MINI PROJECT Bca Sem 6 PDF
MINI PROJECT Bca Sem 6 PDF
MINI PROJECT Bca Sem 6 PDF
TUSHAR YADAV
2028100314
1. INTRODUCTION
2. PROFESSIONAL ETHICS
3. CYBER CRIMES
4. CORPORATE GOVERNANCE
Introduction
What is ethics?
Ethics is a system of moral principles. They affect how people make decisions and lead their
lives.
Ethics is concerned with what is good for individuals and society and is also described as moral
philosophy.
The term is derived from the Greek word ethos which can mean custom, habit, character or
disposition.
Ethics covers the following dilemmas:
How to live a good life
Our concepts of ethics have been derived from religions, philosophies and cultures. They infuse
debates on topics like abortion, human rights and professional conduct.
Ethics is about the 'other' At the heart of ethics concern about something or someone
other than ourselves and our own desires and self-interest.
Ethics is concerned with other people's interests,
with the interests of society, with God's interests,
with "ultimate goods", and so on.
So when a person 'thinks ethically' they are
giving at least some thought to something
beyond themselves.
Macro Level
At a macro level, sometimes called the systemic level, ethics are defined and influenced by the
wider operating environment in which the company exists. Factors such as political pressures,
economic conditions, societal attitudes to certain businesses, and even business regulation can
influence a company's operating standards and policies. Business owners and managers must be
aware of how these pressures affect operations and relationships, and how they may impact on
markets locally, nationally and internationally.
Company Level
At a company or corporate level, ethical standards are embedded in the policies and procedures
of the organization, and form an important foundation on which business strategy is built. These
policies derive from the influences felt at macro level and therefore help a business to respond to
changing pressures in the most effective way. There can be a gap between the company policy
on ethical standards and the conduct of those in charge of running the business, especially if
they are not the direct owners, which can present an ethical challenge for some employees.
Individual Level
Since businesses are run by people, the ethical standards of individuals in the business are an
important consideration. Individuals may well have a very different set of ethical standards from
their employer and this can lead to tensions. Factors such as peer pressure, personal financial
position, and sociology-economic status all may influence individual ethical standards.
Managers and business owners should be aware of this to manage potential conflicts.
Integrated Approach
Ethical standards flow through the entire structure of a business organization, shaping how it
plans its strategy, deals with customers, and manages its workforce. The standards have a reach
far beyond day-to-day operations, and should be considered in all aspects of a business, from the
boardroom to the shop floor and across all functional areas. Supporting this effort, businesses
that genuinely understand the value and importance of ethics have appropriate metrics in place
to measure achievement and identify problems before they become major issues.
Myths about Business Ethics:
In ethical decision making there are three basic principles that can be used for resolution of
problem. These three principles are that of intuition ism, moral idealism and utilitarianism.
The principle of intuition works on the assumption that the HR person or the manager is
competent enough to understand the seriousness of the situation and act accordingly, such that
the final decision does not bring any harm to any person involved directly or indirectly.
The principle of moral idealism on the other hand states that there is a clear distinction between
good and bad, between what is acceptable and what is not and that the same is true for all
situations. It therefore asks to abide by the rule of law without any exception.
Utilitarianism concerns itself with the results or the implications. There is no clear distinction
between what is good and what is bad; the focus is on the situation and the outcome. What may
be acceptable in a certain situation can be unacceptable at some other place. It underlines that if
the net result of the decision is an increase in the happiness of the organization, the decision is
the right one.
Before taking a decision, moral decisions need to be thought upon and not just accepted blindly.
It is a good idea to make hypothetical situations, develop case studies and then engage others in
brainstorming upon the same. This throws some light into the unknown aspects and widens the
horizon of understanding and rational decision making.
2. Balance Sheet Approach
In balance sheet approach, the manager writes down the pros and cons of the decision.
This helps arrive at a clear picture of things and by organizing things in a better way
One good practice is to announce ones stand on various ethical issues loudly such that a clear
message to every member of the organization and to those who are at the greater risk of falling
prey to unethical practices. This will prevent the employees from resorting to unethical means.
