CII advocates the need to create a facilitative, streamlined and harmonized regulatory environment that promotes voluntary adoption of best practices and self-regulation by corporates and has been working with the Government, Regulators and Industry to create a conducive regulatory environment. The October 2017 edition of the Policy Watch highlights key issues and policy interventions for promoting corporate governance and integrity.

1. 1policy watch
this IssueInside
Message From the
Director General............ 1
Chandrajit Banerjee,
Director General, CII
Policy Barometer.......... 6
Industry Voices........... 11
CEO Speak............................................................................................2
October 2017, Volume 6, Issue 4
Policy
G
lobally there is a clear
recognition that only effective
governance coupled with the
rule of law and justice and transparent
policies will be the backbone of any
efficient corporate system, society or
economy. Indian Industry today is
operating in a globalized environment
where there are few barriers to trade
and investment.
To take advantage of global opportunities,
the Industry should work towards
attaining global standards of corporate
governance, following good ethical
practices and complying with the law in
true letter and spirit.
CII believes that one of the first things
which a company must prioritise is to
be compliant with the laws of the land.
With a plethora of legislations focusing
on compliance, companies are required
to meet a range of norms, laws and
regulations. CII, with the Indian School
of Business (ISB) and GE, has developed
a training module for company personnel
to become compliance officers.
CII members have also signed the CII
Model Code of Conduct which contains
six basic principles of doing business
ethically. The message is that Industry
would wish to do business the right
way. The Government is also coming
out with new legislations to ensure that
corporate governance is strengthened.
The new Prevention of Corruption
Amendment Bill 2013 is expected to be
passed by Parliament soon which would
address both givers and takers of illegal
remuneration.
Over the past several years, heightened
expectations of shareholders and
enhanced requirements that demand
more accountability and transparency are
creating new challenges for corporate
governance across India.
CII has been engaging with the
Government and Regulators to create
a conducive environment towards
strengthening corporate governance
through sustained dialogue and has
been advocating the need for creating a
facilitative, streamlined and harmonized
regulatory environment that promotes
voluntary adoption of best practices
and self-regulation by corporates so
that regulation remains light-handed
and facilitative.
We have been working extensively on
the Companies Act, 2013 and have
been providing Industry inputs to the
Government. CII has contributed its
views on the Companies (Amendment)
Bill, 2017 which helped streamline many
important provisions of the Act to make
it pro-industry.
Recently, SEBI had set up a Committee
on Corporate Governance to support and
enable sustainable growth of enterprise,
while safeguarding the interests of
various stakeholders. Detailed inputs
were submitted to SEBI on the terms
of reference of the Committee, many of
which were accepted by the Committee
in its Report.
Every institution, be it business, corporates
or the State, needs to act in a way which
goes beyond personal motivations - what
we call the Triple Bottom Line: People,
Planet, Profit - which has to be guided
by ethical behavior.
CII has been deeply engaged in
strengthening corporate governance and
will continue its endeavor to motivate
Industry to embrace this model in a
willing and compliant manner. n
Chandrajit Banerjee
Director General
Confederation of Indian Industry
Sumit Mazumder, Past President, CII and Chairman, CII National Committee on
Integrity & Transparency in Governance and Advisory Council on North East and CMD,
TIL Limited
Keki Mistry, Chairman, CII National Council on Corporate Governance and
Vice Chairman & CEO, HDFC Limited
Focus: Corporate Governance and Transparency

2. 2 policy watch
CEOSpeak
Beyond Ethics, a Company Must Focus on
Compliance
Sumit Mazumder
Past President, CII and Chairman, CII National
Committee on Integrity & Transparency in
Governance and Advisory Council on North East
and CMD,TIL Limited
Source: mindscannershutterstock.com
In a globalized environment, if an Indian
company wishes to partner with a good
company overseas, it needs to follow good
practices and be respectable.
Government is also trying to create an
environment where the message is clear
- that corruption and black money would
not be tolerated. Several measures had
been taken to address these issues. I
believe that the levels of corruption would
come down particularly with the use of
technology, resulting in lesser contact
between the Government representatives
and businesses.
Over the last six to seven years, CII has
strengthened focus on ethics, integrity
would accrue to a company as a result of
ethical practices, most notably, by way of
higher profits, better customer retention,
and attracting and retaining the best talent.
The Government’s efforts to improve ease of
doing business in India would also benefit
CII’s agenda considerably.
Beyond ethics, a company must focus
on compliances. Compliance primarily
means following the laws of the land. Its
importance cannot be understated. We are
developing a band of dedicated compliance
officers through training programmes that
we organize with the help of GE and the
Indian School of Business. We need many
such trained people in Indian business today.
However, ethics goes beyond compliance.
