Preface:: Kumar Mangalam Birla Committee

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 Exchanges, 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.
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.
THE TERM COMMITTEE:
The Committees terms of the reference were to: suggest suitable amendments to
the listing agreement executed by the stock exchanges with the companies and any
other measures to improve the standards of corporate governance in the listed
companies, in areas such as continuous disclosure of material information, both
financial and non-financial, manner and frequency of such disclosures,
responsibilities of independent and outside directors; draft a code of corporate best
practices; and suggest safeguards to be instituted within the companies to deal with
insider information and insider trading.

CORPORATE GOVERNANCE:
The Objective.
1. Corporate governance has several claimants shareholders and other
stakeholders - which include suppliers, customers, creditors, and 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, keeping
in view primarily the interests of a particular class of stakeholders, namely, the
shareholders, who together with the investors form the principal constituency of
SEBI while not ignoring the needs of other stakeholders.
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 stakeholder". This definition harmonizes the need for a company to strike
a balance at all times between the need to enhance shareholders wealth whilst not
in any way being detrimental to the interests of the other stakeholders in the
company.
3. In the opinion of the Committee, the imperative for corporate governance lies
not merely in drafting a code of corporate governance, but in practicing it. Even
now, some companies are following exemplary practices, without the existence of
formal guidelines on this subject. Structures and rules are important because they
provide a framework, which will encourage and enforce good governance; but
alone, these cannot raise the standards of corporate governance. What counts is the
way in which these are put to use. The Committee is thus of the firm view, that the
best results would be achieved when the companies begin to treat the code not as a
mere structure, but as a way of life.
4. It follows that the real onus 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. The extent of discipline, transparency and fairness, and the
willingness shown by the companies themselves in implementing the Code, will be
the crucial factor in achieving the desired confidence of shareholders and other
stakeholders and fulfilling the goals of the company

THE RECOMMENDATIONS 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.While making the
recommendations the Committee has been mindful that any code of Corporate
Governance must be dynamic, evolving and should change with changing context
and times. It would therefore be necessary that this code also is reviewed from time
to time, keeping pace with the changing expectations of the investors,
shareholders, and other stakeholders and with increasing sophistication achieved in
capital markets.

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.
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.
Board Procedures At least 4 Meetings of the Board in a Year with
Maximum Gap of 4 Months between 2 Meetings. To Review Operational
Plans, Capital Budgets, Quarterly Results, Minutes Of Committees Meeting.
Director Shall Not Be A Member Of More Than 10 Committee And Shall
Not Act As Chairman Of More Than 5 Committees Across All Companies
Management Discussion And Analysis Report Covering Industry Structure,
Opportunities, Threats, Risks, Outlook, Internal Control System
Information Sharing With Shareholders

NON-MANDATORY RECOMMENDATIONS:
Role Of Chairman
Remuneration Committee Of Board
Shareholders 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
Venturing Into New Businesses

Preface:: Kumar Mangalam Birla Committee

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Preface:: Kumar Mangalam Birla Committee

Uploaded by

Copyright:

Available Formats

PREFACE:

You might also like