Description
The PPT explains with corporate governance and how the companies are incorporating CSR as a part of their management strategy.
Corporate Governance and CSR
What is Corporate Governance?
? ? ? ? ?
A Topic of World wide Political Debate Gained more importance in last two Decades Power & Responsibilities of Board of Directors Rules Governing Mergers & Acquisitions Compensation of Chief Executives
What is Corporate Governance
? ? ?
Study requires Interdisciplinary approach Closely related to broader subjects CSR & Ethics are important aspects of Corporate Governance
?
Involves the problems of Corporate Decision Making , Leadership and Organization Theory
Definitions of Corporate Governance
? ?
No Standardized Definition
“Deals with the ways in which suppliers of finance to
corporations assure themselves of getting A return on their investment”, The Journal of Finance, Shleifer
and Vishny
?
“Defined narrowly as the relationship of a company with its shareholders or, more broadly as its relationship with society” from an article in Financial Times(1997)
Definitions of Corporate Governance
?
“Corporate governance is the system by which business
corporations
are
directed
&
controlled.
The
Corporate
Governance structure specifies the distribution of rights & responsibilities among participants in the Corporations, such as the Board, Managers, Shareholders and other Stakeholders, and spells out the rules and procedures for making decisions on Corporate Affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance”, OECD April 1999
Board of Directors
?
A body of elected or appointed persons who oversee the activities of a Company As stated in the Articles of Association the strength of a Board should be minimum 5 members and maximum 18 members
?
?
ITC Board comprises of 15 Board Members, 4 of them are Executive Directors
Responsibilities
?
Following are the main responsibilities of the ITC Board
?
Set strategic goals and seek accountability for its fulfilment Provide direction and exercise control to ensure that the company fulfils Stakeholders’ aspirations and societal expectations Protect and enhance shareholder value
?
?
Appointment to the Board
?
Shareholders vote upon the appointment and removal of Directors in a general meeting at ITC All directors are liable to rotation unless otherwise voted by shareholders One third of the directors who are liable to retire by rotation, retire each year and are eligible for re-election
?
?
Board Composition
?
? ?
Executive Directors
Non Executive Directors Nominee Directors
Executive Directors
?
Role
?
Design, Develop Organization
and
Implement
Strategies
for
the
?
Responsible for the day to day operations of the company Accountable to the president of the Board and report to the board on a regular basis ITC Board has 4 Executive Directors including the Chairman, Mr. Y. C. Deveshwar
?
?
Non Executive Directors
?
Individuals having profound knowledge in fields of Finance, Law, Government and Regulatory Requirement, Technology etc. Act as guardians of the interest of all Shareholders and Stakeholders, especially in areas of potential conflict
?
?
The board of ITC has 6 such Independent Directors
Nominee Directors
?
Representatives of Government, Banks or Financial Institutions Ensure that the operations of the company are carried out in accordance with public policy and within the ambit of law Provide adequate feedback to the nominating institutions on the affairs and operations of the company
?
?
Nominee Directors
?
The Board of ITC has 3 such Nominee Directors
1.
Mr. A Baijal representing Unit Trust Of India Mr. R K Kaul representing General Insurer’s Association of India and Mr. D K Mehrotra representing the Life Insurance Corporation of India
2.
3.
Board Meetings
? ?
The Board to meet at least 6 times in a year The agenda papers for meetings are circulated 7 working days prior to the Board meeting
?
Review of Quarterly Performance, Internal External Audit Findings, Treasury Policies etc.
and
?
The Corporate governance report for year 2007-08 lists the date of meetings along with the members who attended the meeting
Role of Audit Committee
? Preparation
of final accounts is a mandatory and important task
? True
? Lack
and Fair view
of transparency in the accounts of companies in the past
Audit Committees
?
These failures have led to the formation of ? Cadbury Committee ? The Blue Ribbon Committee, National Association ? Securities Dealers (NASD) ? Securities and Exchange Commission ? N.R. Narayan Murthy Committee ? Naresh Chandra committee
Audit Committee Definition
?
