‘Corporate Governance’

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I CORPORATE GOVERNANCE : MEANING AND RELEVANCE 2

CORPORATE GOVERNANCE PRACTICES AT NHPC LTD

Background
Corporate Mission
Corporate Vision
II 3-8
Corporate Governance
Code of Conduct on Corporate Governance
Fraud Policy
Policy and Procedure for Banning Dealings
CORPORATE GOVERNANCE AT JAYPEE GROUP
Background
Corporate Mission
III Corporate Vision 9 - 13
Corporate Governance
The Board
Code of Conduct on Corporate Governance
CORPORATE GOVERNANCE IN UK
Background
Origin of Corporation in UK
Need for Corporate Governance in UK
IV Common Threads in Corporate Failure 14 - 19
Modern Evolution
Corporate Governance Model
Corporate Governance in UK
UK Corporate Governance Code

V REFERENCES 20

CORPORATE GOVERNANCE PRACTICE

AT NHPC LTD, JAYPEE ASSOCIATES &
UNITED KINGDOM

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CORPORATE GOVERNANCE :
MEANING AND RELEVANCE
1.1 In the fast changing business scenario, good Corporate Governance helps
in achieving long term Corporate Goals of enhancing Stakeholders’ value.
Corporate Governance focuses on commitment to values adhering to ethical
business practices. This includes corporate structures, culture, policies and the
manner in which the Corporate entity deals with various stakeholders, with
transparency being the key word. Accordingly, timely, adequate and accurate
disclosure of information on the performance and ownership forms the
cornerstone of Corporate Governance.

1.2 Corporate Governance is a concept in the heart of which lies the

immutable principles which dictates the essence on which a company should
ethically conduct the affairs of the business. Ethics connote the commitment of
the company towards its shareholders / stakeholders, creditors, business
associates, the state and the employees at large. Strong Corporate Governance
is indispensable to a resilient and vibrant corporate entity. The principles on
which the good corporate governance is based are simple principles of fairness,
transparency and accountability.

1.3 Broadly speaking, Corporate Governance denotes the following:

 Direction and control of the affairs of a company;

 Establishing a system whereby directors of companies are entrusted with

responsibilities and duties in relation to the direction of a company's
affair;

 A system of structuring, operating and controlling a company with specific

aims of fulfilling the long-term strategy goal of the owners;

 Consideration and care for the interest of the employees;

 Taking account of the needs of the environment and the local community;

 Maintaining excellent relations with both customers and suppliers;

 Maintaining proper compliance with all the applicable legal and regulatory
requirements;

 A system of accountability primarily directed towards the shareholder in

addition to maximising the welfare of shareholders.

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CORPORATE GOVERNANCE :
NHPC LIMITED

BACKGROUND

2.1 NHPC Limited, A Govt. of India Enterprise, was incorporated in the year
1975 with an authorised capital of Rs. 2000 million and with an objective to
plan, promote and organise an integrated and efficient development of
hydroelectric power in all aspects.   Later on NHPC expanded its objects to
include development of power in all its aspects through conventional and non-
conventional sources in India and abroad.

2.2 At present, NHPC is a Mini Ratna Category-I Enterprise of the Govt. of

India with an authorised share capital of Rs. 1,50,000 Million . With an
investment  base of over Rs. 3,87,180 Million Approx. , NHPC is among the TOP
TEN companies in the country in terms of investment.

2.3 Since its inception in 1975, NHPC has grown to become one of the largest
organisation in the field of hydro power development in the country. With its
present capabilities, NHPC can undertake all activities from concept to
commissioning  of  Hydroelectric Projects.

Corporate Mission

2.4 Corporate mission of the company is summarized as follows:-

 To achieve international standards of excellence in all aspects of hydro

power and diversified business.

 To execute and operate projects in a cost effective, environment friendly

and socio-economically responsive manner.

 To foster competent trained and multi-disciplinary human capital.

 To continually develop state-of-the-art technologies through innovative

R&D and adopt best practices.

