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Corporate Governance


Question1: What is a code of good Corporate Governance? Do you
consider it can serve any useful purpose in improving governance?
Support you answer with examples.
In A Board Culture of Corporate Governance, business author Gabrielle
O'Donovan defines corporate governance as 'an internal system encompassing
policies, processes and people, which serves the needs of shareholders and
other stakeholders, by directing and controlling management activities with good
business savvy, objectivity, accountability and integrity. Sound corporate
governance is reliant on external marketplace commitment and legislation, plus
a healthy board culture which safeguards policies and processes.
O'Donovan goes on to say that 'the perceived quality of a company's corporate
governance can influence its share price as well as the cost of raising capital.
Quality is determined by the financial markets, legislation and other external
market forces plus how policies and processes are implemented and how people
are led. External forces are, to a large extent, outside the circle of control of any
board. The internal environment is quite a different matter, and offers
companies the opportunity to differentiate from competitors through their board
culture. To date, too much of corporate governance debate has centred on
legislative policy, to deter fraudulent activities and transparency policy which
misleads executives to treat the symptoms and not the cause.'
It is a system of structuring, operating and controlling a company with a view to
achieve long term strategic goals to satisfy shareholders, creditors, employees,
customers and suppliers, and complying with the legal and regulatory
requirements, apart from meeting environmental and local community needs.
Report of SEBI committee (India) on Corporate Governance defines corporate
governance as the acceptance by management of the inalienable rights of
shareholders as the true owners of the corporation and of their own role as
trustees on behalf of the shareholders. It is about commitment to values, about
ethical business conduct and about making a distinction between personal &
corporate funds in the management of a company. The definition is drawn from
the Gandhian principle of trusteeship and the Directive Principles of the Indian
Constitution. Corporate Governance is viewed as business ethics and a moral
duty. See also Corporate Social Entrepreneurship regarding employees who are
driven by their sense of integrity (moral conscience) and duty to society. This
notion stems from traditional philosophical ideas of virtue (or self governance)
and represents a "bottom-up" approach to corporate governance (agency) which
supports the more obvious "top-down" (systems and processes, i.e. structural)
Question 2: Chairman of the BOD has a pivotal role in the performance
of BOD, Do you agree? Support your answer with reasons and example.
While each company will have its own needs and criteria for the selection of a
Chairman, it is generally viewed that it is proper to separate the role of the
Chairman from the CEO in the interest of providing checks and balances. While
the board will be finally responsible for setting up strategy the initiator will
normally be the CEO. The Chairman however, is the leader of the board and
therefore, must set the. Standards required from the board colleagues.

The Chairman is also the link between the board and the Shareholders, he or
she needs to be satisfied with the corporate reporting to them. This will include
the interim and annual results, the annual report, the AGM and the periodic
reports on special occasions such as during takeovers.
Reporting of results to analysts and institutions is also an important event where
the Chairman's presence an involvement is expected.
Chairman is the most vital appointment in the Corporate Governance. It is
difficult to identify any common practice for evaluation of his performance.

It is common knowledge that Boards in India, in general, function rather
passively. However, the importance of the role of the Boards has begun to be
appreciated. A great responsibility lies on the chairman of the BOD's to galvanize
the members for a significant contribution.
Question 3: What are the three major committees of the Board? Discuss
their role and usefulness?
Answer: Committees of the Board:

I) Audit Committee:-

A committee for providing checks against the executive with the ability to review
objectively the progress made where improvements to control or system have
been agreed.


i. Review fully the interim and final accounts. ii. Keep the board fully informed of
the quality of the financial reporting and many areas of disagreements with the
auditors. iii. Settle disputes between the management and external auditors. iv.
Establish that the audit fee is appropriate and that the auditors' work plan is

2) Remuneration Committee:-

The main role of this committee is to have an appropriate reward polity that can
attract, retain and motive directors to achieve the long term goals of the

Committee members will need to be sensitive to wider community concerns.
i. The committee is and is seen to be, independent with access to its own
external advice.
ii. It has a clear policy on remuneration that is well understood and has support
of the shareholders. Iii. Performance packages are aligned with shareholders
interests in mind. iv. Reporting is clear, concise and gives the reader of the
annual report a bird's eye view of policy payments and the rationale behind

3) Nomination Committee:

This is the third important Committee of the Board of Directors'. It is through
this committee that the new non-executive directors are brought for selection.
1. This committee is usually chaired by the Chairman himself.
2. They select the Non-Executive Directors'.
3. Usually they will discuss and agree the brief, choose the-search firms, agree
the shortlist and interview the final candidates.
However, this practice is changing. Financial institutions and more active
shareholders are beginning to exert their views rather than just rubber-
stamping anew appointment in the next AGM.