It entails the adherence to fair and good
practices, irrespective of whether the same is
mandated by law or not.That’s the message
that CII is attempting to spread amongst
its Members, who are being requested to
adopt and implement the CII Model Code of
Conduct that was developed last year.
While CII has been conducting several
programmes on awareness and experience
sharing, we felt that there is a need to
expose our Industry to the best practices
from around the world. That is what brought
about CII’s partnership with Ethisphere, USA,
which is a world-renowned organization on
ethics and compliances.
A number of large companies, both Indian
and US based with strong presence in India,
are teaming up to push for better ethics and
business practices in India and South Asia,
to draft a strategy for making anti-corruption
more a part of everyday business consideration
and conversations.The companies will be the
founding members in Ethisphere’s South Asia
Business Ethics Leadership Alliance (BELA). A
lot of activities under BELA are planned for
the coming months.
and compliances. CII strongly believes that
Industry must take the lead when it comes
to ethical business practices. As surveys
have shown, there are many benefits which

3. 3policy watch
CEOSpeak
Emerging Trends in Corporate Governance
Keki Mistry
Chairman, CII National Council on
Corporate Governance and
Vice Chairman & CEO, HDFC Limited
Source: LeoWolfertshutterstock.com
Corporate governance is often looked
upon as a means to measure how well
companies are run. Investors use corporate
governance as an indicator to judge the
quality of a company’s management and the
effectiveness of its board. It is now widely
accepted by companies that sound principles
of governance are a necessary tool for their
long term development and sustainability.
Governance is intensifying around the
world, with each country differing on their
level of corporate governance. It is safe to
assume that governance levels in developed
countries - particularly the US and Europe
have a stronger focus than those from
emerging countries.
However, there are emerging countries such
as India that are making an earnest effort
to increase their standards of governance. In
India, regulators and the private sector are
coming together to implement best practices
across the corporate world.
To take a step back, many of us know
that the reason for the intense focus on
governance was due to the fact that western
countries were completely blindsided by
the flaws exposed in their governance
system. For instance, in the US, increased
Government regulation was spurred in
a large part by corporate scandals (e.g.
Enron) and the bursting of the tech bubble.
Following these events, the US Government
swung into action by enacting laws to
protect investors from the possibility of
fraudulent accounting. It accomplished
It would be of interest to note that
the Government is coming out with a
legislation to comply with the requirements
of the United Nations Convention against
Corruption (UNCAC) which they had
ratified in 2011. Let’s look at one of the
bills which is of great significance to the
Indian Industry - I refer to the Prevention of
Corruption (Amendment) Bill, 2013. Under
the proposed amendments in the Act, for
the first time, the bribe-giver would also
be hauled up. However, I believe that laws
to prevent corruption can only do half the
job. What we need in order to complete the
other half is the belief that businesses can
be equally profitable, in fact more profitable
in the long run, by functioning ethically. The
conviction to stay away from provocations
and stick to the right path would have a
lasting impact.
We are currently studying the new ISO
Standard 37001 dealing with management
of bribery. We would expect that Industry
would like to get certified under this
standard to prove the point that they have
systems in place for anti-bribery.
We are also looking at exchanging
information and experiences on internal
fraud and whistle blower policy – two very
important areas the Industry would have
to deal with.
Members may be interested to note that
last year, the Committee studied two
sectors namely healthcare and realty and
recommended several measures to bring
in transparency in these sectors. As it is
known, the common citizen is impacted by
both healthcare and real estate. The reports
have been widely circulated to the relevant
Government departments (both Central
and States) and to companies operating
in the field.
This year, the Committee has decided to
focus on higher professional education and
medical education.
Needless to mention, CII would continue
to work seriously in the area of ethics and
compliance and encourage the Industry to
follow good practices. n

4. 4 policy watch
CEOSpeak
this by strengthening the authority and
independence of audit committees, and
improving financial disclosures. The global
financial crises of 2008-09 which originated
in the US before spreading like wild fire
across the globe, brought about an even
greater focus on corporate governance and
consumer protection.
The Government of Switzerland implemented
an ordinance to control excessive executive
pay for listed companies. Together with
new international standards from bodies
such as the Financial Stability Board, these
events have had a fundamental impact
on how investors, regulators, shareholders
and the media judge the effectiveness of
management and boards as well as the
overall health of companies.
Role of the Board
It is important to note that Government
regulations aren’t the only way in which
governance norms have emerged - investors
exert a strong influence on governance both
directly and through their proxy advisors.
Several corporate boards all over the world
are striving to adopt good governance
practices to ensure the most optimum
functioning of their boards.
In fact, one of the areas where one can
really observe the level of governance
within an organization is in the functioning
of its board.
An important characteristic of a good
boardroom is an atmosphere that allows
for dissenting views. Directors must be
encouraged to bring in varied perspectives to
boardroom discussions wherein constructive
debate facilitates more effective decision
making.