 To adopt the best practices of corporate governance and institutionalize

value based management for a strong corporate identity.

 To maximize creation of wealth through generation of internal funds and

effective management of resources.

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Corporate Vision

2.5 The corporate vision of the company states - A world class, diversified &
transnational organization for sustainable development of hydro power and
water resources with strong environment conscience.

CORPORATE GOVERNANCE

2.6 The core message on corporate governance by NHPC Ltd is recorded as -

Being NHPCians means striving towards the highest possible standards of ethical
business conduct. This is a matter as much practical as ethical; NHPC employs
people who relentlessly make endeavour to execute projects in / ahead the
schedule and efficient generation of hydroelectric power, but its most valuable
asset by far is the reputation as a company that warrants faith and trust. That
trust is the foundation upon which the success and prosperity of the organization
rests and it must be re-earned everyday, in every way, by every NHPCian.

Code of Conduct on Corporate Governance

2.7 The Code is framed to enhance ethical and transparent process in

managing the affairs of the Company, and thus to sustain the trust and
confidence reposed in the Board Members by the shareholders of the Company.

2.8 This Code envisages that the Board of Directors of the Company must
act within the bounds of the authority conferred upon them and with a duty to
comply with the requirements of applicable law.

2.9 The principles prescribed in this Code are general in nature and lay down
broad standards of compliance and ethics, as required by Clause 49 of the
Listing Agreement with The Stock Exchanges. The Board Members should also
review other applicable policies and procedures of the Company for specific
instructions and guidelines, which are to be read in conjunction with this Code.

2.10 Ethical Conduct. Every Board Member shall act within the authority
conferred upon him by the Company and under applicable law, keeping the best
interests of the Company in view and shall:

 Act with professionalism, utmost care, skill, diligence, honesty, good faith
and integrity as well as high moral and ethical standards;

 Fulfil their fiduciary obligations without allowing their independence of

judgment to be compromised;

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 Act fairly and transparently and not participate in any decision-making

process on a subject matter in which a conflict of interest exists or is likely
to exist such that an independent judgment of the Company’s best
interest cannot be exercised;

 Avoid conducting business with (a) a relative or (b) a private limited

company in which he or his relative is a member or a director (c) a public
limited company in which he or his relative holds 2% or more shares or
voting right and (d) with a firm in which the relative is a partner, except
with the prior approval of the Board;

 Avoid having any personal and/or financial interest in any business

dealings concerning the Company;

 Not engage in any business, relationship or activity with anyone who is a

party to a transaction with the Company;

 Avoid any dealings with a contractor or supplier that compromises the

ability to transact business on a professional, impartial and competitive
basis or influences decisions to be made by the Company;

 Not hold any positions or jobs or engage in other businesses or interests

that are prejudicial to the interests of the Company;

 Not exploit for his own personal gain, opportunities that are discovered
through use of corporate property, information or position, unless the
opportunity is disclosed fully in writing to the Board and the Board
declines to pursue such opportunity;

 Not seek, accept, or offer or make, directly or indirectly, any gifts, illegal
payments, remuneration, donations or comparable benefits which are
intended to or perceived to obtain business or uncompetitive favours for
the conduct of business save as otherwise provided under the Rules;

 Not commit any offence involving moral turpitude or any act contrary to
law or opposed to public policy.

2.11 Disclosures. Notwithstanding that any instances of conflict of

interest exist due to any historical reasons, adequate and full disclosure by the
interested Board Member should be made to the Company. It is also incumbent
upon every Board Member to make a full disclosure of any interest which the
Board Member or the Board Member’s immediate family, which would include
parents, spouse and children, may have in a company or firm which is a
supplier, customer, distributor of or has other business dealings with the
Company.

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2.12 With respect to related party disclosures, Board Members shall make
disclosure to the Board under the provisions of Accounting Standard 18 annexed
hereto as Appendix II issued by the Institute of Chartered Accountants of India
(ICAI) and / or any modification or re-codification thereof.