Question 4: The concept of the Chairman cum Managing Director in
Public Sector Undertakings has been in vogue for quite some time. This
defeats the purpose of Chairman of Board for Directors exercising
checks and balances on the performance of Managing Director / Chief
Executive Officer. Discuss
The chairman is the highest office of an organized group such as a board,
committee, or deliberative assembly. The person holding the office is typically
elected or appointed by the members of the group. The chairman presides over
meetings of the assembled group and conducts its business in an orderly
fashion. When the group is not in session, the officer's duties often include
acting as its head, its representative to the outside world and its spokesperson.

A Chairman is selected by a company's board to lead the board of directors,
preside over meetings, and lead the board to consensus from the disparate
points of view of its members. The chairman is the presiding director over the
other directors on the board and is expected to be fair, a good listener, and a
good communicator.
In public companies, the role of the chairman of the board is distinct from that of
the company's CEO or managing director. This point has more recently been
brought into focus after corporate governance shortcomings were observed in
companies where the two roles are combined. It is believed that the separation
of functions within the board of directors or in the structure of the supervisory
board and management board would facilitate control over the workings of the
company and increase the accountability of the CEO or chairman of the
management board.
In an attempt to inject transparency into the relationship between executive
management and the board of directors as well as between management and
the market or shareholders, the UK Cadbury Report was published in 1992. Its
recommendations have been adopted to a greater or lesser extent by some
countries within the European Union and the United States, as well as by the
World Bank.
Chairman of the Board types
In the case of companies and similarly-organized bodies, there are generally two
types of chairmen, non-executive and executive.
A non-executive Chairman of the Board is and does the following:
A part-time officeholder who sits on and chairs the main board of a company
Provides support and advice to a CEO
This position usually entails fulfilling a similar function on a number of additional
board committees, as well as being a political figurehead of the Company.

An executive Chairman of the Board is and does the following:
A full-time officeholder who typically leads the board and also takes a hands-on
role in the company's day-to-day management.
Helps the CEO to oversee all the operational aspects involved in running the
company, which include project planning and development delivery, retail and
leasing, sales, market research and many other areas within their extensive
Has overall responsibility for the company which involves engineering and
controlling the company's current growth in and future expansion into
international markets.
In addition, oversees all projects' development activities and related businesses
of the company, with the intention of generating financial returns for the
shareholders and driving sustainable development.
The chairman often sets the style of leadership of the board which in turn filters
down through the organization.

Question 5: Write short notes on any three of the following:
a. Legal aspects and liabilities of directors.
b. The Cadbury Code of best practices.
c. Corporate social Responsibility
d. CIIs Recommendation on Corporate governance
e. Sexual Harassment in work place

(A)Legal aspects and liabilities of directors
Companies Act 1956 make the directors liable for the following amongst other
Contravention of the law
Failure to refund the subscription money to investors Misrepresentation in offer
documents and annual accounts
Duties of directors
Attend all board meetings - devote sufficient time and pay attention for
conducting the affairs of the company in the best interest of the stakeholders
Ensure and protect the interest of the creditors of the company
At all times maintain the confidentiality of matter discussed at the board meeting
Ensure that the companys assets are not wasted and spent for useful purpose
Exercise utmost care and diligence in discharging the functions in the capacity of

