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10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 1 CG & CSR ( Over all Concepts) M.R.Vanithamani Asst. Professor School of Management VLBJCET.

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Presentation on theme: "10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 1 CG & CSR ( Over all Concepts) M.R.Vanithamani Asst. Professor School of Management VLBJCET."— Presentation transcript:

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2 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 1 CG & CSR ( Over all Concepts) M.R.Vanithamani Asst. Professor School of Management VLBJCET

3 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 2 Some Definitions “Corporate Governance is the system by which companies are directed and controlled…” –Cadbury Report (UK), 1992 “…to do with Power and Accountability: who exercises power, on behalf of whom, how the exercise of power is controlled.” Sir Adrian Cadbury.

4 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 3 An OECD Definition “ Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders..also the structure through which objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.” –Preamble to the OECD Principles of Corporate Governance, 2004

5 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 4 What is Corporate Governance? The Manner in which a Corporation is Run –Achieving its Objectives –Transparency of its Operations –Accountability & Reporting –Good Corporate Citizenship The Processes & Operating Relationships that Best Achieve Organisational Goals

6 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 5 CORPORATE GOVERNANCE  WHAT IS CORPORATE GOVERNANCE – Processes And Structure By Which Business And Affairs Of Corporate Sector Is Directed And Managed  OBJECTIVE OF CORPORATE GOVERNANCE a) To build up an environment of trust and confidence amongst those having competing and conflicting interest B) To enhance shareholders’ value and protect the interest of other stakeholders by enhancing the corporate performance and accountability

7 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 6 Some Governance Models Finance or the Principal-Agent Model –Markets for Capital, Managerial Talent and Corporate Control, Key determinant –In general, profit-maximisation goal is co- functional with social-welfare-maximisation –Shareholders as Residual Claimants have superior control rights

8 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 7 Exclusive Accountability to Shareholders Risk-bearing Entrepreneurs Residual Claimants Winding-up Ranking: Last in Pecking Order Boards Appointed by Shareholders Non-congruence of Stakeholder Interests

9 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 8 The Stakeholder Case Firm Objective must be defined more widely than just shareholder-value-maximisation, since risk capital is not the only, or even the major input Residual Claimant Rights Not Universally Valid, eg, Circumscribed in case of pre-bankruptcy (US Chapter XI) Situations Other Such: Employees with Firm-specific Specialised Skills, Customers/Vendors with Substantial Stake in the Business, etc

10 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 9 The Corporate Board Central to Corporate Governance –Juxtaposed between Shareholders on the one hand, and on the other, Managers of the Entity (Cadbury) –Follows Distancing between Ownership and Control (Berle and Means) –Trustee for All Shareholders –Loyalty & Commitment – Always to Company M.R.Vanithamani, Assistant Professor, School of Management, VLBJCET

11 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 10 Board Role & Responsibility Provide/ Exercise –Leadership and Strategic Guidance –Objective Judgement Independent of Management –Control over the Company Direct and Control the Management of the Company Be Accountable at all times to All Shareholders

12 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 11 Dimensions of Board Responsibility Direction involves –Formulation & Review of Company Policies, Strategies, Budgets and Plans, Risk Management Policies, Top Level HR Policies, etc –Setting Objectives & Monitoring Performance –Oversight of Acquisitions, Divestitures, Projects, Financial and Legal Compliance, etc

13 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 12 Dimensions of Board Responsibility Control Involves –Prescribing Codes of Conduct, –Overseeing Disclosure & Communication Processes, –Ensuring Control Systems to Protect Company Assets –Reviewing Performance & Realigning Action Initiatives to Achieve Company Objectives

14 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 13 Dimensions of Board Responsibility Accountability Involves –Creating, Protecting and Enhancing Company Wealth and Resources –Timely and Transparent Reporting –Good Corporate Citizenry including Discharge of Stakeholder Obligations and Societal Responsibilities without Compromising the Shareholder Wealth Maximisation Goal

15 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 14 Corporate Governance & Capital Market Drivers: A Conceptual Framework Listed Corporations (The Board & the Executive) Regulators Government Stock Exchanges (SEBI/RBI) Legislation Listing Agreements Market OperatorsInstitutional Investors Press/Media (Rewards) (Pension Funds/Insce Cos) (Opinion Makers) Lenders (Banks/ Depositors) Shareholders/ Stakeholders REGULATION & LEGISLATION Market Operations, Critique & Monitoring

16 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 15 Environment Social Economic An Enterprise’s Triple Effect on Society Business Impact Sustainable Development Equal Opportunities Waste ControlEducation & Culture Emissions Community Regeneration Energy Use Human Rights Product Employee Life-cycle Volunteers Product Wealth Productive Ethical Value Generation Employment Trading

17 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 16 The Triple-Bottomline Impact Business Impact environmentsociety economics

18 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 17 Governance Orientation Matrix

19 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 18 Governance Orientation & Sustainable Profits

20 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 19 Attributes & Responsibilities of Boards &Directors Assume Responsibility for Effective & Efficient Management, through Oversight Mechanisms Integrity is Indivisible; Role Model Director is the Most Persuasive Statement of Ethical values Consider Transparency as the Norm. Confidentiality should not lead to Opacity Ultimate Responsibility for True and Fair Presentation Rests with the Board Poor Leadership Infects

21 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 20 RECENT DEVELOPMENTS  Committee headed by Shri Naresh Chandra constituted in august 2002 to examine corporate audit, role of auditors, relationship of company & auditor  Recommendation of Naresh Chandra committee:  Recommended a list of disqualifications for audit assignments like direct relationship with company, any business relationship with client, personal relationship with director  Audit firms not to provide services such as accounting, internal audit assignments etc. To audit clients  Auditor to disclose contingent liabilities & highlight Significant accounting policies.

22 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 21 RECENT DEVELOPMENTS  Recommendation of Naresh Chandra committee:  Audit committee to be first point of reference for appointment of auditors  CEO & CFO of listed company to certify on fairness, correctness of annual audited accounts  Redefinition of independent directors – does not have any material, pecuniary relationship or transaction with the company  Composition of board of directors  Statutory limit on the sitting fee to non-executive directors to be reviewed  Recommendations have formed part of companies (amendment) bill, 2003 (yet to be passed) M.R.Vanithamani, Assistant Professor, School of Management, VLBJCET

23 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 22 RECENT DEVELOPMENTS  Sebi constituted a committee headed by shri N. R. Narayana Murthy to review existing code of corporate governance  Recommendations:  Strengthening the responsibilities of audit committee  Improving quality of financial disclosures  Utilization of proceeds from IPO  To assess & disclose business risks  Formal code of conduct for board  Whistle blower policy to be placed in a company providing freedom to approach the audit committee  Subsidiaries to be reviewed by audit committee of holding company M.R.Vanithamani, Assistant Professor, School of Management, VLBJCET

24 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 23 CG Systems / Models 1.Anglo – American Model (or) Unitary Board Model (or) Anglo- Saxon Approach 2.German Model (or) Toe-tier Board Model (or) Continental European Approach 3.Japanese model (or) Business Network Model 4.Indian Model

25 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 24 Anglo – American Model (or) Unitary Board Model Shareholders BODShareholders Officers/ Managers Shareholders Company Creditors Elect Lies on Manage Appoints & Supervises Stake in Monitors & Regulates Own

26 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 25 Anglo – American Model (or) Unitary Board Model Ownership is equally divided between individual & institutional stakeholders. Directors are rarely independent of management Companies are run by professional managers who have negligible ownership stakes. Investors are reluctant activists Discourages large investors from taking active role in CG.

27 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 26 German Model (or) Toe-tier Board Model Employees & Labour Unions Supervisory Board Shareholders Management Board (Including Labour Relation Officer) Company Manage Appoints & Supervises Own Appoints 50%C

28 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 27 German Model (or) Toe-tier Board Model 1.CG is exercised through 2 boards 2.The upper board supervises the executive board on behalf of the stakeholders. 3.Societal –oriented approach 4.Ensures employees & Labourers also enjoy a share in governance. 5.Supervisory board appoints & monitors management board. 6.MB independently conducts day to day operations.

