Corporate Governance

Corporate Governance
• 1 Definition
• 2 History
o 2.1 Impact of Corporate Governance
o 2.2 Role of Institutional Investors
• 3 Parties to corporate governance
• 4 Principles
• 5 Mechanisms and controls
o 5.1 Internal corporate governance controls
o 5.2 External corporate governance controls
• 6 Systemic problems of corporate governance
• 7 Role of the accountant
• 8 Regulation
o 8.1 Rules versus principles
o 8.2 Enforcement
o 8.3 Action Beyond Obligation
• 9 Corporate governance models around the world
o 9.1 Anglo-American Model
o 9.2 Non Anglo-American Model
• 10 Codes and guidelines
• 11 Corporate governance and firm performance
o 11.1 Board composition
o 11.2 Remuneration/Compensation
• 12 Ethical issues in Corporate governance
1
• 13 Efforts to improve Corporate governance
• 14 Introduction
• 15 Bajaj capital
• 16 Smart financial workplace award—bajaj capital
• 17 A Financial Powerhouse
o Mission
o Vision
• 18 Eligibility
• 19 Regional Offices
• 20 Bajaj Capital-Easy way To Success
• 21 Valued Reports
• 22 Growth Through Governance-At a glance
• 23 Conclusion
• 24 Bibliography
2
The impact of a corporate governance system in economic efficiency,
with a strong emphasis on shareholders welfare. The positive effect of good
corporate governance on different stakeholders ultimately is a strengthened
economy, and hence good corporate governance is a tool for socio-economic
development
Parties involved in corporate governance include the regulatory body
(e.g. the Chief Executive Officer, the board of directors, management and
shareholders All parties to corporate governance have an interest, whether
direct or indirect, in the effective performance of the organisation.
The Bajaj Capital A Special Service