Morality and ethical make up for a perennial debate and ethical perfection is almost impossible.
A better way to deal with this is to integrate ethical decision making into strategic management
of the organization. The way the HR manager gains an alternate perspective rather than the
traditional employee oriented or stakeholder oriented view.
The issue is an old one. Almost 2500 years ago, the philosopher Socrates debated the question
with his fellow Athenians. Socrates' position was clear: Ethics consists of knowing what we
ought to do, and such knowledge can be taught.
Dramatic changes occur in young adults in their 20s and 30s in terms of the basic
problem-solving strategies they use to deal with ethical issues.
These changes are linked to fundamental changes in how a person perceives society and
his or her role in society.
The extent to which change occurs is associated with the number of years of formal
education (college or professional school)
Recent surveys indicate that most Fortune 500 corporations have developed written codes of
ethical business conduct and training programs to communicate those standards to their
employees. If ethics cannot truly be "learned" in significant ways by adults, then the value of
corporate ethics training programs would indeed be suspect.
Moral Capacities
Almost every human being is born with capacities for sympathy, fellow-feeling, concern about
the well-being of others. The proper development of these capacities is not automatic, but the
vast majority of us have developed them because we've been raised in loving families and made
stable friendships at an early age. Every so often, of course, we get a jarring glimpse of someone
who never had the requisite nurturing, an adult who is relatively intelligent but who somehow
never learned how to be compassionate.
But applying basic ethical principles like fairness in the workplace isn't always easy. Our
consciences can have all of the standard equipment, and yet collectively we may not intuit
identical resolutions to specific ethical questions:
Where should you draw the line between a legitimate business courtesy and a bribe?
How do you hold to exemplary ethical standards when your competitor fights dirty?
How do you conduct a layoff in the fairest possible manner?
Deliberation and Discussion
Perhaps most importantly, a corporate ethics program can simply make ethics an acceptable
subject of discussion on the job. Most employees want to work for a company where they don't
feel they're being asked to abandon their core values in order to succeed in their jobs. Yet unless
they're given formal opportunities and encouragement from management to discuss ethics,
they're likely to be silenced by the few cynics among them who think that ethics is for "wimps"
or is irrelevant to the bottom line narrowly conceived. Employees need to hear from
management that the company depends on their individual integrity to maintain its good name,
and is willing to hear their ethical concerns on an ongoing basis.
Finally, corporate ethics initiatives must go well beyond written codes and employee
workshops. The ethics that are taught in formal settings can be easily undermined in other ways.
Employees pay very close attention to the subtle (and not-so-subtle) cues given off by their
supervisors in day-to-day interactions. Why should employees believe that management is
serious about ethical risks if their bosses either don't listen to their concerns or shoot the
messengers of unpleasant news? What sense will it make to preach fairness if promotions and
compensation are in fact based on who you know rather than individual merit and performance?
What message is sent when management allows a salesman to pad his expense account because
he's a top performer?
In other words, managers and employees must regularly make the effort to examine the goals,
incentives, pressures, and styles of communication that drive behavior in the organization, and
ask themselves, Are these factors reinforcing or undermining the ethical standards we want to
uphold?
Lawrence Kohl berg's stages of moral development:
Kohl berg's six stages can be more generally grouped into three levels of two stages each:
conventionalize, conventional and post-conventional. Following Piaget's constructionist
requirements for a stage model, as described in his theory of cognitive development .
Level 1 (Pr-Conventional)
A community of moles gives shelter to a homeless porcupine. The moles, however, are
constantly stabbed by the porcupine's quills. What should they do? This scenario was used to
aid in the development of a theory that argued women and men may have differing paths to
moral development. This lesson will introduce and apply that theory, developed by Carol
Gilligan.
The field of moral development encompasses prosocial behavior, such as altruism, caring and
helping, along with traits such as honesty, fairness, and respect. Many theories of moral
development have been proposed, but this lesson will focus on the specific theory proposed by
Psychologist Carol Gilligan.
Gilligan was a student of Developmental Psychologist Lawrence Kohl berg, who introduced
the theory of stages of moral development. Gilligan, however, felt as though her mentor's theory
did not adequately address the gender differences of moral development due to the fact that
participants in Kohl berg's study were predominately male and because his theory did not
include the caring perspective.
