BUSINESS ETHICS IN CORPORATE GOVERANCE INTRODUCTION BUSINESS ETHICS IN CORPORATE GOVERANCE Group No : 10 VIRAL PANDYA (roll no : 36) ATEET CHATURVEDI (roll no : 10) ADITYA KOTAWALE (roll no : 25) KISHORE VEDANTAM (roll no: 58) 2

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Corporate Governance Parties Shareholders – those that own the company Directors – Guardians of the Company’s assets for the Shareholders Managers who use the Company’s assets Primarily concerned with public listed companies i.e. those listed on a Stock Exchange

Four Pillars of Corporate Governance Accountability Fairness Transparency Independence

Accountability Ensure that management is accountable to the Board Ensure that the Board is accountable to shareholders

Fairness Protect Shareholders rights Treat all shareholders including minorities, equitably Provide effective redress for violations

Transparency Ensure timely, accurate disclosure on all material matters, including the financial situation, performance, ownership and corporate governance

Independence Procedures and structures are in place so as to minimise, or avoid completely conflicts of interest Independent Directors and Advisers i.e. free from the influence of others

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Business Ethics in Corporate Governance INTRODUCTION Business Ethics in Corporate Governance 13

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Elements of Corporate Governance Good Board practices Control Environment Transparent disclosure Well-defined shareholder rights Board commitment

Good Board Practices Clearly defined roles and authorities Duties and responsibilities of Directors understood Board is well structured Appropriate composition and mix of skills

Good Board procedures Appropriate Board procedures Director Remuneration in line with best practice Board self-evaluation and training conducted

Control Environment Internal control procedures Risk management framework present Disaster recovery systems in place Media management techniques in use

Control Environment Business continuity procedures in place Independent external auditor conducts audits Independent audit committee established

Control Environment Internal Audit Function Management Information systems established Compliance Function established

Transparent Disclosure Financial Information disclosed Non-Financial Information disclosed Financials prepared according to International Financial Reporting Standards (IFRS)

Transparent Disclosure Companies Registry filings up to date High-Quality annual report published Web-based disclosure

Well-Defined Shareholder Rights Minority shareholder rights formalised Well-organised shareholder meetings conducted Policy on related party transactions

Well-Defined Shareholder Rights Policy on extraordinary transactions Clearly defined and explicit dividend policy

Board Commitment The Board discusses corporate governance issues and has created a corporate governance committee The company has a corporate governance champion A corporate governance improvement plan has been created Appropriate resources are committed to corporate governance initiatives

Board Commitment Policies and procedures have been formalised and distributed to relevant staff A corporate governance code has been developed A code of ethics has been developed The company is recognised as a corporate governance leader

Other Entities Corporate Governance applies to all types of organisations not just companies in the private sector but also in the not for profit and public sectors Examples are NGOs, schools, hospitals, pension funds, state-owned enterprises

Why Corporate Governance? Better access to external finance Lower costs of capital – interest rates on loans Improved company performance – sustainability Higher firm valuation and share performance Reduced risk of corporate crisis and scandals

CASES

ABSENCES OF CG CAUSES SERIOUS MALPRACTICES INTRODUCTION ABSENCES OF CG CAUSES SERIOUS MALPRACTICES WAKF BOARD LAND SCAM – 2012 – 1.5 – 2 Lakh Crore (3rd Biggest Scam in India) In March of 2012, Anwar Maniapddy, the chairman of Karnataka State Minorities Commission submitted a sensational report which alleged 27,000 acres of land, which was controlled by Karnataka Wakf Board had been allocated illegally or misappropriated. The value of land which was misappropriated was in tune of 1.5 to 2 lakh crore rupees. The land managed by Wakf board, a Muslim charitable trust, is typically donated to under-privileged and poor people of Muslim community. However, the report alleged that nearly 50 percent of the land owned by Wakf board was misappropriated by Politicians and Board members in conjunction with real estate mafia at fraction of actual land cost. 31

BIRTH OF CORPORATE FORENSIC INDUSTRY The big four—Ernst & Young, KPMG, PriceWaterhouse Coopers and Deloitte — Alvarez and Marsal and FTI Consulting are among those engaged in the sector. Corporate investigations or forensics include processes such as background checks on company executives and promoters besides looking into fraud, corruption and other corporate governance issues. The corporate forensics business in India is estimated at Rs 400 to Rs 500 crore and could grow to about Rs 800 crore in the next few years, analysts said.

Best Governed Companies in India INTRODUCTION Best Governed Companies in India 33

INTRODUCTION CONCLUSION Failure in Corporate Governance is a real threat to the future of every corporation. With effective CG, Companies can gain Competitive advantage and generates positive reaction in the market. Companies should adopt Environmental, Whistle blowing & Ethical training programmes. 34

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INTRODUCTION Choose your path 36

INTRODUCTION THANK YOU 37