2.13 If a Board Member fails to make a disclosure as required herein, and the
Company of its own accord becomes aware of an instance of conflict of interest
that ought to have been disclosed by the Board Member, the Company would
take a serious view of the matter and consider suitable disciplinary action
against the Board Member.

2.14 Other Directorships. Unless specifically permitted by the Chairman of

the Board, Board Members shall not serve as director of any other company or
as partner of a firm that is engaged in a competing business with the Company
or with which the Company has business relations. This clause is not applicable
to Non-Whole Time Directors. Whole Time Directors shall not accept any
appointment or post, whether advisory or administrative, in any firm or
company, whether Indian or foreign, having competing interests with the
Company (other than (i) Joint Venture Companies with Management Control
vested in NHPC and (ii) subsidiary company of NHPC) or with which the company
has or had business relations, within two years from the date of cessation of
Directorship of the Company unless approved by the Government.

2.15 Insider Trading. Every Board Member shall comply with the Code of
Internal Procedures and Conduct in dealing with the securities of the Company.

2.16 Public Representation and Confidentiality of Information. The

Company honors the information requirements of the public and its
stakeholders. In all its public appearance with respect to disclosing information
in relation to the Company’s activities to public constituencies such as the
media, the financial community, employees and shareholders, the Company
shall be represented only by specifically authorized Officers.

2.17 Any information concerning the Company’s business, its customers,

suppliers, etc. to which the Board Members have access or which is possessed
by the Board Members, must be considered privileged and confidential and
should be held in confidence at all times, and should not be disclosed to any
person, unless (i) authorized by the Board; or (ii) the same is part of the public
domain at the time of disclosure; or (iii) is required to be disclosed in accordance
with applicable laws.

2.18 Regulatory Compliance. Every Board Member shall, in his business

conduct, comply with all applicable laws, rules and regulations, both in letter and
in spirit, in all the territories in which he operates. If the ethical and professional

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standards set out in the applicable laws and regulations are below that of the
Code, then the standards of the Code shall prevail.

2.19 Health, Safety and Environment. The Company and the Board
Members shall strive to provide a safe and healthy working environment and
comply, in the conduct of its business affairs, with all regulations regarding the
preservation of the environment of the territory it operates in. The Board
Members shall be committed to prevent the wasteful use of natural resources
and minimize any hazardous impact of the development, production, use and
disposal of any of its products and services on the ecological environment.

2.20 Protection of Assets. The Board Members shall not misuse, for
personal gain or otherwise, the assets of the Company, including tangible assets
such as equipment and machinery, systems, facilities, materials, resources as
well as intangible assets such as proprietary information, relationships with
customers and suppliers, etc., and shall employ them for the purpose of
conducting the business for which they are duly authorized.

Fraud Policy

2.21 In compliance with the provisions of the Corporate Governance

Guidelines, a Fraud Policy has been framed and got approved from the Board of
Directors. The "Fraud Policy" has been framed to provide a system for detection
and prevention of fraud, reporting of any fraud that is detected or suspected and
fair dealing of matters pertaining to fraud. The policy will ensure and provide for
the following:

 To ensure that management is aware of its responsibilities for detection

and prevention of fraud and for establishing procedures for preventing
fraud and/or detecting fraud when it occurs.

 To provide a clear guidance to employees and others dealing with NHPC

Ltd. forbidding them from involvement in any fraudulent activity and the
action to be taken by them where they suspect any fraudulent activity.

 To conduct investigations into fraudulent activities.

 To provide assurances that any and all suspected fraudulent activity will
be fully investigated.

Policy and Procedure for Banning Business Dealings

2.22 Suppliers/ bidders, who deal with NHPC are expected to adopt ethics of
highest standards and a very high degree of integrity, commitments and
sincerity towards the work undertaken. It is not in the interest of NHPC to deal

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with Agencies who commit deception, fraud or other misconduct in the tendering
process.

2.23 Since banning of business dealings involves civil consequences for an

Agency concerned, it is incumbent that adequate opportunity of hearing is
provided and the explanation, if tendered, is considered before passing any
order in this regard keeping in view the facts and circumstances of the case.