Carol Gilligan felt that Lawrence Kohl berg did not address gender differences in moral development
Gilligan argued that males and females are often socialized differently, and females are more apt
than males to stress interpersonal relationships and take responsibility for the well-being of
others. Gilligan suggested this difference is due to the child's relationship with the mother and
that females are traditionally taught a moral perspective that focuses on community and caring
about personal relationships. Care-Based Morality & Justice-Based Morality
Gilligan proposed the Stages of the Ethics of Care theory, which addresses what makes actions
'right' or 'wrong'. Gilligan's theory focused on both care-based morality and justice-based
morality.
Professional Ethics
Ethical Dilemma:
Mounting Scandals:
In the face of mounting scandals, corporations are adopting codes of ethics. Business schools
are developing ethical courses and consultants are hired to put integrity into corporate cultures.
What relevance do business ethics have for corporate Managers?
Laws and regulations underlie many matters regarding relationships managers have with staff
and customers.
Many diverse groups need to be satisfied and this demands mutual trust. A breach of ethics
breaks down the mutual trust required to maintain individual and organizational moral behavior.
Ethical issues in Business:
The most fundamental or essential ethical issues that businesses must face are integrity and
trust. A basic understanding of integrity includes the idea of conducting your business affairs
with honesty and a commitment to fairly. Preparatory Ethics:
Be a Role Model.
Hire Moral People.
Stress Standards.
Be Committed.
Proactive steps to address unethical behavior:
Grant staff the know-how to appropriately identify and handle ethics violations. Accomplish
this by implementing ethics-training programs for all new and existing employees to increase
the effectiveness of the code.
4.Continuously review the code:
Each year, share copies of the code of ethics with every employee. Ensure that your employees
confirm their understanding of the code by requiring them to sign a form of acknowledgment
afterward.
While maintaining high ethical standards and complying with laws and regulations are
important for all businesses, manufacturing companies face additional challenges because of
the potential for harming employees and consumers. When you operate a manufacturing
line, the potential for injury to workers and the possibility that your products are unsafe for
consumers is always present. Implementing policies, procedures and controls to reduce these
risks is not only ethical it is often a legal requirement.
Safe Manufacturing Environment
Manufacturing processes use energy and produce waste. Legal restrictions govern how
companies can produce energy while limiting emissions and how they have to treat waste to
reduce environmental damage. Ethical concerns influence the overall approach of a company
toward environmental degradation caused by its manufacturing operations. Taking into account
both legal and ethical factors, you have to reduce your energy use by increasing energy
efficiency and exploring the use of alternative technologies. At the same time, you can reduce
waste by looking at where it is generated and changing your manufacturing process to produce
as little as possible.
Secure Workplace
Employers have a legal and ethical responsibility to ensure workers are not subject to sexual
harassment or other forms of workplace hostility and to treat all employees fairly. If your
manufacturing environment has mostly male workers, you have to be especially vigilant that
female employees feel welcome and comfortable. To meet both the legal and ethical challenges,
institute detailed policies against harassment and make sure all employees comply.
Safe Products
In addition to internal issues, manufacturing companies face liability once their products leave
the factory. Product safety is governed by legislation, and ethical concerns mean you should
only ship products that have been tested for safety. While knowingly shipping dangerous
products is illegal and unethical, the use of your products also may have unintended and harmful
effects. Going beyond legal requirements to thoroughly test all aspects of the use of your
products reduces your exposure to possible law suits and fulfills your ethical duties.
There are ethical issues pertaining to the salaries, executive perquisites and the annual incentive
plans etc. The HR manager is often under pressure to raise the band of base salaries. There is
increased pressure upon the HR function to pay out more incentives to the top management and
the justification for the same is put as the need to retain the latter. Further ethical issues crop in
HR when long term compensation and incentive plans are designed in consultation with the
CEO or an external consultant. While deciding upon the payout there is pressure on favoring the
interests of the top management in comparison to that of other employees and stakeholders.