Never be negligent and not to commit or let others commit tort-liable acts
Never misuse the power vested upon the director
Not to use/exercise the powers given for a collateral purpose
Never ever make secret profits and make good loss - whether due to breach of
duty or of negligence.
Act always in the best interest of the company and as well its shareholders,
customers and other stakeholders of the company
The chairman manages the activities of the board and ensures that the effective
functioning of the board ensuring the adherence of the formulated polices and
plans and its actual performance by putting them in practice by the executive
management. The chairman works very closely with the company secretary to
ensure the legal compliance and ensure the regulatory requirements to avoid
any noncompliance and bring a good corporate governance practices in the
company. The chairman needs to be a good business man understanding the
language of the business, the market in which the company is, what the product
and services are offered by the company, its future prospects in the national and
international perspective keeping the long term view in mind for taking the
company to the higher level of performance. The chairman needs to ensure that
the internal needs of the board and its code is observed and he has to also deal
with varied levels in the organization such as executive, non executive directors,
senior management, outside experts, internal and statutory auditors,
employees, stakeholders mainly shareholders. The chairman needs to have an
excellent working relationship with the CEO of the company who puts the plan
into reality. Very good inter personal relationship with all levels is required to be
maintained by the chairman. An excellent chairman would be in a position to
take the company to its phenomenal growth and make the company a very
successful one.
(B)The Cadbury Code of best practices
The Cadbury Code of Best practices had 19 recommendations. The
recommendations are in the nature of guidelines relating to Board of Directors,
Non-executive Directors, Executive Directors and those on Reporting and Control.
Relating to the Board of Directors these are:
The Board should meet regularly retain full and effective control over the
company and monitor the executive management
There should be a clearly accepted division of responsibilities at the head of a
company, which will ensure balance of power and authority, such that no
individual has unfettered powers of decision. In companies where the Chairman is
also the Chief Executive, it is essential that there should be a strong and
independent element on the Board, with a recognized senior member. The Board
should include non-executive Directors of sufficient caliber and number for their
views to carry significant weight in the Boards decisions.
The Board should have a formal schedule of matters specifically reserved to it for
decisions to ensure that the direction and control of the company is firmly in its
There should be an agreed procedure for Directors in the furtherance of their
duties to take independent professional advice if necessary, at the companys
All directors should have access to the advice and services of the Company
Secretary, who is responsible to the Board for ensuring that Board procedures are
followed and that applicable rules and regulations are complied with. Any question
of the removal of Company Secretary should be a matter for the Board as a whole.
Relating to the Non-Executive Directors the recommendations are:
Non-executive Directors should bring an independent judgement to bear on issues
of strategy, performance, resources, including key appointments, and standards of
The majority should be independent of the management and free from any
business or other relationship, which could materially interfere with the exercise of
their independent judgement, apart form their fees and shareholding. Their fees
should reflect the time, which they commit to the company.
Non-executive Directors should be appointed for specified terms and
reappointment should not be automatic.
Non-executive Directors should be selected through a formal process and both,
this process and their appointment, should be a matter for the Board as a whole.
For the Executive Directors the recommendations in the Cadbury Code of
Best Practices are:
Directors service contracts should not exceed three years without shareholders
There should be full and clear disclosure of their total emoluments and those of
the Chairman and the highest-paid UK Directors, including pension contributions
and stock options. Separate figures should be given for salary and performance-
related elements and the basis on which performance is measured should be
Executive Directors pay should be subject to the recommendations of a
Remuneration Committee made up wholly or mainly of Non-executive Directors.
And on Reporting and Controls the Cadbury Code of Best Practices stipulate
It is the Boards duty to present a balanced and understandable assessment of the
companys position.
The Board should ensure that an objective and professional relationship is
maintained with the Auditors.
The Board should establish an Audit Committee of at least three Non-executive
Directors with written terms of reference, which deal clearly with its authority and
The Directors should explain their responsibility for preparing the accounts next
to a statement by the Auditors about their reporting responsibilities.
The Directors should report on the effectiveness of the companys system of
internal control
The Directors should report that the business is a going concern, with supporting
assumptions or qualifications as necessary.
(E) Sexual Harassment in work place
According to the Protection of Human Right Act, 1993 "human rights" means the
rights relating to life, liberty, equality and dignity of the individual guaranteed by
the Constitution or embodied in the International Covenants and enforceable by
courts in India. It is necessary and expedient for employers in work places as
well as other responsible persons or institutions to observe certain guidelines to
ensure the prevention of sexual harassment of women as to live with dignity is a
human right guaranteed by our constitution.
It has been laid down by the Supreme Court that it is the duty of the employer
or other responsible persons in work places or other institutions to prevent or
deter the Commission of acts of sexual harassment and to provide the procedure
for the resolution, settlement or prosecution of acts of sexual harassment by
taking all steps required.
What amounts to sexual harassment?
Sexual harassment includes such unwelcome sexually determined behaviour
(whether directly or by implication) as:
(a) physical contact and advances
(b) a demand or request for sexual favours
(c) sexually coloured remarks
(d) showing pornography
(e) any other unwelcome physical, verbal or non-verbal conduct of sexual