29 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 28 Japanese model (or) Business Network Model Supervisory Board President Executive Management Company Appoint Manage Consults Owns Provides Loans Own Shareholders Ratifies the President’s Decision Main Bank

30 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 29 Japanese model (or) Business Network Model Boards tends to be large Power is based on the relationship between the top management and the network Lending banks are given a role in CG The main bankers & shareholders together appoints BODs President consults supervisory board & excutive management.

31 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 30 Indian Model of CG Internal Environment External Environment Internal Environment Govt Regulations, Policies Companies Act, SEBI, Stock Exchange Corporate Culture, structure, influences Depositors, borrowers, customers & stakeholders CG System Vision, mission, policies SH Auditors BOD CG outcomes / Benefits to the society Proper Governance Investor Protection Healthy corporate sector development Shareholders Value Concern for customers

32 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 31 Indian Model of CG Governed by Company’s Act-1956 Follows more or less the UK model Private companies are dominated by the founder & his family members.

33 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 32 Theories of Corporate Governance Corporate governance Agency Theory Transaction Cost Economics Stakeholder Theory Stewardship Theory

34 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 33 Agency theory Identifies relationship between Principal & Agent Principal delegates work to agents Owners are the Principal & Directors are the Agents BOD should act as monitoring device by ensuring that the problems arise out of P-A relationship are minimised.

35 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 34 Transaction Cost Economics Views the firm as governance structure. Choice of appropriate governance structure aligns the interest of directors & Shareholders. There are certain economic benefits to the firm itself to undertake transactions internally rather than externally.

36 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 35 CG Systems / Models 1.Anglo – American Model (or) Unitary Board Model (or) Anglo- Saxon Approach 2.German Model (or) Toe-tier Board Model (or) Continental European Approach 3.Japanese model (or) Business Network Model 4.Indian Model

37 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 36 Anglo – American Model (or) Unitary Board Model Shareholders BODShareholders Officers/ Managers Shareholders Company Creditors Elect Lies on Manage Appoints & Supervises Stake in Monitors & Regulates Own

38 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 37 Anglo – American Model (or) Unitary Board Model Ownership is equally divided between individual & institutional stakeholders. Directors are rarely independent of management Companies are run by professional managers who have negligible ownership stakes. Investors are reluctant activists Discourages large investors from taking active role in CG.

39 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 38 German Model (or) Toe-tier Board Model Employees & Labour Unions Supervisory Board Shareholders Management Board (Including Labour Relation Officer) Company Manage Appoints & Supervises Own Appoints 50%C

40 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 39 German Model (or) Toe-tier Board Model 1.CG is exercised through 2 boards 2.The upper board supervises the executive board on behalf of the stakeholders. 3.Societal –oriented approach 4.Ensures employees & Labourers also enjoy a share in governance. 5.Supervisory board appoints & monitors management board. 6.MB independently conducts day to day operations.

41 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 40 Japanese model (or) Business Network Model Supervisory Board President Executive Management Company Appoint Manage Consults Owns Provides Loans Own Shareholders Ratifies the President’s Decision Main Bank

42 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 41 Japanese model (or) Business Network Model Boards tends to be large Power is based on the relationship between the top management and the network Lending banks are given a role in CG The main bankers & shareholders together appoints BODs President consults supervisory board & excutive management.

43 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 42 Indian Model of CG Internal Environment External Environment Internal Environment Govt Regulations, Policies Companies Act, SEBI, Stock Exchange Corporate Culture, structure, influences Depositors, borrowers, customers & stakeholders CG System Vision, mission, policies SH Auditors BOD CG outcomes / Benefits to the society Proper Governance Investor Protection Healthy corporate sector development Shareholders Value Concern for customers

44 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 43 Indian Model of CG Governed by Company’s Act-1956 Follows more or less the UK model Private companies are dominated by the founder & his family members.

45 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 44 Sir Adrian Cadbury’s Definition of Corporate Governance “Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals.The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources.The aim is to align as nearly as possible the interests of individuals,corporations and society.”

46 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 45 HISTORY OF CORPORATE GOVERNANCE Ever since the concept of corporate entity was recognized, corporate governance in various in various manifestations has been in existence. Efforts to articulate standards for corporate governance took roots in countries like the US and the UK. As a fall out of 1997 economic and financial crisis, Asian countries too became keenly interested in the issue of corporate governance. The OECD countries took early initiatives to address governance issues. Despite various attempts to define corporate governance and, its elements, and suggesting a model of good corporate governance, no universally accepts model of good corporate governance exists.

47 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 46 HISTORY OF INDIAN CORPORATE GOVERNANCE Recommendations of the Kumar Mangalam Birla Committee Constituted by SEBI and the Naresh Chandra Committee, led to addition and updating of clause 49 in the listing agreement. Compliance of provisions of clause 49 is largely mandatory by listed companies though it has some non – mandatory provisions also. SEBI has undertaken a project for rating the good corporate governance practices of listed companies. There has been little progress in this direction.

48 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 47 Value creation Principles of Governance Four board ideals, which should be the guiding force of company’s philosophy on corporate governance. Purpose of setting out philosophy on corporate governance is to reflect Board’s commitment to adoption of good governance practice as part of the company’s corporate culture / life apart from complying with regulatory requirements. It is a kind of self disciplinary code designed to secure the ultimate goal of making the company a value driven organization. Transparency Accountability Disclosure Disclosure

49 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 48 ROLE OF CONSTITUENTS OF CORPORATE GOVERNANCE Shareholders :- Role to appoint directors and auditors and to see if an appropriate governance structure is in place Board of Director:- Responsible for governance of the company. Management :- Responsibility of management is to ensure that control systems are in place to achieve objectives laid down by board. Society – environmental protection; social consciousness Trade - fairness in dealing

50 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 49 OBJECTIVES OF CORPORATE GOVERNANCE That a properly structured board capable of taking independent and objective decisions is in place at the helm of affairs. That the Board is balanced as regards the representation of adequate number of non – executive and independent directors who will take care of the interests and well being of all the stakeholders. That the board adopts transparent procedures and practices and arrives at decisions on the strength of adequate information.

51 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 50 LEGAL AND REGULATORY FRAME WORK The Companies Act 1956 was the principals legislation providing the formal structure for corporate governance. Securities and Exchange Board of India – Listing agreement – Clause 49 has made certain provisions with regard to corporate governance mandatory for listed companies. Sarbannes Oxley Act (AS 5 serves as guideline)

52 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 51 SEBI Guidelines on Corporate Governance

53 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 52 Board Procedure The Board meeting shall be held at least four times a year. The difference of two Board meeting should not be more than four months.

54 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 53 Board of Directors:Composition of Board The Board of Directors of the company shall have an optimum combination of executive and non- executive directors with not less than 50% of the Board of Directors Comprising of Non-Executive Directors. In case of a Non-Executive Chairman,at least 1/3 rd of board should comprise of Independent Directors. A Director shall not be a member in more than 10 committees or act as Chairman of more than 5 Committees.

55 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 54 Information to be placed before Board of Directors Annual operating plans and budgets and any updates. Capital budgets and any updates Quarterly results of the company and its operating divisions or business segments. Minutes of meetings of audit committee and other committees of the board. The information on recruitment and remuneration of senior officers just below the board level,including appointment or removal of Chief Financial Officer and the Company Secretary.

56 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 55 Information to be placed before Board of Directors Show cause,demand,prosecution notices and penalty notices,which are materially important. Fatal or serious accidents,dangerous occurances,any material effluent or pollution problems. Any material default in financial obligations to and by the company,or substantial non- payment for goods sold by the company.

57 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 56 Information to be placed before Board of Directors Any issue,which involves possible public or product liability claims of substantial nature,including any judgement or order which may have passed strictures on the conduct of the company or taken an adverse view regarding another enterprise that can have negative implications on the company. Details of any joint venture or collaboration agreement. Transactions that involve substantial payment towards goodwill,brand quality or intellectual property.

58 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 57 Information to be placed before Board of Directors Significant labor problems and their proposed solutions.Any significant development in HR/IR front like signing of wage agreement,implementation of Voluntary Retirement Scheme. Sale of a material nature,or investments, subsidiaries, assets which is not in normal course of business. Non compliance of any regulatory,statutory nature or listing requirements and shareholders service such as non-payment of dividend,delay in share transfer.

