1|Page

PROJECT REPORT ON
CORPORATE GOVERNANCE
With Special Reference to
“(ADITYA BIRLA GROUP)”

Submitted To:

Submitted By:

2|Page
ACKNOWLEDGEMENT

3|Page
 ACKNOWLEDGEMENT

I would like to express my heartfelt thanks to many people. This dissertation is an effort to
contribute towards achieving the desired objectives. In doing so, I have optimized all
available resources and made use of some external resources, the interplay of which, over
a period of time, led to the attainment of the set goals.

I take here a great opportunity to express my sincere and deep sense of gratitude to my
esteemed faculty for giving me an opportunity to work on this project. The support &
guidance from sir, was of great help & it was extremely valuable.

I also express my sincere thanks to all the people who, directly or indirectly, contributed in
time, energy and knowledge to this effort.

4|Page
 CONTENTS

CHAPTER DESCRIPTION PAGE NO.

INTRODUCTION

 Corporate Governance in India-A Background

 Guidelines & Codes of Corporate Governance
1  Need for the study 09-17

 Statement of the problem

 Objective of the study
 Research Methodology

PROFILE OF THE INDUSTRY

2  ORGANIZATIONAL OVERVIEW 18-24

 ADITYA BIRLA CHEMICALS
(INDIA) LIMITED

3 REVIEW OF LITERATURE 25-27

CORPORATE GOVERNANCE IN &

4 28-37
REGULATORY FRAMEWORK IN INDIA

5 CONCLUSION 38-39

6 REFERENCES 40-41

5|Page
INTRODUCTION

6|Page
 CHAPTER 1-INTRODUCTION

1.1 Corporate Governance in India – A Background

The history of the development of Indian corporate laws has been marked by Interesting
contrasts. At independence, India inherited one of the world’s poorest economies but one
which had a factory sector accounting for a tenth of the national product; four
functioning stock markets (predating the Tokyo Stock Exchange) with clearly defined
rules governing listing, trading and settlements; a well-developed equity culture if only
among the urban rich; and a banking system replete with well-developed lending norms
and recovery procedures.24 In terms of corporate laws and financial system, therefore,
India emerged far better endowed than most other colonies. The 1956 Companies Act as
well as other laws governing the functioning of joint-stock companies and protecting the
investors’ rights built on this foundation.

The beginning of corporate developments in India were marked by the managing agency
system that contributed to the birth of dispersed equity ownership but also gave rise to
the practice of management enjoying control rights disproportionately greater than their
stock ownership. The turn towards socialism in the decades after independence marked
by the 1951 Industries (Development and Regulation) Act as well as the 1956 Industrial
Policy Resolution put in place a regime and culture of licensing, protection and
widespread red-tape that bred corruption and stilted the growth of the corporate sector.
The situation grew from bad to worse in the following decades and corruption, nepotism
and inefficiency became the hallmarks of the Indian corporate sector.

In the absence of a developed stock market, the 3 all-India development. Finance

institutions (DFIs) – the Industrial Finance Corporation of India, the Industrial
Development Bank of India and the Industrial Credit and Investment Corporation of
India – together with the state financial corporation’s became the main providers of long-
term credit to companies. Along with the government owned mutual fund, the Unit Trust
of India, they also held large blocks of shares in the companies they lent to and

7|Page
invariably had representations in their boards. In this respect, the corporate governance
system resembled the bank-based German model where these institutions could have
played a big role in keeping their clients on the right track. Unfortunately, they were
themselves evaluated on the quantity rather than quality of their lending and thus had
little incentive for either proper credit appraisal or effective follow-up and monitoring.
Their nominee directors routinely served as rubber-stamps of the management of the day.
With their support, promoters of businesses in India could actually enjoy managerial
control with very little equity investment of their own. Borrowers therefore routinely
recouped their investment in a short period and then had little incentive to either repay
the loans or run the business. Frequently they bled the company with impunity, siphoning
off funds with the DFI nominee directors mute spectators in their boards.