Where any of these acts is committed in circumstances where under the victim
of such conduct has a reasonable apprehension that in relation to the victim's
employment or work whether she is drawing salary, or honorarium or voluntary,
whether in government, public or private enterprise such conduct can be
humiliating and may constitute a health and safety problem it amounts to sexual
It is discriminatory for instance when the woman has reasonable grounds to
believe that her objection would disadvantage her in connection with her
employment or work including recruiting or promotion or when it creates a
hostile work environment. Adverse consequences might be visited if the victim
does not consent to the conduct in question or raises any objection thereto.
Steps to be taken by the employers
All Employers or persons in charge of work place whether in public or private
sector should take appropriate steps to prevent sexual harassment. Without
prejudice to the generality of this obligation they should take the following
(a) Express prohibition of sexual harassment as defined, above at the work place
should be notified, published and circulated in appropriate ways.
(b) The Rules/Regulations of Government and Public Sector bodies relating to
conduct and discipline should include rules / regulations prohibiting sexual
harassment and provide for appropriate penalties in such rules against the
(c) As regards private employers steps should be taken to include the aforesaid
prohibitions in the standing orders under the Industrial Employment (Standing
Orders) Act, 1940.
(d) Appropriate work conditions should be provided in respect of work, leisure,
health and hygiene to further ensure that there is no hostile environment
towards women at work places and no employee woman should have reasonable
grounds to believe that she is disadvantaged in connection with her
Question1: The CIIs desirable code of corporate governance stresses
more on the role of Board of Directors and therefore has limited values.

Board of Directors - CII recommendations:
On the Board of Directors, CII has made the following recommendations:
i. A simple broad structure can maximize shareholder wealth just as well as a
two-tier board.
ii. The full board must meet six times a year, preferably at an interval of two
months and each meeting must have an agenda for at least half a day's
iii. Listed companies with a turnover in excess of 200 Crores and above should
have professionally competent and acclaimed non-executive directors'.
iv. Non-Executive Directors should account for at least 30% of the board, if the
Chairman is a non-executive director.
v. No single director should hold directorship in more than 10 companies. .
vi. Non-Executive directors to play important role in maximizing long-term
shareholder value, should become me active participants and not passive
vii. Pay a commission over and above sitting fees and offer stock options as
viii. Directors' who do not attend 50% or more of the meetings must not be
considered for re-appointment generally.
ix. All key information must be placed before the Board of Directors.
x. Audit committee must be appointed to assist the BOD's, of t e company and
must have full access to all financial information.
Question2: Performance evaluation of the BOD seems to be an Essential
component in improving corporate governance . Do you agree? Who
should do this evaluation and how?
Performance Evaluation of the BOD:
Size and composition of boards vary ascending to the personal dynamics,
industry, size of the organization, etc. Though the necessity of evaluation is
generally accepted, there is no widespread agreement about how the evaluation
should be carried out.