59 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 58 Non Executive Directors All compensation paid to NED’S shall be fixed by the Board of Directors and shall be approved by shareholders in general meeting. Limits shall be set for the maximum number of stock options that can be granted to NED’s in any financial year and in aggregate. Company shall publish its compensation philosophy in respect of NED’s in its annual report.

60 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 59 Non Executive Directors Company shall disclose on an annual basis,details of shares held by NEDs. NEDs shall be required to disclose their stock holding in the listed company in which they are proposed to be appointed as Directors,prior to their appointment. Person shall be eligible for the office of NED so long as the term of office did not exceed 9 years in terms of 3 years each,running continuously.

61 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 60 Independent Director No monetary relationship with the company, its promoters, senior management or affiliate companies. Not related to promoters or the senior management. Not been an executive with the company in the immediately three preceding financial years. Is not a partner or executive of the auditors/ lawyers/consultants of the company; Is not a supplier, service provider or customer of the company. Does not hold 2 per cent or more of the shares of the company. The British definition, interestingly, as given in the Higgs report is an exclusive definition which provides for who cannot be an independent director.

62 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 61 Independent Director Independent Director shall periodically review legal compliance reports prepared by the company as well as steps taken by the company to cure any taint. The considerations as regards remuneration paid to an independent Director shall be the same as those applied to a non-executive director.

63 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 62 Code of Conduct It shall be obligatory for the Board of a company to lay down the code of conduct for all Board members and senior management of a company. All Board members and senior management personnel shall affirm compliance with the code on an annual basis.

64 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 63 Board Independence Majority of the directors should be independent on management both in fact & appearance.  Assessing Independence  Relationship with non-profit organizations  CEO can also serve as chairman of the board & acts as a bridge between the management and the board.

65 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 64 Duties & Responsibilities of the Board Should act on a fully informed basis, in good faith, with due diligence and care and the best interest of the company & Shareholders. Should treat all shareholders equally Considering the interest of the stakeholders, should apply high ethical standards. Should be able to exercise objective independent judgment on corporate affairs

66 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 65 Key function of the Board Reviewing and guiding all Plans & Policies Setting targets and monitoring Overseeing major capital expenditures Monitoring governance practices and incorporating changes whenever needed. Selecting, compensating, monitoring and evaluating key executives. Aligning key executives & board remuneration.

67 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 66 contd Ensuring formal & transparent nomination & election process Monitoring & managing conflicts Preventing abuse & misuse of corporate asserts Ensuring integrity of corporate financial system Overseeing the process of disclosure & communication

68 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 67 Distribution of Decision & Control Rights Stockholder’s General assembly Decision Legitimating Management Team 3 rd Degree Decision rights Decision Management BOD 2 nd Degree Decision Rights Decision control Control Separation Separation gains from specialization in risk bearing & decision making Separation cost from lack of incentives Further Control Separation Separation gains from transaction cost. Separation cost from increased bureaucracy

69 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 68 Role of BOD & Management Selection, compensation and evaluation of qualified & ethical CEO Planning for management Succession Understanding, reviewing & monitoring implementation of the corporation’s - strategic plans - annual operating plans & budget Focusing on the integrity & clarity of the corporation’s financial statement & financial reporting

70 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 69 contd Engaging outside auditors & considering independence issues Advising management on significant issues & reviewing and approving further actions Reviewing management's plan for business resiliency Nominating directors & committee members ensuring effective CG.

71 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 70 Board Organizations (Committees) Committee structure permits the board to address key areas in depth. Committees decide about the CG issues Board designates chairmen for committees Effective CG depends on audit, compensation & CG committee. To study special issues additional committees are formed. Responsibilities are clearly defined & documented

72 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 71 1. Audit Committee Comprised of solely independent directors with 3-5 members Members qualify as independent as per listings Should meet minimum financial standards with at least one financial expert. Should be specialized in risk assessment & management Practice. Primary Functions: oOutside Auditors 0 Financial Statements oIndependence 0 Internal audit functions oInternal Controls 0 Communication oCompliance 0 Hiring auditor Personnel. oCritical Accounting Judgment & Estimates

73 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 72 2. CG Committee/ Nominating Committee Recommend Director Nominees Consists of independent directors Recommends directors for appointment to committees Monitor & Safeguard the board’s independence Ensures timely & quality information to Board Develops & Recommends CG principles for all Looks after the evaluation of Board &management

74 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 73 3.Compensation Committee Takes care of Corporation’s overall compensation & CEO, Sr.Mgt Compensation Establishes appropriate incentives for management & employees at all levels. Deciding stock options & Equity Compensation Lon term / Short term performance based compensations. Ensuring the benefits proportionate to the contributions

75 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 74 Board & Management Evaluation Effectiveness, operations & Contributions must be measured. Periodic self evaluation of board Ensuring quality contribution by directors Renomination based on earlier performance Plans for retirement & Replacement of members. Succession planning Evaluation of CEO’s performance & others

76 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 75 Composition of Audit Committee The Audit Committee shall have minimum 3 members. All the members to be Non Executive Directors. The majority of the members to be independent. All members of Audit shall be financially literate. One member must have financial and accounting knowledge. Chairman of the committee shall be an Independent Director. The Chairman shall be present at Annual General Meeting to answer shareholders Queries.

77 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 76 Functioning of Audit Committee Audit Committee shall meet at least thrice a year. One meeting to be held before finalisation of Annual Accounts. Other two meetings should be held at interval of 6 months. The quorum shall be of 2 members or 1/3 rd of the members of the audit committee,whichever is higher and minimum of 2 independent Directors.

78 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 77 Power of the Audit Committee To investigate any activity within its terms of reference. To seek information from any employee. To obtain outside legal or other professional advise. To secure attendance of outsiders with relevant expertise,if it considers necessary.

79 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 78 Role of Audit Committee 1.Oversight of the company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. 2.Recommending the appointment and removal of external auditor, fixation of audit fee and also approval for payment for any other services. 3.Reviewing with management the annual financial statements before submission to the board.

80 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 79 Role of Audit Committee 4.Reviewing with the management, external and internal auditors, the adequacy of internal control systems. 5.Reviewing the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit. 6.Discussion with internal auditors any significant findings and follow up there on.

81 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 80 Role of Audit Committee 7.Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board. 8.Discussion with external auditors before the audit commences about nature and scope of audit as well as post- audit discussion to ascertain any area of concern. 9. Reviewing the company’s financial and risk management policies. 10.To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors.

82 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 81 Review of Information by Audit Committee 1.Financial statements and draft audit report, including quarterly / half-yearly financial information; 2.Management discussion and analysis of financial condition and results of operations; 3.Reports relating to compliance with laws and to risk management;

83 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 82 Review of Information by Audit Committee 4. Management letters / letters of internal control weaknesses issued by statutory / internal auditors; and 5. Records of related party transactions 6. The appointment, removal and terms of remuneration of the Chief internal auditor shall be subject to review by the Audit Committee.

84 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 83 Audit Reports and Audit Qualifications In case it has followed a treatment different from that prescribed in an Accounting Standards, management shall justify why they believe such alternative treatment is more representative of the underlined business transactions. Management shall also clearly explain the alternative accounting treatment in the footnote of financial statements.

85 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 84 Whistle Blower Policy i.Personnel who observe an unethical or improper practice shall be able to approach the audit committee without necessarily informing their supervisors. ii.Companies shall take measures to ensure that this right of access is communicated to all employees through means of internal circulars, etc. iii.The employment and other personnel policies of the company shall contain provisions protecting "whistle blowers" from unfair termination and other unfair prejudicial employment practices.

86 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 85 Whistle Blower Policy i.Company shall annually affirm that it has not denied any personnel access to the audit committee of the company and that it has provided protection to "whistle blowers" from unfair termination and other unfair or prejudicial employment practices. ii.Such affirmation shall form a part of the Board report on Corporate Governance that is required to be prepared and submitted together with the annual report.