This sordid but increasingly familiar process usually continued till the company’s net
worth was completely eroded. This stage would come after the company has defaulted on
its loan obligations for a while, but this would be the stage where India’s bankruptcy
reorganization system driven by the 1985 Sick Industrial Companies Act(SICA) would
consider it “sick” and refer it to the Board for Industrial and Financial Reconstruction
(BIFR). As soon as a company is registered with the BIFR it wins immediate protection
from the creditors’ claims for at least four years. Between 1987 and 1992 BIFR took well
over two years on an average to reach a decision, after which period the delay has
roughly doubled. Very few companies have emerged successfully from the BIFR and
even for those that needed to be liquidated, the legal process takes over 10 years on
average, by which time the assets of the company are practically worthless. Protection of
creditors’ rights has therefore existed only on paper in India. Given this situation, it is
hardly surprising that banks, flush with depositors’ funds routinely decide to lend only to
blue chip companies and park their funds in government securities.

Financial disclosure norms in India have traditionally been superior to most Asian
countries though fell short of those in the USA and other advanced countries.
Noncompliance with disclosure norms and even the failure of auditor’s reports to
conform to the law attract nominal fines with hardly any punitive action. The Institute of
Chartered Accountants in India has not been known to take action against erring auditors.
8|Page
While the Companies Act provides clear instructions for maintaining and updating share
registers, in reality minority shareholders have often suffered from irregularities in share
transfers and registrations – deliberate or unintentional. Sometimes non-voting
preferential shares have been used by promoters to channel funds and deprive minority
shareholders of their dues. Minority shareholders have sometimes been defrauded by the
management undertaking clandestine side deals with the acquirers in the relatively scarce
event of corporate takeovers and mergers. Boards of directors have been largely
ineffective in India in monitoring the actions of management. They are routinely packed
with friends and allies of the promoters and managers, in flagrant violation of the spirit of
corporate law. The nominee directors from the DFIs, who could and should have played
a particularly important role, have usually been incompetent or unwilling to step up to
the act. Consequently, the boards of directors have largely functioned as rubber stamps of
the management. For most of the post-Independence era the Indian equity markets were
not liquid or sophisticated enough to exert effective control over the companies. Listing
requirements of exchanges enforced some transparency, but non-compliance was neither
rare nor acted upon. All in all therefore, minority shareholders and creditors in India
remained effectively unprotected in spite of a plethora of laws in the books. The years
since liberalization have witnessed wide-ranging changes in both laws and regulations
driving corporate governance as well as general consciousness about it. Perhaps the
single most important development in the field of corporate governance and investor
protection in India has been the establishment of the Securities and Exchange Board of
India (SEBI) in 1992 and its gradual empowerment since then. Established primarily to
regulate and monitor stock trading, it has played a crucial role in establishing

The basic minimum ground rules of corporate conduct in the country. Concerns about
corporate governance in India were, however, largely triggered by a spate of crises in the
early 90’s – the Harshad Mehta stock market scam of 1992 followed by incidents of
companies allotting preferential shares to their promoters at deeply discounted prices as
well as those of companies simply disappearing with investors’ money.
These concerns about corporate governance stemming from the corporate scandals as
well as opening up to the forces of competition and globalization gave rise to several
investigations into the ways to fix the corporate governance situation in India. One of the
9|Page
first among such endeavors was the CII Code for Desirable Corporate Governance
developed by a committee chaired by Rahul Bajaj. The committee was formed in 1996
and submitted its code in April 1998. Later SEBI constituted two committees to look into
the issue of corporate governance – the first chaired by Kumar Mangalam Birla that
submitted its report in early 2000 and the second by Narayana Murthy three years later.

These important efforts at improving corporate governance in India. The SEBI

committees Recommendations have had the maximum impact on changing the corporate
governance Situation in India. The Advisory Group on Corporate Governance of RBI’s
standing Committee on International Financial Standards and Codes also submitted its
own Recommendations in 2001. A comparison of the three sets of recommendations in
reveal the progress in the thinking on the subject of corporate governance in India over
the years. An outline provided by the CII was given concrete shape in the Birla
Committee report of SEBI. SEBI implemented the recommendations of the Birla
Committee through the enactment of Clause 49 of the Listing Agreements. They were
applied to companies in the BSE 200 and S&P C&X Nifty indices, and all newly listed
companies, on March 31, 2001; to companies with a paid up capital of Rs. 10 crore or
with a net worth of Rs. 25 crore at any time in the past five years, as of March 31, 2002;
to other listed companies with a paid up capital of over Rs. 3 crore on March 31, 2003.
The Narayana Murthy committee worked on further refining the rules.