Dumb and Neubauer have suggested criteria for evaluation in three categories:
I. The Directors themselves:
1. Intent, especially CEO/Chairman - To create a forum in which expertise and
wisdom can be tapped.
2. Selection, Nomination and Depart\1re - Loyalty to company and stockholders
and handle departures carefully.
3. Composition and Balance - Choose Directors carefully-ensure skill balance, no
magic number as to the size of the board.
II. The Role - Define a Role - a set of functions and activities that adds value.
1. Arrange on a board mission - clear and shared understanding of its
mission for the board and top management of company.
2. Defining the portfolio - Identify areas where the board can add value. Allocate
time to each area.
3. Setting Priorities - Identify priorities and consider if time and attention given
4. The Board - Management Balance - Decide explicitly to avoid undue power to
management by default. Specify which decisions delegated to management.
Boards may choose to impose more rigorous standards upon themselves.
5. The Business Environment - In which the company operates should
influence/the board's involvement.
6. The status of the company - Current stage of company's development will
also reflect the level of the Board's involvement. E.g. - Expansion, retrenchment,
III. The Working style - Doing things right.
.:. Size I Structures I Committees - Committees focus on issues and help
overcome the risk of ignorance.
.:. Meeting Schedule - Need to have enough meetings so that the board's role is
not just confined to monitoring only.
.:. Information - Is the board getting timely adequate and correct information to
make strategic decisions. Need site visit to gain better understanding.
.:. Climate - Climate must support proper introspection and constructive
criticism. Its essential features should be frank open courteous, critical, involved,
direct and helpful

Once all or some of the features are accepted, as positive the evaluation
could begin by measuring performance in relation to these.

Question3:- Discuss the various developments in the field of Corporate
Governance in India in recent Years?
While recent high-profile corporate governance failures in developed countries
have brought the subject to media attention, the issue has always been central
to finance and economics. The issue is particularly important for developing
countries since it is central to financial and economic development. Recent
research has established that financial development is largely dependent on
investor protection in a country de jure and de facto. With the legacy of the
English legal system, India has one of the best corporate governance laws but
poor implementation together with socialistic policies of the prereform era has
affected corporate governance. Concentrated ownership of shares, pyramiding
and tunneling of funds among group companies mark the Indian corporate
landscape. Boards of directors have frequently been silent spectators with the
DFI nominee directors unable or unwilling to carry out their monitoring
functions. Since liberalization, however, serious efforts have been directed at
overhauling the system with the SEBI instituting the Clause 49 of the Listing
Agreements dealing with corporate governance. Corporate governance of Indian
banks is also undergoing a process of change with a move towards more
market-based governance.
With the recent spate of corporate scandals and the subsequent interest in
corporate governance, a plethora of corporate governance norms and standards
have sprouted around the globe. The Sarbanes-Oxley legislation in the USA, the
Cadbury Committee recommendations for European companies and the OECD
principles of corporate governance are perhaps the best known among these.
But developing countries have not fallen behind either. Well over a hundred
different codes and norms have been identified in recent surveys 28 and their
number is steadily increasing. India has been no exception to the rule. Several
committees and groups have looked into this issue that undoubtedly deserves all
the attention it can get. In the last few years the thinking on the topic in India
has gradually crystallized into the development of norms for listed companies.
The problem for private companies, that form a vast majority of Indian
corporate entities, remains largely unaddressed. The agency problem is likely to
be less marked there as ownership and control are generally not separated.
Minority shareholder exploitation, ho wever, can very well be an important issue
in many cases.

Development of norms and guidelines are an important first step in a serious
effort to improve corporate governance. The bigger challenge in India, however,
lies in the proper implementation of those rules at the ground level. More and
more it appears that outside agencies like analysts and stock markets
(particularly foreign markets for companies making GDR issues) have the most
influence on the actions of managers in the leading companies of the country.
But their influence is restricted to the few top (albeit largest) companies. More
needs to be done to ensure adequate corporate governance in the average
Indian company.