2.24 General Conditions of Contract (GCC) of NHPC generally provide that

NHPC shall have the rights to remove from list of approved suppliers /
contractors or to ban business dealings if any Agency has been found to have
committed misconduct or fraud or anything unethical not expected from a
reputed contractor. The banning shall be with prospective effect, i.e. future
business dealings.

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CORPORATE GOVERNANCE : JAYPEE GROUP

BACKGROUND

3.1 Jaypee Associate Limited was incorporated by Shri Jayprakash Gaur in

1950. Today the Group is a diversified infrastructure conglomerate and has a
formidable presence in Engineering & Construction along with interests in the
Power, Cement and Hospitality. The infrastructure conglomerate has also
expanded into Real Estate & Expressways.

Corporate Mission

3.2 The corporate mission of the company states – “Our solitary Mission is to
achieve Excellence in every sector that we operate in - be it Engineering &
Construction, Cement, Real Estate or Consultancy. To augment our core
competencies and adopt the most comprehensive modern technology to
overtake the obstacles in our path of achievement. To obtain sustainable
development and simultaneously enhancing the shareholders value and fulfilling
our obligations towards building a better India."

Corporate Vision

3.3 The corporate vision of the company states – “As a group, we are
committed to strategic business development in infrastructure, as the key to
nation building in the 21st century. We aim to achieve perfection in everything
we undertake with a commitment to excel. It is the determination to transform
every challenge into opportunity; to seize every opportunity to ensure growth
and to grow with a human face.”

CORPORATE GOVERNANCE

3.4 The Company’s philosophy on corporate governance aims at attaining the

highest level of transparency, accountability towards its stakeholders, including
shareholders, employees, the Government and lenders and to maximize returns
to shareholders through creation of wealth on sustainable basis.

The Board

3.5 Board of Directors. The constitution of the Board aims at ensuring

Directors commitment to participate in the affairs of the Company with
understanding and competence to deal with current and emerging business
issues. The Company’s policy does not prescribe any pre-determined or specific
tenure for Directors (except Whole-time Directors who are appointed for a term

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of five years) as this has the inherent advantage of not losing valuable
contribution from the Directors who, over the years, have developed insight into
the Company and its affairs.

3.6 The Board of Directors comprised 18 Directors as on March 31, 2010 out
of which 8 are Independent Directors. As per Clause 49 of the Listing
Agreement, in case of an Executive Chairman, at least half of the Board should
comprise Independent Directors. Our Board, which is headed by Executive
Chairman, earlier had 10 Independent Directors, out of which nomination of Shri
M J Subbaiah has been withdrawn by ICICI Bank Ltd. and Shri ERC Shekar has
since resigned due to personal reasons. The Company will reconstitute the Board
within the prescribed period.

3.7 Board Meetings. During the financial year 2009-10, Six Meetings of the
Board of Directors were held as against the requirement of four meetings. The
maximum time gap between two meetings was not more than four calendar
months. The meetings were held on following dates:-

 April 30, 2009

 July 18, 2009

 August 27, 2009

 October 21, 2009

 December 22, 2009

 January 17, 2010

3.8 Information to Board. Information placed before the Board of

Directors broadly covers the items specified in Clause 49 of the Listing
Agreement and such other items which are necessary to facilitate meaningful
and focused deliberations on issues concerning the Company and taking decision
in an informed and efficient manner. Besides, the Directors on the Board have
complete access to all information of the Company, as and when necessary.

3.9 Audit Committee. As a measure of good Corporate Governance

and to provide assistance to the Board of Directors in fulfilling the Board’s
oversight responsibilities, an Audit Committee has been constituted by the Board
comprising four Directors, all being Non-Executive with majority of them being
independent. The Chairman of the Audit Committee is an Independent Director.
The Company Secretary acts as the Secretary to the Audit Committee.

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3.10 The constitution of the Audit Committee also meets the requirements
under Section 292A of the Companies Act, 1956 (The Act). The terms of
reference and powers of the Audit Committee are in keeping with those
contained under Clause 49 of the Listing Agreement and the Act.