87 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 86 Subsidiary Companies i.The company agrees that provisions relating to the composition of the Board of Directors of the holding company shall be made applicable to the composition of the Board of Directors of subsidiary companies ii.At least one independent director on the Board of Directors of the holding company shall be a director on the Board of Directors of the subsidiary company. iii.The Audit Committee of the holding company shall also review the financial statements, in particular the investments made by the subsidiary company.

88 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 87 Subsidiary Companies (iv) The minutes of the Board meetings of the subsidiary company shall be placed for review at the Board meeting of the holding company. (v) The Board report of the holding company should state that they have reviewed the affairs of the subsidiary company also

89 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 88 Disclosures of Contingent Liabilities The company agrees that management shall provide a clear description in plain English of each material contingent liability and its risks, which shall be accompanied by the auditor’s clearly worded comments on the management’s view. This section shall be highlighted in the significant accounting policies and notes on accounts, as well as, in the auditor’s report, where necessary.

90 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 89 Disclosures Basis of related party transactions. Board Disclosures-Risk Management Proceeds from Initial Public Offerings Management Shareholders

91 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 90 Remuneration of Directors:Disclosures to be made a.All elements of remuneration package of all the directors i.e. salary, benefits, bonuses, stock options, pension etc. b.Details of fixed component and performance linked incentives, along with the performance criteria. c.Service contracts, notice period, severance fees. d.Stock option details, if any – and whether issued at a discount as well as the period over which accrued and over which exercisable.

92 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 91 CEO/CFO Certification a.They have reviewed the balance sheet and profit and loss account and all its schedules and notes on accounts, as well as the cash flow statements and the Directors’ Report; b.These statements do not contain any materially untrue statement or omit any material fact nor do they contain statements that might be misleading; c.These statements together present a true and fair view of the company, and are in compliance with the existing accounting standards and / or applicable laws / regulations;

93 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 92 CEO/CFO Certification a.They are responsible for establishing and maintaining internal controls and have evaluated the effectiveness of internal control systems of the company; and they have also disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if any, and what they have done or propose to do to rectify these; b.They have also disclosed to the auditors as well as the Audit Committee, instances of significant fraud, if any, that involves management or employees having a significant role in the company’s internal control systems; and c.They have indicated to the auditors, the Audit Committee and in the notes on accounts, whether or not there were significant changes in internal control and / or of accounting policies during the year.

94 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 93 Compliance The company shall obtain a certificate from either the auditors or practicing company secretaries regarding compliance of conditions of corporate governance as stipulated in this clause and annex the certificate with the directors’ report, which is sent annually to all the shareholders of the company. The same certificate shall also be sent to the Stock Exchanges along with the annual returns filed by the company.

95 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 94 CEO’S & CFO’S required to affirm financials CEO’S and CFO’S are required to certify the reports filed with the SEC. False and/or improper certifications can attract fine ranging from $ 1 Million to $ 5 Million or up to 10 years imprisonment or both.

96 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 95 Penalties Penalties prescribed under the SOX ACT for any wrong doings are very stiff. Any CEO or CFO providing a certificate knowing that the certificate does not meet with the criteria stated,may be fined upto $ 1 Million and/or imprisonment upto 10 years. Those who WILFULLY provide false certification can be fined upto $ 5 Million and/or imprisonment upto 20 years.

97 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 96 CORPORATE GOVERNACE AND ETHICS Wide exposure of unethical practices in various corporate houses. With the increasing liberalization and globalization of Indian economy, the driving forces for business ethics are getting further strengthened due to need to match the best global competitive standards of ethics

98 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 97 CORPORATE GOVERNACE AND ETHICS Ethics carry importance from the point of view of employee’s customers, shareholders, lenders, dealers and vendors all of whom form part of the corporate of business stakeholders. All need to be treated fairly and justly.

99 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 98 CORPORATE GOVERNACE AND ETHICS Corporate ethics and good governance becomes highly important and should go hand in hand. Examples of unethical practices in corporate houses : (a)Unofficial estimates by the IMF state that Indians have stashed away at least 100 billion dollars in foreign banks. (b)There are about 4 lakh registered companies in India, 40% of them do not file any returns

100 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 99 Corporate Governance And Social Responsibility Corporate are born,exist and grow in a society and hence owe an obligation towards betterment of society. A business firm must view itself as a socially responsive entity and assume wider responsibilities. Corporate must accept social responsibility of giving due weight age to protect the environment and safeguard the interest of customers,employees,suppliers and the community.

101 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 100 Corporate Governance And Social Resposibility Corporations do not exist solely to provide returns to shareholders.Instead,they must serve a larger social purpose. Corporations should be ‘socially responsible’ institutions,managed in public interest and that they exist to create wealth for the society.

102 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 101 CORPORATE SOCIAL RESPONSIBILITY ENVIRONMENT:- Eco-efficiency Sustainable development Environment accounting CUSTOMERS:- Direct indirect

103 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 102 Models of CSR 1.Classical View – Making Profit 2.Archie Carroll’s Pyramid Philanthropic Ethical Legal Economic

104 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 103 Contd… 3.Stakeholders Model Bringing Balance among all stakeholders Look after the health of corporations Balancing multiple claim of stakeholders Owners – Higher Profits Customers – Better R&D Employee- Good Pay & Benefits Local Community – Non Exploitation & Upliftment

105 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 104 CSR - Types

106 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 105 Types of CSR 1.Cause Promotion : Providing funds to promote a cause so as to increase its awareness 2.Cause Related Marketing : Donating certain % of resources to a social cause 3.Social Marketing: Supports the development & Implementation of a behavior campaign 4.Corporate Philanthropy : Donating / Direct contribution towards a particular cause. 5.Community Volunteering : Supports & encourages all the stakeholders to volunteer, to support local to work on a social cause. 6.Socially Responsible Business Practices : Adopting business Practices to protect the environment and doing socially responsible business.

107 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 106 CSR in Developed Vs Developing Countries Developed Countries -Governance -Ethical Businesses -Human Rights - Environment Developing Countries - Focus on Nation Building - Socio-Economic Development - Rural Development - Employment - Education - Health Care - Community Support

108 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 107 CSR in India Based on :- Ethical beliefs of founding fathers Business areas in which they operate Socio –Economic Environment Opportunity available over a longer stay Visibility Perception of Customer Oversight

109 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 108 CSR Philosophies in India 1.Ethical – Mahatma Gandhi’s Principle : Voluntary Commitment from the Company 2.Static – Nehru’s Principle : State ownership & legal requirements ensures CSR. Public Sectors shall act as role models to other corporate in CSR leading to good economic development 3.Liberal – Milton Friedman's view : Corporate responsibilities are limited to private owners 4.Stakeholder- Edward Freeman’s : Companies respond to the needs of SHs which leads to good CSR.

110 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 109 Why CSR is Preferred? Visibility Feel good Factor (Helps in retaining talents) Business Partner Requirement Voluntary Pressure from Stakeholders / Investors/ Lenders/ NGOs Need to maintain Good Relation with External entity Founder’s Attitude Threat of Regulators Desire to enhance or sustain competitiveness Barrier to Competition

111 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 110 Barriers in Implementing CSR Absence of clear linkage between CSR & financial Success Low voluntary adoption to CSR Lack of mechanisms to measure, evaluate & improve CSR. Smaller companies think as it is the responsibility of bigger ones Philanthropic Exercise High overheads of implementing & sustaining csr. There is no universally accepted frame work for CSR

112 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 111 RISK AND RISK MANAGEMENT CYCLE

113 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 112 RISK The uncertainty of event occurring that could have an impact on the achievement of the objectives. Risk implies uncertainty of profits or danger of loss due to some unforeseen events in the future.

114 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 113 TYPES OF BUSINESS RISK Operational risk Market risk Inherent risk Static risk Credit risk Systematic risk

115 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 114 OPERATIONAL RISK An operational risk is a risk arising from execution of a company's business functions Ex: fraud risks, legal risks, physical or environmental risks, etc.