The Bajaj Capital has been created to especially to serve family-
owned businesses. Bajaj Capital is the first to introduce elite service in
India.
They offer to share with the global best practices related to
accumulation, enhancement and preservation of wealth, and make available
the expertise of the pool of specialists.
A dedicated Wealth Enhancement Manager will be assigned to offer
exclusive and personalised service. They provide world-class services in
areas like Wealth Management, Risk Management, Investment Banking,
Estate Planning, Taxation, etc.
3
Corporate governance is the set of processes, customs,
policies, laws and institutions affecting the way a corporation is directed,
administered or controlled. Corporate governance also includes the
relationships among the many stakeholders involved and the goals for which
the corporation is governed. The principal stakeholders are the
shareholders, management and the board of directors. Other stakeholders
include employees, suppliers, customers, banks and other lenders, regulators,
the environment and the community at large.
Corporate governance is a multi-faceted subject An
important theme of corporate governance is to ensure the accountability of
certain individuals in an organization through mechanisms that try to reduce
4
or eliminate the principal-agent problem. A related but separate thread of
discussions focus on the impact of a corporate governance system in
economic efficiency, with a strong emphasis on shareholders welfare. There
are yet other aspects to the corporate governance subject, such as the
stakeholder view and the corporate governance models around the world.
There has been renewed interest in the corporate
governance practices of modern corporations since 2001, particularly due to
the high-profile collapses of a number of large U.S. firms such as Enron
Corporation and Worldcom. In 2002, the US federal government passed the
Sarbanes OxleyAct, intending to restore public confidence in corporate
governance.
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 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 the international
5
organisational environment; 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
6
principle of trusteeship and the Directive Principles of the Indian
Constitution. Corporate Governance is viewed as ethics and a moral duty.
In the 19th century, state corporation laws enhanced the
rights of corporate boards to govern without unanimous consent of
shareholders in exchange for statutory benefits like appraisal rights, to
make corporate governance more efficient. Since that time, and because
most large publicly traded corporations in the US are incorporated under
corporate administration friendly Delaware law, and because the US's
wealth has been increasingly securitized into various corporate entities and
institutions, the rights of individual owners and shareholders have become
increasingly derivative and dissipated. The concerns of shareholders over
7
administration pay and stock losses periodically has led to more frequent
calls for corporate governance reforms.
In the 20th century in the immediate aftermath of the Wall
Street Crash of 1929 legal scholars such as Adolf Augustus Berle, Edwin
Dodd, and Gardiner C. Means pondered on the changing role of the modern
corporation in society. Berle and Means' monograph "The Modern
Corporation and Private Property" (1932, Macmillan) continues to have a
profound influence on the conception of corporate governance in scholarly
debates today.
From the Chicago school of economics, Ronald Coase's "The
Nature of the Firm" (1937) introduced the notion of transaction costs into
the understanding of why firms are founded and how they continue to
behave. Fifty years later, Eugene Fama and Michael Jensen's "The
Separation of Ownership and Control" (1983, Journal of Law and Economics)
firmly established agency theory as a way of understanding corporate
governance: the firm is seen as a series of contracts. Agency theory's
dominance was highlighted in a 1989 article by Kathleen Eisenhardt
(Academy of Management Review).
US expansion after World War II through the emergence
of multinational corporations saw the establishment of the managerial class.
Accordingly, the following Harvard Business School management professors
published influential monographs studying their prominence: Myles Mace
8
(entrepreneurship), Alfred D. Chandler, Jr. (business history), Jay Lorsch
(organizational behavior) and Elizabeth MacIver (organizational behavior).
According to Lorsch and MacIver "many large corporations
have dominant control over business affairs without sufficient accountability
or monitoring by their board of directors."
Since the late 1970’s, corporate governance has been the
subject of significant debate in the U.S. and around the globe. Bold, broad
efforts to reform corporate governance have been driven, in part, by the
needs and desires of shareowners to exercise their rights of corporate
ownership and to increase the value of their shares and, therefore, wealth.
Over the past three decades, corporate directors’ duties have expanded
greatly beyond their traditional legal responsibility of duty of loyalty to the
corporation and its shareowners.
In the first half of the 1990s, the issue of corporate
governance in the U.S. received considerable press attention due to the
wave of CEO dismissals (e.g.: IBM, Kodak, Honeywell) by their boards.
CALPERS led a wave of institutional shareholder activism (something only
very rarely seen before), as a way of ensuring that corporate value would not
be destroyed by the now traditionally cozy relationships between the CEO
and the board of directors (e.g., by the unrestrained issuance of stock
options, not infrequently back dated).
In 1997, the East Asian Financial Crisis saw the economies
of Thailand, Indonesia, South Korea, Malaysia and The Philippines severely
9
affected by the exit of foreign capital after property assets collapsed. The
lack of corporate governance mechanisms in these countries highlighted the
weaknesses of the institutions in their economies.
In the early 2000s, the massive bankruptcies (and criminal
malfeasance) of Enron and Worldcom, as well as lesser corporate debacles,
such as Adelphia Communications, AOL, Arthur Andersen, Global Crossing,
Tyco, and, more recently, Fannie Mae and Freddie Mac, led to increased
shareholder and governmental interest in corporate governance. This
culminated in the passage of the Sarbanes-Oxley Act of 2002. But, since
then, the stock market has greatly recovered, and shareholder zeal has
waned accordingly.
The positive effect of good corporate governance on
different stakeholders ultimately is a strengthened economy, and hence
good corporate governance is a tool for socio-economic development.After
East Asian economies collapsed in the late 20th century, the World Bank's
president warned those countries, that for sustainable development,
corporate governance has to be good. Economic health of a nation depends
substantially on how sound and ethical businesses are.
10
Many years ago, worldwide, buyers and sellers of corporation
stocks were individual investors, such as wealthy businessmen or families,
who often had a vested, personal and emotional interest in the corporations
whose shares they owned. Over time, markets have become largely
institutionalized: buyers and sellers are largely institutions (e.g., pension
funds, insurance companies, mutual funds, hedge funds, investor groups, and
banks).
The rise of the institutional investor has brought with it
some increase of professional diligence which has tended to improve
regulation of the stock market (but not necessarily in the interest of the
small investor or even of the naïve institutions, of which there are many).
Note that this process occurred simultaneously with the direct growth of
individuals investing indirectly in the market (for example individuals have
twice as much money in mutual funds as they do in bank accounts). However
this growth occurred primarily by way of individuals turning over their funds
to 'professionals' to manage, such as in mutual funds. In this way, the
majority of investment now is described as "institutional investment" even
though the vast majority of the funds are for the benefit of individual
investors.Program trading, the hallmark of institutional trading, is averaging
over 60% a day in 2007.
Unfortunately, there has been a concurrent lapse in the
oversight of large corporations, which are now almost all owned by large
institutions. The Board of Directors of large corporations used to be chosen
11
by the principal shareholders, who usually had an emotional as well as
monetary investment in the company (think Ford), and the Board diligently
kept an eye on the company and its principal executives (they usually hired
and fired the President, or Chief executive officer— CEO).
Nowadays, if the owning institutions don't like what the
President/CEO is doing and they feel that firing them will likely be costly
(think "golden handshake") and/or time consuming, they will simply sell out
their interest. The Board is now mostly chosen by the President/CEO, and
may be made up primarily of their friends and associates, such as officers of
the corporation or business colleagues. Since the (institutional) shareholders
rarely object, the President/CEO generally takes the Chair of the Board
position for his/herself (which makes it much more difficult for the
institutional owners to "fire" him/her). Occasionally, but rarely, institutional
investors support shareholder resolutions on such matters as executive pay
and anti-takeover measures.
Finally, the largest pools of invested money (such as the
mutual fund 'Vanguard 500', or the largest investment management firm for
corporations, State Street Corp.) are designed simply to invest in a very
large number of different companies with sufficient liquidity, based on the
idea that this strategy will largely eliminate individual company financial or
other risk and, therefore, these investors have even less interest in a
particular company's governance.
Since the marked rise in the use of Internet transactions
from the 1990s, both individual and professional stock investors around the
12
world have emerged as a potential new kind of major (short term) force in
the direct or indirect ownership of corporations and in the markets: the
casual participant. Even as the purchase of individual shares in any one
corporation by individual investors diminishes, the sale of derivatives (e.g.,
exchange-traded funds (ETFs), Stock market index options, etc.) has
soared. So, the interests of most investors are now increasingly rarely tied
to the fortunes of individual corporations.
But, the ownership of stocks in markets around the world
varies; for example, the majority of the shares in the Japanese market are
held by financial companies and industrial corporations (there is a large and
deliberate amount of cross-holding among Japanese keiretsu corporations
and within S. Korean chaebol 'groups') whereas stock in the USA or the UK
and Europe are much more broadly owned, often still by large individual
investors.
Parties involved in corporate governance include the
regulatory body (e.g. the Chief Executive Officer, the board of directors,
management and shareholders).Other stakeholders who take part include
suppliers, employees, creditors, customers and the community at large.
In corporations, the shareholder delegates decision rights
to the manager to act in the principal's best interests. This separation of
ownership from control implies a loss of effective control by shareholders
13
over managerial decisions. Partly as a result of this separation between the
two parties, a system of corporate governance controls is implemented to
assist in aligning the incentives of managers with those of shareholders.
With the significant increase in equity holdings of investors, there has been
an opportunity for a reversal of the separation of ownership and control
problems because ownership is not so diffuse.
A board of directors often plays a key role in corporate
governance. It is their responsibility to endorse the organisation's strategy,
develop directional policy, appoint, supervise and remunerate senior
executives and to ensure accountability of the organisation to its owners and
authorities.
The Company Secretary, known as a Corporate Secretary in
the US and often referred to as a Chartered Secretary if qualified by the
Institute of Chartered Secretaries and Administrators (ICSA), is a high
ranking professional who is trained to uphold the highest standards of
corporate governance, effective operations, compliance and administration.
All parties to corporate governance have an interest,
whether direct or indirect, in the effective performance of the
organisation. Directors, workers and management receive salaries, benefits
and reputation, while shareholders receive capital return. Customers receive
goods and services; suppliers receive compensation for their goods or
services. In return these individuals provide value in the form of natural,
human, social and other forms of capital.
14
A key factor in an individual's decision to participate in an
organisation e.g. through providing financial capital and trust that they will
receive a fair share of the organisational returns. If some parties are
receiving more than their fair return then participants may choose to not
continue participating leading to organizational collapse.
Key elements of good corporate governance principles
include honesty, trust and integrity, openness, performance orientation,
responsibility and accountability, mutual respect, and commitment to the
organization.
Of importance is how directors and management develop a
model of governance that aligns the values of the corporate participants and
then evaluate this model periodically for its effectiveness. In particular,
15
senior executives should conduct themselves honestly and ethically,
especially concerning actual or apparent conflicts of interest, and disclosure
in financial reports.
Commonly accepted principles of corporate governance include:
• Rights and equitable treatment of shareholders:
Organizations should respect the rights of shareholders and help
shareholders to exercise those rights. They can help shareholders
exercise their rights by effectively communicating information that is
understandable and accessible and encouraging shareholders to
participate in general meetings.
• Interests of other stakeholders:
Organizations should recognize that they have legal and other
obligations to all legitimate stakeholders.
• Role and responsibilities of the board:
The board needs a range of skills and understanding to be able to deal
with various business issues and have the ability to review and
challenge management performance. It needs to be of sufficient size
and have an appropriate level of commitment to fulfill its
responsibilities and duties. There are issues about the appropriate
mix of executive and non-executive directors. The key roles of
chairperson and CEO should not be held by the same person.
• Integrity and ethical behaviour:
16
Ethical and responsible decision making is not only important for public
relations, but it is also a necessary element in risk management and
avoiding lawsuits. Organizations should develop a code of conduct for
their directors and executives that promotes ethical and responsible
decision making. It is important to understand, though, that reliance
by a company on the integrity and ethics of individuals is bound to
eventual failure. Because of this, many organizations establish
Compliance and Ethics Programs to minimize the risk that the firm
steps outside of ethical and legal boundaries.
• Disclosure and transparency:
Organizations should clarify and make publicly known the roles and
responsibilities of board and management to provide shareholders
with a level of accountability. They should also implement procedures
to independently verify and safeguard the integrity of the company's
financial reporting. Disclosure of material matters concerning the
organization should be timely and balanced to ensure that all investors
have access to clear, factual information.
Issues involving corporate governance principles include:
• oversight of the preparation of the entity's financial statements
• internal controls and the independence of the entity's auditors
• review of the compensation arrangements for the chief executive
officer and other senior executives
• the way in which individuals are nominated for positions on the board
17
• the resources made available to directors in carrying out their duties
• oversight and management of risk & dividend policy
" Corporate Governance " despite some feeble attempts
from various quarters has remained ambiguous and often misunderstood
pharse. For Quite some time it was confined to only corporate management.
It is not so. it is something much broader for it must include a fair, efficient
and transparent administration to meet certain well defined objectives.
Corporate governance also must go beyong law. The quantity, quality and
frequency of financial and managerial disclosure, the degree and extent to
which the board of Director (BOD) exercise their trustee responsibilities
and the commitment to run transparent organization- these should evolve
due to interplay of many factors and the role played by more progressive
elements within the corporate sector. In India, a strident demand for
evolving a code of good practices by the corporate themselves is emerging.
Corporate governance mechanisms and controls are designed
to reduce the inefficiencies that arise from moral hazard and adverse
selection. For example, to monitor managers' behaviour, an independent
third party (the auditor) attests the accuracy of information provided by
management to investors. An ideal control system should regulate both
motivation and ability.
Internal corporate governance controls
18
Internal corporate governance controls monitor activities and then take
corrective action to accomplish organisational goals. Examples include:
• Monitoring by the board of directors:
The board of directors, with its legal authority to hire, fire and
compensate top management, safeguards invested capital. Regular
board meetings allow potential problems to be identified, discussed
and avoided. Whilst non-executive directors are thought to be more
independent, they may not always result in more effective corporate
governance and may not increase performance. Different board
structures are optimal for different firms. Moreover, the ability of
the board to monitor the firm's executives is a function of its access
to information. Executive directors possess superior knowledge of the
decision-making process and therefore evaluate top management on
the basis of the quality of its decisions that lead to financial
performance outcomes, ex ante. It could be argued, therefore, that
executive directors look beyond the financial criteria.
• Remuneration:
Performance-based remuneration is designed to relate some
proportion of salary to individual performance. It may be in the form
of cash or non-cash payments such as shares and share options,
superannuation or other benefits. Such incentive schemes, however,
are reactive in the sense that they provide no mechanism for
19
preventing mistakes or opportunistic behaviour, and can elicit myopic
behaviour.
External corporate governance controls
External corporate governance controls encompass the controls external
stakeholders exercise over the organisation. Examples include:
• demand for and assessment of performance information (especially
financial statements)
• debt covenants
• government regulations
• media pressure
• takeovers
• competition
• managerial labour market
• telephone tapping
• Supply of accounting information:
Financial accounts form a crucial link in enabling providers of finance
to monitor directors. Imperfections in the financial reporting process
will causof corporate governance. This should, ideally, be corrected by
the working of the external auditing process.
20
• Demand for information:
A barrier to shareholders using good information is the cost of
processing it, especially to a small shareholder. The traditional answer
to this problem is the efficient market hypothesis (in finance, the
efficient market hypothesis (EMH) asserts that financial markets are
efficient), which suggests that the shareholder will free ride on the
judgements of larger professional investors.
• Monitoring costs:
In order to influence the directors, the shareholders must combine
with others to form a significant voting group which can pose a real