Even the most prudent norms can be hoodwinked in a system plagued with
widespread corruption. Nevertheless, with industry organizations and chambers
of commerce themselves pushing for an improved corporate governance system,
the future of corporate governance in India promises to be distinctly better than
the past.
Case Study
Ram Krishan Dhir (RKD) was extremely happy to be selected as the corporate MD of the United
Group at Indore. The United Group consisted of three industries, all located within 30 Km of the
corporate office, Indore. Madhya Pradesh Medical Equipments Ltd. (MPMEL) was one of the
industries of this group. Each industry of the group had its own CEO who was directly answerable to
the corporate MD.
MPMEL established in 1980, with Japanese collaboration, had soon earned a name
for its quality and customer responsiveness. By 1983, with employee strength of around 300 MPMEL
with very harmonious industrial relations, and the latest technology had registered a good turn over o
over Rs. 80 Crores. But there the success story ended. Mr. Raj Anand, The original promoter of the
group died in an air crash and his eldest son Mr. Virat Anand (VA) took control of entire business in
January, 1984. Virat was a spoiled brat, lived in luxury, had no qualms about swindling money
wherever possible and had least regards and considerations for the professional management and
the employees.
MPMEL`s down ward journey had truly begun. By 1987, it had witnessed change of
4CEOs and 12 middle /junior levels managers. Most of present set of managers were hand picked by
Virat and groomed in his culture of scant concern for the employees and the organizational growth. In
the following years, the MPMEL lost many of its major customers, Performance, quality of its medical
equipment and industrial relations deteriorated. It was defaulting often on its payment to the lending
bankers and even the salary payment to its employees was often delayed and even withheld. By
February 1989, when RKD was taking over as corporate MD, the situation was:

a. Two of its leading lending banks (Syndicate Bank and Bank of Baroda) had stopped further
payments & over drafting to MPMEL and had served notices to MPMEL for clearance of its
b. Four of its old and professional directors of the Boars of Directors, had resigned and replaced
by cronies and relatives of VA
c. Industrial relations in the MPMEL were bad and there was total lack of trust between the
management and employees. A number of local DADAS were in control of the employees
and MPMEL employees had gone on a violent strike in November, 1988 for irregular payment
of salaries, adhoc promotions and inaction of outstanding issues. The striking employees had
physically beaten up the CEO and some other managers and damaged a number of buildings
and windows. They had however, spared the main air- conditioned production complex. The
strike had ended by police intervention and signing of a Long Term Agreement (LTA) with
the Union employees. Promised actions by the management were over due.
d. The other two industries of the United Group were only slightly better but heading downwards.
e. MPMEL was still operative and producing good quality equipment at about 50% capacity. The
rejection rate however, had increased considerably and there was a large dump of rejected
quality equipment. The quality control department was totally disheartened due to dismissal of
its good manager six months ago without any replacement and no one was paying any
attention to their concerns and suggestions.
f. The turn over in 1988 had dropped to Rs. 36 crore.

RKD, an MBA and an ex DIG Police, with an excellent track record as a good administrator
and a person of high integrity was determined to bring about a major change in MPMEL.
Within a month of his taking over, after his discussions with a section of employees and their
union leaders, senior managers, some experts (two of them were ex-MDs) and the Chairman
of the BOD, he realized that their problems had nothing to do with their products and
technology but they seem to weave around the management of Human Resources and
excessive withdrawal of funds by the Chairman. There were strong indications of continuing
rumblings, dissatisfaction among employees and lack of faith in management despite the
1. Analyze the situation, as RKD, as you see it and suggest a course of action you propose to

Under the leadership of Mr. Raj Anand, the company registered a good turnover. It earned a
name for quality and customer responsiveness. After the death of Mr. Raj Anand, the company
gradually lead to failure. The successor, Mr. Virat Anand could not become a good leader and
ended up the business in disaster. The company witnessed change of management several
times which included change of 4CEOs and 12 middle /junior levels managers. It also lost many
of its major customers, performance, quality of its medical equipment and industrial relations
deteriorated. The company had lot of dues with its bankers and even the salaries of employees
were often delayed/withheld. While these are the major problems, the following are some of the
suggestions proposed:

a. Firstly, clearing the dues of MPMEL with Syndicate Bank and Bank of Baroda
b. Salary settlement of the employees and offer promotions if required. Conduct a meeting
with the employee union and enter into a mutual agreement for the welfare of the
employees and organization.
c. Re appoint the old BODs and appoint a new CEO; remove cronies and relatives of VA
d. The other two industries of the United Group were only slightly better but heading
e. Concentrate on the quality control department through discussions with manager
(appointing new manager or re appointing old manager if possible).
f. Have a discussion with the strategic and operation departments to know the reasons behind
the drop in turnover and rejection of quality equipment.

2. What actions in particular you plan to take to change the culture of MPMEL?

Changing the organizational culture requires time, commitment, planning and proper execution.