Race, gender and Disability
In many organizations till recently the employees were differentiated on the basis of their race,
gender, origin and their disability. Not anymore ever since the evolution of laws and a
regulatory framework that has standardized employee behaviors towards each other. In good
organizations the only differentiating factor is performance! In addition the power of filing
litigation has made put organizations on the back foot. Managers are trained for aligning
behavior and avoiding discriminatory practices.
Employment Issues
Human resource practitioners face bigger dilemmas in employee hiring. One dilemma stems
from the pressure of hiring someone who has been recommended by a friend, someone from
your family or a top executive.
Yet another dilemma arises when you have already hired someone and he/she is later found to
have presented fake documents. Two cases may arise and both are critical. In the first case the
person has been trained and the position is critical. In the second case the person has been highly
appreciated for his work during his short stint or he/she has a unique blend of skills with the
right kind of attitude. Both the situations are sufficiently dilemma tic to leave even a seasoned
HR campaigner in a fix.
Privacy Issues
Any person working with any organization is an individual and has a personal side to his
existence which he demands should be respected and not intruded. The employee wants the
organization to protect his/her personal life. This personal life may encompass things like his
religious, political and social beliefs etc. However certain situations may arise that mandate
snooping behaviors on the part of the employer. For example, mail scanning is one of the
activities used to track the activities of an employee who is believed to be engaged in activities
that are not in the larger benefit of the organization.
Similarly there are ethical issues in HR that pertain to health and safety, restructuring and
layoffs and employee responsibilities. There is still a debate going on whether such activities are
ethically permitted or not. Layoffs, for example, are no more considered as unethical as they
were thought of in the past.
Ethics are important to any business, creating trust and customer confidence. When business
people make unethical decisions, benefiting themselves only, it can lead to the kind of scandal
and outrage that destroy careers and even companies. Nobody wants to deal with shady,
unethical individuals, giving preference to those they can trust to behave in an ethical way.
Trust
Ethical behavior creates a comfort zone where people know that they will be treated fairly.
Ethics means transparency in accounting and financial matters, building trust within a
community and among investors and customers. Once trust is lost, it is very hard to gain it back.
Confidentiality
A key ethical concept dealing with accounting and financial matters is to keep these matters
confidential. An ethical person will not disclose private financial matters to people who should
not have the information. A lot of damage can be done by an employee or consultant spilling the
beans about a firm's or an individual's financial situation or decisions.
Collaboration
An ethical environment fosters collaboration, the sharing of ideas. Collaboration requires a
sense of honesty and ethics. If you know that your idea will be stolen by a colleague or that it
will be misused, you will not collaborate. Each person brings a set of knowledge and skills to a
finance committee or group, and if people refuse to collaborate and share information, good
decisions are harder to make.
Code of Ethics
Emphasizing the importance of ethics in accounting and financial matters, the American
Institute of C Pas requires members to follow its code of professional conduct. Other
organizations also have a code of conduct, such as the California Society of C Pas, the New
York State Society of C Pas and the Institute of Management Accountants.
Unit- III
Cuber Crimes
Cyber crime is defined as a crime in which a computer is the object of the crime (hacking,
phishing, spamming) or is used as a tool to commit an offense (child pornography, hate crimes).
Cyber criminals may use computer technology to access personal information, business trade
secrets or use the internet for exploitative or malicious purposes. Criminals can also use
computers for communication and document or data storage. Criminals who perform these
illegal activities are often referred to as hackers.
Cyber crime may also be referred to as computer crime.
Cyber Terrorism:
Cyber terrorism is the use of the Internet to conduct violent acts that result in, or threaten, loss
of life or significant bodily harm, in order to achieve political gains through intimidation. It is
also sometimes considered an act of Internet terrorism where terrorist activities, including acts
of deliberate, large-scale disruption of computer networks, especially of personal computers
attached to the Internet by means of tools such as computer viruses , computer worms , phishing
, and other malicious software and hardware methods and programming scripts.
The internet is perhaps the most useful technological advance today. The quick growth of the
internet presents many benefits and drawbacks with respect to Society.
