M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

Cadbury Committee
A committee was set up under the chairmanship of ADRAIN
CADBURY in May 1991 by the financial reporting council, the London
stock exchange and the accountancy professional to look into the financial
aspect of corporate governance. The committee first submitted its report for
public scrutiny on 27 May,1992.

The recommendation made by the Cadbury Committee are as

follows:-

 Decision making power should not be vested in single person, i.e

there should be a separation of the roles of the chairman and the chief
executives.
 Non- executive directors should act independently while giving their
judgment on issues of the strategy, performance, allocation of
resources and designing codes conduct.
 A majority of directors should be independents non- executive
directors i.e they should not have any financial interest in the
company.
 The terms of directors should not exceeds three years. This can be
extended only with the prior approvals of the shareholders.
 There should be full transparency in matter relating to directors
emolument. There should be judicious mix of salary and performance
related pay.
 A remuneration committee made up wholly or largely to non-
executive directors should decide on the pay of the executive
directors.
 The interim company report should give the balance sheet
information and should be reviewed by the auditor.
 The pension funds should be managed distinct from the company.
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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

 There should be a “profession and objective” relationship between

the board and the executives.
 Information regarding the audit fee should be made public and there
should be regular rotation of auditors.

The recommendation made by the Cadbury Committee were widely

accepted by the corporate in U.K and they became a reference for many
other committees, which were up.

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

Comments:-
The HINDUSTAN MOTORS LIMITED complies with all the Cadbury
Committee Recommendations’.

The company has separate powers for the chairman & executive &
non executive directors. There are one executive director and nine non
executive director. The chairman takes advice on major decision of the
company. The non executive director takes the decision in the best interest
of the company.

The majority of Board of Director are independent,i.e.,6 The

Company provides all the relevant information about the company in a
transparent manner which means they provide all the information. There is
one non executive chairman who is also promoter of the company.

The tenure of board of director is 3 years & it can be extended with

the approval of stakeholders. The balance sheet is approved by the
auditors.

The board of directors meeting was held 4 times in the past year
which is good for the development of the company.

The company keeps a healthy & friendly environment in its working

so keep the employees happy & satisfied.

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

N.R Narayan Murthy Committee

With the belief that the efforts to improve corporate governance
standards in India must continue because these standards themselves were
evolving in keeping with the market dynamics, the Securities and
Exchange Board of India (SEBI) had constituted a Committee on Corporate
Governance in 2002 , in order to evaluate the adequacy of existing
corporate governance practices and further improve these practices. It was
set up to review Clause 49, and suggest measures to improve corporate
governance standards.

The SEBI Committee was constituted under the Chairmanship of Shri

N. R. Narayana Murthy, Chairman and Chief Mentor of Infosys
Technologies Limited. The Committee comprised members from various
walks of public and professional life. This included captains of industry,
academicians, public accountants and people from financial press and
industry forums.

The terms of reference of the committee were to:

 review the performance of corporate governance; and

 determine the role of companies in responding to rumour and other
price sensitive information circulating in the market, in order to
enhance the transparency and integrity of the market.

The issues discussed by the committee primarily related to audit

committees, audit reports, independent directors, related parties, risk
management, directorships and director compensation, codes of conduct
and financial disclosures.

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

The committee's recommendations in the final report were selected

based on parameters including their relative importance, fairness,
accountability, transparency, ease of implementation, verifiability and
enforceability.

The key mandatory recommendations focused on:

 strengthening the responsibilities of audit committees;

 improving the quality of financial disclosures, including those related
to related party transactions and proceeds from initial public
offerings;
 requiring corporate executive boards to assess and disclose business
risks in the annual reports of companies;
 introducing responsibilities on boards to adopt formal codes of
conduct; the position of nominee directors; and
 stock holder approval and improved disclosures relating to
compensation paid to non-executive directors.

Non-mandatory recommendations included:

 moving to a regime where corporate financial statements are not

qualified;
 instituting a system of training of board members; and
 evaluation of performance of board members.

As per the committee, these recommendations codify certain

standards of 'good governance' into specific requirements, since certain
corporate responsibilities are too important to be left to loose concepts of
fiduciary responsibility. Their implementation through SEBI's regulatory
framework will strengthen existing governance practices and also provide
a strong incentive to avoid corporate failures.

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

The Committee noted that the recommendations contained in their

report can be implemented by means of an amendment to the Listing
Agreement, with changes made to the existing clause 49.

Comments

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

The HINDUSTAN MOTORS LTD company also fully complies with the
Narayan Murthy Committee recommendation.