It is more difficult to change the culture of an existing organization than to create a culture in a brand
new organization. When an organizational culture is already established, people must unlearn the old
values, assumptions, and behaviours before they can learn the new ones.
The two most important elements for creating organizational cultural change are executive support
and training.

Executive support: Executives in the organization must support the cultural change, and in ways
beyond verbal support. They must show behavioural support for the cultural change. Executives must
lead the change by changing their own behaviours. It is extremely important for executives to
consistently support the change.

Training: Culture change depends on behaviour change. Members of the organization must clearly
understand what is expected of them, and must know how to actually do the new behaviours, once
they have been defined. Training can be very useful in both communicating expectations and
teaching new behaviours.

Other components important in changing the culture of an organization are:
a. Create value and belief statements by using employee focus groups, by department, to put
the mission, vision, and values into words that state their impact on each employee's job. This
would provide all employees a common understanding of the desired culture that actually
reflects the actions they must commit to on their jobs.

b. Practice effective communication by keeping all employees informed about the organizational
culture change process ensuring commitment and success. Telling employees what is
expected of them is critical for effective organizational culture change.

c. Redesign the approach to rewards and recognition to encourage the behaviours vital to the
desired organizational culture.

Review all work systems such as employee promotions, pay practices, performance management,
and employee selection to make sure they are aligned with the desired culture. As an example, you
cannot just reward individual performance if the requirements of your organizational culture specify
team work. An executive's total bonus cannot reward the accomplishment of his department's goals
without recognizing the importance of him playing well with others on the executive team to
accomplish your organizational goals.
1. Essence of Corporate Governance is--
a)Effective accountability
b) Good management
c) Codes of conduct

2. Corporate Governance is a system of--
a) Structuring, operating and controlling a company
b) Good management
c) Codes of conduct
d) Ensuring maximum profits for the share holder

3. The concept of Corporate Governance is application to--
a) Private sector only
b) Public sector only
c) Government only
d)Both private and public sector

4. The questions of Corporate Governance have come up mainly due to--
a) Liberalization of economy
b) Deregulation of industry and business
c) Public demand for better performance
d) All the above

5. As per Raja J Chelliah weakness in the system of governance in India can
only be remedied through--
a) Stricter laws
b) Movement of moral regeneration
c) Codes of conduct
d) More privatization

6. A Corporate must be socially responsible for--
a) Society expect so
b) It is in the self inter of the corporate
c) It mitigate pressure and government regulations
d) All the above

7. Corporate Governance is poorly defined even today because--
a) Values and ethics cannot be typecast into a one - size -fits -all
b) The Cadbury Committee of 1992 has erected a convention of severity of
c) At the end of the day , giant corporations will continue to dominate
d) None of these

8. Which one of the following is not a category of share- holders in India?
a) Promoters
b) Financial Institutions
c) Individual Investors
d) Ministries of Government of India

9. In the private sector who has the firm hold over the companies?
a) Individual investors
b) Promoters
c) Financial Institutions
d) Customers

10. In the public sector who selects/ appoints the board members?
a) The PSU concerned
b) Controlling administrative ministry
c) The BOD
d) Financial Institutions

11. The head of the BOD is normally called--
c) Chairman
d) Managing Director

12. For effective corporate governance CEO of the company--
a) Should always head the BOD
b) Should never head the BOD
c) Be allowed to exercise his choice to head the board
d) Should be allowed to appoint the head of the BOD

13. The BOD should consists of--
a) Only executive directors
b) Majority of executive directors
c) Only non-executive director
d) A good mix of executive and non - executive directors

14. Which one of the following is not a parameter of best boards?
a) Accountability of share holders
b) Maximization of profits
c) Independence of decision making
d) Transparency of disclosures

15. Desirable corporate governance in India - A code was prepared by--
a) Government of India
c) Confederation of Indian Industries
d) None of these

16. Directors are Liable for--
a) Negligence and breach of trust
b) Misfeasance
c) None of the above
d) Both (a) and (b) above
17. The directors appointed by financial institutions on the BOD are called--
a) Non-Executive directors
b) Executive directors
c) Nominee directors
d) Institutional directors