The recommendations also show that much of the thrust in Indian corporate Governance
reform has been on the role and composition of the board of directors and the disclosure
laws. The Birla Committee, however, paid much-needed attention to the subject of share
transfers which is the Achilles’ heel of shareholders’ right in India. The frequency of
compliance of companies to the different aspects of the corporate governance regulation.
Clearly much more needs to be accomplished in the area of compliance. Besides in the
area of corporate governance, the spirit of the laws and principles is much more
important than the letter. Consequently, developing a positive culture and atmosphere of
corporate governance is essential is obtaining the desired goals. Corporate governance
norms should not become just another legal item to be checked off by managers at the
time of filing regulatory papers.
10 | P a g e
 1.2 Guidelines and Codes of Corporate Governance

In 1995, the Confederation of Indian Industry (CII) took a special initiative on corporate
governance – the first institutional initiative by Indian industry. It was soon followed by
the professional bodies like the Institute of Companies Secretaries of India (ICSI) during
the year 1996-97 to focus the attention of the Indian corporate sector on the imperative
need to evolve new norms of governance to sustain and develop Indian industry on
healthy lines. A working group, set up by the Department of Company Affairs, also
looked into the matter of Corporate Governance, which needs to be introduced. The
pressure for change was because of lack of confidence of individual investors as well as
of institutional investors. In 2002, the Security and Exchange Board of India, as well as
the Department of Company Affairs established Narayana Murthy Committee and
Naresh Chandra Committee, which in their reports have provided guidelines for
corporate governance, keeping in view developments in corporate sector especially in the
USA.

CII Code of Corporate Governance

In December 1995, the CII set-up a Committee under the chairmanship of industrialist
Rahul Bajaj to prepare a comprehensive voluntary code of corporate governance for
listed companies. The final draft report was released in April 1998. The CII Code on
corporate governance recommended that the: key information to be reported, listed
companies to have audit committees, corporate to give a statement on value addition,
consolidation of accounts to be optional. Main emphasis was on transparency, as stated
by Shekar Datta, the then President of CII, in the foreword to the Report:
“Corporate Governance is a phrase which implies transparency of management systems
in business and industry, be it private or public sector –all of which are corporate entities.
Just as industry seeks transparency in Government policies and procedures, so, corporate
governance seeks transparency in corporate sector

Corporate governance is the set of processes, customs, policies, laws, and institutions
affecting the way a corporation (or company) is directed, administered or controlled.
Corporate governance also includes the relationships among the many stakeholders

11 | P a g e
involved and the goals for which the corporation is governed. In simpler terms it means
the extent to which companies are run in an open & honest manner.

1.3 NEED FOR THE STUDY

Corporate governance is required to protect the interest of all the parties during takeovers
and mergers. SEBI. SEBI has made corporate governance compulsory for
certain companies. This is done to protect the interest of the investors and other
stakeholders.

The corporate governance practices concentrates on stakeholders protection specially

investors protection. Good corporate governance citizenship evident through good
corporate governance practices. Good corporate governance enhances the financial
position of the company through ethical means knowing the corporate governance issues
in chemical companies is need of ours.

The need for corporate governance is highlighted by the following factors:

Wide Spread of Shareholders:

Today a company has a very large number of shareholders spread all over the nation and
even the world, and a majority of shareholders being unorganized and having an
indifferent attitude towards corporate affairs. The idea of shareholders’ democracy
remains confined only to the law and the Articles of Association; which requires a
practical implementation through a code of conduct of corporate governance.

Changing Ownership Structure:

The pattern of corporate ownership has changed considerably, in the present-day-times;
with institutional investors (foreign as well Indian) and mutual funds becoming the
largest shareholders in the large corporate private sectors. These investors have become
the greatest challenge to corporate management, forcing the latter to abide by some
established code of corporate governance to build up its image in society.

12 | P a g e
Corporate Scams or Scandals:
Corporate scams (or frauds) in the recent years of the past have shaken public confidence
in corporate management. The event of the Harshad Mehta scandal, which is perhaps,
one biggest scandal, is in the heart and mind of all, connected with corporate
shareholding or otherwise being educated and socially conscious.