The Cadbury Committee defines Audit Committee as a channel of communication between auditors and board of directors, in order to ensure that any difference in the opinion of the auditors and that of the board of directors could be addressed in a manner so as to ensure the reliability of the financial statements.
ITC Limited
Although, unlike USA, companies in India are not required to publish an audit committee report, ITC does publish and annual Corporate Governance report which has all the required details of the Audit Committee. ? The Audit Committee of the Board at ITC is in line with the Companies Act 1956 and Clause 49
?
ITC Audit Committee functions
?
The Audit Committee re-ensures the board the existence of an effective internal control environment which performs the following functions: 1. Efficiency and effectiveness of operations 2. Safeguarding of assets and provisions for liabilities. 3. Reliability of information 4. Compliance with all relevant statutes
ITC Audit Committee Powers
The Audit Committee also has the powers to 1. Investigate any activate and seek any information 2. Obtain legal and professional advice, whenever considered necessary
?
Role of ITC Audit Committee
1. 2. 3. 4. 5.
Overseeing the company’s financial reporting process Recommending the appointment and removal of external auditors Reviewing with the management the financial statement before submission to the board Reviewing the adequacy of internal audit function Reviewing the financial and risk management policies
ITC Audit Committee Composition
?
The committee presently comprises three Non-Executive Directors ? Independent Directors ? Financially literate ? Two members, including the Chairman of the Committee, have accounting and financial management expertise adhering to the Clause 49 agreement.
Remuneration Committee
Recommends compensation terms to the Board ? Comprises four Non Executive Directors ? Chairman of the committee is also a Non Executive Independent Director ? The compensation are declared in the Corporate Governance Report
?
Shareholders Grievance Committee
Looks into redressal of shareholder grievances ? Under the Chairmanship of a nonexecutive independent director ? It consists of three Directors, two of whom are independent directors ? Guarantees safeguarding of shareholder’s interests
?
ITC Code of Conduct
? ?
Adopted by the Board of Directors Applicable to Directors, Management and Employees Senior
?
Based on 3 fundamental principles
?
?
?
Good Corporate Governence Good corporate Citizenship Exemplary personal conduct
What the code covers?
Commitment to sustainable development ? Concern for occupational health ? Safety and environment ? Gender friendly work place ? Transparency and auditability ? Legal compliance ? Philosophy of leading by example
?
ITC code of conduct for insider trading
?
Prohibits purchase/sale of company shares by the employees of the company while he/she is in procession of unpublished sensitive information
Non Mandatory Clauses
?
?
? ? ? ? ?
?
Non-Executive Chairman's Office Tenure of independent Directors Remuneration Committee Shareholder Rights Audit Qualifications Training of board of directors Mechanism for evaluation of Non-Executive Directors. Whistle Blower policy
Whistle Blower policy
Encourages open door policy ? Any non-adherence of the ITC code of conduct/unethical behavior has to be brought to the notice of the higher authorities ? The matter to be raised with the head of corporate human resources.
?
Advantages of Corporate Governance
?
Advantages to the Clients and Stakeholders Advantages to the Company
?
Advantages to Client and Shareholders
? Improving access to capital:
Well governed companies receive higher market valuations and greater shareholder trust, resulting in higher capital flows
.
? Improving performance :
Improved governance structures ensure quality decision-making, and enhance the long-term prosperity.
Advantages to Company
? ?
Adding Value:
Corporate governance is a priority for a company because it presents opportunities for it to manage risks and add value to stakeholders.
Reducing investment risk:
It is in company’s interest to reduce the risk of investments by improving the governance of invested companies.
?
?
Avoiding risk to reputation:
Corporate governance ensures that the company’s reputation remains in the market.
Developing capital markets :
Improving corporate governance contributes to the development of the public and private capital markets by ensuring financial stability across the globe.
ITC Corporate Governance and CSR
CSR – Ensuring long term sustainability ? 4 major areas covered
?