threat of carrying resolutions or appointing directors at a general
meeting.
Financial reporting is a crucial element necessary for the
corporate governance system to function effectively. Accountants and
auditors are the primary providers of information to capital market
participants. The directors of the company should be entitled to expect that
management prepare the financial information in compliance with statutory
and ethical obligations, and rely on auditors' competence.
21
Current accounting practice allows a degree of choice of
method in determining the method of measurement, criteria for recognition,
and even the definition of the accounting entity. The exercise of this choice
to improve apparent performance (popularly known as creative accounting)
imposes extra information costs on users. In the extreme, it can involve non-
disclosure of information.
One area of concern is whether the accounting firm acts as
both the independent auditor and management consultant to the firm they
are auditing. This may result in a conflict of interest which places the
integrity of financial reports in doubt due to client pressure to appease
management. The power of the corporate client to initiate and terminate
management consulting services and, more fundamentally, to select and
dismiss accounting firms contradicts the concept of an independent auditor.
Changes enacted in the United States in the form of the Sarbanes-Oxley
Act (in response to the Enron situation as noted below) prohibit accounting
firms from providing both auditing and management consulting services.
Similar provisions are in place under clause 49 of SEBI Act in India.
The Enron collapse is an example of misleading financial
reporting. Enron concealed huge losses by creating illusions that a third
party was contractually obliged to pay the amount of any losses. However,
the third party was an entity in which Enron had a substantial economic
stake. In discussions of accounting practices with Arthur Andersen, the
partner in charge of auditing, views inevitably led to the client prevailing.
22
However, good financial reporting is not a sufficient
condition for the effectiveness of corporate governance if users don't
process it, or if the informed user is unable to exercise a monitoring role
due to high costs.
Rules versus principles
23
Rules are typically thought to be simpler to follow than principles,
demarcating a clear line between acceptable and unacceptable behaviour.
Rules also reduce discretion on the part of individual managers or auditors.
In practice rules can be more complex than principles. They may
be ill-equipped to deal with new types of transactions not covered by the
code. Moreover, even if clear rules are followed, one can still find a way to
circumvent their underlying purpose - this is harder to achieve if one is
bound by a broader principle.
Principles on the other hand is a form of self regulation. It
allows the sector to determine what standards are acceptable or
unacceptable. It also pre-empts over zealous legislations that might not be
practical.
Enforcement
Enforcement can affect the overall credibility of a regulatory
system. They both deter bad actors and level the competitive playing field.
Nevertheless, greater enforcement is not always better, for taken too far it
can dampen valuable risk-taking. In practice, however, this is largely a
theoretical, as opposed to a real, risk.
Action Beyond Obligation
Enlightened boards regard their mission as helping
management lead the company. They are more likely to be supportive of the
24
senior management team. Because enlightened directors strongly believe
that it is their duty to involve themselves in an intellectual analysis of how
the company should move forward into the future, most of the time, the
enlightened board is aligned on the critically important issues facing the
company.
Unlike traditional boards, enlightened boards do not feel
hampered by the rules and regulations of the Sarbanes-Oxley Act. Unlike
standard boards that aim to comply with regulations, enlightened boards
regard compliance with regulations as merely a baseline for board
performance. Enlightened directors go far beyond merely meeting the
requirements on a checklist. They do not need Sarbanes-Oxley to mandate
that they protect values and ethics or monitor CEO performance.
At the same time, enlightened directors recognize that it is
not their role to be involved in the day-to-day operations of the corporation.
They lead by example. Overall, what most distinguishes enlightened
directors from traditional and standard directors is the passionate
obligation they feel to engage in the day-to-day challenges and strategizing
of the company. Enlightened boards can be found in very large, complex
companies, as well as smaller companies.
25
Although the US model of corporate governance is
the most notorious, there is a considerable variation in corporate governance
models around the world. The intricated shareholding structures of
keiretsus in Japan, the heavy presence of banks in the equity of German
firms, the chaebols in South Korea and many others are examples of
arrangements which try to respond to the same corporate governance
challenges as in the US.
Anglo-American Model
There are many different models of corporate governance
around the world. These differ according to the variety of capitalism in
which they are embedded. The liberal model that is common in Anglo-
American countries tends to give priority to the interests of shareholders.
The coordinated model that one finds in Continental Europe and Japan also
recognizes the interests of workers, managers, suppliers, customers, and the
community. Both models have distinct competitive advantages, but in
different ways. The liberal model of corporate governance encourages
radical innovation and cost competition, whereas the coordinated model of
corporate governance facilitates incremental innovation and quality
competition. However, there are important differences between the U.S.
recent approach to governance issues and what has happened in the U.K..
In the United States, a corporation is governed by a board of
directors, which has the power to choose an executive officer, usually known
as the chief executive officer. The CEO has broad power to manage the
corporation on a daily basis, but needs to get board approval for certain
26
major actions, such as hiring his/her immediate subordinates, raising money,
acquiring another company, major capital expansions, or other expensive
projects. Other duties of the board may include policy setting, decision
making, monitoring management's performance, or corporate control.
The board of directors is nominally selected by and
responsible to the shareholders, but the bylaws of many companies make it
difficult for all but the largest shareholders to have any influence over the
makeup of the board; normally, individual shareholders are not offered a
choice of board nominees among which to choose, but are merely asked to
rubberstamp the nominees of the sitting board. Perverse incentives have
pervaded many corporate boards in the developed world, with board
members beholden to the chief executive whose actions they are intended
to oversee. Frequently, members of the boards of directors are CEOs of
other corporations, which some see as a conflict of interest.
The U.K. has pioneered a flexible model of regulation of
corporate governance, known as the "comply or explain" code of governance.
This is a principle based code that lists a dozen of recommended practices,
such as the separation of CEO and Chairman of the Board, the introduction
of a time limit for CEOs' contracts, the introduction of power, and provide a
system of managerial accountability These goals are equally important for
both private corporations and government bodies.
Because of the implicit relationship between private interests
and the larger government, good corporate governance practices are
27
essential to establishing good governance at the national level in developing
countries.A number of ties the keep the public and private sectors closely
linked. On one hand, judiciary and regulatory bodies as well as legislatures
play a role in corporate management and oversight. At the same time cartels
and large corporate interests use their size to exert not only economic, but
also political power. These two sectors are so intertwined that a country
cannot significantly change one without simultaneously instituting changes in
the other.
According to Nicolas Meisel, there are four priorities which
developing countries should concentrate on while experimenting with new
forms of corporate and public governance. The first is to focus on improving
the quality of information and increasing the speed at which it is created
and distributed to the public. Good communication is important to the
functioning of any organization. The second is to allow individual actors more
autonomy while at the same time maintaining or increasing accountability.
Thirdly, if a hierarchical organization used to orient private activities
toward the general interest, new countervailing powers should be encouraged
to fill this role. Finally, the part the state plays and how government
officials are selected must be considered if a developing economy is to
achieve sustainable growth. This may involve making it easier for newcomers
with new ideas incumbents who may hold to older, possibly outdated, models.
Publicly listed companies in the U.K. have to either apply those
principles or, if they choose not to, to explain in a designated part of their
annual reports why they decided not to do so. The monitoring of those
explanations is left to shareholders themselves. The tenet of the Code is
28
that one size does not fit all in matters of corporate governance and that
instead of a statuary regime like the Sarbanes-Oxley Act in the U.S., it is
best to leave some flexibility to companies so that they can make choices
most adapted to their circumstances. If they have good reasons to deviate
from the sound rule, they should be able to convincingly explain those to
their shareholders.
The code has been in place since 1993 and has had drastic
effects on the way firms are governed in the U.K. A study by Arcot, Bruno
and Faure-Grimaud from the Financial Markets Group at the London School
of Economics shows that in 1993, about 10% of the UK companies member of
the FTSE 350 were compliants on all dimensions while they were more than
60% in 2003. The same success was not achieved when looking at the
explanation part for non compliant companies. Many deviations are simply not
explained and a large majority of explanations fail to identify specific
circumstances justifying those deviations. Still, the overall view is that the
U.K.'s system works fairly well and in fact is often branded as a benchmark,
followed by several countries.
Non Anglo-American Model
In East Asian countries, family-owned companies dominate. A
study by Claessens, Djankov and Lang (2000) investigated the top 15 families
in East Asian countries and found that they dominated listed corporate
29
assets. In countries such as Pakistan, Indonesia and the Philippines, the top
15 families controlled over 50% of publicly owned corporations through a
system of family cross-holdings, thus dominating the capital markets.
Family-owned companies also dominate the Latin model of corporate
governance, that is companies in Mexico, Italy, Spain, France (to a certain
extent), Brazil, Argentina, and other countries in South America.
Europe and Asia exemplify the insider system: Shareholder and stakeholder
•a small number of listed companies
• an illiquid capital market where ownership and control are not frequently
traded
• high concentration of shareholding in the hands of corporations,
institutions,families or government
• the insider model uses a system of interlocking networks and committees.
At the same time that developing countries are undergoing a
process of economic growth and transformation, they are also experiencing a
revolution in the business and political relationships that characterize their
private and public sectors. Establishing good corporate governance practices
is essential to sustaining long-term development and growth as these
countries move from closed, market-unfriendly, undemocratic systems
towards open, market-friendly, democratic systems.
30
Corporate governance principles and codes have been
developed in different countries and issued from stock exchanges,
corporations, institutional investors, or associations (institutes) of directors
and managers with the support of governments and international
organizations. As a rule, compliance with these governance recommendations
is not mandated by law, although the codes linked to stock exchange listing
requirements may have a coercive effect.
For example, companies quoted on the London and Toronto
Stock Exchanges formally need not follow the recommendations of their
respective national codes. However, they must disclose whether they follow
the recommendations in those documents and, where not, they should
provide explanations concerning divergent practices. Such disclosure
requirements exert a significant pressure on listed companies for
compliance.
In the United States, companies are primarily regulated by the
state in which they incorporate though they are also regulated by the
federal government and, if they are public, by their stock exchange. The
highest number of companies are incorporated in Delaware, including more
than half of the Fortune 500. This is due to Delaware's generally business-
friendly corporate legal environment and the existence of a state court
dedicated solely to business issues (Delaware Court of Chancery).
Most states' corporate law generally follow the American Bar
Association's Model Business Corporation Act. While Delaware does not
31
follow the Act, it still considers its provisions and several prominent
Delaware justices, including former Delaware Supreme Court Chief Justice
E. Norman Veasey, participate on ABA committees.
One issue that has been raised since the Disney decision in 2005
is the degree to which companies manage their governance responsibilities;
in other words, do they merely try to supersede the legal threshold, or
should they create governance guidelines that ascend to the level of best
practice. For example, the guidelines issued by associations of directors (see
Section 3 above), corporate managers and individual companies tend to be
wholly voluntary. For example, The GM Board Guidelines reflect the
company’s efforts to improve its own governance capacity. Such documents,
however, may have a wider multiplying effect prompting other companies to
adopt similar documents and standards of best practice.
One of the most influential guidelines has been the 1999 OECD
Principles of Corporate Governance. This was revised in 2004. The OECD
remains a proponent of corporate governance principles throughout the
world. Building on the work of the OECD, other international organisations,
private sector associations and more than 20 national corporate governance
codes, the United Nations Intergovernmental Working Group of Experts on
International Standards of Accounting and Reporting (ISAR) has produced
voluntary Guidance on Good Practices in Corporate Governance Disclosure.
This internationally agreed benchmark consists of more than fifty distinct
disclosure items across five broad categories:
• Board and management structure and process
32
• Ownership structure and exercise of control rights
• Financial transparency and information disclosure
• Auditing
• Corporate responsibility and compliance
The World Business Council for Sustainable Development
WBCSD has done work on corporate governance, particularly on
accountability and reporting, and in 2004 created an Issue Management
Tool: Strategic challenges for business in the use of corporate responsibility
codes, standards, and frameworks.This document aims to provide general
information, a "snap-shot" of the landscape and a perspective from a think-
tank/professional association on a few key codes, standards and frameworks
relevant to the sustainability agenda.
33
In its 'Global Investor Opinion Survey' of over 200
institutional investors first undertaken in 2000 and updated in 2002,
McKinsey found that 80% of the respondents would pay a premium for well-
governed companies. They defined a well-governed company as one that had
mostly out-side directors, who had no management ties, undertook formal
evaluation of its directors, and was responsive to investors' requests for
information on governance issues. The size of the premium varied by market,
from 11% for Canadian companies to around 40% for companies where the
regulatory backdrop was least certain (those in Morocco, Egypt and Russia).
Other studies have linked broad perceptions of the quality of
companies to superior share price performance. In a study of five year
cumulative returns of Fortune Magazine's survey of 'most admired firms',
Antunovich et al found that those "most admired" had an average return of
125%, whilst the 'least admired' firms returned 80%. In a separate study
Business Week enlisted institutional investors and 'experts' to assist in
differentiating between boards with good and bad governance and found
that companies with the highest rankings had the highest financial returns.
On the other hand, research into the relationship between
specific corporate governance controls and firm performance has been
mixed and often weak. The following examples are illustrative.
34
Board composition
Some researchers have found support for the relationship
between frequency of meetings and profitability. Others have found a
negative relationship between the proportion of external directors and firm
performance, while others found no relationship between external board
membership and performance. In a recent paper Bagahat and Black found
that companies with more independent boards do not perform better than
other companies. It is unlikely that board composition has a direct impact on
firm performance.
Remuneration/Compensation
The results of previous research on the relationship between
firm performance and executive compensation have failed to find consistent
and significant relationships between executives' remuneration and firm
performance. Low average levels of pay-performance alignment do not
necessarily imply that this form of governance control is inefficient. Not all
firms experience the same levels of agency conflict, and external and
internal monitoring devices may be more effective for some than for others.
Some researchers have found that the largest CEO performance incentives
came from ownership of the firm's shares, while other researchers found
that the relationship between share ownership and firm performance was
dependent on the level of ownership. The results suggest that increases in
ownership above 20% cause management to become more entrenched, and
less interested in the welfare of their shareholders.
35
Some argue that firm performance is positively associated with
share option plans and that these plans direct managers' energies and
extend their decision horizons toward the long-term, rather than the short-
term, performance of the company. However, that point of view came under
substantial criticism circa in the wake of various security scandals including
mutual fund timing episodes and, in particular, the backdating of option
grants as documented by University of Iowa academic Erik Lie and reported
by James Blander and Charles Forelle of the Wall Street Journal.
Even before the negative influence on public opinion caused by
the 2006 backdating scandal, use of options faced various criticisms. A
particularly forceful and long running argument concerned the interaction of
executive options with corporate stock repurchase programs. Numerous
authorities (including U.S. Federal Reserve Board economist Weisbenner)
determined options may be employed in concert with stock buybacks in a
manner contrary to shareholder interests. These authors argued that, in
part, corporate stock buybacks for U.S. Standard & Poors 500 companies
surged to a $500 billion annual rate in late 2006 because of the impact of
options. A compendium of academic works on the option/buyback issue is
included in the study Scandal by author M. Gumport issued in 2006.
A combination of accounting changes and governance
issues led options to become a less popular means of remuneration as 2006
progressed, and various alternative implementations of buybacks surfaced to
challenge the dominance of "open market" cash buybacks as the preferred
means of implementing a share repurchase plan.
36
(Inaugural Address delivered at NBCC Seminar on 22.03.2000, New