116 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 115 MARKET RISK Market risk is the risk that the value of an investment will decrease due to moves in market factors Equity risk, the risk that stock prices will change.Equity risk Interest rate risk, the risk that interest rates will change.Interest rate risk Currency risk, the risk that foreign exchange rates will change.Currency risk Commodity risk, the risk that commodity prices (e.g. grains, metals) will change.Commodity risk Credit risk, the risk that a loan will not be paid back.Credit risk

117 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 116 OTHER RISKS  INHERENT RISKS- A risk which it is impossible to managed or transferred away  STATIC RISKS- Risk which is unique to an individual asset  CREDIT RISKS- Failure to meet the obligated payments of counter parties on time  SYSTEMATIC RISKS- The risk of holding Market Portfolio

118 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 117 TYPES OF BUSINESS RISK Internal risks 1.Human factors 2.Technological factors 3.Physical factors External risks 1.Economic factors 2.Natural factors 3.Political factors

119 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 118 RISK MANAGEMENT The culture, processes and structures that are directed towards the effective management of potential opportunities and adverse effects. Risk management is a structured approach to managing uncertainty related to a threat, a sequence of human activities including: risk assessment, strategies development to manage it, and mitigation of risk using managerial resources.

120 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 119 RISK MANAGEMENT CYCLE RISK IDENTIFICATION RISK ASSESMENT RISK TREATMENTS CREATE RISK MANAGEMENT PLAN IMPLEMENTATION REVIEW AND EVALUATION ESHTABLISH THE CONTEXT

121 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 120 ESHTABLISH THE CONTEXT Identification of risk in a selected domain of interest Planning the remainder of the process. Mapping out the following:  the social scope of risk management  the identity and objectives of stakeholders  the basis upon which risks will be evaluated, constraints. Defining a framework for the activity and an agenda for identification. Developing an analysis of risks involved in the process. Mitigation of risks using available technological, human and organizational resources.

122 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 121 IDENTIFICATION Source analysis Problem analysis METHODS 1.Objectives-based risk identification 2.Scenario-based risk identification 3.Taxonomy-based risk identification 4.Common-risk Checking 5.Risk Charting

123 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 122 RISK ASSESSMENT Potential severity of loss to the probability of occurrence. Rate of occurrence of risk Severity of consequences Rate of occurrence * impact of the event = risk

124 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 123 POTENTIAL RISK TREATMENTS Avoidance (eliminate) Reduction (mitigate) Transference (outsource or insure) Retention (accept and budget)

125 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 124 RISK MANAGEMENT PLAN CREATION Select appropriate controls or countermeasures to measure each risk. Document in statement of applicability. Identify control objectives and document.

126 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 125 REVIEW AND EVALUATION to evaluate whether the previously selected security controls are still applicable and effective, and to evaluate the possible risk level changes in the business environment.

127 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 126 LIMITATIONS If risks are improperly assessed and prioritized, time can be wasted in dealing with risk of losses that are not likely to occur. Prioritizing too highly the risk management processes could keep an organization from ever completing a project or even getting started.

128 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 127 ‘Risk management’, on the other hand, is defined as the identification, analysis and economic control of all such risks that may threaten assets, resources, or earning capacity of a firm/company. Risk management is in reality ‘an all business activities embracing’ tool and with a high standard of risk management, it would naturally be possible to ensure high standard of corporate governance.

129 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 128 It would, therefore, be necessary for the internal auditor to first get a fair idea of various categories of risks and action to be taken to confirm that enough safeguards are in place for managing different risks.

130 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 129 If the internal auditor has to report on how the financial risks are being managed, he would consider the impact of following sub- categories of financial risks: ✎ Market risks: Under this subcategory foreign exchange risk, interest risk, commodity risk and equity risks are considered. ✎ Liquidity risk ✎ Credit risk ✎ Economic risk arising out of changes in economic structure ✎ Sovereign risk: failure of a government company/corporation or a State government to honour its loan obligations or other commitments

131 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 130 While examining the financial risks, the internal auditor has to pay special attention to the following points: ☛ Receivables and bad/doubtful debts: This is one significant item, which has to form part of the internal auditor’s report, as in many companies financial crisis starts with a poor control on this item. It has a direct bearing on the financial health of many companies, particularly those companies with a very large number of customers, like telecom companies, electricity companies. ☛ Inventories: Optimum Inventory levels are decided by the Production and other concerned departments but it is the internal auditor who can ensure that the inventory carrying cost is properly controlled and is optimum.

132 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 131 ☛ Investments: The risk arising out of changes in interest rate policies of the Central Government /Reserve Bank of India can be quite substantial and has to be assessed at regular intervals because such changes result in substantial erosion of investments as in Debt schemes of Mutual Funds, etc. ☛ Foreign exchange transactions: The risk of financial loss on account of depreciation of foreign exchange bank balances or receivables has to be critically examined for reporting to the Board.

133 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 132 This risk arises out of wider aspects of a company’s activities, e.g., risk arising due to poor marketing strategy/acquisitions strategy, changes in consumer behaviour, poor product launches. From the point of corporate governance, management of strategic risks may be considered to be responsibility of the senior management/Board of Directors.

134 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 133 In case of other risks like environmental, technological and operational risks the internal auditor may not have an expert knowledge of the severity of the risks and he would have to take help of the concerned Departmental heads to critically examine the process of the risk management.

135 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 134 In this case, one major issue that the internal auditor may be required to examine could be adequacy of the insurance cover and the cost of such cover. For this purpose he would have to examine the past experience about insurance claims, loss prevention and safety measures, and, of course, the risk profile of various assets. In view of the increased competition between the general insurance companies, both in the public and private sectors, it has become possible to obtain a mega policy cover and the internal auditor may be the right authority to critically examine all aspects regarding the insurance cover obtained for all risks of a company.

136 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 135 It would be necessary for the internal auditor to weigh impact of all these risks on the financial performance of the company and make a suitable quarterly report to the Board of Directors/CEO/MD of the company. This report could be submitted when the Board considers the Quarterly performance of the company.

137 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 136 Financial reporting risks Liquidity and leverage Contractual compliance. Compliance with local laws intellectual property management. Engagement execution Integration of subsidiaries,Human resource management Culture, values and leadership.

138 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 137 Macro economic factors, Exchange rate fluctuations,Political environment, Competitive environment,Concentration of revenues, inflation and cost structure Immigration, regulations Security and business continuity, Technology obsolescence

139 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 138 CSR - MEANING What is corporate social responsibility ? CSR is about how companies manage the business processes to produce an overall positive impact on society.

140 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 139

141 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 140 The relationship between a company and its employees can have a big impact on that other key relationship - that between the company and its customers. Remuneration: does the company pay a fair wage Employee development: does the company invest in training and development for its staff Is the employee consulted about policies and procedures that may affect the working environment? Work-life balance Health and safety CSR Issues that need to be managed in the workplace

142 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 141 Community initiatives

143 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 142 CORPORATE SOCIAL RESPONSIBILITY CSR can be described as an approach by which a company:  recognizes that its activities have a wider impact on the society and the development of the society, in turn it helps the business  Actively manages the economic, social, environmental and human impact of its activities

144 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 143 Observations of social responsibility CSR is a vision about the relationship of business and society. It is most effectively treated as investments Profits are not only to reward investors but also to provide jobs, pay fair wages and contribute to the prosperity of the community

145 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 144 5 DIMENTIONS OF CSR Customer Employee Business partner Environmental protection and sustainable dimension Community

146 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 145 COMMUNITY Business operate in local, national and global context. Companies will make more important contribution to society especially to local communities. long term success of the company depends on the health, stability, prosperity of the community in which it operates.

147 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 146 COMMUNITY INITIATIVES OF CORPORATES

148 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 147 BAJAJ Bajaj works in 33 villages and Talukas of Pune District and 11 villages of Aurangabad district, Maharashtra. The integrated development activities under implementation include women empowerment, income generation, health programmes, agricultural extension, animal husbandry, watershed development, drinking water schemes, sanitation and education. 5600 families comprising a rural population of about 30,000 people are copartners in these development activities.

149 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 148 EDUCATION They conduct non formal education, to non school going and poorly performing school going children. About 400 primary students undergo the programme each year. They also conduct classes for vocational training like tailoring, bamboo craft, handicraft, making of greeting cards, mats, paper bags and assist computer training

150 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 149 BAJAJ Education Computer class Tailoring class

151 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 150 HEALTH CARE The health care programme, which includes mother and child care, eradication of malnutrition, TB, leprosy etc, Each village has a health worker who makes home visits to assist/ advise villagers on health matters. They also providing medical services, for a nominal fee or free for the poor, at the door steps of the villagers, through the mobile clinic..