Workplace ? Marketplace ? Community ? Environment
?
Stakeholder Engagement
?
Shareholders
Dividends and issue of bonus shares ? Chairman’s address at the AGM ? Board encourages open dialogue with all ? Investor Service Centre accredited with ISO 9001:2000 ? Dedicated and trained team to address needs and concerns of investors
?
Stakeholder Engagement
?
Customers
Continuous interaction with customers through visits, surveys and meetings ? Customer delight by new products, value added services, improvement in quality and strong R&D
?
Stakeholder Engagement
?
Employees
Lucrative remuneration to retain talent ? Improving their quality of life through better facilities, work life balance ? Constant feedback for employee satisfaction ? Skills improvement via training and development
?
Stakeholder Engagement
?
Government
Compliance with all economic, environment, safety and social regulations ? Reporting to the Regulatory agencies ? Proactive participation in Government, statutory and business forums ? Achieved “Beyond Compliance Status” for adopting best international practices
?
Stakeholder Engagement
?
Farmers
Integral part of the ITC value chain ? Improvement in quality and farm practices through in-house R&D ? E-Choupals helping in higher productivity, connectivity to markets and better price realisation ? Training and awareness building for pest management, water and energy conservation
?
Stakeholder Engagement
?
Community and Environment
Generating livelihood for over 5 million people ? E-Choupal – world’s largest rural infrastructure ? Zero solid waste discharge status ? Carbon positive two years in a row ? Water positive five years in a row
?
Stakeholder Engagement
?
Suppliers
Periodic vendor reviews and audits resulting in vendor development ? Vendor participation in design and development of products and services ? Support from vendors in improving/upgrading technology
?
Bibliography
1. 2. 3. 4. 5.
ICFAI University, Corporate Governance for Emerging Markets, 2006 ITC Report on Corporate Governance, 2008 ITC Sustainability Report, 2007 www.indlaw.comhttp://en.wikipedia.org/wiki/Board_of_directors
Thank You
doc_854416488.ppt
The PPT explains with corporate governance and how the companies are incorporating CSR as a part of their management strategy.
Corporate Governance and CSR
What is Corporate Governance?
? ? ? ? ?
A Topic of World wide Political Debate Gained more importance in last two Decades Power & Responsibilities of Board of Directors Rules Governing Mergers & Acquisitions Compensation of Chief Executives
What is Corporate Governance
? ? ?
Study requires Interdisciplinary approach Closely related to broader subjects CSR & Ethics are important aspects of Corporate Governance
?
Involves the problems of Corporate Decision Making , Leadership and Organization Theory
Definitions of Corporate Governance
? ?
No Standardized Definition
“Deals with the ways in which suppliers of finance to
corporations assure themselves of getting A return on their investment”, The Journal of Finance, Shleifer
and Vishny
?
“Defined narrowly as the relationship of a company with its shareholders or, more broadly as its relationship with society” from an article in Financial Times(1997)
Definitions of Corporate Governance
?
“Corporate governance is the system by which business
corporations
are
directed
&
controlled.
The
Corporate
Governance structure specifies the distribution of rights & responsibilities among participants in the Corporations, such as the Board, Managers, Shareholders and other Stakeholders, and spells out the rules and procedures for making decisions on Corporate Affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance”, OECD April 1999
Board of Directors
?
A body of elected or appointed persons who oversee the activities of a Company As stated in the Articles of Association the strength of a Board should be minimum 5 members and maximum 18 members
?
?
ITC Board comprises of 15 Board Members, 4 of them are Executive Directors
Responsibilities
?
Following are the main responsibilities of the ITC Board
?
Set strategic goals and seek accountability for its fulfilment Provide direction and exercise control to ensure that the company fulfils Stakeholders’ aspirations and societal expectations Protect and enhance shareholder value
?
?
Appointment to the Board
?
Shareholders vote upon the appointment and removal of Directors in a general meeting at ITC All directors are liable to rotation unless otherwise voted by shareholders One third of the directors who are liable to retire by rotation, retire each year and are eligible for re-election
?