I would also like to point out that a board
can operate at an optimal level only if
the independent directors are willing to
devote more time to their task, ask the
right questions and have more challenging
discussions and debates around various
issues.
Any effort to enhance governance is
of no use if the organization does not
embrace a culture of integrity, honesty and
transparency.
Globally, the following trends in corporate
governance have emerged over the last
few years:
• There is an increasing expectation
around the oversight role of the board,
which includes overall strategy planning,
investor engagement and executive
succession planning.
• There is continued focus on the
composition of the board. Particular
attention is being paid to the skill
profile of directors, diversity and the
making of a robust mechanism for
board refreshment that goes beyond
the box-ticking exercise.
• Boards are increasingly expected
to play a more active role in risk
management, particularly cyber security
risks. Stakeholders are monitoring
companies to check if they are adept in
responding to cyber security threats.
• Markets are giving greater weightage to
companies that provide sustained value
creation. It is important for companies
not to compromise long-term interests
for short-term priorities.
• There is greater focus on environmental,
social and governance issues. Companies
are increasingly feeling pressure from
the socially conscious investors who
are measuring the sustainability and the
ethical impact of their investments.
It is apparent that corporate governance is
a complex subject that requires the smooth
synchronisation of various functions which
need to work together in harmony.
India
Now coming to corporate governance in
India, companies are striving to implement
policies and processes as directed by the
Companies Act, 2013 and the SEBI (Listing
Obligations and Disclosure Requirements)
Regulations, 2015.Source: Pixsoozshutterstock.com

5. 5policy watch
CEOSpeak
Source: Sergey Dudyrevshutterstock.com
More specifically, the Companies Act has
raised the bar for boards in India. The Act
has made several significant changes which
seek to redefine the governance of Indian
boardrooms.
Some of the changes include:
• The need for robust internal financial
controls
• Greater risk management oversight of
boards
• More disclosures in the directors’
report
• Independent directors being entrusted
with greater responsibilities
A majority of Indian companies are fully
aware that sound principles of corporate
governance are a necessary tool for their
development and sustainability.Value driven
governance increases the worth of these
companies as they want to distinguish
themselves from their competitors.
Most Indian companies have done rather
well over the years in terms of maintaining
governance standards and many have done
so voluntarily, driven by internal policies and
the desire to do the right thing.
There is recognition in India that companies
committed to good governance have a
distinct competitive advantage along with
enhanced reputation and investor trust.
Global investors are extremely cautious in
identifying the companies where they invest.
One of their main focus areas is good
governance. Global investors are willing to
pay a huge premium to companies where
governance practices are perceived to be
strong.
As a result, a majority of Indian companies
are aware that robust governance has a
premium and if their policies and practices
fail to meet high ethical standards, they will
be exposed to serious reputational risks.
No doubt we have had corporate governance
setbacks in recent years. However, there
are also several examples of leading
corporate houses that have stood the test
of time, created wealth, diversified their
businesses, haven’t compromised on their
core values and have preserved a culture
of accountability.
There is always scope to improve and some
companies in their desire to gain global
recognition are striving to further enhance
their level of governance.
One has to compliment several Indian
companies which have tried to imbibe
international best practices in corporate
governance. It is important to recognise
that each country has to evolve governance
norms that suits them best culturally.
In conclusion, India Inc. is proceeding on the
right path in establishing best practices in
governance. At the same time, governance
in India has a unique flavour and I do
believe that the regulators are taking this
into consideration while framing the laws
and regulations.
The bar continues to rise for Indian boards,
which are now beginning to face increasing
pressure from shareholders, proxy firms and
regulators. Boards are beginning to use
robust assessment practices to ensure that
they measure up to the evolving standards of
governance, have the right composition and
follow best practices so as to be effective
stewards of the business. n

6. 6 policy watch
Policy Barometer
Key CII Recommendations for Corporate
Governance and Transparency
SEBI Terms of Reference 1
Ensuring independence in spirit of
independent directors and their active
participation in the functioning of the
company.
CII recommendations:
• Independence must be measured in the
context of the concerned individual’s
own standing and ability to bring out
issues and suggestions in a constructive
manner and look at achieving collective
success for the board.
• The process of selecting independent
directors is extremely critical. They
provide vital perspective and genuine
feedback on external perception of the
organization which can greatly help the
board strategy and function.There needs
to be a prescribed set of rules on the
eligibility of independent directors and
more particularly the committees they
serve upon. Independent directors should
have relevant qualifications particularly if
they are serving on the Audit Committee
or the Risk Management Committee. A
minimum number of years of experience
may be specified.