Positive Issues:
With the growth of the internet, more activities are being conducted online. Politics is no
exception to these phenomena. Political parties are increasingly using the internet to spread their
messages by establishing Web Pages.
With such a new medium, there are however many unanswered questions.
While some one more skeptical, others believe that the internet may help to refresh or
revolutionist politics.
Through enhanced communication, citizens may become more involved or knowledgeable and
perform their civic responsibilities well. The internet may also change the way in which political
groups conduct election campaigns.
The internet may also enable small groups with limited resources to participate in the political
process. Indeed, the internet may have the potential to change many aspects of politics in ways
that we cannot predict.
It has a central role in Industry, Commerce, Government, Medicine, Education etc. but like any
other technologies, it also has problematic implications on our society.
Personal privacy: It enables exchange of information on a large scale from anybody. In this
situation there is increased potential for disclosing information violating privacy of individuals.
The Patent law provides powerful protection to the inventions & protects processes and invented
devices and includes unique form of computer soft wares which lead to technical effect. Under
the Patent Act, 1970 penalizes the unauthorized use of patents, and provides for imprisonment
for a term which may extend to 2 years or with fine or both for contravention of secrecy
provisions under section 118. Section 120, penalizes unauthorized claim of patent rights, and
penalizes with a fine of Rupees 1 lake.
There are many theories advocating the protection of Intellectual property rights, but the
common thread in all of the theories is that, the effort and the initiative of the author or creator
needs to be protected and rewarded and to promote creativity. The freedom provided by the
internet is often abused; this is where the role of law and regulation steps in.
1) False information.
2) Possible addiction to the internet.
3) Illegal issues involving the internet.
4) The loss of conventional forms of interaction with others.
One of the ethical issues that come into play with the cuber crime is ethical hacking. Ethical
hackers are those who try to compromise computer systems for the sake of informing the
content owner, so they can fix the problem.
Some security professionals do this for a living. So there are no ethical issues, since the target
company is aware of and is playing for this service. On the other hand, some security enthusiasts
are freelancing ethical hackers. These people penetrate Software and websites and publish the
problem and sometimes solutions to the problems.
Sometimes these ethical hackers send this information privately to the creator and sometimes
they publish the hack public ally. Software companies and website owners are often upset about
people penetrating their systems, no matter what their intentions?
It is okay to hack a website for the purpose of helping the owner. Sometimes motivations of
hackers plays into how hacking is viewed in the ethical perspective?
Computer crime comes in different forms and can cause serious amount of damage. Computer
crime has been around for a long time. With the continual advancements in technology, it has
been made easier for criminals to hide the information of their crimes. These are handled
differently than they have in the past because of this fact.
Computer criminals of today are commonly found to be in their teenage years. But hackers of
1960’s and 1970’s were found to be university graduate students. The reason for such age
difference between the times is that fifty to sixty years ago, you could only find computers on
college campuses where as today, it is uncommon to find a household without computer.
Technology today is also very different than it used to be. There are now passwords and PIN
no. in order to protect the users from having any information stolen. However it also protects the
hackers from being easily identified.
Hackers are able to take this advantage and continue to hack into systems of countries’ and
companies’ etc…
Information warfare:
Is a concept involving the battle space use and management of information and communication
technology (ICT) in pursuit of a competitive advantage over an opponent. Information warfare
may involve collection of tactical information, assurance(s) that one's own information is valid,
spreading of propaganda or disinformation to demoralize or manipulate the enemy and the
public, undermining the quality of opposing force information and denial of information
collection opportunities to opposing forces. Information warfare is closely linked to
psychological warfare .
The U.S. Air Force often attack strategic enemy communications targets, and disabling such
networks electronically. This allows them to be quickly re-enabled communications network
after the enemy territory is occupied. The first application of these techniques was used against
Iraqi communications networks in the Gulf War .
Unit – IV
Corporate governance-I
An independent board, strong controls, transparency and shareholder rights generally increase
market value. But precise impacts of 'good governance' can be hard to pin down. Exact linkages
to share price are not often obvious, governance is more important in some periods than in
others, and it affects some industries more than others.
There have been significant, positive changes in boardroom practices over the past 25 years. The
following are the recommendations FOR Directors, CEO’s and Shareholders on how to meet
future Governance Challenges.