Greater Expectations of Society of the Corporate Sector:

Society of today holds greater expectations of the corporate sector in terms of reasonable
price, better quality, pollution control, best utilization of resources etc. To meet social
expectations, there is a need for a code of corporate governance, for the best management
of company in economic and social terms.

Hostile Take-Overs:
Hostile take-overs of corporations witnessed in several countries, put a question mark on
the efficiency of managements of take-over companies. This factors also points out to the
need for corporate governance, in the form of an efficient code of conduct for corporate
managements.

1.4 STATEMENT OF THE PROBLEM

There is a vital role of corporate governance in the establishment of a competitive market; this
is also suggested by the empirical studies that nations having good corporate governance
practices tend to have strong growth in their corporate sectors. This study examines the impact
of corporate governance on the performance of the firm. The impact of Board attributes, Audit
committee attributes and Ownership attributes should be checked on Return on Equity
and Return on Assets of the Firms. Multiple regression (Panel least square) should be
used to analyze the data. The previous results have shown that Board Independence has a
significant impact on Return on Equity of the firm while Board size and Audit Committee
Independence have a significant impact on Return on Assets.

13 | P a g e
1.5 OBJECTIVES OF THE STUDY

The fundamental objective of corporate governance is to boost and maximize shareholder

value and protect the interest of other stakeholders. The Board keeps the shareholders
informed of relevant developments impacting the company. The Board effectively and
regularly monitors the functioning of the management team.
The three primary objectives of corporate governance are:
 The motivation of value-maximizing decisions;
 The protection of assets from unauthorized acquisition, use or disposition, and
 The production of proper financial statements (e.g., that meet the legal
requirements).

1.6 RESEARCH METHODOLOGY

Exploratory research is used majorly to gain insights into the pool of data related to CSR
and Corporate Sustainability. An Exhaustive literature survey regarding the topic and
related concepts has been done. Secondary data has been collected inclusive of
quantitative and qualitative data from various sources including websites, books, research
papers, newspapers, magazines, and websites. Finally, the data is arranged and analyzed
in a chronological order to finally shape into a case study on Aditya Birla Group. Case
studies are in-depth investigations of a single person, group, event or community.
Typically, data are gathered from a variety of sources and by using several different
methods (e.g. observation & interviews). The research may also continue for an
extended period of time, so processes and developments can be studied as they happen.

This is a descriptive research study. It has taken Aditya Birla Chemicals (India) Limited
as a case study. It used only Primary & Secondary Data. The primary data were
collected from the secretarial department of the Company by interview. The secondary
data were collected from the company‘s annual reports and website. The data are
analyzed descriptively by using cross-tabulation and percentage analysis.

14 | P a g e
PROFILE OF THE INDUSTRY

15 | P a g e
 CHAPTER 2-PROFILE OF THE INDUSTRY

2.1 ORGANIZATIONAL OVERVIEW

Aditya Birla Chemicals (India) Ltd, is a unit of Aditya Birla Group and one of the
leading Chlor Alkali Company in India. The plant has been commissioned in 1984 and
located at Garhwali Road, Dist. ALAMAU, State JHARKHAND, and India.
Company‘s detail product range & Installed Capacity:

 Caustic Soda lye 109,500 TPA

 Liquid Chlorine 91,250 TPA
 Hydrochloric Acid 45,625 TPA
 Sodium Hypo Chlorite 1,460 TPA
 Aluminums Chloride 11,680 TPA
 Stable Bleaching Powder 17,520 TPA

The manufacturing process of the plant is the latest energy efficient and environment
friendly state-of-art Membrane Cell Technology. To meet the requirement of
uninterrupted power supply, company has a state-of-art 30 MW Captive Power Plant.
Company has implemented SAP R/3 and People Soft System.

To meet the heterogeneous business challenges, company has adopted WCM (World
Class Management) work culture. Further organization has adopted 40 villages under
community development to improve the quality of life in nearby vicinity of the factory.

