Kumaramangalam Birla Committee recommendations: Three Constituents
Shareholders
the Board of Directors
the Management
Applicability of recommendations
Mandatory
Non mandatory
Mandatory recommendations
absolutely essential for the framework of corporate governance and virtually form its core which can be enforced through the amendment of the listing agreement
Applicability
applicable to the listed companies, their directors, management, employees and professionals associated with such companies,
The ultimate responsibility for putting the recommendations into practice lies directly with the board of directors and the management of the company.
recommendations will apply to all the listed private and public sector companies, in accordance with the schedule of implementation.
As for listed entities, which are not companies, but body corporates (e.g. private and public sector banks, financial institutions, insurance companies etc.) incorporated under other statutes, the recommendations will apply to the extent that they do not violate their respective statutes, and guidelines or directives issued by the relevant regulatory authorities.
Board Of directors
The Board of a Company provides leadership and strategic guidance, objective judgement independent of the management to the Company and exercises control over the Company.
The Board must fulfils its legal requirements and also must be aware and understanding of its responsibilities.
An effective corporate governance system is one, which allows the Board to perform these dual functions efficiently
Functions of BOD
Directs the Company by formulating and reviewing the Company’s policies.
Controls the Company and its management by laying down the code of conduct.
Is accountable to the shareholders for creating, protecting and enhancing wealth
and resources of the Company.
Is not involved in day to day management of the Company.
Composition
Executive directors are involved in the day to day management of the Companies
Non executive directors bring external and wider perspective and independence to the decision making.
Non executive directors may be independent or non-independent.
Independent Directors
Receive director’s remuneration
Do not have any other material pecuniary relationship or transactions with the Company, its promoters, its management etc.,
Emphasis on the calibre of the non executive directors.
Mandatory Recommendations
Optimum combination of executive and non-executive directors with not less than 50% of the board comprising the non executive directors.
At least one third of the board should comprise of independent directors
Institutions should appoint nominees on the board of Companies only on a selective basis where such appointment is considered necessary to protect the interest of the Institution
Chairman
The role of the Chairman is to ensure that the board meetings are conducted in an effective manner.
The Chairman’s role should in principle be different from that of the Chief Executive.
Non-mandatory REcommendation
A non executive Chairman should be entitled to maintain a Chairman’s Office at the Company's expense and also allowed reimbursement of expenses incurred in the performance of his duties.
Audit Committee
Oversight of the finance function and monitoring
Relies on the senior financial management and the outside auditors.
Mandatory recommendation
A qualifies and independent audit committee should be set up by the board of a Company. This would go a long way in enhancing the credibility of the financial disclosures of a Company and promoting transparency
Audit Committee
Minimum of 3 members ( non executive directors, majority being independent and with at least one director having financial and accounting knowledge)
The chairman of the committee should be an independent director.
The Chairman should be present at AGM to answer shareholder queries.
The Company Secretary should act as the Secretary to the Committee
( the above are mandatory recommendations)
Frequency of meetings and quorum of the Audit committee
Meet at least thrice a year
One meeting before finalization and one every 6 months
Quorum should be either 2 members or 1/3rd of the members of the audit
committee whichever is higher and there should be a minimum of two independent directors. ( this is a mandatory recommendation
Powers of the Audit Committee
To investigate any activity within its terms of reference
To seek information from any employee
To obtain outside legal or other professional advice
To secure services of outsiders with relevant expertise
( this is a mandatory recommendation)
Board procedures
The Board meetings should be held at least 4 times in a year with a maximum time gap of 4 months between any two meetings.
A director should not be a member in more than 10 committees or act as a Chairman of more than 5 committees across all companies in which he is a director.
Every director must inform the Company about the Committee positions he occupies in other Companies and notify changes as and when they take place.
Management
Management is responsible for ensuring that the principles of corporate governance are adhered to and enforced.
Disclosures must be made by the management to the Board relating to all material financial and commercial transactions, where they have personal interest that may have potential conflict with the interest of the Company at large
( this is a mandatory recommendation)
Shareholders
The GBM provide an opportunity to the shareholders to address their concerns to the Board of Directors and comment on and demand any explanation on the Annual report or on the overall functioning of the Company.
Responsibilities of Shareholders
Show a greater degree of interest and involvement in the appointment of directors and the auditors.
Inform themselves about the new directors.
Shareholders rights
Right to transfer and registration of shares.
Obtaining relevant information on the Company on a timely and regular basis
Participating and voting in shareholder meetings
Electing members of the Board
Right to information on takeovers, sale of assets or divisions of the Company and changes in the Capital structure.
Half yearly declaration of financial performance including summary of significant events in the last 6 months should be sent to each household of shareholders.