1)Items for top of every Board’s Agenda: a) the rule of boards of directors is in the spot
light. b) Today some experts are calling for tougher regulations on board and a larger role
for shareholders in key strategic decision making. C) Also required drastic rethink of how
the board can add long term value to the Company.
2)Transparency, a rising trend in listed Companies: a) Good corporate governance
cannot guarantee that good decisions will always be made. b) What good governance does
do is ensure there is accountability and decisions are taken in an appropriate manner. C)
The recent experience of public ally traded companies has shown that good governance
requires both transparency and fluid communication between the major interest groups.
Importance of Corporate Governance:
To understand the scope of the legal framework and study the amendments, proxy advisory
firms analyze the role of directors and how they are impacted by changes in the amendments.
Proxy firms offer analytical data for the shareholders and corporate advisory services to
companies.
A company that has good corporate governance has a much higher level of confidence among st
the shareholders associated with that company. Active and independent directors contribute
towards a positive outlook of the company in the financial market, positively influencing share
prices. Corporate Governance is one of the important criteria for foreign institutional investors
to decide on which company to invest in.
The corporate practices in India emphasize the functions of audit and finances that have legal,
moral and ethical implications for the business and its impact on the shareholders. The Indian
Companies Act of 2013 introduced innovative measures to appropriately balance legislative and
regulatory reforms for the growth of the enterprise and to increase foreign investment, keeping
in mind international practices. The rules and regulations are measures that increase the
involvement of the shareholders in decision making and introduce transparency in corporate
governance, which ultimately safeguards the interest of the society and shareholders.
Corporate governance safeguards not only the management but the interests of the stakeholders
as well and fosters the economic progress of India in the roaring economies of the world.
• One or more women directors are recommended for certain classes of companies
• Every company in India must have a resident directory
• The maximum permissible directors cannot exceed 15 in a public limited company. If
more directors have to be appointed, it can be done only with approval of the shareholders
after passing a Special Resolution
• The Independent Directors are a newly introduced concept under the Act. A code of
conduct is prescribed and so are other functions and duties
• The Independent directors must attend at least one meeting a year
• Every company must appoint an individual or firm as an auditor. The responsibility of
the Audit committee has increased
• Filing and disclosures with the Registrar of Companies has increased
• Top management recognizes the rights of the shareholders and ensures strong
cooperation between the company and the stakeholders
• Every company has to make accurate disclosure of financial situations, performance,
material matter, ownership and governance
Additional Provisions
• Inside Directors – These directors are responsible for approving high-level budgets
prepared by upper management, implementing and monitoring business strategy, and
approving core corporate initiatives and projects. Inside directors are either shareholders
or high-level managers from within the company. Inside directors help provide internal
perspectives for other board members. These individuals are also referred to as executive
directors if they are part of company's management team.
• Outside Directors – While having the same responsibilities as the inside directors in
determining strategic direction and corporate policy, outside directors are different in that
they are not directly part of the management team. The purpose of having outside directors
is to provide unbiased and impartial perspectives on issues brought to the board.
Management Team
As the other tier of the company, the management team is directly responsible for the
company's day-to-day operations and profitability.
• Chief Executive Officer (CEO) – As the top manager, the CEO is typically responsible
for the corporation's entire operations and reports directly to the chairman and the board of
directors. It is the CEO's responsibility to implement board decisions and initiatives, as
well as to maintain the smooth operation of the firm with senior management's assistance.
Often, the CEO will also be designated as the company's president and therefore be one of
the inside directors on the board (if not the chairman). However, it is highly suggested that
a company's CEO should not also be the company's chairman to ensure the chairman's
independence and clear lines of authority. (See also: 3 Reasons to Separate CEO and
Chairman Positions .)
• Chief Operations Officer (COO) – Responsible for the corporation's operations, the COO
looks after issues related to marketing, sales, production and personnel. Often more hands-
on than the CEO, the COO looks after day-to-day activities while providing feedback to
the CEO. The COO is often referred to as a senior vice president.