Delhi)
N. Vittal, Central Vigilance Commissioner
1. The term ‘corporate governance’ has recently become a buzzword.
Seminars are being held in corporate governance and exercises are
being conducted at different levels to bring in better corporate
governance. The SEBI recently has also notified the corporate
governance guidelines based on the Kumaramangalam Committee
Report.
2. What is corporate governance and how is it different from corporate
management? As I see it, corporate governance is nothing but the
moral or ethical or value framework under which corporate decisions
are taken. Corporate managements generally have been concerned with
using the physical, financial and human resources available with the
management to get the best possible results in the interests of the
stakeholders and, particularly, shareholders. It is quite possible that
in the effort at arriving the best possible financial results or business
results there could be attempts at doing things which are verging on
the illegal or even illegal. There is also the possibility of grey areas
where an act is not illegal but considered unethical. These raise moral
issues.
37
3. The issue of corporate governance became particularly significant in
the context of globalisation because one special feature of the late
20th century / 21st century globalisation is that in addition to the
traditional three elements of the economy, namely physical capital in
terms of plant and machinery, technology and labour, the volatile
element of financial capital. Financial capital invested in the emerging
markets and in third countries is an important element of modern
globalisation and has become particularly powerful. Thanks to the
ubiquitous application of information technology, at the touch of a
computer mouse, it is possible now to transfer billions of dollars
across borders. The significance and the impact of the volatility of
the financial capital was realised when in June 1997 the currency of
South East Asian countries started melting down in countries like
Thailand, Indonesia, South Korea and Malaysia. It was realized by the
World Bank and all investors that it is not enough to have good
corporate management but one should have also good corporate
governance because the investors want to be sure that the decisions
taken are ultimately in the interest of all stake holders. Honesty is
the best policy is a fact that is now being re-discovered.
4. In practical terms, corporate governance has meant that there should
be at the board level non-official directors who are professionals and
who have no conflicting interests and who can particularly operate the
two key committees, the Ethics Committee and the Finance Committee
to see that there is greater transparency in the management of the
enterprise. Corporate governance ultimately has to come to mean
better transparency in the operations without sacrificing business
38
strategy or business secrets which are necessary for success in the
market place and absolutely ethical behaviour where the conduct of
the company will not only be legal but also ethical.
5. That brings us to the basic issue of what will be the ethical issues in
corporate governance. Honesty is the best policy. This means that
there has to be absolute integrity in all operations. Integrity is of
three types:
• Financial integrity
• Moral integrity
• Intellectual integrity
6. So far as corporate governance is concerned, it is financial integrity
that assumes tremendous importance. This would mean that the
directors and all concerned should be open and straight about issues
where there is conflict of interest involved in financial decision-
making. When it comes to even the purchase procedures, there is need
for greater transparency.
7. One of the early orders I issued as the CVC was to see that there
should be no post-tender negotiations. Otherwise, I found that this
practice of post tender negotiations was one of the common means of
breeding corruption in the system. The ban on post-tender
negotiations, I think, has helped in bringing greater transparency
ensuring that vendor rating is done fairly and there is a level playing
field when purchases are made.
39
8. The need for greater transparency, especially in corporate
management arises because with transparency comes accountability.
Recently I had the serendipitous experience of how displaying the
names of officers who were facing major penalty or prosecution of
the web site of the CVC brought a whole set of unexpected reactions.
Firstly, people at large were surprised that there could be
transparency. Secondly, it exposed the delay in our departmental
systems when some of those, whose names were in the web site
claimed that they have not even received the charge sheet. This
means that the disciplinary authorities were slow or worse, they were
protecting the corrupt. If an honest public servant was involved in a
departmental inquiry, delay meant causing harassment to him. The web
site strategy has helped me now to vigorously pursue every month the
pending cases with the various disciplinary authorities. Thirdly, it
shows that how the people of doubtful integrity who were facing
prosecution or penalty procedures can be in sensitive positions.
Fourthly, it also showed that such transparency could have a
deterrent effect on those likely to cross over from being honest to
dishonest. So, transparency has a direct link with accountability and
automatically acts as a self-corrective mechanism.
9. When it comes to the ethical issues in corporate governance, linked
with transparency, the question is to what extent the management or
the manger would practice openness about facts, which may even be
embarrassing.
40
10. Many a time, the issues may arise about being transparent, which may
compromise the financial interests of the company. Suppose a
company has been behaving in a manner, which is harmful to the
environment, there may always be a tendency to downplay the impact
or even cook up the figures to say that there is no damage caused to
the environment. These are really ethical issues where I think the
corporate management will have to show its commitment to good
governance by accepting responsibility. There have been examples of
good companies including Maruti recalling defective vehicles when
safety of the people was threatened. Many a time, such a course of
action has been forced on the companies because of whistle blowers
or consumer activist movements. To the extent the company is able to
take the initiative once the facts come to notice for correcting itself,
it is ethically on the right lines.
11. The same issue of ethics may arise where negotiations have to take
place especially, for instance, with financial institutions for projecting
the viability of a case. Here absolute integrity is essential because
many a time we find that the industries have become sick because of
fudging of figures and not being transparent when the projects being
evaluated. Even more important is the day to day operations. There
was a public sector enterprise, which was allegedly involved in a case
of giving illegal gratification to a State Government enterprise in
order to secure a contract. When the issue came up before us the
point to be decided was whether the act of the public sector
enterprise in engaging a so-called consultant and paying heavily to him
41
for securing the contract was proper though the public sector
enterprise would have got the contract on merits alone.
12. But, as CVC I am also aware of the fact that corruption is a two way
street. If suppose one is running an enterprise and one’s competitors
are going to resort to bribes to get the contract, what should one do?
I think whistle blowing is needed in this situation. I would, therefore,
suggest that in stead of compromising and paying the bribes, it is
better, especially where the CVC has a role to play, to inform the CVC.
In such a situation, the CVC will take up the matter both with the
organisation concerned and the higher authorities, like the Secretary
to the Government, so that such practices can be curbed.
13. The concept of dharma sankata is well known in our Hindu religion.
Narova Kunjarova (human or elephant) was the situation where
Yudhistra in Mahabharata lied. For the sake of getting a short-term
benefit, resorting to lies or straying from the straight and narrow
path ultimately leads to a long-term failure. I would, therefore,
suggest that even at the cost of sacrificing short-term benefits, it is
better for an enterprise to adopt healthy practices.
14. There is an excellent example of Alacrity, an enterprise concerned
with building houses as NBCC. They have adopted the policy, though in
the private sector, that will deal only with cheques and there will be
no cash transactions. This has brought such a reputation to alacrity
that even the public servants who normally take bribes in Chennai
when they come across an employee of alacrity, do not ask for bribes.
Can we not create through, at least our public sector enterprises, an
42
environment in which there will be no underhand dealings and no
violations from the path of integrity and corporate transparency.
15. Corporate governance and ethical behaviour have a number of
advantages. Firstly, they help to build good brand image for the
company. Once there is a brand image, there is greater loyalty, once
there is greater loyalty, there is greater commitment to the
employees, and when there is a commitment to employees, the
employees will become more creative. In the current competitive
environment, creativity is vital to get a competitive edge.
16. Another area where corporate governance and ethical issues may arise
is at the time of the annual report and particularly preparing the
annual balance sheet. There may always be a tendency to do what is
called, window dressing and to show that the results were better than
what were projected. I think a stage has come when it is better to be
transparent and not do much of financial engineering but be straight
because this may prove to be better in the long run. Especially now in
the context of the liberalisation and the opening up of the Indian
companies for foreign competition, an issue will also be raising about
the accounting practices that are being followed in our companies.
Probably we will have to fall in line with the international accounting
standards so that both in terms of transparency and in terms of
actually measuring the effectiveness of the enterprise there is a
certain amount of uniformity. This in turn will also strengthen our
Indian companies to take on the global competition more effectively.
43
17. Finally, we come to the basic issue of effective corporate governance
in the ethical side by ensuring corruption within the organisation is
also kept under control. Here the CVC has been following a three-
point strategy, which can perhaps be adopted by the corporate also
mutatis mutandis so far as their checking up corruption is concerned.
The three points are:
i. Simplification of the rules and procedures so that the scope for
corruption is reduced
ii. Bringing in greater transparency and empower the public. In this case,
the public enterprises are those which are interacting with the
enterprise or with which the enterprise has to have supplier or
customer transactions, and
iii. Effective punishment of the guilty
This three-point strategy should help to nurture a culture of honesty in the
organization. Once the culture of honesty is built up in the organization,
good corporate governance becomes an automatic healthy by product.
44
July 27, 2007
Unless a comprehensive theory of corporate governance is first agreed upon,
efforts to improve it will not amount to much.
In varying degrees, everyone cheats. Businessmen are no exception. So one
of the biggest problems of modern economic organisation, which is
dominated by the joint stock company, is to minimise such cheating.
Corporate cheating has many dimensions but two of them have attracted the
most attention. One is the cheating of customers, mainly on quality and
price. The other is the cheating of shareholders by taking their money but
giving them less than what they deserve by way of dividends.
By and large, competition takes care of the former. In competitive markets
the customer has a choice and simply goes to the alternative supplier if he
feels he is not getting value for money. But the second type of cheating has
proved harder to minimise. Indeed, the effort has even been given a nice
sounding name -- corporate governance.
In a recent paper*, Thomas H Noe, Michael J Rebello and Ramana Sonti say
that all this is very well, but unless a comprehensive theory of corporate
governance is first agreed upon, these efforts will not amount to much. The
reason: good corporate governance depends on many things and focusing on
just one or two of them is not of much use. They say the "key determinants
of governance are board vigilance, the market for corporate assets,
executive compensation, and shareholder activism" and what matters is the
45
relationship between them. In a sense, they are talking of what economists
call a dynamic general equilibrium model where the standard assumption of
economics -- other things being equal or the same -- is given the go by.
"The effect of any one factor on governance may well depend on how the
other governance parameters are set." This is a very important insight
because, as the authors point out, institutional factors such as, say,
jurisdiction can lead to different components of the policy on governance
"being fixed at different levels for different firms".
Second, say the authors, "because a number of the components of the
governance mechanism are choice variables, a sample of firms selected on
the basis usage of a particular governance mechanism may not be random.
Further, the choice of one component of the governance mechanism depends
endogenously on other choices. For this reason, predictions based on the
examination of a single component of the governance mechanism may be
misleading."
From this the authors go on to develop a model for corporate governance.
There are two key givens for this model. One is a competitive securities
market; the other is a market for asset liquidation. They go on show that
"varying the liquidity and opacity of corporate assets and the costs of
enforcing shareholder rights to cash flow" can result in a large number of
designs.
Basically, what happens is this. If shareholders can easily sell off their
holdings their rights get automatically enforced, as the management is
46
forced to behave itself rather better than if "the opacity of corporate
assets is relatively high and asset liquidity is relatively low." The threat of
liquidation and the resulting threat to the managers that they may have to
accept lower salaries somewhere else may well are the most efficient form
of governance.
The other insights in the paper are reproduced verbatim below:
• Management compensation is highest for high and low liquidity firms;
• Managerial compensation is higher under direct shareholder control as
opposed to board control;
• Managerial compensation is increasing in asset opacity;
• In the absence of mandatory restrictions, firm with high and low
asset liquidity will have more passive boards and less sophisticated
governance mechanisms;
• Diffusion of shareholder ownership will be lowest for firms with
illiquid and opaque assets;
• If the market for corporate control is impeded, large block-holding
and board activism increase;
• Shareholder intervention will be positively correlated with the
premium paid by activists for block acquisition;
• Absent mandatory restrictions, the better the legal regime, the
larger the fraction of management affiliated directors on the board;
• Weakening the protection of minority shareholders can lead to both
less board vigilance and better firm performance.
47
Why do you need an Investment Advisor and Financial Planner?
Why do you go to a doctor when you fall ill? Or, visit an architect when you
want to build your house? It’s because they are specialists in their
respective fields
Similarly, an investment advisor is a qualified and experienced specialist
who is capable of advising you and managing your money.
The growing complexities of the money market and the panoramic range of
financial instruments make financial planning and money management an
intimidating task for the average person that’s why you need a reliable
investment advisor and financial planner.
48
BAJAJ CAPITAL’S INVESTMENT SERVICES

