committee in
order to frame the various policies or strategies for the business in this competitive world.
But it has been observed that just one company out of 112 sampled companies, has set up
strategy committee and risk management committee. At present, due to financial crisis in
the world stock market, it has become essential for the companies to set up risk
Voluntary Corporate Governance Disclosure Practices of Selected Companies
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management committee so that external or internal risks attached to the companies can be
managed.
Hence, it can be concluded that though there is slight increase in the mean
disclosure score of voluntary governance items over a period of time yet the overall
disclosure score is less than 50%. It has been observed that mean disclosure score just
ranges between 3-5%. It emerges that the companies are not paying attention to adopt the
practices other than those as required by law. There are few items namely „whistle blower
policy‟, „code of conduct for directors or senior management personnel‟, „CFO/CEO
certification on financial statements‟ and „risk management‟ which have become a part of
the revised clause 49 of the listing agreement. There is a need to extend the scope of
mandatory corporate governance practices further so that more transparency can be
ensured to the investors in governance matters. Moreover, institutes like ICAI and ICSI,
etc., must conduct awards for the best voluntary corporate governance practices also.
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