3.11 Remuneration Committee. The Remuneration Committee,

constitution of which is a non-mandatory requirement, was constituted by the
Board to recommend/review the Remuneration package of the Whole-time
Directors. The Remuneration Committee comprises three independent Directors.

Code of Conducts for Corporate Governance

3.12 The Board of Directors has laid down a Code of Conduct for all Board
members and senior management personnel of the Company. All Board
members and senior management personnel have, on March 31, 2010, affirmed
compliance with the Code of Conduct.

3.13 The Code of Conduct is the main driving principles for practicing ethical
corporate governance in the Jaypee Group of companies. It is intended to
provide guidance and help to all Directors & Senior Management Executives in
recognising their responsibility and dealing with the issues in such manner as to
achieve the objective of the corporate in an ethical way and to help to foster a
culture of honesty in the performance of one’s duties and accountability.

3.14 Members / Directors / Executives. Every member / director /

executive to:

 Make reasonable efforts to attend Board and Committee meetings

regularly.

 Dedicate sufficient time, energy and attention to the affairs of the

Company to ensure diligent performance of his duties, including preparing
for meetings and decision making by viewing in advance any Agenda /
material distributed and making reasonable enquiries.

 Seek to comply with all Corporate Policies.

 Act in the best interest of, and fulfil his fiduciary obligations to the
Company’s shareholders.

 Conduct himself in a professional, courteous and respectful manner.

 Comply with all applicable laws, rules and regulations.

 Act in a manner to enhance and maintain the reputation of the Company.

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 Disclose potential conflicts of interest that he may have regarding any

matters that may come before the Board, and abstain from discussion and
voting on any matter in which the Director has or may have a conflict of
interest.

 Make available to and share with fellow Directors information as may be

appropriate to ensure proper conduct and sound operation of the
Company and its Board of Directors.

 Respect the confidentiality of information relating to the affairs of the

Company acquired in the course of their service as Directors, except when
authorized or legally required to disclose such information.

 Restrain from the use of confidential information acquired in the course of

their service as Directors to his personal advantage.

 Notify the other Directors of his material personal interest and must not
vote on the matter.

 Bring an open and independent mind to Board or Committee meetings and

should not make a decision about a matter before attending and
participating in the deliberations of the meeting.

3.16 General.

 All persons should avoid conflicts of interest with the Company. Any
situation that involves or may reasonably expected to involve, a conflict of
interest should be disclosed properly to the Chairman / Director-in-charge.

 All persons should act and conduct free from fraud and deception. Their
conduct shall conform to the best efforts.

 All persons owe a duty for not taking themselves personally, opportunities
that are discovered during the use of the Company’s property, information
or position, and they have duty towards the Company to advance its
objectives and interest.

 All persons not to compete directly or indirectly with the Company and not
to disclose the confidential and crucial information gathered by the
individuals during the tenure of their position in this Company even after
resignation from the directorship or leaving the services of the Company.

 All persons or their family members shall not accept any gift from persons
or firms who deal with the Company where such gifts can be construed as

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a force to influence their actions and decisions in conflict with the interest
of the Company.

 All persons shall deal fairly with employees of the Company / Group
Companies. They shall not take any unfair advantage of anyone through
manipulation, concealment, abuse of confidential, proprietary or trade
secret information, misrepresentation or other unfair dealing-practices.

 All persons shall not indulge in the activity of subscribing or buying or

selling the Securities of the Company, which may be in contravention of
the policies prescribed by SEBI in the matter of Insider Trading. Such
persons shall not misuse any unpublished price sensitive information
about the Company with others.

 All persons shall give full cooperation to their seniors, share the
information with them, if required, in the best interest of the Company or
for compliance of the requirement of the good corporate governance.

 All persons must adopt proactive practices to promote the progressive and
ethical behaviour at all levels of the management and among other
members of the team in the organisation.

 All persons must ensure that none of their actions obstruct other person
who is performing his duty as assigned to him.