Bajaj Capital, one of India’s oldest Investment Advisory organizations,
offers you comprehensive and scientific Investment Advice. With the
experience of over four decades, they are perfectly poised to offer you the
best possible investment advice. They have qualified, trained and
experienced investment advisors who have in-depth knowledge of the
financial markets.
A team of investment researchers at the Bajaj Capital Centre for
Investment Research, who keep track of every minute change in the market,
every new product and the latest investment trends, backs these investment
advisors. This is what provides Bajaj Capital’s Investment Service its cutting
edge. And that’s not all. Bajaj capital also offers FREE Investment
Assistance that means no hassles either!
Bajaj Capital offers specialized services to Corporate and Institutions
through this Group. It is a strategic service arm comprising handpicked
professionals that provides an exclusive and world-class service to a select
group of clients.
They have a presence in all Metros in India, and an annual mobilization of
over Rs 15,000 crores. Assets Under Management (AUM) is to the tune of
Rs 3,200 crores, and enjoys the patronage of over 750 quality relationships.
49
The Economic Times instituted Bajaj Capital won Smart

Workplaces Awards 2008 in the financial services vertical, The
Smart Workplace Award in association with IT majors Acer and Intel,
to recognize smart offices.
Bajaj Capital is a Smart place to work because they are a complete
technology driven firm with human touch and higher emotional bonding. Our
operations are almost paper free and even when the employees are on the
move, they are connected to the work place all the time with the help of
technology.
They also have modern blend of in house built and outsourced systems like:
• "Just Trade" a world class online trading and financial planning
platform for clients.
• Contact Management System for ensuring that we stay in touch with
the clients.
• World-class CRM systems for enhanced customer experience.
• "Wealth-Maker" a unique technology platform for minute-to-minute
Business Tracking, Client Service, Performance Management.
• Smart Online HR Systems including Elearning Portal, Performance
Appraisal & Rewarding System.
50
• Automated Alerts & Escalations for internal and external world
through SMS and Emails.
• Smart Telecommunication Systems and technology driven Contact
Center.
• Web and Teleconferencing Facility for everyone.
• Every workstation is Technology enabled.
• Business Intelligence Dashboards.
They are committed to give a great lifetime experience with the help of
best Technology Systems.
Bajaj Capital is proud to be amongst the Top 25 Great Place to
Work in India for 2008.
Over 142 branches. Over 3000 hard-core financial professionals. All working
hard in an honest, open and candid work culture to improve life through 360
Financial Planning. Yes! This is Bajaj Capital. Where management enthuses
workforce open heartedly, colleagues grow in cordial environment and over 8
lakh clients enjoy prosperity with personal guidance. That is why; they have
craved a niche among top 25 Great Place to work in India.
51
15 Reasons That Make Working With Bajaj Capital a