• Chief Financial Officer (CFO) – Also reporting directly to the CEO, the CFO is
responsible for analyzing and reviewing financial data, reporting financial performance,
preparing budgets, and monitoring expenditures and costs. The CFO is required to present
this information to the board of directors at regular intervals and provide it to shareholders
and regulatory bodies such as the Securities and Exchange Commission (SEC). Also usually
referred to as a senior vice president, the CFO routinely checks the corporation's financial
health and integrity. (For additional reading, see What Does a Chief Financial Officer (CFO)
Do? )
Together, management and the board of directors have the ultimate goal of maximizing
shareholder value. In theory, management looks after the day-to-day operations, and the board
ensures that shareholders are adequately represented. But the reality is that many boards include
members of the management team.
When you are researching a company, it's always a good idea to see if there is a good balance
between internal and external board members. Other good signs are the separation of CEO and
chairman roles and a variety of professional expertise on the board from accountants, lawyers
and executives. It's not uncommon to see boards that consist of the current CEO (who is
chairman), the CFO and the COO, along with the retired CEO, family members, etc. This does
not necessarily signal that a company is a bad investment, but as a shareholder, you should
question whether such a corporate structure is in your best interests .
Corporate Board Process and Evaluation:
Good governance requires boards to have effective processes and to evaluate their performance
and appraise directors at least once a year. Companies, act 2013 has introduced significant
changes in the board processes.
1) Number of Directors: Specifically provides that a company may have a maximum of 15
Directors. It permits every company to appoint directors above the prescribed limit of 15 by
authorizing such increase through a special resolution.
2) Resident Director: It introduces the requirement of appointing a resident director ire; a
person who has stayed in India for a total period of not less than 182 days in the previous
calendar year.
3) Independent Director: At least one third of the Board to be comprised of independent
directors. He should be a person of integrity, relevant expertise and experience.
4) Woman Director: Listed companies shall be required to appoint at least one Woman
director on its board. It shall be required to comply with this provision within 6 months
from the date of incorporation.
Conclusion: Companies, Act 2013 has introduced significant changes regarding Board
processes. These changes would institutionalize good corporate governance and not make
governance over- dependent on the presence of certain individuals on the board.
1) Audit committee
• Oversight of the company’s financial reporting process and the disclosure of its financial
information to ensure that the financial statement is correct, sufficient and credible.
• Recommending the appointment and removal of external auditor, fixation of audit fee
and also approval for payment for any other services.
• Reviewing with management the annual financial statements before submission to the
board, focusing primarily on;
• Any changes in accounting policies and practices.
• Major accounting entries based on exercise of judgment by management.
• Qualifications in draft audit report.
• Significant adjustments arising out of audit.
• The going concern assumption.
• Compliance with accounting standards.
• Compliance with stock exchange and legal requirements concerning financial statements
Any related party transactions
• Reviewing with the management, external and internal auditors, the adequacy of internal
control systems.
• Reviewing the adequacy of internal audit function, including the structure of the internal
audit department, staffing and seniority of the official heading the department, reporting
structure coverage and frequency of internal audit.
• Discussion with internal auditors any significant findings and follow up there on.
• Reviewing the findings of any internal investigations by the internal auditors into matters
where there is suspected fraud or irregularity or a failure of internal control systems of a
material nature and reporting the matter to the board.
• Discussion with external auditors before the audit commences about nature and scope of
audit as well as post-audit discussion to ascertain any area of concern.
• Reviewing the company’s financial and risk management policies.
• To look into the reasons for substantial defaults in the payment to the depositors,
debenture holders, shareholders (in case of nonpayment of declared dividends) and
creditors.
In terms of Clause 49-IV(G)(iii) of the Listing Agreement, a board committee under the
chairmanship of a non-executive director shall be formed to specifically look into the redress of
shareholder and investors complaints like transfer of shares, non receipt of balance sheet, non
receipt of declared dividends etc. This committee shall be designated as “Shareholders/
Investors Grievance Committee”.