They also focus on giving more importance to the interest of the

stakeholders. The company also provides all the relevant detail regarding
their management discussion & analysis is attached to the Director’s report.

The company also provides some training to their employee & staff worker
to increase their ability & work efficiency.

The company also provides financial disclosures, including those related to

related party transactions and proceeds from initial public offerings.

The main focus of the committee was to strengthening of the audit

committee responsibility & to increase the transparency of the company’s
financial details & enhancing the company ability to gain more confidence
in the mind of the public.

The company also takes approval from stakeholders in deciding how much
salary should be given to the non – executive directors.

The main aim or focus of the committee was to strengthening the certain
standards of 'good governance' & helping to build confidence among the
stakeholders & customers mind.

Kumar Mangalam Birla Committee Report

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

Kumar Mangalam Birla Committee appointed by the Securities

Exchange Board Of India (SEBI) on May7, 1999. The committee was formed
to promote and raise the standards of corporate governance.

Some of the recommendation made by Kumar Mangalam Birla

Committee are as follow:-

1. The board should have an optimum combination of executives and

non- executive’s directors and at least 50% of the board should
comprise of independent directors where chairman is non-executive
and at least half of the board should be independent in case of an
executive chairman.
2. A qualified and an independent “audit committee” should be set by
the board of the company. This would go a long way in enhancing
the creditability of the financial disclosure of a company and
promoting transparency.
3. The board should set up a “remuneration committee” it determine on
their behalf and on the behalf of the shareholder with agreed terms of
reference, the company’s policy on specific remuneration packages
for executive directors including pension right and compensation
payment.
4. The board should set up a committee under the chairmanship of a
non- executive / independent director to specifically into
shareholders issues including share transfer and redressed of
shareholder complaint.
5. To expedite the process of the share transfer, the board should
delegate the power of the share transfer to an officer or a committee
or to the registrar and share transfer agents. The delegated authority
should attend to share transfer formalities at least once in a fortnight.

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

6. The corporate governance section of the annual report should make

disclosures on remuneration paid to director in all forms including
salary, benefits, bonuses, stock option, pension and other fixed as
well as performance linked incentives paid to the directors.
7. The board meeting should be at least four time in a year, with a
maximum gap of four month between any two meetings and all
information recommended by SEBI committee should be placed
before the board.
8. As part of disclosure related to management, in addition to the
director’s report, management discussion and analysis report should
part of the annual report to the shareholder.
9. All the company related information like quarterly result,
presentation made by the companies to analysts may be put on
company’s websites or may be sent in such form so as to enable the
stock exchange on which the company is listed to put it on its own
websites.
10. There should be separate section on corporate governance in the
annual report, with details on the level of compliance by the
company. Non- compliance of mandatory recommendation with
reason thereof and the extent to which the non- mandatory
recommendation have been adopted should be specifically
highlighted.
11. No director should be a member in more than 10 committee or act as
chairman of more than five committees across all companies in which
he is director. Furthermore, it should be a mandatory annual
requirement for every director to inform the company about the
committees position he occupies in other companies and changes.
12. The company should provide a brief resume, expertise in specific
functional areas+ and names of the companies, in which the person

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

also holds the directorship and the membership of committees of the

board, while appointing a new director or re- appointing an existing
director. There should form part of the notice to shareholders.
13. Disclosures to be made to the board by the management relating to
all material, financial and commercial transaction, where they have
personal interest that may have a potential conflict with the interest
of the large. These include dealing in company shares, commercial
dealing with bodies, which have shareholdings of management and
their relatives, etc.
14. The half yearly declaration of financial performance including
summary of the significant events in last six months, should be sent
to each households of shareholders.
15. The financial institutions should under normal circumstances have
no direct role in the decision- making of the board of the company.
They should not have nominees on the board, merely by virtue of the
financial exposure in the company. There is, however, a ground for
the term lending financial institution to have nominees on the boards
of the borrowers companies, to protect their interest as creditors. In
such cases, the nominees directors should take an active interest in
the activates of the board and assume equal responsibility, as any
other director on the board.
16. A separate section on compliance with the mandatory
recommendation of clause 49 should form part and details of non-
compliance should be highlighted
17. A certificate from the auditors on compliance should form part of the
annual report and annual report and a copy has to be sent to the
stock exchanges.

Comments

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

The HINDUSTAN MOTORS LTD, complies with most of the

recommendation of the Kumar Mangalam Committee Report.