 All persons ought to report variation of any type in policy Code to their
seniors and all of them should give patient hearing to those who want to
discuss and criticize any of the issues pertaining to any transaction
assuming the same is in the interest of the Company. In case a person
feels uncomfortable in discussion of such matters then the person desiring
to convey his feeling should contact the Chairman of the Company.

 All persons must disclose if any of their relatives or any Company or firm
in which they have interest is entering into employment or any business
transaction with the Company. Such disclosure of interest should be given
from time to time or periodically to the Company Secretary.

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CORPORATE GOVERNANCE :
UNITED KINGDOM

BACKGROUND

4.1 United Kingdom was once centre of world trade and commerce. With new
world order, it is still the sixth largest economy in the world based on purchase
power parity.

Origin of Corporation in UK

4.2 Corporations were first to start in UK. The early history of formation of
corporations with trading of its shares can be depicted as follows:-

 1564 – “Company of the Mines Royal” 24 shares of £1200 each were

traded.

 1565 – “Company of Mineral and Battery Works” 36 shares

 1606 – “The New River Company” to transport fresh water to London

 1688 – 15 joint stock companies ( none with more than 100 members)

 1712 – invention of the steam driven pump

 1781 to 1790 – number of companies from 33 to 328

 1825 – England repealed Bubble Act

Need for Corporate Governance in UK

4.3 Corporate Governance also originated in UK like its corporations. There

are various reasons for its need. Most common needs for having formal rules /
regulations for corporate governance are given below:-

 Till eighties the government had a large intervention in the businesses or

government itself did business.

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 After eighties things changed. A number of business reforms were

initiated by then PM Ms Margaret Thatcher that reduced government
control.

 Series of corporate frauds took place in UK like BCCI, Atlantic Computers,

Polly Peck, Maxwell etc. which greatly affected the economy, financial
market and credibility of the nation as a whole.

Common Threads in Corporate Failure

4.4 If we study the reasons of the aforesaid corporate frauds, we will come to
see some common threads in their failure.

 Overly optimistic financial reporting

 Lack of Internal control

 Questionable transactions and fraud

 Power in the hands of few

 Weak Corporate Boards

Modern Evolution

4.5 Various committees were formed post major corporate failure in UK. The
significant reports are:

 Cadbury Report- 1992

 Greenbury Report- 1995

 Hampel Report- 1998

 Turnbull Report-1999

 Company Law Review- 2001

 Higgs Review- 2003

4.6 Cadbury Committee. This committee was headed by Sir Adrian

Cadbury who was Chairman of Cadbury Schweppes from 1965 to 1989 and
director of the Bank of England from 1970 to1994. The committee was set up in
1992 by London Stock Exchange to address financial aspects of governance on
the backdrop of concern of failure of major companies.

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4.7 Highlights of Cadbury Committee. The various important issues that

got focused in Cadbury committee report are:-

 Effectiveness of the Board

 Role of Chairman

 Non-executive Directors

 Professional advise

 Directors training

 Board structure and procedures

 Standard of conduct

 Directors responsibilities

 Nomination committee

 Internal control

 Audit committee

 Internal audit

 Board remuneration

Corporate Governance Model

4.8 There are mainly three types of corporate governance model depending
on number of factors like country, region, political system, culture, population,
belief, ethics etc.

4.9 Anglo American Model. This model is followed in UK and USA. The
distinct feature of this model are wide spread shareholding and a great focus on
the shareholders. Ownership and management are separated and it has a single
board structure.

4.10 Relationship Model. This model is mostly followed in Germany, other

European countries and Japan. The distinct feature of this model are all
stakeholders are important - particularly creditors & employees. In this model,

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mostly the company is controlled and managed by families and therefore it has a
dual board structure.

4.11 Hybrid Models. This is convenient mixture of both the models discussed
aforesaid. Mostly followed in India and few Asian countries.