( these are mandatory recommendations)
A board committee under the chairmanship of a non-executive director should be formed to specifically look into the redressal of shareholder complaints like transfer of shares, non-receipt of balance sheet, non receipt of declared dividends etc.,
( this is a mandatory recommendation)
Shareholders
the Board of Directors
the Management
Applicability of recommendations
Mandatory
Non mandatory
Mandatory recommendations
absolutely essential for the framework of corporate governance and virtually form its core which can be enforced through the amendment of the listing agreement
Applicability
applicable to the listed companies, their directors, management, employees and professionals associated with such companies,
The ultimate responsibility for putting the recommendations into practice lies directly with the board of directors and the management of the company.
recommendations will apply to all the listed private and public sector companies, in accordance with the schedule of implementation.
As for listed entities, which are not companies, but body corporates (e.g. private and public sector banks, financial institutions, insurance companies etc.) incorporated under other statutes, the recommendations will apply to the extent that they do not violate their respective statutes, and guidelines or directives issued by the relevant regulatory authorities.
Board Of directors
The Board of a Company provides leadership and strategic guidance, objective judgement independent of the management to the Company and exercises control over the Company.
The Board must fulfils its legal requirements and also must be aware and understanding of its responsibilities.
An effective corporate governance system is one, which allows the Board to perform these dual functions efficiently
Functions of BOD
Directs the Company by formulating and reviewing the Company’s policies.
Controls the Company and its management by laying down the code of conduct.
Is accountable to the shareholders for creating, protecting and enhancing wealth
and resources of the Company.
Is not involved in day to day management of the Company.
Composition
Executive directors are involved in the day to day management of the Companies
Non executive directors bring external and wider perspective and independence to the decision making.
Non executive directors may be independent or non-independent.
Independent Directors
Receive director’s remuneration
Do not have any other material pecuniary relationship or transactions with the Company, its promoters, its management etc.,
Emphasis on the calibre of the non executive directors.
Mandatory Recommendations
Optimum combination of executive and non-executive directors with not less than 50% of the board comprising the non executive directors.
At least one third of the board should comprise of independent directors
Institutions should appoint nominees on the board of Companies only on a selective basis where such appointment is considered necessary to protect the interest of the Institution
Chairman
The role of the Chairman is to ensure that the board meetings are conducted in an effective manner.
The Chairman’s role should in principle be different from that of the Chief Executive.
Non-mandatory REcommendation
A non executive Chairman should be entitled to maintain a Chairman’s Office at the Company's expense and also allowed reimbursement of expenses incurred in the performance of his duties.
Audit Committee
Oversight of the finance function and monitoring
Relies on the senior financial management and the outside auditors.
Mandatory recommendation
A qualifies and independent audit committee should be set up by the board of a Company. This would go a long way in enhancing the credibility of the financial disclosures of a Company and promoting transparency
Audit Committee
Minimum of 3 members ( non executive directors, majority being independent and with at least one director having financial and accounting knowledge)
The chairman of the committee should be an independent director.
The Chairman should be present at AGM to answer shareholder queries.
The Company Secretary should act as the Secretary to the Committee
( the above are mandatory recommendations)
Frequency of meetings and quorum of the Audit committee
Meet at least thrice a year
One meeting before finalization and one every 6 months
Quorum should be either 2 members or 1/3rd of the members of the audit
committee whichever is higher and there should be a minimum of two independent directors. ( this is a mandatory recommendation
Powers of the Audit Committee
To investigate any activity within its terms of reference
To seek information from any employee
To obtain outside legal or other professional advice
To secure services of outsiders with relevant expertise
( this is a mandatory recommendation)
Board procedures
The Board meetings should be held at least 4 times in a year with a maximum time gap of 4 months between any two meetings.
A director should not be a member in more than 10 committees or act as a Chairman of more than 5 committees across all companies in which he is a director.
Every director must inform the Company about the Committee positions he occupies in other Companies and notify changes as and when they take place.
Management
Management is responsible for ensuring that the principles of corporate governance are adhered to and enforced.
Disclosures must be made by the management to the Board relating to all material financial and commercial transactions, where they have personal interest that may have potential conflict with the interest of the Company at large
( this is a mandatory recommendation)
Shareholders
The GBM provide an opportunity to the shareholders to address their concerns to the Board of Directors and comment on and demand any explanation on the Annual report or on the overall functioning of the Company.
Responsibilities of Shareholders
Show a greater degree of interest and involvement in the appointment of directors and the auditors.
Inform themselves about the new directors.
Shareholders rights
Right to transfer and registration of shares.
Obtaining relevant information on the Company on a timely and regular basis
Participating and voting in shareholder meetings
Electing members of the Board
Right to information on takeovers, sale of assets or divisions of the Company and changes in the Capital structure.
Half yearly declaration of financial performance including summary of significant events in the last 6 months should be sent to each household of shareholders.
( these are mandatory recommendations)
A board committee under the chairmanship of a non-executive director should be formed to specifically look into the redressal of shareholder complaints like transfer of shares, non-receipt of balance sheet, non receipt of declared dividends etc.,
( this is a mandatory recommendation)