International Applauds
 ISO 9001:2000 : For quality management System
 ISO 14001:2004 : For environment management System
 SA 8000:2001 : For social Accountability
 OHSAS 18001:1999 : For Occupational Health & Safety Assessment

16 | P a g e
 Management

National Applauds
 IMC Ramakrishna Bajaj National Quality Certificate of merit
 Best Responsible care Committed Company Award
 RC logo
 FICCI award
 Planet Award 2005-06
 Genentech Environment Excellent Gold Award

Membership of IONAL Associates

 Alkali Manufacturers Association Of India (AMAI)
 Indian Chemical Council(ICC)
 American Chemistry Council

2.2 ADITYA BIRLA CHEMICALS (INDIA) LIMITED

Aditya Birla Chemicals (India) Limited (formerly Bihar Caustic and Chemicals
Limited) was incorporated as a joint venture of the Aditya Birla Group and the Bihar
State Industrial Development Corporation. The unit was set up with the objective of
catering to the caustic soda requirements of Hindalco Industries Limited, and to
contribute towards the economic development of the backward region of Palamau
district in Jharkhand.

Commissioned in 1984 with an initial caustic soda capacity of 33,000tpa, the company
has since grown to become the leading caustic soda producer in the eastern region of
the country. The company had commissioned a 30mw captive power plant in the year
2000 and simultaneously, the caustic plant capacity was enhanced to 51,048tpa. In the
year 2006, the capacity was increased to 78,750tpa by converting the mercury cell
technology to the more environment-friendly membrane cell technology supplied by
world-renowned technology supplier UHDENORA, Germany. Presently, the installed

17 | P a g e
capacity stands at 105,000tpa.
For value addition and effective utilization of chlorine, the company has
commissioned a 12,000tpa aluminum chloride plant in the year 2007 and a
17,500tpa stable bleaching powder (SBP) plant in 2008. SBP is marketed under the
brand name Shaktiman. Aluminums chloride is the principal catalyst used in the
Friedel Craft reaction and widely used in pharmaceuticals, chemical intermediates,
agrochemicals, dyestuffs and pigments, hydrocarbon resins, flavors and fragrances.
SBP is used in textile mills for bleaching, sanitation, sewage systems, tanning process,
organic synthesis and other applications.

Our Key People

Mr. Kumar Mangalam Birla Chairman, Aditya Birla Group

Mrs. Rajshree Birla Chairperson, Aditya Birla Centre for
community Initiatives and Rural
Develo pment
Mr. Ajay Srinivasan Financial Services
Mr. Askaran Agarwal Birla Group Trusts & Special
Community Projects
Dr. Bharat Singh Business Review
Council(Services Business)
Mr. D.D. Rathi Business Review Council
(Services Business)
Mr. Debu Bhattacharya Metals
Mr. K.K. Maheswari Pulp and fibre
Mr. Pranab Barua Textiles and Apparels
Mr. Rajiv Dube Group Corporate Services
Mr. Rakesh Jain Aditya Birla Nuvo
Mr. Ravi Kastia Trading, Port and power projects
Mr. Himanshu Kapania Telecom
Dr. Santrupt B. Misra Carbon Black Business and Group HR
Mr. Shailendra jain Chairman, Business Review Council
18 | P a g e
Mr. Thomas Varghese Retail
Mr. Lalit Naik Chemicals
Mr. Tuhin Mukherjee Mining and Mineral Resources
Development
Mr. O.P. Puranmalka Cement
Mr. Vikram Rao Acrylic Fibre and Overseas
Spinning Business

Some global facts about Aditya Birla Group

 It is the world‘s largest aluminum rolling company.

 It is the world leader in viscose staple fibre.
 It is one of the three biggest producers of primary aluminum in Asia.
 It is one of the leading cement producers in India and eighth largest globally.
 It is the fourth largest producer of carbon black in the world.
 It is the fourth largest producer of insulators in the world.
 It is the fifth largest producer of acrylic fibre in the world.

Some Indian facts

 It is the largest premium branded apparel company.

 It is the second largest producer of viscose filament yarn.
 It is the second largest in the chlor-alkali sector.
 It is among the top five cellular operators.
 It is among the top 10 Indian BPO companies by revenue size.
 It is among the top 5 asset management and private sector life insurance
companies.

19 | P a g e
2.4 VISION, MISSION &

VALUES OUR VISION

To be a premium global conglomerate with a clear focus on each business.

OUR MISSION

To deliver superior value to our customers, shareholders, employees and society at

large.