Rewarding Experience
At Bajaj Capital, they value the people. This is because they believe that the
services will be only as good as those who deliver it.
They are in the business of guiding the investors about where to put their
hard-earned money, and helping them achieve their financial goals through
wise investments. Trust and goodwill form the fundamental basis of the
relationships with clients.
This not only demands thorough professional knowledge and an enchanting
personality, but also calls for a missionary zeal to help others selflessly.
Though the work is demanding, most team members feel that working at
Bajaj Capital is a satisfying experience due to the following reasons:
1. Professional Work Environment
They have a growing pool of talented professionals, including CAs,
MBAs, CFPs, CSs, and others. This provides a good opportunity to
interact and learn from each other.

2. Professional Growth
Performance is the key element that matters at Bajaj Capital, when
it comes to rising up the corporate ladder. Bajaj Capital has a
transparent policy of recognising and rewarding deserving people.
52
Many of those who occupy top positions in the organisation today
have worked their way up. The performance management systems
ensure that the credit goes to those who deserve it.

3. Personal Growth
Qualities like leadership; communication skills, negotiating skills and
an impressive personality get developed automatically, largely due to
the contagiously professional atmosphere and rigorous training
programmes at Bajaj Capital.

4. Job Satisfaction
A true spirit of philanthropy is at the heart of every thing that we
do. Many oF efforts are aimed at genuinely helping people,
irrespective of whether they are our clients or not. It obviously
feels great to know that they’ve been of help to someone.
5. Opportunity to Improve Skills
They lay a lot of emphasis on continuing education. Every team
member is encouraged to undergo professional training. The Company
even offers incentives to those pursuing professional programmes
like those offered by the International College of Financial Planning.
Skill-building workshops and meets are also organized from time to
time.
6. Balance Between Work and Play
All work and no play is no fun. Bajaj Capital ensures that all team
members are adequately rewarded for the efforts put in. They
regularly organise trips to various exotic locations in India and
abroad for top performers.
53
7. Value-Driven Organisation
Bajaj Capital is today a respected name in India primarily due to the
strict adherence to values such as honesty and ethics. Qualities of
sincerity, fair play, leadership and initiative are strongly encouraged.

8. Job Security
At Bajaj Capital, quality is the watchword in every sphere of
activity. That’s why we have a rigorous screening procedure. Once
selected, every team member is treated like a family member.
Everyone is given a chance to work in different departments in order
to get acclimatized. No wonder, many of team members have been
with for years. Honest and performing team members will always
find their jobs secure.
9. Family Life
One of the major reasons why a lot of team members prefer to work
with Bajaj Capital is because they have a culture of striking a fine
balance between work and home. They firmly believe if they are
productive, won’t have to miss out on personal life.
10. Culture of Health
Bajaj Capital encourages healthy living. All offices are no-smoking
areas. Efforts are also made to inculcate healthy habits among all by
disseminating health-related information through a dedicated e-
newsletter. There are no night shifts. They also organise yoga
sessions to improve the health and well being of the team members.
54
11. Open-door Policy
The entire top management and the leaders at Bajaj Capital are
always accessible. They are ever willing to help and hear out
whenever needed.
12. Positive Work Culture
There is a supportive, healthy work culture where everyone is
treated equally. Bajaj Capital has also made a successful effort to
cut down stress levels.
13. Humane Environment
Unlike many other companies, they are not guided by blind statistics.
Every team member is treated as a human being and not a machine.
The atmosphere is friendly, and the management is always around to
share the happiness and grief of every team member.
14. Recognition
Every team member is given a chance to excel, and the efforts of
every performer is recognised.
15. Good Compensation
Last but not the least, Bajaj Capital offers a compensation package
that’s one of the best in the industry. They believe and ask the team
members to write their own cheques. Apart from fixed salaries, they
offer aggressive entrepreneurial incentives.
55
Bajaj Capital is proud to be amongst the Top 25 Great