18. The Companies Act 1956 came into force on--
a) 1 January, 1956
b) 1January, 1957
c) 1Apirl, 1956
d) 1April, 1957

19. One of the terms of reference for SEBI's committee on corporate governance
in May 1999 was--
a) To draft a code of corporate best practices.
b) To offer comments on the Sir Cadbury's report.
c) To draft instructions for an effective BOD.
d) None of these

20. The formula for Economic Value Added is--
a) Operating expenses (+) overhead expenses (-) Interest
b) ROI (-) Weighted average cost of capital (x) capital invested
c) Operating Profit (+) Capital Cost (-) Taxes
d) None of these (Correct is: = Net Operating Profit After Taxes (NOPAT) - (Capital *
Cost of Capital)

21. Cadbury Committee report was publishes in UK in--
a) 1990
b) 1980
c) 1992
d) 1993

22. Cadbury Committee was set up to address the--
a) Problem of good corporate governance
b) Financial aspects of corporate governance
c) Problem of degeneration of values
d) Malpractices in the corporate

23. Cadbury Committee along with its report published a document which was
a) Code of conduct for corporate
b) Code of ethical conduct
c) Code of best practices
d) None of the above

24. Desirable Corporate Governance in India - A code had recommended that a
full board's meeting agenda item should require at least-------discussion.
a) 2 days
b) 1 day
c) half a day's
d) None of these
25. In Indian conditions a voluntary code of Corporate Governance would be
more meaningful, which out of the following supported the comment--
a) Greenburg Committee
b) Kumar Mangalam Birla Committee
c) CII National Council
d) Institute of Company Secretaries of India

26. Which out of the following is not expected out of an effective BOD?
a) Transparency of disclosure
b) Accountability to shareholders
c) Dependency of decision making
d) Responsiveness to society

27. Who prepared the report titles "Desirable Corporate Governance in India - A
Code "?
a) Government of India
c) CI I` s Task Force
d) UTI

28. The above report was based on the draft report prepared by--
a) Dr. Goswami
c) Dr. CV Alexander
d) Mr Kumaramangalam

29. The major roadblock for effective Governance has been--
a) Political Interference
b) Vested interests of management
c) Lack of control mechanism
d) Lack of societal pressure

30. Desirable Corporate Governance: A Code (DCGC) recommends that the full
board . should meet minimum of following items--
a) Six times a year
b) Once a year
c) Twice a year

31. The National Task Force on Corporate Governance (set up by CII) was
headed by --
a) Dr. Goswami
b) Mr. Rahul Bajaj
c) Dr. Omkar Goswami
d) Mr C K Birla

32. The word "value" is derived from the French /Latin word--
a) Valeo
b) Vaelram
c) Valoir
d) Valer

33.A value is a ----------------- concept-- ( choose the word most suited to fill
the blank )
a) Behavioral
b) Perceptual
c) Management
d) Decision

34. Conflict of interest--
a) Situation where Shareholders are in conflict with other Stakeholders
d) Different stakeholder groups and individual employees trying to balance their
various interests
c) Dispute between the Boards of Directors
d) Situation where company and the Government is at loggerheads.

35. The ethics of Corporate Governance is therefore the determination of what is
right proper and
a) Good
b) Pleasing
c) Just
d) Practical

36. The word "Ethics" is derived from--
a) The Greek word "Ethos"
b) The French word "Valoir"
c) The Latin word "Valeu"
d) The Latin word "Vallis"

37. The subject of business ethics is multi- leveled. The three levels normally
considered are individual, organization and
a) Government
b) Society
c) Industry
d) Business

38. Misrepresentation is referred as--
a) Error in a Court of Law committed by a Pubic Limited Company
b) Making false and misleading statements
c) Misunderstanding consumer needs
d) None of above

39. Ethical issues are truly managerial dilemma they represent a conflict
between an organization economic performance and its--
a) Reputation
b) Growth
c) Social / ethical performance
d) Employees job satisfaction

40. A good Corporate Governance structure is a working system for--
e) Recognizing the myth that is 'democracy'
f) Appropriate monitoring of compliance and performance
g) Lobbying for necessary legislation when the courts do not give favorable
h) None of these