152 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 151 Bharti Airtel’s response to Tsunami Disaster: Donated Rs. 1 Crore to the Prime Minister’s Relief Fund, in addition to contributions from employees Created 29 Airtel Crisis Communications centres in Tamil Nadu Raised resources for Tsunami victims by initiatives such as a ‘Benefit Cricket Match’

153 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 152 CONSTITUENTS OF A GOOD CORPORATE GOVERNANCE Shareholders elect directors who represent them. Directors vote on key matters and adopt the majority decision. Decisions are made in a transparent manner so that shareholders and others can hold directors accountable. The company adopts accounting standards to generate the information necessary for directors, investors and other stakeholders to make decisions. Good corporate governance is fundamental to raising capital, satisfying investors and running successful businesses in increasingly global markets.

154 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 153 CORPORATE REPUTATION  Corporate reputation is created when a corporate is responsible to all its stakeholders and shareholders.  Unlike corporate governance, which aims at maximization of interest of the general public,customer,employee, retiree, suppliers, shareholders and the financial analyst,besides meeting the requirements of government regulatory bodies,local communities and environmental protection.  Damage to reputation occurs when there is a perceived gap between corporate performance and stakeholders expectation. EXAMPLE:COCA-COLA, When faced with a drinks contamination issue in Belgium in June 1999,is another example of a hugely successful company,which failed to have its reputation..

155 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 154 CORPORATE REPUTATION. In today’s complex environment, organizations need to understand and respond to stakeholders rapidly shifting values, rising expectations, demands for public consultation and an increasingly intrusive new medias.  Now we are entering the era of the “triple bottom line” when companies are being increasingly required to achieve a balance between commercial success, environmental responsibility and social justice.  CSR programmes are in an integral part of good reputation management.

156 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 155 CORPORATE REPUTATIONAL AGENTS.  Reputational agents are individuals and/or groups that reduce the information gap between insiders and outsiders by seeking and providing information to outsiders about the performance of insiders and enterprises.  Examples of reputational agents are: 1.The Media 2.Lawyers 3.Environmentalists 4.Non governmental organizations (NGOs) 5.Investment bankers and corporate governance analysts.

157 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 156 CORPORATE REPUTATION INDEX  The corporate reputation index represents stakeholder expectations and experiences with the company and its services,processes,management and systems.  This index represents the company which is involved in activities like 1.Community development 2.Education and literacy 3.Population and health with special focus on HIV/AIDS 4.Empowerment of woman 5.Physical challenges.

158 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 157 CORPORATE REPUTATION INDEX  It is considered to be a measure of confidence in the organisation and goes beyond market capitalisation and brand equity.  INFOSYS topped the AC NIELSON corporate reputation index,and other two giants-WIPRO and TCS featured among the top 10 most favourable companies.  The study is conducted by AC NIELSON and designed to measure key perceptions of the performance of leading corporations in India,to help benchmark company image and reputation.

159 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 158 CORPORATE reputation DEFINITION: Corporate reputation is defined as the better management of the emotional attachment that stakeholders have with the organization.

160 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 159 Corporate reputation quotient is a comprehensing method of corporate reputation that was created specifically to capture the perceptions of any corporate, stakeholder group such as consumers, investors, employees. The instrument enables research on the drivers of a company reputation as well as comparisions of reputation both within and across industries

161 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 160 DRIVERS OF CORPORATEREPUTATION Corporate reputation model has the following 6 drivers with 20 attributes EMOTIONAL APPEAL: Good feeling about the company Admire and respect the company rusy the company PRODUCTS AND SERVICES: Stand behind the product/services Offers high quality product/services Develops innovative product/services Offers product/service that are good value VISION AND LEADERSHIP: Has excellent leadership Has a clear vision for the future Takes advantage of mkt oppurtunities

162 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 161 WORK PLACE ENVIRONMENT: Is well managed Looks like a good company to work for Looks like it has good employees FINANCIAL PERFORMANCE: Record of profitability Looks like a low risk investment Strong prospects for future growth Tends to outperform its competitors SOCIAL RESPONSIBILITY: Support good causes Environmentally responsible Treats people well

163 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 162

164 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 163 At the heart of the chain is the BRAND that complex of emotional attachments that we have with superior products,services and organisation

165 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 164 REPUTATION  is not as yet a business function  requires a fusion between several aspects human resource management marketing business strategy corporate communications  one of the most undervalued of strategic assets

166 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 165 CORPORATE LEGITIMACY The term legitimacy is derived from Webrian sociology.As Weber emphasised legitimacy constituted the basis of very real difference in the way in which power was exercised. In the organisational level there were two board grounds for exercising authority,based on tradition and its rational legal authority,resting on behalf of the legality of enacted rules and the right of those in positions of authority to issue commands. Corporate legitmacy refers the authority which is confined to the scope of the office and cannot be used in a capricious or self interested way. The ability to issue commands which are seen as binding because they are legitimate and is one of the central pillars of an organisation..

167 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 166 CLASSIC EXAMPLES INFOSYS Health Care Education Environment Act and Culture. Videocon Hospital Education,Sports. Reliance Industries Ltd Community Welfare. Hindustan Unilever Ltd Shakthi-Empowering rural woman,Lifebouy Swatya Chetna,Economic Empowerment of Woman. Godrej Industries Hospital,Mangroves Protection Community Development. Aditya Birla NUVO Infrastructure,livelihood,agriculture and water shed development,health and family welfare education. Bharat petroleum provision of drinking sanitation, vocational training,counsellling of its employees.

168 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 167 Legal Issues in CG Recent scandals in the corporate have given way to increased scrutiny of public registrants. In addition, shareholder groups, such as institutional shareholder services, are taking a harder look at entities and creating new metrics by which to measure and compare corporate governance.

169 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 168 CORPORATE SOCIAL RESPONSIBILITY? Integration of social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.  Behavior by businesses over and above legal requirements.  Voluntarily adopted.  Intrinsically linked to the concept of sustainable development.  Not an optional ‘add-on’ to business core activities — but about the way in which businesses are managed.

170 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 169 CORPORATE SOCIAL RESPONSIBILITIES Corporate social responsibilities implies decide voluntarily to contribute to a better society and clean environment. CSR means companies integrating social and environmental concerns in their daily business operations and in their interactions with their stakeholder on voluntary basis. CSR insists the social, morale, ethical responsibilities of business.

171 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 170 Try to protests welfare of the stakeholder, consumers and the society as whole. Emphasis on firm’s total commitment. Best way of doing a Business. Fixes corporate responsibilities at every level part of management. Corporate social responsibilities view of explicit and implicit is subscribed by a large number of companies that make commitments to various social programmes and projects.

172 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 171 CSR is the voluntarily contribution to the society. CSR so beyond the traditionally cost benefit approach. Where the law ends the social responsibility starts. Social responsibilities will increase the moral commitment to the business unit. CSR is a modern concept.

173 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 172 KEY DRIVERS ON CSR Greater stakeholder awareness of corporate ethical, social and environmental behavior. Direct stakeholder pressures. Investors pressures Peer group pressures increased social responsibilities Globalization /widen market Role of media

174 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 173 SIGNIFICANCE OF CSR CSR insist the social, moral, ethical responsibility of business. Try to protect welfare of the stakeholder consumers and the society as whole. Emphasis on firm’s total commitment Best way of doing a business. Business ethics. (5 Rights)

175 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 174 Keep stakeholders in a satisfied manner. CSR at every organization as a level part of management. Protecting environmental from pollution CSR refers to the relationship between owner or company, stakeholder and the society. CSR builds relationship between company stakeholder and society.

176 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 175 CSR FOR SUSTAINABLE DEVELOPMENT What is sustainability ? Use of processes and materials that can be maintained for an indefinite period. Reduce or eliminate contaminating toxins and in general minimize negative impact on the environment. Sustainability differs from industry to industry By reducing the use of paper – sustainability of world’s forests Not to pollute ground water - sustainability of our drinking water supply

177 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 176 CSR FOR SUSTAINABLE DEVELOPMENT  The sustainable development of the business depends upon the relationship with in and around the organization and out of the organization, which it means with stakeholders.  Improving Corporate social performance building “ THE GOOD SOCIETY”  Frederick (1978) argues that the fundamental idea of CSR is that business executives there an obligation to work for social Betterment.