The company has 9 non executive directors out of 10 directors. The board
complying with 60% directorship which is average . The audit committee
setup by the company is an independent entity & provides the company’s
financial details in a transparent & fair manner & enhancing the
creditability of the company.

The company has also setup remuneration committee which decides the
salary of the board of directors & its employees. The meeting was held on
4th september 2009 & 27 january 2010.

Thay have setup a different share transfer agent & registrar of share

The company holded 4 board meetings during the financial year & the gap
between the meetings was only 4 months. The company also provides their
financial reports on a quarterly & half yearly basis on their websites .

The company also complies with the No director should be a member in

more than 10 committee or act as chairman of more than five committees
across all companies in which he is director.

The companies also have a separate section of Corporate Governance

report in its financial report.

The company also provides all the detail about the attendance of the
different board of directors & their salary.

The company complies fully with the clause 49 of the SEBI listing
agreement.

The board has appointed a company secretary as the compliance

officer under the code responsible for complying with the procedures,

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

monitoring adherence to the rules for the preservation of price sensitive

information, pre- clearance of trade monitoring the trade and
implementation of the code of conduct under the overall supervision of the
Board. The company has formulated a code of conduct for prevention of
insider trading in accordance with the guidelines specified under the SEBI
Regulation Act 1992.

CII Report

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

Confederation Of Indian Industry (CII) took the initiatives to draft

some codes of corporate governance. CII was set up in mid 1996 under the
leadership of Mr.Rahul. Baja, ex president, CII, and CMD, Bajaj Auto Ltd.

Objectives:-

 Primary goal of CII is to develop Indian Industry and to ensure that

government and society as whole, understand both the needs of
industry and its contribution to the nation and well- beings. The
objective of CII are as follow:-

 To identify and strengthen industry’s role in the economic

development of the Indian Industry.

 To act as a catalyst in bringing about the growth and development of

Indian Industry.

 To reinforce Industry’s commitment to the society.

 To provide up to date information and data to industry and

government.

 To create awareness and support industry’s effort on quality

environment, energy management, and consumer protection.

 To identify and address the special needs of the small sector to make
it more competitive.

 To promote cooperation with counterparty organization.

 To work towards the globalization of Indian Industry and integration

into the world economy.

This is done by adopting a proactive and partnership approach with

the government on various national and international issues concerning the

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

Indian economy. It closely interact on the policy issues at both the central
and the state level. Extensive dialogue and interaction with members and
all section of the community to build consensus are held.

Some of the recommendation made by the CII committee on

corporate governance is given below:-

1. The full board should meet a minimum of six times a year, preferably
at an interval of two months, and each meeting should have agenda
items that require at least half day’s discussion.

2. Any listed company with a turnover of Rs.100/- crore and higher

should have professionally competent, independent, non- executive
directors, who should constitute at least 30% of the board if the
chairman of the company is a non- executive directors, or at least
50% of the board if the chairman and managing directors is the same
person.

3. No single person should hold directorship in more than 10

companies. This ceiling excludes directorship in subsidiaries (where
the group has over 25% but no more than 50% equity stake).

4. For non- executive director to play a material role in corporate

decision- making and maximization long- term shareholder value,
they need to become active participant on the board, not passive
advisors; have clearly defined responsibilities within the bard such as
audit committee; and know how to read a balance sheet, profit and
loss accounts, cash flows statement and financial ratio and have some
knowledge of various company law. This, of course, exclude those
who are invited to join boards as expert in other fields such as science
and technology.

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

5. To secure better effort from non- executive directors, companies

should pay a commission over and above the sitting fees for the use
of professional inputs. The present commission of 1% of net profit (if
the company has a managing director) is sufficient; consider offering
stock options, so as to relate reward to performance commission
reward on current profit. Stock option are reward contingent upon
future appreciation of corporate value. An appropriate mix of the
two can align a non- executive directors towards keeping an eye on
short term profit as well as long term shareholder value.

6. While re-appointing members of the boards, companies should give

the attendance record of the concerned directors. If the director’s has
not been present (absent with or without leave) for 50% or more
meetings, then this should be explicitly stated in the resolution that is
put to vote. As a general practice, one should not re-appoint any
director who has not had the time to attend even one half of the
meetings.

Key information that must be reported and placed before the board
must contain:

 Annual operating plans and budgets, together with update long term
plan.

 Capital budgets, manpower and overhead budgets.

 Quarterly result for the company as a whole and its operating

division or business segments.

 Internal audit reports, including cases of theft and disorder of a

material nature.