• Guiding principles for their selection and
appointment could include:
- Willingness to commit time
- Appointing a lead independent
director, usually the senior most
director or the chairman of the audit
committee and regular meetings at
periodic intervals without the non-
executive directors
- Honest board evaluation
- Appointment of independent
directors keeping in mind the
expertise needed at the board.
• The role of independent directors
may be articulated to challenge the
assumptions and the business scenarios
that are being discussed in the board
meetings. The potential role of lead
independent directors should be to
essentially facilitate interaction among
the other independent directors in the
context of the company matters and
communicating the collective view of the
independent directors to the chairman
and management as appropriate. The
chairman may speak to independent
directors and take their views outside
the boardroom.This will ensure everyone
gets to express their views frankly while
helping the board meeting achieve its
aim efficiently.
• Women directors, whether independent
or family member should be subject to
the same rigors of appointment at the
board on the basis of merit. Diversity
should not be only gender sensitive;
diversity goes beyond that.
• The Companies Act, 2013 and SEBI
(Listing Obligations and Disclosure
Requirements) Regulations, 2015 require
a director to forward a copy of his/her
resignation along with detailed reasons
for the resignation to the Registrar of
Companies / Stock Exchanges in the
manner prescribed. The reason for
resignation should be detailed in the
logical reasoning. Where a director
resigns primarily on the ground that
the company is not being governed
in a proper manner, it should be in
the fitness of things that the director
formally shares his / her concerns with
the board.
• On prescribing a minimum remuneration
to independent directors, given the
diversity of companies in India (both
from the objective criterion of size and
sector but also subjective criterion such
as governance standards and promoter
control), it may not be desirable to
have a one size fits all approach on
this. It would be better that companies
decide the amount to be paid to the
independent directors based on their
capacity and need for best talent. It
may not be appropriate to stipulate
any minimum remuneration for an
independent director.
• Liability insurance may be initiated
for all directors including independent
directors.
• Training and familiarization of board
members are desirable practices.
• In many cases, there is information
asymmetry between directors on boards
given the limited number of interactions
(mostly 4 quarterly meetings in a year).
There is a need to bridge this information
gap between the company management
and board and lay out specifically the
responsibilities of the management
vis‑à-vis the board.
SEBI Terms of Reference 2
Improving safeguards and disclosures
pertaining to related party transactions.
CII recommendations:
• There is need for a more tactical
approach of conflict of interest, as it
goes beyond pecuniary interest. This
is fundamentally driven by personal
value system. Collective commitment
Recommendations for the SEBI Committee on Corporate Governance

7. 7policy watch
Policy Barometer
and discussion around this in case of
the concerned board and company may
help.
• Conflict of interest provisions and
requirements of abstaining from voting
are adopted only at a board level
decision making process, since the
directors are holding office in a fiduciary
capacity. Extending this principle to
shareholders’ meetings has the effect
of defeating corporate democracy since
every shareholder, be it promoter or
public, whether a related party or not,
is entitled to exercise his/her votes at
shareholders’ meetings. Mandating that
minority shareholders should approve
transactions with entities in which
majority shareholders are interested,
would lead to a piquant situation where
minorities can oppress the majority.
SEBI Terms of Reference 3
Issues in accounting and auditing practices
by listed companies.
CII recommendations:
• Improving audit quality in the backdrop
of emerging technologies and social
media, compliance risks and stepped-
up enforcement efforts globally may
be looked at. Audit quality should be
comprehensively addressed by advanced
tools and technologies, evaluation of
audit firms, training, rigorous oversight
and swift and certain action on audit
quality lapses.
• There is need for an independent audit
regulator which is independent of the
profession it regulates. National Financial
Reporting Authority (NFRA) provisions
should be notified and NFRA should
be set up with Industry participation.
• Boards adopt practices for effective
risk management. These should include
demanding and obtaining a holistic view
of risks both on and off the balance
sheet, their ownership and how they
are mitigated; clear understanding,
articulation and consideration of risk
appetite and design of controls, policies
and procedures.The board’s consideration
of inherent risks on any new strategic
initiative and continuous evaluation of
evolving risks while also looking at
risk assessment and incorporation of
appropriate risk mitigation measures is
vital.
• Audit report format should be in line
with the international practices where
the auditor is required to detail the risks
as identified, how to address those risks
through the audit procedures and the
auditor conclusions therein. This would
then have auditors address various
risks including cyber risk and also
require the auditors to use technology
specialists where the underlying systems
are technologically advanced. Given the
dynamic nature of cyber security and
the constant evolution, boards may
appoint a cyber security auditor who
shall present a Report to the board.
SEBI Terms of Reference 4
Improving effectiveness of board evaluation
practices.
CII recommendations:
• Methodology of board evaluation
should be left to the corporates. A SEBI
guidance note on this is useful.