178 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 177 SUSTAINABILITY IN TERMS OF CORPORATE SOCIAL RESPONSIBILITY  In the globalized era, it is of at most importance for an organization to have a policy that has a concern towards the social responsibility.  The extent up to which the companies are able to sustain their commitment towards the society and the environment.

179 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 178 BUSINESS HOUSES ARE RESPONSIBLE TO THE VARIOUS STAKEHOLDER PERSPECTIVES AND INITIATIVES

180 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 179 CONTENTS Stake holders Share holders Employees (or) internal customers Consumers (end users) Customers(marketing channels) Suppliers Government Local community Bankers,Creditors, Financial institutions Environment Society

181 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 180 STAKE HOLDERS Person, group, or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization's actions, objectives, and policies.Persongrouporganization organization'sactionsobjectives Key stakeholders in a business organization include creditors, customers, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources.businesscreditors customersdirectorsemployeesgovernment agenciesownersshareholderssuppliers communityresources All stakeholders are not equal and different stakeholders are entitled to different considerations. For example, a firm's customers are entitled to fair trading practices but they are not entitled to the same consideration as the firm's employees.considerationspracticesconsideration

182 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 181 What is a primary stakeholder? Employees Customers Stockholders

183 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 182 What is a Secondary Stakeholder? No contractual bond or direct legal authority Community Activists Advocacy groups Religious organizations Nongovernmental organizations (NGOs)

184 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 183 Why do Corporations Care about Secondary Stakeholder Action? Direct operational costs (legal fees, public relations expenses etc) but –Civil Suits –Protests –Letter-writing campaigns –Extreme actions (Greenpeace) Consequences to reputation and ability to attract customers, employees and appease regulators and shareholders

185 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 184 Stakeholder Management Stakeholders are those parties impacted by the company and upon whom its ultimate success depends Major stakeholders in addition to investors:  Employees  Customers  Business partners  Communities  Environment

186 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 185 Enterprise Eco-System: The Stakeholder Concept Enterprise Partners Employees Customers Environment Communities Suppliers Enterprise

187 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 186 SHARE HOLDERS  Adequate ROI  Dividend  Bonus shares  Complements  Discount coupon

188 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 187 EMPLOYEES (OR) INTERNAL CUSTOMERS QQuality of life / Work-life-balance HHuman resource policies RResponsible restructuring HHuman rights DDiversity JJob creation TTraining and education HHealth and wellness HHarassment

189 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 188 RIGHT PERSON FOR THE RIGHT JOB – RECRUITING AND SELECTING THE GREEN MINDED EMPLOYEES  “Green minded people for the job”.  Parameters that reveals the attitude of the candidate towards CSR  Preference/ importance to their past records  Candidates prefer jobs in the company that cares more for the environment and the society.

190 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 189 CONSUMERS (END USERS) -Business ethics (5 RIGHTS) -Continual supply -Gift Cheque -Offer coupon -Festival offer -Privilege card -Discount coupon

191 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 190 CUSTOMERS(Marketing channels)  Continual supply (SCM)  Ethical marketing, ethical advertising  Products and Services Product safety Quality  Fair pricing  Customer service  Responsible procurement  Audits  Cause related marketing

192 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 191 SUPPLIERS  Codes of conduct  Responsible Supply chain management Monitoring  Human rights  Labor standards (ILO)  Minority Vending  Fair Trade

193 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 192 GOVERNMENT -Settlement of taxation -Cordial relationship -Avoid tax evasion -Avoid black money -Transparency in books of accounts

194 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 193 GREENING OF TRAINING  New ways of thinking and doing.  Training is often the starting point for a company’s programs.  Creative thinking about environmental issues - change management effort.  Senior managers - Assigning short readings or video presentations to stimulate thinking.  Green thinking.

195 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 194 LOCAL COMMUNITIY (Corporate Citizenship)  Volunteerism  Education  Skill development  Poverty alleviation  Philanthropy  Partnership with NGOs

196 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 195 BANKERS,CREDITORS, FINANCIAL INSTITUTIONS -Proper repayment of interest and principal amount -Justify the affordability -Financial services -Smooth relationship

197 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 196 ENVIRONMENT  Eco-Efficiency Waste reduction Pollution avoidance Recycling Reducing materials, energy, water Lower packaging costs Certification  Life-cycle management  Greening the supply chain  Public procurement

198 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 197 SOCIETY Human Rights Pollution free environment Clean green everywhere Social welfare activities Well being, Material well being, Financial well being Tree plantation Forestation

199 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 198 Examples of CSR : RELIANCE- INDIA Health and safety environmental program Occupational health care centre's(OHC) -Clean development mechanism(CDM) -Fresh water provide to near village Education for poor Initiatives to combat HIV-AIDS and TB Adoption of public health centre's Highway rescue intervention Dhirubhai ambani hospital-Lodhivali

200 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 199 Moti khavadi medical centre Community medical services and SEZ,Jamnagar Thalassaemia detection camp and parental councelling Cancer-aid for cancer patient Mobile dispensaries Blood donation derives Public health care Drishti painting competition

201 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 200 Community development Reliance rural development trust(RRDT) Empowerment of women and youth Skill up gradation Eco-friendly initiatives Packaging solutions to formers (Leno bags) Polyethylene(PE) Biogas Domes for renewable energy source

202 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 201 Sports for physically challenged Real Indian heroes Dhirubhai ambani foundation (DAF) Dhirubhai ambani Education –rewards and scholarships Reliance Kargil scholarship schemes Reliance school of life sciences(RSLS) Dhirubhai ambani International school Great India media

203 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 202

204 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 203 Scope of social responsibility Protecting and promoting stake holder interests Social concern and promotion of common welfare programmes Good corporate governance itself is a social responsibility. Corporate in the vanguard of rendering social services. Corporation should supplement state efforts

205 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 204 Barriers to CSR A) Corporate Level –Lack of leadership and vision –Too much focus on short-term goals –Inability to recognize opportunities –Lack of entrepreneurial spirit and innovation

206 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 205 Barriers to CSR B) Country/Society Level –Lack of creative pressure from the government and civil society. –Lack of support from the consumers –Lack of peer support through business associations - reluctance of other companies to follow –Lack of economic/market incentives

207 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 206

208 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 207 INTRODUCTION Corporate social responsibility is a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, commodities and other stakeholders as well as the environment.

209 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 208 Environmental Concerns The growth of consumerism, leading to the high rate of consumption of natural resources, is at the heart of many environmental problems. Traditionally industry has been driven by consumer demand to produce goods efficiently, regardless of the consequences. Regulation and innovation are changing this system, but yet have not solved problems.

210 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 209 ENVIRONMENTAL PRESERVATION Role of stakeholders To promote environmental awareness among the people we need the help of different stakeholders to achieve such environmental preservation. These stakeholders are:  Public opinion  The Media  Environmental groups  Corporations  Government  Sustainable development

211 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 210 COSTS AND BENEFITS OF ENVIRONMENTAL REGULATION Environmental regulation are often criticized as being too costly. Protecting environmental quality is an expensive task for many regulated industries. Forward thinking firms can turn environmental regulations to their advantage. To realize that not all the firms are affected equally by environmental regulations.

212 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 211 TRADE AND ENVIRONMENT Countries have now begun to negotiate agreements on environmental issues. In future any firm with international dealings will have to take environmental issues into considerations. The lack of standardization of environmental regulations between countries has complicated trade issues. The north America free trade agreement (NAFTA) one of the first major trade agreement to seriously integrate environmental concerns into trade considerations.

213 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 212 ROLE OF CORPORATE IN ENVIRONMENTAL MANAGEMENT Corporation is powerful enough to influence any situation, be it developmental or environmental. In recent years, as awareness about environmental degradation occurring air, water, soil and biosphere has grown. Most of the blame has been laid at the doorstep of industry, with the big corporations roped in as the main culprits and enemies of the environment.