?
Board Composition
?
? ?
Executive Directors
Non Executive Directors Nominee Directors
Executive Directors
?
Role
?
Design, Develop Organization
and
Implement
Strategies
for
the
?
Responsible for the day to day operations of the company Accountable to the president of the Board and report to the board on a regular basis ITC Board has 4 Executive Directors including the Chairman, Mr. Y. C. Deveshwar
?
?
Non Executive Directors
?
Individuals having profound knowledge in fields of Finance, Law, Government and Regulatory Requirement, Technology etc. Act as guardians of the interest of all Shareholders and Stakeholders, especially in areas of potential conflict
?
?
The board of ITC has 6 such Independent Directors
Nominee Directors
?
Representatives of Government, Banks or Financial Institutions Ensure that the operations of the company are carried out in accordance with public policy and within the ambit of law Provide adequate feedback to the nominating institutions on the affairs and operations of the company
?
?
Nominee Directors
?
The Board of ITC has 3 such Nominee Directors
1.
Mr. A Baijal representing Unit Trust Of India Mr. R K Kaul representing General Insurer’s Association of India and Mr. D K Mehrotra representing the Life Insurance Corporation of India
2.
3.
Board Meetings
? ?
The Board to meet at least 6 times in a year The agenda papers for meetings are circulated 7 working days prior to the Board meeting
?
Review of Quarterly Performance, Internal External Audit Findings, Treasury Policies etc.
and
?
The Corporate governance report for year 2007-08 lists the date of meetings along with the members who attended the meeting
Role of Audit Committee
? Preparation
of final accounts is a mandatory and important task
? True
? Lack
and Fair view
of transparency in the accounts of companies in the past
Audit Committees
?
These failures have led to the formation of ? Cadbury Committee ? The Blue Ribbon Committee, National Association ? Securities Dealers (NASD) ? Securities and Exchange Commission ? N.R. Narayan Murthy Committee ? Naresh Chandra committee
Audit Committee Definition
?
The Cadbury Committee defines Audit Committee as a channel of communication between auditors and board of directors, in order to ensure that any difference in the opinion of the auditors and that of the board of directors could be addressed in a manner so as to ensure the reliability of the financial statements.
ITC Limited
Although, unlike USA, companies in India are not required to publish an audit committee report, ITC does publish and annual Corporate Governance report which has all the required details of the Audit Committee. ? The Audit Committee of the Board at ITC is in line with the Companies Act 1956 and Clause 49
?
ITC Audit Committee functions
?
The Audit Committee re-ensures the board the existence of an effective internal control environment which performs the following functions: 1. Efficiency and effectiveness of operations 2. Safeguarding of assets and provisions for liabilities. 3. Reliability of information 4. Compliance with all relevant statutes
ITC Audit Committee Powers
The Audit Committee also has the powers to 1. Investigate any activate and seek any information 2. Obtain legal and professional advice, whenever considered necessary
?
Role of ITC Audit Committee
1. 2. 3. 4. 5.
Overseeing the company’s financial reporting process Recommending the appointment and removal of external auditors Reviewing with the management the financial statement before submission to the board Reviewing the adequacy of internal audit function Reviewing the financial and risk management policies
ITC Audit Committee Composition
?
The committee presently comprises three Non-Executive Directors ? Independent Directors ? Financially literate ? Two members, including the Chairman of the Committee, have accounting and financial management expertise adhering to the Clause 49 agreement.
Remuneration Committee
Recommends compensation terms to the Board ? Comprises four Non Executive Directors ? Chairman of the committee is also a Non Executive Independent Director ? The compensation are declared in the Corporate Governance Report
?
Shareholders Grievance Committee
Looks into redressal of shareholder grievances ? Under the Chairmanship of a nonexecutive independent director ? It consists of three Directors, two of whom are independent directors ? Guarantees safeguarding of shareholder’s interests
?
ITC Code of Conduct
? ?