• Effectiveness of board processes;
independence and quality of independent
directors; risk management can act as
the key guidelines for effectiveness of
the board. Effective boardrooms are the
ones where the CEO and his/her team
develop the strategy while the board
provides critical oversight. The chairman
of the board plays an important role
as he/she has to ensure that there
is an honest interaction between the
management and the directors.
• Whether a company should have a
combined chairman and CEO or a
separate chairman and CEO should
be left to the wisdom of the board
of directors which is best placed to
decide on such a critical aspect of
governance, keeping in mind the nature
of the company, its vintage, the business
segments, competition profile and other
related matters.
• The board has an important role on the
matter of succession planning where
it needs to be active and persuasive.
The board must take a stand to
protect the interest of stakeholders.
The Nomination and Remuneration
Committee (NRC) should proactively
have some possible options for CEO
succession in mind. Best practice is for
the Chair of the Nomination Committee
to have some possibilities (internal or
external) identified for an eventuality.
• In recent years, there has been an
emergence of various new skill sets such
as digital technology and innovation
as critical capabilities to complement
the traditional requirements of finance
and industry experience. Globally while
such disclosures are still gathering
momentum, Indian Industry is showing
interest in such transparency, but it may
not be mandated immediately.While the
skills matrix of directors does provide
valuable insights on capabilities that
are most important for each company,
it will also be important in the medium
term to articulate in annual reports on
how these skills matrix will be used to
further improve the performance of the
company.
SEBI Terms of Reference 5
Addressing issues faced by investors
on voting and participation in general
meetings.
CII recommendations:
• E-voting has ensured greater participation
from the shareholders which was not the
case earlier. This, in turn, has helped
companies in understanding the views
of the shareholders. Low physical
participation of retail shareholders in
meetings has always been an issue even
before the introduction of e-voting.
• Companies incorporated in India are
subject to various regulations issued
by different regulators depending on
the nature of business and whether
their securities are listed or not. In case

8. 8 policy watch
Policy Barometer
of large companies having lakhs of
shareholders, even though the annual
report is ready within a reasonable time
of the board meeting, printing/posting
takes a long time and thus causes
delay in holding AGMs. The requirement
of physical dispatch of annual report
to those not having email ids add to
the delay, hence it is difficult to hold
AGMs in June/July. If exemptions in
printing/dispatch in physical form is
made available to Indian companies,
it would be possible to stagger the
timeline for holding AGMs of listed
companies and hold AGMs as early
as possible. Staggering the timelines
is not likely to help in achieving the
advantages which are envisaged. It
is also submitted that mandatory live
webcast is also not workable, as it
will impose undue burden on many
companies. There can also be many
logistical and technical issues in this.
This can remain voluntary and companies
willing to do such live webcast can do
so, as they are anyway doing now. With
e-voting facility, shareholders today have
enough opportunities to participate in
the AGMs, though in a remote way.
SEBI Terms of Reference 6
Disclosure and transparency related issues.
CII recommendations:
• With respect to the requirements of
disclosure by the board, many times
it is not clear how these requirements
can be practically and meaningfully
complied with by any board, for example,
disclosure on proper and sufficient care
for preventing and detecting fraud and
other irregularities; adequacy of internal
financial controls operating effectively;
compliance with the provisions of all
applicable laws and that such systems
are adequate and operating effectively
and elements of risk, which in the
opinion of the board may threaten
the existence of the company. These
statements are too broad and vague
and do not provide any guidance to
directors for discharging obligations.
Thus these are difficult to implement in
practice. Any such requirement which is
unclear and ambiguous is onerous and
needs to be made objective and specific
to enable compliance by directors.
• The obligations under law must be
reasonably specific, failing which
compliance cannot be expected at
a practical business level. Also an
environment of uncertainty in obligations
is not conducive to attracting talented
and independent directors. The board
may rely on the affirmations made by the
executive management – and thus the
intersection and interaction of board and
executive management is paramount. A
suitable framework for internal controls
may be recommended against which
such controls in the company may
be benchmarked for evaluating the
adequacy and operating effectiveness
of controls in which a balance can
be maintained between excessive and
useful information.
• The proposed restriction on the number
of layers of subsidiaries of a company will
act as a deterrent for further investment
by the subsidiaries of a company which
in turn will counter the Make in India
initiative of the Government of India.
For example, in various conglomerates,
businesses are housed across several
subsidiary entities. Joint ventures by such
conglomerates through its subsidiaries,
or further acquisitions in India (by
such subsidiaries) if prohibited by such
restriction, would create operational
difficulties. This would, apart from
restricting incorporation of a third layer
subsidiary, also restrict the second layer
foreign subsidiaries from incorporating
an Indian or a foreign subsidiary. Further,
the draft MCA Rule does not apply to
the acquisition of subsidiaries having
such layered structure and incorporated
in other countries, thus hurting investor
sentiment in the domestic economy
while tipping the scales in favour of
foreign investments by Indian companies.
