KUMAR_MANGALAM_BIRLA_COMMITTEE_REPORT_ON.pptx
- 1. KUMAR MANGALAM BIRLA COMMITTEE REPORT ON CORPORATE GOVERNANCE
- 2. PREFACE The concept of corporate governance has been attracting public attention for quite some time in India. The topic is no longer confined to the halls of academia and is increasingly finding acceptance for its relevance and underlying importance in the industry and capital markets. Stock Exchange , Intermediaries, Financial institutions, Mutual Funds and concerned professionals who may have access to inside information. This is being dealt with in a comprehensive manner, by a separate group appointed by SEBI, under the chairmanship of Shri Kumar Mangalam Birla.
- 3. KUMAR MANGALAM BIRLA COMMITTEE In early 1999, Securities and Exchange Board of India(SEBI) had set up a committee under Shri Kumar Mangalam Birla, member SEBI Board, to promote and raise the standards of good corporate governance. The report submitted by the committee is the first formal and comprehensive attempt to evolve a ‘Code of Corporate governance’, in the context of prevailing conditions of governance in Indian companies, as well as the state of capital markets.
- 4. Corporate Governance-The Objective 1. Corporate Governance has several claimants – Shareholders and other stakeholders-Which includes suppliers , customers, creditors, the bankers, the employees of the company, the government and the society at large. This Report on Corporate Governance has been prepared by the committee for SEBI. 2. The Committee therefore agreed that the fundamental objective of corporate governance is the “enhancement of shareholder value keeping in view the interests of other stakeholders”.
- 5. 3. In the opinion of the committee, the imperative for corporate governance lies not merely in drafting a code of corporate governance, but in practising it. 4. It follows that the real ones of achieving the desired level of corporate governance, lies in the proactive initiatives taken by the companies themselves and not in the external measures like breadth and depth of a code or stringency of enforcement of norms.
- 6. THE RECOMMENDATION OF THE COMMITTEE This Report is the first formal and comprehensive attempt to evolve a Code of corporate Governance, in the context of prevailing conditions of governance in Indian companies, as well as the state of capital markets.
- 7. APPLICABILITY OF THE RECOMMENDATIONS Mandatory and Non-mandatory recommendations The committee divided the recommendations into two categories, namely, mandatory and non- mandatory. The recommendations which are absolutely essential for corporate governance can be defined with precision and which can be enforced through the amendment of the listing agreement could be classified as mandatory.
- 8. MANDATORY RECOMMENDATIONS Applies to listed companies with paid up capital of Rs. 3 Crore and above. Composition of Board of Directors – Optimum Combination of Executive & Non-Executive Directors. Audit Committee – With 3 Independent Directors with one having financial and accounting knowledge. Remuneration committee.
- 9. Board Procedure Management discussion and analysis report covering industry structure, opportunities, threats, risks, outlook, internal control system. Information sharing with shareholders.
- 10. NON-MANDATORY RECOMMENDATIONS Role of Chairman. Remuneration committee of board. Shareholder’s right for receiving half yearly financial performance postal ballot covering critical matters like alteration in memorandum etc. Sale of whole or substantial part of the undertaking. Corporate restructuring. Further issue of capital
- 11. Names of the members of the committee Shri Kumar Mangalam Birla, Chairman, Aditya Birla Group Chairman of the committee Shri Rohit Bhagat, Country Head, Boston Consulting Group. Dr. J Bhagwati, Jt. Secretary, Ministry of Finance. Shri Sameer Biswas, Regional Director, Western Region, Department of company Affairs, Government of India. Shri S. P. Chhajed, President of Institute of Chartered Accountants of India. Shri Virender Ganda, Ex-President of Institute of company secretaries of India. Dr. Sumantra Ghoshal, Professor of Strategic Management, London Business school. Shri Vijay Kalantri, President, All India Association of Industries. Shri Pratip Kar, Executive Director, SEBI – Member Secretary. Shri Y. H. Malegam, Managing Partner, S.B. Billimoria & Co.
- 12. Names of the members of the committee Shri Kumar Mangalam Birla, Chairman, Aditya Birla Group Chairman of the committee Shri N. R. Narayana Murthy, Chairman and Managing Director, Infosys Technologies Ltd. Shri A. K. Narayanan, President of Tamil Nadu Investor Association. Shri Kamal Parekh, Ex-President, Calcutta Stock Exchange(Shri J M Chaudhary – President Calcutta stock exchange). Dr. R.H. Patil, Managing Director, National Stock Exchange Ltd. Shri Anand Rathi, President of the Stock Exchange , Mumbai. Ms. D.N. Raval, Executive Director, SEBI. Shri Rajesh Shah, Former President of Confederation of Indian Industries. Shri L. K. Singhvi, Sr. Executive Director, SEBI. Shri S. S. Sodhi, Executive Director, Delhi Stock Exchange.
- 13. Suggested List of items to be Included in the report on Corporate Governance in the Annual Report of Companies 1. A brief statement on company’s philosophy on code of governance. 2. Board of Directors. 3. Audit Committee. 4. Remuneration Committee report. 5. Shareholders Committee. 6. General Body meetings. 7. Disclosures. 8. Means of communication. 9. General Shareholder Information.
- 14. CLAUSE 49 As per the committee, the recommendations should be made applicable to the listed companies, their directors, management, employees and professionals associated with such companies, in accordance with the time table proposed in the schedule given later in this section. The recommendations will apply to all the listed private and public sector companies, in accordance with the schedule of implementation. The committee recognizes that compliance with the recommendations would involve restructuring the existing board of companies. It also recognises that some companies, especially the smaller ones, may have difficulty in immediately complying with these conditions. The recommendations were implemented through Clause 49 of the Listing Agreements, in a phased manner by SEBI.
- 15. CONCLUSION There are several corporate governance structures available in the developed world but there is no one structure, which can be singled out as being better than the others. There is no “one size fits all” structure for corporate governance. The committee’s recommendations are not therefore based on any one model but are designed for the Indian environment. Corporate Governance extends beyond corporate law. The committee believes that its recommendations will go a long way in raising the standards of corporate governance in Indian firms and make them attractive destinations for local and global capital. These recommendations will also form the base for further evolution of the structure of corporate governance in consonance with the rapidly changing economic and industrial environment of the country in the new millennium.