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

 Show cause, demand and prosecution notice report revenue

authorities that are considered important (material nature of any
exposure that exceeds 1% of the company’s net worth).

 Fatal or serious accident, dangerous occurrence, and any effluent or

pollution problems.

 Default in payment of interest or non- payment of the principal on

any public deposit, and/ or to any secured creditor or financial
institution.

 Default such as non- payment of inter- corporate deposit by or to the

company, or materially substantial non- payment for goods sold by
the company.

 Any issues which involves possible or public product liability claim

of a substantial nature, including any judgment or order which may
have either passed structures on the conduct of the company, or
taken as adverse view regarding another enterprise that can have
negative implication for the company.

 Details of any joint venture or collaboration agreement.

 Transaction that involves substantial payment towards goodwill,

brand equity, r intellectual property.

 Recruitment and remuneration of senior officer just below the board

level, including appointment or removal of the chief financial officer
and the company secretary.

 Labor problems and their proposed solution.

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

 Quarterly details of foreign exchange exposure and the steps taken

by the management to limit the risk of adverse exchange rate
movement, if material.

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

Comments
The company complies with all the recommendations of the CII committee
recommendations.

The company has setup a consumer grievance committee which sees the
complaints of various stakeholders & customers.

The company has taken certain initiatives in building a good corporate

image & has taken certain initiatives for social responsibilities.

They also provides all the relevant details about the financial position &
their collaborations.

Name Qualifications Salary Meetings Attended

Santhanam .R B.tech P.G,Dip 51,61,320 4/4

(mgmt)
Eric Paul Rajendran P.G. in personnel 22,72,360 4/4
Mgmt
Chowdhury Moloy B.E (Mech) 30,54,129 N.A
Vijay Kumar B.E , MBA 38,26,447 2/4
Ravi K R MA in personel 30,35,093 2/4
Mgmt, MA in Public
Admin
Murhty KSr Mtech , PGDBM 25,16,900 2/4
Goenka Y B.Com, 19,28,844 2/4
FICWA,ACS,MBM
Sriram P s BE, (Mech) 23,57,459 N.A

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

India's First ATM Card Fraud

The Chennai City Police have busted an international gang involved

in cyber crime, with the arrest of Deepak Prem Manwani (22), who was

caught red-handed while breaking into an ATM in the city in June last, it is

reliably learnt.

The dimensions of the ci+

ty cops' achievement can be gauged from the fact that they have

netted a man who is on the wanted list of the formidable FBI of the United

States. At the time of his detention, he had with him Rs 7.5 lakh knocked

off from two ATMs in T Nagar and Abiramipuram in the city. Prior to that,

he had walked away with Rs 50,000 from an ATM in Mumbai.

While investigating Manwani's case, the police stumbled upon a

cyber crime involving scores of persons across the globe.

Manwani is an MBA drop-out from a Pune college and served as a

marketing executive in a Chennai-based firm for some time.

Interestingly, his audacious crime career started in an Internet cafe. While

browsing the Net one day, he got attracted to a site which offered him

assistance in breaking into the ATMs. His contacts, sitting somewhere in

Europe, were ready to give him credit card numbers of a few American

banks for $5 per card. The site also offered the magnetic codes of those

cards, but charged $200 per code.

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

The operators of the site had devised a fascinating idea to get the

personal identification number (PIN) of the card users. They floated a new

site which resembled that of a reputed telecom companies.

That company has millions of subscribers. The fake site offered the

visitors to return $11.75 per head which, the site promoters said, had been

collected in excess by mistake from them. Believing that it was a genuine

offer from the telecom company in question, several lakh subscribers

logged on to the site to get back that little money, but in the process parted

with their PINs.

Armed with all requisite data to hack the bank ATMs, the gang

started its systematic looting. Apparently, Manwani and many others of his

ilk entered into a deal with the gang behind the site and could purchase

any amount of data, of course on certain terms, or simply enter into a deal

on a booty-sharing basis.

Meanwhile, Manwani also managed to generate 30 plastic cards that

contained necessary data to enable him to break into ATMS.

He was so enterprising that he was able to sell away a few such cards to his

contacts in Mumbai. The police are on the lookout for those persons too.

On receipt of large-scale complaints from the billed credit card users and

banks in the United States, the FBI started an investigation into the affair

and also alerted the CBI in New Delhi that the international gang had

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M. D. COLLEGE CORPORATE GOVERNANCE T. Y. F. M.

developed some links in India too. Manwani has since been enlarged on

bail after interrogation by the CBI. But the city police believe that this is the

beginning of the end of a major cyber crime.

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