CORPORATE GOVERNANCE IN UK

4.12 One can distinguish two post-war eras in UK corporate governance. The
first, during the 1950s and 1960s, was the era of management control, in which
share ownership was fragmented, family owners had largely given up trying to
maintain control over large firms, and the financial institutions had not yet
begun to play any important role. This was a time of generally slack
management but quite high R&D spending, by international standards. During
the 1980s came the era of indirect owner-control, in which the dominant
shareholders were institutional and they exercised a sort of control by paying
close attention to financial results of firms and being prepared to sell their
shares to hostile bidders if the offer price was right.

4.13 The second era displays an outsider-dominated financial system, par

excellence. As a result of the institutional investors’ historical position in the UK
stock market, they were unlikely to show an active interest in their investee
companies. They tried to achieve their target performance by buying and selling
shares, relying on their judgement of the underlying strength of companies and
their ability to exploit anomalies in share prices. Institutions tended not to vote
their shares regularly, and to intervene directly with company managements
only in circumstances of crisis.

UK CORPORATE GOVERNANCE CODE

4.14 UK corporate governance code was formulated by UK Financial Reporting

Council and it was implemented in 2003. The latest revised edition is effective
from June 2010. The code incorporated almost all the recommendations of
Cadbury and Higgs review.

4.15 Section A: Leadership.

 Every company should be headed by an effective board which is

collectively responsible for the long-term success of the company.

 There should be a clear division of responsibilities at the head of the

company between the running of the board and the executive
responsibility for the running of the company’s business. No one individual
should have unfettered powers of decision.

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 The chairman is responsible for leadership of the board and ensuring its
effectiveness on all aspects of its role.

 As part of their role as members of a unitary board, non-executive

directors should constructively challenge and help develop proposals on
strategy.

4.16 Section B: Effectiveness.

 The board and its committees should have the appropriate balance of
skills, experience, independence and knowledge of the company to enable
them to discharge their respective duties and responsibilities effectively.

 There should be a formal, rigorous and transparent procedure for the

appointment of new directors to the board.

 All directors should be able to allocate sufficient time to the company to

discharge their responsibilities effectively.

 All directors should receive induction on joining the board and should
regularly update and refresh their skills and knowledge.

 The board should always be supplied with right information for effective
functioning.

 All directors should be able to allocate sufficient time to the company to

discharge their responsibilities effectively.

 All directors should receive induction on joining the board and should
regularly update and refresh their skills and knowledge.

 The board should always be supplied with right information for effective
functioning.

4.17 Section C: Accountability.

 The board should present a balanced and understandable assessment of

the company’s position and prospects.

 The board is responsible for determining the nature and extent of the
significant risks it is willing to take in achieving its strategic objectives.

 The board should maintain sound risk management and internal control
systems.

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 The board should establish formal and transparent arrangements for

considering how they should apply the corporate reporting and risk
management and internal control principles and for maintaining an
appropriate relationship with the company’s auditor.

4.18 Section D: Remuneration.

 Levels of remuneration should be sufficient to attract, retain and motivate

directors of the quality required to run the company successfully, but a
company should avoid paying more than is necessary for this purpose. A
significant proportion of executive directors’ remuneration should be
structured so as to link rewards to corporate and individual performance.

 There should be a formal and transparent procedure for developing policy

on executive remuneration and for fixing the remuneration packages of
individual directors. No director should be involved in deciding his or her
own remuneration.

4.19 Section E: Relations with Shareholders.

 There should be a dialogue with shareholders based on the mutual

understanding of objectives. The board as a whole has responsibility for
ensuring that a satisfactory dialogue with shareholders takes place.

 The board should use the AGM to communicate with investors and to
encourage their participation.

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National Institute of Financial Management
 ‘Corporate Governance’

REFERENCE
1. www.nhpcindia.com

2. www.jalindia.com

3. www.frc.org.uk

4. ‘Corporate governance and innovation: UK compared with US and insider

economy’ by Andrew Tylecote and Paulina Ramirez

5. ‘An International Comparison of Corporate Governance Models’ by

Gregory Francesco Maassen

6. OECD Principles of Corporate Governance

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National Institute of Financial Management