This will put Indian companies at a
disadvantage vis-à-vis their international
counterparts.
SEBI Terms of reference 7
Any other matter, as the Committee deems
fit pertaining to corporate governance in
India.
CII recommendations:
• PSE governance aspects:
- Freedom needs to be given to
listed companies to decide on
the structure they would want
to follow. After appointing the
board, the Government needs
to step back and not intervene
in every administrative/executive
decision. PSEs need to be treated
at par with private companies. They
need to have freedom in selecting
independent directors, deciding on
their remuneration and performance
evaluation metrics, among others.
- Appointment of nominee directors
needs to be different from the
executives of the administrative
ministry in order to maintain
neutrality of the board.
- Government needs to ensure that
the minority shareholder gets a fair
deal. This is of prime importance for
PSEs where two roles of owner and
policy maker merge into one.
- Role of promoter’s nominee vis-
a-vis independent directors to be
separated so that the board can
function keeping the company’s
priorities in mind.
- Government needs to offer flexibility
to Maha/Navaratnas to decide on
their projects independently while
funding is being done through
internal generations, instead of
the circuitous process of seeking
approvals at present.
• Family owned enterprises, public sector
enterprises, multinational companies,
private sector companies that are
not family owned and do not have
a dominant promoter - each of these
companies’ boards have their own
challenges that need to be addressed
differently.

9. 9policy watch
Policy Barometer
• Corporate governance ratings can
be helpful only as a very broad
guide and only if more than half the
potentially ratable entities are in the
mix. Comparisons and a search for the
best practices are far more valuable
guides to better board performance.
Nowhere in the world has rating
delivered better governance. It is the
collective efforts of board members
and executives which has delivered
results. Corporate governance ratings
simply reflect the relative standing of
CII Model Code of Conduct – Ethical Business Practices
Accurate Books and Records: The
company will maintain accurate accounts
and records which reflect the true and fair
picture of the company’s affairs in compliance
with accepted accounting principles and
standards for financial reporting.
Bribery and Corruption: The company will
prohibit bribery in any form in all its business
dealings and will maintain strong controls
to prevent and detect improper payments.
The company shall comply with anti-money
laundering and terrorist financing laws
and report unaccounted cash or suspicious
transactions.
Fair and Equitable Treatment: The
company shall not unfairly discriminate
on the basis of race, caste, religion, color,
ancestry, marital status, gender, sexual
orientation, age, nationality, ethnic origin
or disability. The company shall not tolerate
harassment, whether sexual, verbal, physical
or psychological against any employee.
Health and Safety: The company shall
provide a safe, clean and healthy work
environment.
Quality of Goods and Services: The
company shall strive to ensure that its
products and services meet the legally
required safety and quality standards.
Environment and Society: The company
shall strive to be a good corporate citizen
by promoting social welfare activities,
promoting sustainability and minimizing the
adverse impact of company operations on
the environment.
Business Courtesies -
Industry Guidelines
The guidelines herein can be adopted by
companies as follows:
• Companies which currently do not have
any specific guidelines on business
courtesies may adopt these guidelines
and/or modify certain industry specific
practices for their operations.
• For companies with similar existing
policies related to business courtesies,
these guidelines can act as a reference
document. Such organizations may
ensure that they have also implemented
appropriate monitoring and tracking
mechanisms of such courtesies as per the
guidance set forth in the document.
Guidelines
Need for industry wide guidance
Corruption, bribery and improper payments
continue to be high compliance risks in the
country. Trends have emerged which show
that bribery and improper payments have
taken various forms other than a simple
exchange of cash. In India, the Prevention
of Corruption Act (POCA), 1988 expressly
prohibits Government officials to accept
remuneration, financial or non-financial
advantage of any kind other than the legal
remuneration for the services rendered by
them. Further, the Prevention of Corruption
Amendment Bill, 2013, makes giving bribe
a specific offence.
In the private sector also, companies want
to ensure that business decisions are made
in an objective, unbiased manner, without
any apparent or perceived conflict of interest
or with a view to obtain improper business
advantage.
However, interactions in the usual course
of business are inevitable and may require
basic courtesies to be provided. These are
relevant also in the cultural context in India,
where basic courtesies and giving of gifts
to business partners is seen as a sign of
respect and maybe customary.
Various Government, public and private
sector enterprises have their own codes of
conduct for their employees. In the absence
of common guidance on what business
courtesies can be provided during business
interactions, CII seeks to provide industry
guidelines that CII Member companies can
consider to assist them to understand the
business courtesies and create a reference
for their organizations and employees.
an entity vis-à-vis others with respect
to its corporate governance policies,
practices and performance. Corporate
governance ratings should continue to
remain voluntary. Moreover, we have not
come across mandatory requirement of
governance rating in any of the major
economies.