OUR VALUES

 Integrity

 Commitment

 Passion

 Seamlessness

 Speed

2.6 Our

Products Caustic

Soda

It is also known as lye and Sodium Hydroxide (NaOH), which is a caustic metallic base. It
is used in many industries, mostly as a strong chemical base in the manufacture of pulp
and paper, textile, drinking water, soap, and detergents and as a drain cleaner.

Liquid Chlorine

Chlorine is used in the purification of drinking water, as bleaching agent in pulp, paper and
textile industries.

20 | P a g e
It is also used as raw material / intermediate chemical in the manufacture of PVC plastics,
paraffin waxes, synthetic rubbers, pesticides / insecticides, inorganic / organic chemicals,
pharmaceuticals etc.

Hydrochloric Acid

Hydrochloric acid is a solution of hydrogen chloride (HCl) in water that is a highly

corrosive, strong mineral acid with many industrial uses. It is found naturally in gastric acid.

Sodium Hypochlorite

Sodium hypochlorite is a chemical compound with the formula NaClO. Sodium

hypochlorite solution, commonly known as bleach, is frequently used as disinfectant or a
bleaching agent.

Aluminum Chloride

Aluminum chloride (AlCl3) is the main compound of aluminum and chlorine. It is white,
but samples are often contaminated with iron dichloride, giving it a yellow color. The solid
has a low melting and boiling point. It is mainly produced and consumed in the production
of aluminum metal, but large amounts are also used in other areas of chemical industry.
The compound is often cited as a Lewis acid. It is an example of an inorganic compound
that "cracks" at mild temperature, reversibly changing from a polymer to a molecule.

Stable Bleaching Powder

Calcium hypochlorite is a chemical compound with formula Ca (ClO) 2. It is widely used

for water treatment and as a bleaching agent (bleaching powder).Calcium hypochlorite is
used for the disinfection of drinking water or swimming pool water. It is used as a sanitizer in
outdoor swimming pools in combination with a cyanuric acid stabilizer, which reduces the
loss of chlorine due to ultraviolet radiation. The calcium content hardens the water and
tends to clog up some filters; hence, some products containing calcium hypochlorite also
contain anti-scaling agents. Calcium hypochlorite is also an ingredient in bleaching
powder, used for bleaching cotton and linen. It is also used in bathroom cleaners,
household disinfectant sprays, moss and algae removers, and weed killers.
21 | P a g e
REVIEW OF LITERATURE

22 | P a g e
 CHAPTER -3 REVIEW OF LITERATURE

National Foundation of Corporate Governance (2004)

The Discussion paper examines the definition and important of corporate governance as
well as the important of regulating corporate governance practices in the country. The
Discussion Paper also traces the initiative and regulations with regard to the evolution of
corporate governance in the country and benchmarks the existing regulations and practices
against the widely accepted and well-known OECD Principles of Corporate Governance.

Companies Bill, (2008)

The company’s bill, 2008 is intended to modernize the structure for corporate regulation in
India and represents a major reform statement by the Government to promote the
development of the Indian corporate sector through enlightened regulation.

Rajesh Chakraborty Indian School of Business January, (2005)

The recent high-profile corporate governance failures in developed countries have brought
the subject to media attention, the issue has always been central to finance and economics.
The issue is particularly important for developing countries since it is central to financial
and economic development. Recent research has established that financial development is
largely dependent on investor protection in a country-de jure and de facto.

23 | P a g e
Dr. Manmohan Singh, (2009)

Former Prime Minister Manmohan Singh said that Indian firms will not be able to compete
in the world market unless they follow the globally recognized norms for transparency in
running of businesses. “Few bothered about corporate governance and transparency in
accounting and management in the era of protectionism, but such laxity is no longer
possible”.

24 | P a g e
 CORPORATE GOVERNANCE &
REGULATORY FRAMWORK IN INDIA

25 | P a g e
 CHAPTER -4 CORPORATE GOVERNANCE & REGULATORY
FRAMEWORK IN INDIA

3.1 INTRODUCTION

The regulatory framework for Corporate Governance in India in general words, Corporate
Governance means a set of rules and regulations by which an organization is governed,
controlled and directed. It is conducted by the Board of Directors of the concerned
committee for the benefit of the company's stakeholders.