214 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 213 ENVIRONMENTAL AUDIT Environmental audits provide an in-depth review of the company processes and progress in realizing long term strategic goals. It examines the company’s performance as against its policy, and undertaken with reference to performance of personnel, technology, system and documentation. it also examines pick over these are related to relevant standards of practice.

215 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 214 MANAGING ENVIRONMENTAL ISSUES Reducing cost through measures such as recycling or energy conservation. Reducing the possibility of industrial disasters. Establishing a good corporate reputation and earning the goodwill of people. Mitigating employees by providing a better work environment. Conforming to a code of ethics.

216 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 215 ENVIRONMENTAL RISK MANAGEMENT Probability of occurrence of an adverse event such as an accident. Probability distribution of the total cost if the event occurs. Allocation of responsibility if an accident occurs. Certainty of the assessment. Managers should look at better environmental performance as an opportunity rather than as a threat. Many companies allow environmental issues to be handled by lawyers and consultants.

217 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 216 ENVIRONMENTAL MANAGEMENT IN INDIA Environmental practices in India have improved significantly in recent times. Regulations have become more stringent. Many companies are looking into environmental management for improve their image and to cut costs. A recent survey of 47 companies conducted by business today and Tata energy research institute has revealed that 75% of them have an environmental policy.

218 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 217 NATIONAL ENVIRONMENTAL POLICY Environmental and economy are the two sides of the same coin. Conservation of life supporting systems. Forest and wildlife conservation. Forest cover. Biodiversity conservation. Concerns on fresh water resources. Deficiencies in the draft policy.

219 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 218 INDIAN OIL Indian oil has a intensive social responsibility programme for health, family welfare, education, environment protection, providing potable water, sanitation and empowerment of women. Indian oil has invested close Rs.7000crore for production of green fuels meeting global standards. To secure the nations energy security, the corporation is now in the process of commercializing various options in alternative fuels such as ethanol-blended petrol, biodiesel and hydrogen.

220 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 219 YAMANA GOLD It is a leading Canadian - based gold mining company. Its business and operation decisions are guided by concern for the natural environment. It is working on a number of water saving, air monitoring, and protection initiatives at their operations. In 2008 plan to explore new programs to reduce their carbon footprint. They were continuously conduct environment audit. YAMANA CUT 10% BY 2010 Reduce fossil fuel consumption. Reduce solid waste Reduce fresh water consumption Reduce power consumption

221 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 220 CORPORATE SOCIAL RESPONSIBILITY WELFARE, SAFETY AND SOCIAL INITIATIVES

222 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 221 Welfare, safety & social initiatives Welfare, safety and social initiatives means that what are the initiatives taken by the companies for the welfare and development of society as well as their employees.

223 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 222 Welfare & social initiatives of ZenSar Technologies For the welfare of the society ZenSar technologies established ZenSar Foundation. The main objective of this is to improve, guide and inspire the lives of underprivileged community.

224 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 223 Activities of ZenSar foundation Health care initiatives: It includes weekly clinics, counseling sessions and health camps are regularly held to promote general health and well being in the community. Educational initiatives: The ZenSar foundation identified AKANKSHA, a NGO that focuses on developing a strong educational foundation, deep sense of self-esteem and facilitates fun activities for underprivileged children.

225 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 224 Livelihood Advancement Business School (LABS) It promotes customized programs for youth and women in the age group of 18-30 youth from economically weaker sections of society, and empower them to gain access to opportunities for sustainable livelihoods and growth in the new economy. NGO partnership In addition to the community initiatives, the ZenSar foundation has been working with various NGO on multiple social programs for Pune

226 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 225 Social initiatives of INDIAN OIL CORPORATION Establishment of CSR IOC established their CSR program in the year 1964. the main aim of this program is to help to enrich the quality of life of the community and preserve ecological balance and heritage through a strong environment conscience. Sharing Profits Every year IOC set aside a fixed portion of ita profits for spreading smiles in millions of lives acrosss the country through a comprehensive community welfare and development program.

227 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 226 Social welfare activities of TATA coffee Community development programs To improve the welfare of its employees the company implemented Social Accountability system in their plantation division,curing division and roasting division at kushal Nagar. Coorg Foundation Coorg Foundation, a public Charitable Trust established by the company. It contributes towards treatment of individual affiliated with serious illness and made donations to medical institutions for conducting free medical camps.

228 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 227 Conscofe General Public Charitable Trust (CGPCT) CGPCT established in the year 1986,with the aim of adopting pollibetta or any of the surrounding villages or any other villages in kodagu district or anywhere in Karnataka state for the purpose of development and the provision of public utilities and amenities. Conscofe employees welfare trust Conscofe employees welfare trust take care of the housing,education, scholarships, pension benefits, etc of its employees. SWASTHA centre for special education and rehabilitation The main aim of this project is to teach underprivileged students about envelope& file making, screen printing, making greeting cards and other paper products.

229 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 228 Social initiatives of BPCL BPCL started their social activities right from 1984. They conducted different activities for the development of society as well as employees. These activities include the following: –Counseling –HIV/AIDS care and prevention –Generation next

230 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 229 Social initiatives of TNPL  TNPL provides Scholarship to the children belonging to the economically weaker section to pursue their education free in TNPL school.  TNPL supports augmentation of the educational facilities available in Government schools in villages surrounding the company.  Provide every year free education in TNPL School for 5 underprivileged children from neighbouring villages.  Sponsor 3 students from villages within a radius of 15 km in and around the factory premises, for the Diploma Course in Pulp and Paper Technology conducted by Seshasayee Institute of Technology (S.I.T), Trichy.  Award special prizes to students of Government High Schools and Higher secondary Schools securing first 3 ranks in the school in X & XII standard Public Examination. Education

231 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 230 TNPL regularly organizes Medical Camps in the neighbouring villages, through Medical officers and Para Medical Staff of the Company. So far, over 150 camps have been conducted. Special Medical Camps to address ailments relating to Eye, ENT, Dental with the active involvement of leading medical hospitals in the region have been conducted. Persons requiring hospitalization or surgery are given financial assistance on merits. A sum of Rs.3 lakhs has been given for construction of a separate Infectious Diseases Block at Govt. Hospital, Karur. Medical and public health

232 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 231 Test 1 objectives 1.Agency theory identifies relationship between Principles & Agents 2.Japanese model of CG is otherwise known as Business Network Model 3.Anglo American model considers Investors as reluctant activists 4.In Japanesh model of CG, Lending banks are given a role in CG 5.In Indian model of GC Private companies are dominated by Founders& Family 6.Share holders are also viewed as Stakeholders 7.Agency Cost forms the theoretical base for CG 8.Co –determination in CG is Employee Representation in Board 9.The 3A’s of CG are Acceptability, Affordability, Adaptability 10.The 4P’s of CG are Purpose, Process, People, Performance

233 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 232 Test 2 - objectives 1.CEO acts as a bridge between the management and the board. 2.Audit committee should be specialized in risk assessment & management Practice 3.Compensation Committee decides stock options & Equity Compensation 4.SEBI Listing agreement Clause 49 has made certain provisions with regard to corporate governance mandatory for listed companies 5. The Board meeting shall be held at least four times a year 6.A Director shall not be a member in more than 10 committees or act as Chairman of more than 5 Committees 7.Personnel who observe an unethical or improper practice shall be able to approach the audit committee without informing their supervisors through- Whistle blowing policy 8.Risk enhance or impede an organization’s ability to achieve its current or future objectives 9.Net Risk exposure = Gross risk – safeguards 10.BODs are a small group of people who direct, monitor and control a Corporate Entity and ensure Long Term Viability and also Maximum Shareholders

234 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 233 Important Questions CG Models Barriers in implementing CG BOD- Duties & Responsibilities Committees SEBI,clause 49 for listing Corporate Reputation Risk cycle Stake holder & Shareholders Contd………..

235 10/10/2014M.R.Vanithamani, AP, SOM, VLBJCET 234 Contd…. CSR –Models & Types CSR – sustainable development CSR- in today’s corporate CSR – Issues Business houses are responsible to the various stakeholder perspectives & initiatives Restructuring- need & issues


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