Online Submission of Mid-Term Assignment-I

Subject: BUSINESS ETHICS AND CORPORATE

GOVERNANCE

Paper Code: MBA (FT) CP-401

Submitted by :- Upwan Prabhakar

Roll no. :- 18MBA061
Ques.1. Reliance Industries Ltd is a typical Indian family
promoted and managed company.
What are the typical governance issues at RIL in
comparison to a professionals-promoted and managed
company like Infosys Ltd?
Answer :-
At Reliance Industries Limited (RIL), Corporate Governance is all about maintaining
a valuable relationship and trust with all stakeholders. We consider stakeholders as
partners in our success, and we remain committed to maximising stakeholders'
value, be it shareholders, employees, suppliers, customers, investors, communities
or policy makers. This approach to value creation emanates from our belief that
sound governance system, based on relationship and trust, is integral to creating
enduring value for all. We have a defined policy framework for ethical conduct of
businesses. We believe that any business conduct can be ethical only when it rests
on the six core values of Customer Value, Ownership Mindset, Respect, Integrity,
One Team and Excellence.
Turning to the corporate governance scenario in Family Managed Companies
(FMCs), the recent amicable settlement of the feud between Ambani brothers of
Reliance was welcomed by the business community and the Government alike.
However, it has thrown open a number of governance issues for debate especially in
widely held , family promoted joint-stock companies where public holding/outside
holding far outstrips the family holding.
The Current Issues
 Whether the board of directors of indian family managed
companies have been playing a constructive role in promoting
corporate governance
 Issues relating to independence of directors about the
directives regarding proportion,the question of real
independence,and whether there is a problem in getting
independent directors of the right calber,and in sufficient
numbers
 Who should oversee the board structure part of corporate
governance, sebi or department of company affairs?the issue
arises because both have come out with recommendations and
guidelines which are different and hence create confusion.
 How does corporate governance in India compare with some of
those developed countries and comparable developing
countries?
 What best and next practices shall be adopted by India to
assume leadership in the area?
Ques.3. Study the changes in the compensation for the
NEDs since the introduction of Clause 49 guidelines?
Answer :-
Clause 49 of the SEBI guidelines on Corporate Governance as
amended on 29 October 2004 has made major changes in the definition
of independent directors, strengthening the responsibilities of audit
committees, improving quality of financial disclosures, including those
relating to related party transactions and proceeds from public/ rights/
preferential issues, requiring Boards to adopt formal code of conduct,
requiring CEO/CFO certification of financial statements and for
improving disclosures to shareholders. Certain non-mandatory clauses
like whistle blower policy and restriction of the term of independent
directors have also been included.[1]
The term ‘Clause 49’ refers to clause number 49 of the Listing
Agreement between a company and the stock exchanges on which it is
listed (the Listing Agreement is identical for all Indian stock exchanges,
including the NSE and BSE). This clause is a recent addition to the
Listing Agreement and was inserted as late as 2000 consequent to the
recommendations of the Kumarmangalam Birla Committee on Corporate
Governance constituted by the Securities Exchange Board of India
(SEBI) in 1999.
Clause 49, when it was first added, was intended to introduce some
basic corporate governance practices in Indian companies and brought
in a number of key changes in governance and disclosures (many of
which we take for granted today). It specified the minimum number of
independent directors required on the board of a company. The setting
up of an Audit committee, and a Shareholders’ Grievance committee,
among others, were made mandatory as were the Management’s
Discussion and Analysis (MD&A) section and the Report on Corporate
Governance in the Annual Report, and disclosures of fees paid to non-
executive directors. A limit was placed on the number of committees that
a director could serve on.