Place to Work in India for 2008
Over 142 branches. Over 3000 hard core financial professionals. All working
hard in an honest, open and candid work culture to improve life through 360
Financial Planning. Yes! This is Bajaj Capital. Where management enthuses
workforce open heartedly, colleagues grow in cordial environment and over 8
lakh clients enjoy prosperity with personal guidance. That is why; they have
craved a niche among top 25 Great Place to work in India.
56
Why TO depend on BAJAJ CAPITAL?
Wide Range of Products and Services

Bajaj Capital arts are a financial supermarket that caters to all the needs.
The range of products includes mutual funds, life and general insurance, tax-
free and taxable bonds, fixed deposits, real estate, structured products,
small savings and much more.
Pan-India Reach
They have 109 offices in 50 cities across India. This, along with the strong
IT infrastructure allows us to swiftly execute operations throughout the
length and breadth of the country.
Specialists at Your Service

The team comprises Certified Financial Planners, Chartered Accountants,
Company Secretaries, Legal Experts, MBAs and Economists.
Complete assistance
They offer complete investment assistance, right from documentation to
completion of transactions and follow-ups.
Strong Research Base

In an industry, it is important to keep up to speed with the developments.
They have a strong in-house research team as well as outsourced support to
ensure just that.
57
Service Standards
Bajaj Capital adheres to stringent quality standards and professional ethics.
We also provide value-added services that match the global standards.
Personalised Service
A dedicated Relationship Manager is assigned to every client, and is
responsible for delivering personalised and prompt service.
Periodic Portfolio Reviews

Client portfolios are periodically evaluated and a trigger mechanism alerts us
of impending deadlines. This information is presented to you in a timely and
easily understandable manner.
Immediate Alerts
They have an automated alert system to inform immediately, every time a
new product that matches your requirements is launched in the market.
Information Sharing
High quality reports, presented in an easily understandable and actionable
manner are regularly sent to all the clients. They also keep in regular touch
with designated members of organisation on a regular basis. Investment
means putting the money to work to earn more money. Done wisely, it can
help to meet the financial goals like buying a new house, paying for a college
education, enjoying a comfortable retirement, or whatever is important.
58
Bajaj Capital's time tested Investment Philosophy:
• Do not invest directly in the stock market. Take the Mutual Funds
route.
• Safety of principal should be of prime importance. We believe in a
controlled (risk) approach to investments.
• Do not let inflation eat up your money in a savings bank account. Go for
superior and stable returns.
• Have a look at your financial objectives. Your investments should depend
upon them.
• Diversify your investments. Do not put all your eggs in one basket.
• Keep a reasonable amount of liquid cash to meet your emergency needs.
• Take a balanced approach to investing. Avoid risky investments as well as
an overly cautious approach to Investing.
• Monitor your investments once a month and take corrective action, if
required, immediately.
• Do not try to time the entry and exit of your investments.
• Every time is a good time to invest if you have a long- term outlook and
keep investing regularly.
• Put no more than 10% of your total investments in one company.
59
Investment Mantras for the Uninitiated
All of us are not born with a silver spoon in our mouth. But each one of us
wishes to strike gold and has a desire to be rich. There is a constant urge in
us to make the money grow at a pace that not only provides for the financial
goals but also helps us to improve standard of living from good to better.
This makes it really essential to plan the allocation of the available financial
resources in such a way that they can generate the maximum possible
return. The term 'allocation of resources' means putting the money in the
various asset classes such as debt, equity and cash
However, following an ad-hoc approach to investments cannot do this. One is
required to plan investments in a systematic manner so that he gets
maximum returns with minimum risk. Also, the allocation should be regularly
reviewed at periodic intervals.
For this, one can either plan investments oneself, or refer to an expert (a
Financial Planner) who not only helps to invest appropriately but also
monitors the performance of the portfolio so that do not miss on the best
opportunities available in terms of investing and also do not take undue risk
on the portfolio.
A financial planner will give meaning to investments by linking the same to
the financial goals. This way one would know where one is going and it will
60
become easier to chart out an appropriate pathway towards the relevant
destination point.
An investment decision is a trade off between the risk & return.
However, the investment avenue will definitely depend upon certain factors.
Some of the questions needed to answer are:
• What is age?
• How many dependents do have?
• What are financial goals?
• How much money would need to fund each goal?
• What is the time horizon of goals?
• How much are concerned about liquidity?
• What is risk profile?
All these questions will help to chalk out a plan, which can match the suitable
products with goals.
Need could be:
• Cash flow Planning
• Insurance Planning
• Retirement Planning
• Investment Planning
• Tax Planning
• Children’s Future Planning
61
Cash flow Planning: Cash flow Planning takes care of the timing of cash
inflows and outflows. It basically helps in analyzing the income and expenses
and intends to maintain a regular flow of income in the family. It is a holistic
approach to meet the life goals.
Insurance Planning: Insurance is not the person who passes away but for
those who survive. It takes care of the financial loss, which may arise on the
happening or non-happening of an event. Insurance Planning relates to two
fields of insurance
1. Life Insurance: It takes care of the financial needs of the dependants
of the deceased bread earner of the family.
2. General Insurance: It takes care of the risk of financing of property.
Retirement Planning: It takes care of the cash flows during retirement
when the person is not working. Usually people are not concerned about
retirement at an early age. But planning for retirement at an early stage is
necessary in order to maintain the same standard of living.
Investment Planning: Investment Planning takes care of investment
decisions i.e to say this decision relates to appropriateness of an investment,
62
inflation factor, etc.
Tax Planning: It implies arrangement of the person's financial affairs in
such a way that it reduces the tax liability.
Children's Future Planning: Children's Future Planning takes care of
regular expenses on child’s education and higher education. It also helps to
make arrangements for the children marriage.
63
Bajaj Capital is a union of leading financial advisors to form a Financial
Powerhouse, which will cover length and breadth of the country and help
millions of Indian achieve their respective goals.
Mission:
The missions of Bajaj Capital Advisors Network is to synergies the
strengths of togetherness and create a common learning, operating and
growth platform to help all partners organise, grow and achieve their
respective organisational goals.
Vision:
• Build and retain a growing membership base of financial professionals
• Develop a bond within the community as the premier resource for
financial information
• Increase awareness on Financial Planning, using the CFP mark as the
cornerstone
• Nurture and develop the careers of our members through outstanding
educational programs
• Make members aware of financial market-related issues and provide a
forum to respond and offer feedback.
64
Why be a part of the Bajaj Capital?
Today the financial advisory business has become very competitive. More
and more MNCs, banks and stock brokers are entering into the business of
distribution of financial product and services, and many banks are planning to
go retail. As such, the choice for investors will be many. Competition will be
driven by knowledge-based advice and service, supported by up-to-date
technology support. The cost of operation will go up and margins might
shrink. It is not viable for all players to invest in technology and brand
building, and hence there is a need to form an alliance in form of advisors
network. The basis of this network is utilising the power of technology to
reach our investors. The Bajaj Capital will offer a common platform to like-
minded advisors to learn, organise and grow their business together.
65
Eligibility
Who can join the Bajaj Capital?
Anyone who is involved in (or is interested in) advisory, distribution and
marketing of financial products is welcome to join.
For instance, it may be a sub-broker of stockbrokers, an Insurance agent, an
AMFI registered Mutual Fund advisor, a Chartered Accountant or a Company
Secretary. This can be a part-time business opportunity for many educated
housewives, retired bankers and other professionals.
Even those already engaged in some other business but seeking an
alternative source of income can look at this golden business avenue. Joining
Bajaj Capital becomes an additional revenue stream.
Starting and establishing your own financial operation and handsome income
comparable to other professions like Medicine or Law, Bajaj Capital can help
to grow to viable level.
Young professionals out from the colleges and business schools, thinking of
making a long-term career in this industry can find this helping them in their
career objective.
66
NORTH
United India Life Building, F-Block, Connaught Place,
New Delhi-110001. Ph: 51790444, 23736201, 23712925
Contact- Mr. C.P. Bhatia
M. No: 9811027502
WEST
Agra Building, Gr. Floor,
7/9 Oak Lane, Fort, Mumbai-400023.
Ph: 56376995-99,Fax: 56376994
Contact- Dr. Manasvi Singh/Mr.Jignesh Parekh
M.No: 9820444628/9821028352
EAST
507, Lords, 5th Floor, 7/1,
Lord Sinha Road, Kolkata-700071.
Ph: 22820383, 40034030/4733
Conact-Mr. Biman Chakraborty
M.No: 9830026830
SOUTH
19, Wellington Plaza, G. Floor,
90, Anna Salai Chennai 600002.
Ph: 044-23451234, 23451207/8.
Contact- K.Suresh
M.No: 9840903190
67
Focusing whether they are an independent financial advisor working
full-time or part-time, would lead business to succeed. The Bajaj Capital is
here to ensure that you reach your goal easily and quickly. Success is lot
easier to achieve when have the time and resources to focus on greatest
asset -- the clients.
Information Sharing
Hassles of having multiple points of contacts often lead to time and energy
wasted. They intend to provide a single point-of-contact for all the
informational needs. Single, immediate access to information and resources
that provide solutions makes success easier.
The Bajaj Capital provides one-stop access to:
• Consolidated billing for all investment schemes
• Client-related portfolio reports
• Market intelligence
• Research
Through web-based technology platform, the Bajaj Capital saves staff time
and money by making available what needed, and eliminating the need to keep
track of multiple login IDs and passwords.
68
Financial Planning
Look for broadening the client base with the one of the most successful
Financial Advisory services. It's all possible to succeed when they offer a
sophisticated financial planning tool that gives a wide choice. They are one of
the pioneers in bringing this concept and now actively involved in making it a
proven process in the Indian financial advisory business. They can help to
grow into a proficient financial planner.
Strong Brand Name
Many independent Advisors prefer to retain their independent identity.
They respect that. After all, they are a business owner. They know how to
best connect with the community.
But consider this:
1. Bajaj Capital’s aggressive advertising through print and electronic
media reaches across the length and breadth of the country. People see
us as long-term financial planners, easily approachable, accessible, and an
organisation that communicates in an easy-to-understand manner.
2. Bajaj Capital is the preferred partner of most investment-related
companies, mutual funds etc.
3. Bajaj Capital is one of biggest Financial Advisory companies with over
100 investment centres and over 7 lakh investors.
4. Bajaj Capital is able to organise seminar/meets for invaluable clients
to value their association.
69
The affiliation with Bajaj Capital puts you at the forefront of the clients'
selection when it comes to choosing financial services. The association with
Bajaj Capital can help open many doors.
Bajaj Capital is present in 60 cities and serves seven lakhs customers but
they realised that they too together can serve all investors of the country;
hence they require support to cover length and breadth of the country.
Confidentiality
Client has chosen to deal with Bajaj. As the principle for forty years they
have kept strict confidentiality of our associate its client and have never
approach them directly. This is why independent financial Advisors prefer to
deal with Bajaj Capital.
Unbiased Research
With every passing day there are newer investment products hitting the
market and it is a really cumbersome task to be up to date with all
investment products particularly the performances and changes. They want
to have readily available perfect recommended list of investment option for
the clients.
Bajaj Capital has put some of the most distinguished and experienced
professionals to work for. The Research team reviews all the investment
products. The list of recommendation is based on the merit of the product.
They provide high-value reporting and advice of uncompromising objectivity
at its best. Many of our seasoned experts are MBA, CA, CFP etc.
70
Back Office Outsourcing
While Bajaj Capital is supporting for back end activities in a way it is like
outsourcing which MNCs are now a days doing in India.
71
They are pleased to take the honor of offering new value added service to
their associates empanelled in Bajaj Capital Group.
These reports will help to give value added information to the clients and
valued customers, on their investments. These reports will help to know
their portfolio value, gain/losses, return etc.
They can now have a track of performance online while sitting anywhere,
where net is at the disposal.
Some of the types of report under consideration to offer are as below.
• Comprehensive Portfolio & Performance Valuation Report This
Report show the Details of Complete Investment status of the Investor
e.g Amount Invested, Purchase Units, Sold Units, Capital Gain, Current
Market Value etc.
• Comprehensive Portfolio & Performance Valuation Summary