The terms of reference of our Shareholders’/ Investors Grievance Committee are given below:
“To allot the Equity Shares of the Company, and to supervise and ensure:
• Efficient transfer of shares; including review of cases for refusal of transfer transmission
of shares and debentures;
• Redress of shareholder and investor complaints like transfer of shares, non-receipt of
balance sheet, non-receipt of declared dividends etc;
• Issue of duplicate / split / consolidated share certificates;
• Allotment and listing of shares;
• Review of cases for refusal of transfer / transmission of shares and debentures;
• Reference to statutory and regulatory authorities regarding investor grievances; and to
otherwise ensure proper and timely attendance and redress of investor queries and
grievances.
The Shareholders/ Investor Grievances Committee looks into redress of shareholder and investor
complaints, issue of Duplicate/ Consolidated Share Certificates, Allotment and Listing of shares
and review of cases for refusal of
Transfer/ Transmission of shares and debentures and reference to Statutory and Regulatory
Authorities. The scope and functions of the Shareholders/Investor Grievances Committee are as
per Clause 49 of the Listing Agreement.
Remuneration committee
Risk committee
Nomination committee
The primary role of the Nomination Committee of the board is to assist the board by identifying
prospective directors and make recommendations on appointments to the board and the senior
most level of executive management below the board. The committee also clears succession
plans for these levels. The Nomination Committee is responsible for making recommendations
on board appointments and on maintaining a balance of skills and experience on the board and
its committees.
Succession planning for the board is a matter which is devolved primarily to the Nomination
Committee, although the committee’s deliberations are reported to and debated by the full
board. The board itself also regularly reviews more general succession planning for the senior
management of the group.
Together with the audit and compensation committees, the nominating/corporate governance
committee rounds out the three standing committees of a public company’s board of directors. It
plays a critical role in overseeing matters of corporate governance for the board, including
formulating and recommending governance principles and policies. As its name implies, this
committee is charged with enhancing the quality of nominees to the board and ensuring the
integrity of the nominating process. Given the recent focus on board composition and diversity,
director elections, and proxy access, the role of nominating/corporate governance committee is
in the spotlight.
Corporate compliance committee
The primary Objective of the Compliance Committee is to review, oversee and monitor:
Ethics committee
But an ethics committee can do much more. The committee can be charged to meet all seven
requirements for an effective ethics management process. For each of the above arenas of
responsibility there may be several specific roles.
Independent Director:
Independent directors as the name suggests are directors on Board of a company who are
independent individuals, not having any other relationship or transaction with the company.
Following class of companies are required to appoint at least 1/3 of total number of directors on
their Board of Directors as independent directors:
• Listed Companies,
• Public Companies having paid up share capital of one hundred corer rupees or more; or
• Public Companies having turnover of three hundred corer rupees or more;
• Public Companies which have, in aggregate, outstanding loans or borrowings or
debentures or deposits, exceeding two hundred corer rupees.
The compensation offered to independent directors in the form of “sitting fee” has been
increased from rupees 20,000 to max of rupees 1,00,000 per meeting. Some researchers have
complained that firms have appointed “Independent directors who are overly sympathetic to
management, while still technically independent according to regulatory definitions.
One complaint against the regulations is that CEO’s may find loopholes to influence directors.
The real question is since independent directors only play a supervisory role, should they be
penalized in the event of a discrepancy in their responsibilities. They are expected to be
independent from the management and act as the trustees of the shareholders. This implies that
they are obligated to be fully aware of and question the conduct of the organization on relevant
issues. The problem is that independent director cannot commitment to ethical practices.
Post liberalization, India has adopted the market model ire; liberalized foreign investment in
Indian Companies. This has led to increasing public investment in the equity capital of
companies.
Now the focus is equally on the monitory shareholders interest, enterprise performance and
corporate social responsibility. Ownership structure is affecting the implementation of the code
of ethics. Concentrated ownership has certain positive and negative influences on corporate
governance.
Tunneling of funds is one of the negative influences. In practice independent directors are
appointed by Management. And therefore it is likely that they will be loyal to the business
family.
India is weak in the implementation of rules and regulations. Endeavor on the part of the
government to improve the same in minimal. However, there is a need to speed up the process
of implementation by strengthening existing institutions and creating new ones if required.
BIBLOGRAPHY
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