CORPORATE GOVERNANCE IN INDIA

1. CORPORATE GOVERNANCE IN
INDIA
M A D E BY
S A H I L N A G PA L
R O L L N O. 2 3 2
B .C O M ( H O N S ) 4 T H S E M E S T E R
S E C T I O N D
SRI GURU NANAK DEV KHALSA COLLEGE
UNIVERSITY OF DELHI

2. CONTENTS
Introduction
Definition
Key players
Principles of Corporate Governance
Objectives of Corporate Governance
Corporate Governance in India
Securities Exchange Board Of India
Satyam Scandal
Conclusion

3. INTRODUCTION
The last few years have seen some major scams and
corporate collapse across the globe.
In India, the major example is Satyam which is one of the
largest IT companies in India.
All these events have caused the pendulum of public faith
to shift away from free market to a more closely
regulated one

4. DEFINITION
A system of law and sound approaches
by which corporations are directed
and controlled
Corporate governance are the policies,
procedures and rules governing the
relationships between the
shareholders, directors and managers
in a company, as defined by the
applicable laws, the corporate
charter, the company’s bylaws, and
formal policies

5. KEY PLAYERS IN CORPORATE GOVERNANCE
Management
Board of Directors
Customers
Shareholders
Employees
Regulators
Suppliers

6. PRINCIPLES IN CORPORATE GOVERNANCE
Rights and equitable treatment of shareholders
Interests of other stakeholders
Role and responsibilities of the board
Integrity and ethical behaviour
Disclosure and transparency

7. OBJECTIVES OF CORPORATE GOVERNANCE
Enhance the performance of companies
Enhance access to capital
Enhance long term prosperity
Provide barrier to corrupt dealings
Impacts on the society as a whole

8. CORPORATE GOVERNANCE IN INDIA
The Indian corporate scenario was more or less stagnant till the early
90s.
The position and goals of the Indian corporate sector has changed a lot
after the liberalization of 90s.
India’s economic reform programme made a steady progress in 1994.
India with its 20 million shareholders, is one of the largest emerging
markets in terms of the market capitalization.

9. SECURITIES EXCHANGE BOARD OF INDIA
On April 12, 1988, SEBI was established with objective
of protecting the rights of small investors and
regulating and developing the stock markets in
India.
In 1992, the Bombay Stock Exchange (BSE),the leading
stock exchange in India, witnessed the first major
scam masterminded by Harshad Mehta.

10. SECURITIES EXCHANGE BOARD OF INDIA
Analysts unanimously felt that if more powers had been given to
SEBI, the scam would not have happened.
As a result the Government of India brought in a separate
legislation by the name of ‘SEBI Act 1992’and conferred
statutory powers to it.
Since then, SEBI had introduced several stock market reforms.
These reforms significantly transformed the face of Indian Stock
Markets

11. SATYAM SCANDAL
Overstated assets and income
The results announced on October 17, 2009
overstated quarterly Revenues by percent and
profits by 97 percent.
The global head of internal audit also illegally
obtained loans for the company.
Created 13000 fake salary accounts
Created fake customer identities and generated
fake invoices to inflate revenue

12. SATYAM SCANDAL
The CEO was convinced that the gap in the balance sheets reached an
unmanageable heights and could not be filled.
Satyam Computer crashed by Rs 139.15 or 77.69 per cent to close at Rs
39.95, after the Chairman`s confession
Bombay stock exchange fell 700 points
The Sensex recorded the biggest single-day loss in the past two months,
after Satyam Computers Services, plunged 80 percent.

13. SEBI and Clause 49
1. SEBI asked Indian firms above a certain size to implement Clause
49, a regulation that strengthens the role of independent directors
serving on corporate boards.
1. On August 26, 2003, SEBI announced an amended Clause 49 of the
listing agreement which every public company listed on an Indian
stock exchange is required to sign. The amended clauses come into
immediate effect for companies seeking a new listing.
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14. The major changes to Clause 49…
1.Independent Directors —1/3 to ½depending whether the chairman of
the board is a non-executive or executive position.
2 .Non-Executive Directors ----The total term of office of non-executive
directors is now limited to three terms of three years each.
3. Board of Directors-----The board is required to frame a code of
conduct for all board members and senior management and each of them
have to annually affirm compliance with the code.
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15. Clause 49..
4.Audit Committee----Financial statements and the draft audit report of
management discussion and analysis of…
• Financial condition
• Result of operations of compliance with laws
• Risk management letters
• Letters of weaknesses in internal controls issued by statutory
• Internal auditors
• Removal and terms of remuneration of the chief internal auditor
5.Whistleblower Policy ----This policy has to be communicated to all
employees and whistleblowers should be protected from unfair treatment
and termination.
6.Subsidiary Companies-----50% non-executive directors & 1/3 &
½independent directors depending on whether the chairman is non-
executive or executive. ॐ 15

16. ॐ 16
7.Disclosures----Contingent liabilities./Basis of related party transactions.
/Risk management/ . Proceeds from initial public offering/ .
Remuneration of directors.
8.Certifications --- reviewed the necessary financial statements and
directors’report; established and maintained internal controls,
disclosed to the auditors and informed the auditors and audit
committee of any significant changes in internal control
and/or of accounting policies during the year.

17. CONCLUSION
Corporate governance And economic development are
intrinsically linked.
Effective corporate governance systems promote the
development of strong financial systems
Which, in turn, have an unmistakably positive effect on
economic growth and poverty reduction.

18. THANK YOU