• There is need for separate standards to
be prescribed for governance oversight
in M&A transactions. Similarly, separate
standards need to be drawn for start-ups
and MSMEs.
• Finding directors of financially weak
companies is a challenge.The Companies
Act disqualifies directors of companies
that fail to redeem debentures or repay
deposits on due date or pay interest
thereon for one year. There is a need for
balancing risk and reward for directors,
especially independent directors, in
stressed organizations.
The SEBI Corporate Governance Committee
Report was launched recently and many
CII recommendations have been accepted.
For others, CII has made a detailed set of
recommendations to SEBI again.

10. 10 policy watch
Policy Barometer
– Timing and context surrounding the
business courtesy must be weighed in
order to assess, whether any particular
courtesy could objectively be perceived
to be a bribe
– Should be avoided in circumstances
wherein a bid, deal, approval or decision
that involves, impacts or benefits the
company is pending with a customer/
regulator/Government agency and the
recipient is involved in the decision
making process
Common areas of interactions
Some of the common areas of interaction,
where business courtesies are given or
expected to be given are:
– Customer meetings or visits held at
company site or outside venue
– Inspection, audits, on-site
investigations by Government
agencies
– Pre and ongoing project discussions
(e.g. technical discussions)
– Visits to manufacturing facilities by
Government officials or regulator
– Interactions during festive season or
occasions like weddings, etc
– Company sponsored training or visits
to company facilities
Definition of ’Business Courtesy’
A business courtesy is any gift given or
hospitality extended with the intent of
building and maintaining relationships
with commercial counterparts or as a
cultural expectation or in the course
of etiquette in the ordinary course
of business. Business courtesies are
sometimes referred to as ’gratuities’.
The ‘Reasonability’ test of business
courtesies
In general, business courtesies:
– Must not be given in exchange for any
favor or business advantage or for any
favorable treatment
– Must be infrequent and reasonable
in amount, under the concerned
circumstances
– Permitted under the rules of the
recipient's employer
– Permitted under the giver's and
recipient's internal policies
– Should not involve adult entertainment
– Should not be monetary in nature (cash
or equivalents e.g. cheques, loans, shares
etc.)
– Should be properly recorded/ expensed
in company's books and records to track
for subsequent financial and compliance
audit purposes
can be provided in the ordinary
course of business. These should
be limited to customers/Government
officials or regulators for this specific
purpose
– Should not be provided to their
friends and/or family members
– Mode of transportation should be
reasonable and not extravagant.
Air fare/Rail fare should be avoided
unless mandatory per contractual
arrangement
• Meals/Snacks/Refreshments
– Meals must only be offered as a
casual social hospitality
– Casual meals like lunch or tea and
light refreshments during business
meetings can be provided at
company premises
– Lavish or extravagant meals, meals at
venues that do not have a positive
reputation or are associates with
illegitimate activities should be
avoided
Awareness and Monitoring
mechanisms
Companies are advised to form written
policies, regarding extending as well
as receiving of business courtesies.
Companies should ensure ongoing
education and awareness of the policy
to employees at all levels, as well as
targeted communication with employees
in functions, where probability of such
interactions is high, for example, sales,
sourcing and commercial. Companies
should set up a process to track
business courtesies which can reflect the
purpose of interactions, actual gift and/
or courtesy provided and Government
officials to whom the courtesies were
extended. This will enable an effective
management oversight and auditability.
Companies should conduct periodic
internal audits to ensure that the
policies/guidelines are followed and
necessary approvals are obtained. n
Broad Guidance for common types of
Business courtesies (not exhaustive, but
indicative)
• Gifts & Entertainment
– Gifts should be of nominal value
– Gifts to be in nature of consumables
e.g. flowers, food, fruits etc
– Gifts should be preferably company
monogrammed
– Gifts should not include cash or cash
equivalents, adult entertainment,
jewelry, ornaments or art work etc
– Gifts to family members should be
avoided
– For festive occasions or weddings,
gifts of nominal value, such as,
flower bouquets, box of sweets can
be given
• Transportation
– Casual lift, ground transportation to
and from the company office/facility
Source: Gustavo Frazaoshutterstock.com

11. 11policy watch
Industry Voices
High quality financial reporting is a key ingredients of good corporate governance, and India has just witnessed
a paradigm shift in its financial reporting and audit landscape. With the adoption of the IFRS converged Indian
Accounting Standards framework coupled with the mandatory auditor rotation, India can now claim to have
standards that are on par with the best in the world. However, true success will depend significantly on the
effectiveness of monitoring and on enforcement mechanisms to ensure that the new standards are adopted
in spirit and truly enhance the quality of corporate India’s reporting to its stakeholder communities.