Report
This Report will show the Summary of the above Report.
• Comprehensive Portfolio & Performance Valuation Report

(Family)
This Report will show the Details of the Investments of the Members of
Family under ANA Grouped by ANA Itself.
72
• Transaction Statement Report for a certain period
This Report will show all the transaction details done in certain period.
• Transaction Statement Report based on Product/Issuer or

Company/Schemes
This Report shows all the Transactions based on selection of
issuer/company and schemes.
• Transaction Summary Report (Scheme Wise)
This Report will show scheme wise summary of the Business.
• Bill Report
This Report will show all the transaction with Sub brokerage in it.
73
BAJAJ CAPITAL is in the forefront of implementation
of Corporate Governance best practices
Corporate Governance at BAJAJ CAPITAL is based on the following main

principles:
• Constitution of a Board of Directors of appropriate composition, size,
varied expertise and commitment to discharge its responsibilities and
duties.
• Ensuring timely flow of information to the Board and its Committees
to enable them to discharge their functions effectively.
• Independent verification and safeguarding integrity of the Company’s
financial reporting.
• A sound system of risk management and internal control.
• Timely and balanced disclosure of all material information concerning
the Company to all stakeholders.
• Transparency and accountability.
• Compliance with all the applicable rules and regulations.
74
Fair and equitable treatment of all its stakeholders including employees,

customers, shareholders and investors.
Bajaj Capital was one of the first companies in the organised
sector to offer investment advisory and financial planning services along
with a wide spectrum of financial products and services, all under one roof.
Over the past 42 years, they have won the trust of over 7 lakh
individual investor clients, including hundreds of High Net worth Individuals,
Non-Resident Indians and members of business-owning families.
In fact, they are honored to be the personal financial advisors
to several families that have been investing through them for three
generations.
The trust and goodwill of the investors are greatest assets,
motivating and inspiring to excel and achieve the greatest heights of
professionalism and service
75
This project wouldn’t have been possible without the help of
websites from where the information was collected.namely,
• www.google.com
• www.bajajcapital.com
• www.wikipedia.com
76

Corporate Governance - Bajaj

Transféré par

Informations du document

Description originale:

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Corporate Governance - Bajaj

Transféré par

Droits d'auteur :

Formats disponibles

o 2.1 Impact of Corporate Governance

o 2.2 Role of Institutional Investors

• 3 Parties to corporate governance

• 5 Mechanisms and controls

o 5.1 Internal corporate governance controls

o 5.2 External corporate governance controls

• 6 Systemic problems of corporate governance

• 7 Role of the accountant

o 8.1 Rules versus principles

o 8.3 Action Beyond Obligation

• 9 Corporate governance models around the world

o 9.1 Anglo-American Model

o 9.2 Non Anglo-American Model

• 10 Codes and guidelines

• 11 Corporate governance and firm performance

o 11.1 Board composition

• 12 Ethical issues in Corporate governance

• 13 Efforts to improve Corporate governance

• 16 Smart financial workplace award—bajaj capital

• 20 Bajaj Capital-Easy way To Success

• 22 Growth Through Governance-At a glance

The impact of a corporate governance system in economic efficiency,

with a strong emphasis on shareholders welfare. The positive effect of good

corporate governance on different stakeholders ultimately is a strengthened

economy, and hence good corporate governance is a tool for socio-economic

Parties involved in corporate governance include the regulatory body

shareholders All parties to corporate governance have an interest, whether

direct or indirect, in the effective performance of the organisation.

The Bajaj Capital A Special Service

owned businesses. Bajaj Capital is the first to introduce elite service in

They offer to share with the global best practices related to

accumulation, enhancement and preservation of wealth, and make available

the expertise of the pool of specialists.

A dedicated Wealth Enhancement Manager will be assigned to offer

exclusive and personalised service. They provide world-class services in

areas like Wealth Management, Risk Management, Investment Banking,

Estate Planning, Taxation, etc.

Corporate governance is the set of processes, customs,

policies, laws and institutions affecting the way a corporation is directed,

administered or controlled. Corporate governance also includes the

the corporation is governed. The principal stakeholders are the

shareholders, management and the board of directors. Other stakeholders

include employees, suppliers, customers, banks and other lenders, regulators,

the environment and the community at large.

Corporate governance is a multi-faceted subject An

important theme of corporate governance is to ensure the accountability of

certain individuals in an organization through mechanisms that try to reduce

or eliminate the principal-agent problem. A related but separate thread of

discussions focus on the impact of a corporate governance system in

economic efficiency, with a strong emphasis on shareholders welfare. There

There has been renewed interest in the corporate

governance practices of modern corporations since 2001, particularly due to

the high-profile collapses of a number of large U.S. firms such as Enron

Corporation and Worldcom. In 2002, the US federal government passed the

Sarbanes OxleyAct, intending to restore public confidence in corporate

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 and integrity.

Sound corporate governance is reliant on external marketplace commitment

O'Donovan goes on to say that 'the perceived quality of a