Adopted by the Board of Directors Applicable to Directors, Management and Employees Senior
?
Based on 3 fundamental principles
?
?
?
Good Corporate Governence Good corporate Citizenship Exemplary personal conduct
What the code covers?
Commitment to sustainable development ? Concern for occupational health ? Safety and environment ? Gender friendly work place ? Transparency and auditability ? Legal compliance ? Philosophy of leading by example
?
ITC code of conduct for insider trading
?
Prohibits purchase/sale of company shares by the employees of the company while he/she is in procession of unpublished sensitive information
Non Mandatory Clauses
?
?
? ? ? ? ?
?
Non-Executive Chairman's Office Tenure of independent Directors Remuneration Committee Shareholder Rights Audit Qualifications Training of board of directors Mechanism for evaluation of Non-Executive Directors. Whistle Blower policy
Whistle Blower policy
Encourages open door policy ? Any non-adherence of the ITC code of conduct/unethical behavior has to be brought to the notice of the higher authorities ? The matter to be raised with the head of corporate human resources.
?
Advantages of Corporate Governance
?
Advantages to the Clients and Stakeholders Advantages to the Company
?
Advantages to Client and Shareholders
? Improving access to capital:
Well governed companies receive higher market valuations and greater shareholder trust, resulting in higher capital flows
.
? Improving performance :
Improved governance structures ensure quality decision-making, and enhance the long-term prosperity.
Advantages to Company
? ?
Adding Value:
Corporate governance is a priority for a company because it presents opportunities for it to manage risks and add value to stakeholders.
Reducing investment risk:
It is in company’s interest to reduce the risk of investments by improving the governance of invested companies.
?
?
Avoiding risk to reputation:
Corporate governance ensures that the company’s reputation remains in the market.
Developing capital markets :
Improving corporate governance contributes to the development of the public and private capital markets by ensuring financial stability across the globe.
ITC Corporate Governance and CSR
CSR – Ensuring long term sustainability ? 4 major areas covered
?
Workplace ? Marketplace ? Community ? Environment
?
Stakeholder Engagement
?
Shareholders
Dividends and issue of bonus shares ? Chairman’s address at the AGM ? Board encourages open dialogue with all ? Investor Service Centre accredited with ISO 9001:2000 ? Dedicated and trained team to address needs and concerns of investors
?
Stakeholder Engagement
?
Customers
Continuous interaction with customers through visits, surveys and meetings ? Customer delight by new products, value added services, improvement in quality and strong R&D
?
Stakeholder Engagement
?
Employees
Lucrative remuneration to retain talent ? Improving their quality of life through better facilities, work life balance ? Constant feedback for employee satisfaction ? Skills improvement via training and development
?
Stakeholder Engagement
?
Government
Compliance with all economic, environment, safety and social regulations ? Reporting to the Regulatory agencies ? Proactive participation in Government, statutory and business forums ? Achieved “Beyond Compliance Status” for adopting best international practices
?
Stakeholder Engagement
?
Farmers
Integral part of the ITC value chain ? Improvement in quality and farm practices through in-house R&D ? E-Choupals helping in higher productivity, connectivity to markets and better price realisation ? Training and awareness building for pest management, water and energy conservation
?
Stakeholder Engagement
?
Community and Environment
Generating livelihood for over 5 million people ? E-Choupal – world’s largest rural infrastructure ? Zero solid waste discharge status ? Carbon positive two years in a row ? Water positive five years in a row
?
Stakeholder Engagement
?
Suppliers
Periodic vendor reviews and audits resulting in vendor development ? Vendor participation in design and development of products and services ? Support from vendors in improving/upgrading technology
?
Bibliography
1. 2. 3. 4. 5.
ICFAI University, Corporate Governance for Emerging Markets, 2006 ITC Report on Corporate Governance, 2008 ITC Sustainability Report, 2007 www.indlaw.comhttp://en.wikipedia.org/wiki/Board_of_directors
Thank You
doc_854416488.ppt