Arun M Kumar
Member, CII National Council on Corporate Governance and CEO, KPMG in India
When in doubt, disclose is the maxim that is at the core of good corporate governance, for transparency and
disclosure is one of the three legs on which good corporate governance rests, the other two being related
party transactions on fair terms and prudent decision making. In fact one can argue that transparency and
disclosure is the most important of the three as it sheds light on the other two, revealing their presence.
Given its importance, it is essential to constantly evangelize transparency and disclosure in promoting good
corporate governance.
Suresh Senapaty
Chairman, CII Compliance Forum and Chairman, Honeywell Automation India Limited
Ever-increasing levels of stakeholder interest and regulatory scrutiny in corporate affairs continue to
drive urgency for compliance by companies. This is not only true in India, but also across the world,
with some western legislations such as the Foreign Corrupt Practices Act (US) and the UK Bribery Act
enforcing cross-jurisdictional and extra-territorial authority. Countries like Brazil, Canada, France, Russia
and Spain are introducing new legislations, monitoring compliance and widening jurisdictions. This year
also sees the introduction of ISO 37001, the first international standard on anti-bribery management
systems. However, we should always remember that the other side of the ‘compliance’ coin is ‘culture’.
Actively involving leadership teams in promoting and building an ‘ethical culture’ will be as important
as ‘ticking the box’ on compliance.
Dr Mukund Rajan
Chairman, CII Council on India@75 and Chief Ethics Officer & Chairman, Tata Global Sustainability Council, Tata Sons Limited

12. 12 policy watch
Industry Voices
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No part of this publication may be reproduced, stored in, or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying,
recording or otherwise), in part or full in any manner whatsoever, or translated into any language, without the prior written permission of the copyright owner. CII has made every
effort to ensure the accuracy of the information and material presented in this document. Nonetheless, all information, estimates and opinions contained in this publication are
subject to change without notice, and do not constitute professional advice in any manner. Neither CII nor any of its office bearers or analysts or employees accept or assume any
responsibility or liability in respect of the information provided herein. However, any discrepancy, error, etc. found in this publication may please be brought to the notice of CII for
appropriate correction.
Published by Confederation of Indian Industry (CII), The Mantosh Sondhi Centre; 23, Institutional Area, Lodi Road, New Delhi 110003, India
Tel: +91-11-24629994-7, Fax: +91-11-24626149; Email: info@cii.in; Web: www.cii.in
For suggestions please contact Priya Shirali, Corporate Communications at priya.shirali@cii.in
PSEs have rich experience and insights in their field of operations and the board members of PSEs act
with high standards of professional integrity, and display ethical conduct while managing the businesses
of the public enterprises. PSEs have comprehensive guidelines and procedures in place that facilitate
their systemic and efficient operations, but, in the changing times, sometime, they appear to promote
somewhat cautious and risk-averse approach. The current uncertain and rapidly changing environment
demands agility and flexibility. We look forward to the ongoing broad-based exercise initiated by the
Government to facilitate even more enhanced roles of PSEs in nation building and to enable them to
stay ahead of the curve.
Atul Sobti
Chairman, CII Public Sector Enterprises Council and CII National Committee on Capital Goods and Engineering and CMD, BHEL
Today’s world is facing some challenging times and the root cause often rests in ethical issues. It is becoming
increasingly difficult to distinguish between right and wrong as we engage in a world that is hugely integrated
and complex, yet there is a strong need to imbibe high ethical standards. Despite challenges posed by persistent
poverty, environmental degradation, the condition of refugees, and the violation of human rights etc., a growing
number of institutions are imbibing principles of transparency, good governance and a concern for societal
issues which is inspiring. While short term thinking of following low ethical standards can deliver benefits in
the short term, this cannot be a formula for sustainable long term growth. Leaders and institutions have a
choice to make; let's hope they err on the side of what is good, right and in the public interest.
Harpal Singh
Member, CII Committee on Integrity and Transparency in Governance and Mentor & Chairman Emeritus, Fortis Healthcare Limited
In terms of priority, a board’s roles include selecting the best CXOs following an accepted succession planning
framework, protect, pivot from or enhance the business model, allocate resources optimally, challenge strategy,
facilitate a sense that accountability and compliance create the space to take risk, adopt an intolerant attitude
to policy deviations and allocate resources to IT enable compliance, assist in creating a politically appropriate
external image of the enterprise and continually improve processes through feedback and evaluations. No
one size fits all! Each board has a flavor of its own. The key message is to innovate, be prepared at all
times and co-create value.
Shailesh Haribhakti
Member, CII National Council on Corporate Governance and Chairman, Haribhakti & Co. LLP &
NE Independent Chairman, NPS Trust, L&T Financial Holdings and Future Fashions Limited