2018 was an eventful year for the corporate governance regulatory framework in India.
The Securities and Exchange Board of India (SEBI) not only approved a host of
recommendations made by the Kotak Committee on Corporate Governance (Kotak
Committee) but also gave these recommendations the required regulatory impetus by
notifying the Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) (Amendment) Regulations, 2018.

On April 1, 2019, a slew of these amendments (Amendments) came into effect and all the
listed entities ensured their readiness in terms of implementation and compliance.
Broadly, the Amendments have four intended targets: the board of directors, the listed
company, the investors and the promoters.

While the popular notion of ‘corporate governance’ maybe that of the ability to govern
boards, it is at times best to take a step back and look at the literal phraseology – the
governance of corporations. The Kotak Committee appears to have done exactly this and,
in the process, introduced some Amendments that corporations need to think through well,
especially the large ones. For instance, what may at first appear to be minor typical
changes – mandatory submission of quarterly results, limited review of consolidated
entities, amended definition of material subsidiary (for certain select aspects only) and

26 | P a g e
half-yearly statement of cash flows – could potentially have wide-ranging implications on
group structuring, audit & reporting, and costs.

Speaking of costs, another industry practice that will now become the regulatory norm
applicable to all listcos is the secretarial audit of the listco and its material unlisted Indian
subsidiaries. The Amendments also specifically recognize the systemic impact that may
result from any lapse of governance at large corporates, and as a result, there are several
changes that the top 100, 500 and 2,000 listed companies will have to adjust to.

Corporate governance is the set of processes, customs, policies, laws, and

institutions affecting the way a corporation (or company) 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. In simpler
terms it means the extent to which companies are run in an open & honest manner.

Corporate governance has three key constituents namely: the Shareholders, the Board of
Directors & the Management. Other stakeholders include employees, customers, creditors,
suppliers, regulators, and the community at large. The concept of corporate governance
identifies their roles & responsibilities as well as their rights in the context of the
company. It emphasizes accountability, transparency & fairness in the management of a
company by its Board, so as to achieve sustained prosperity for all the stakeholders.

Corporate governance is a synonym for sound management, transparency & disclosure.

Transparency refers to creation of an environment whereby decisions & actions of the
corporate are made visible, accessible & understandable. Disclosure refers to the process
of providing information as well as its timely dissemination.

In A Board Culture of Corporate Governance, business author Gabrielle O'Donovan

defines corporate governance as ―An internal system encompassing policies,
processes and people, which serves the needs of shareholders and other stakeholders, by
directing and controlling management activities with good business savvy, objectivity,
accountability and integrity‖. Sound corporate governance is reliant on external
27 | P a g e
marketplace commitment and legislation, plus a healthy board culture which safeguards
policies and processes.

Issues involving corporate governance principles include:

 Internal controls and internal auditors

 The independence of the entity's external auditors and the quality of their audits
 Oversight of the preparation of the entity's financial statements
 Review of the compensation arrangements for the chief executive officer and
other senior executives

3.2 SCOPE & IMPORTANCE OF CORPORATE GOVERNANCE

Corporate Governance ensures transparency which ensures strong and balanced economic
development. Corporate Governance has a broad scope. It includes both social and
institutional aspects. Corporate Governance encourages a trustworthy, moral, as well as
ethical environment.

 Accountability of Board of Directors & their constituent responsibilities to the

ultimate owners- the shareholders.

 Transparency, i.e. right to information, timeliness & integrity of the information

produced.

 Clarity in responsibilities to enhance accountability.

 Quality & competence of Directors and their track record.

 Checks & balances in the process of governance.

 Adherence to the rules, laws & spirit of codes.

An active & involved board consisting of professional & truly independent directors plays
an important role in creating trust between a company & its ‘investors and is the best

28 | P a g e
guarantor of good corporate governance.
The Aditya Birla Group is one of the pioneers in the field of corporate governance. As a
part of the Group, ABFRL is committed to continuously adopt and adhere to the best
governance practices, to achieve the ultimate goal of making the Company a value-driven
organization.

Aditya Birla Group Corporate Principles:

Employees:

People build our Group's Success we believe that our employees provide us with the
cutting edge. They help us deliver value for our shareholders, our customers and society at
large. Our employees are our strength. We respect the individual rights and dignity of all
employees. We believe in the inherent potential of the employees and are fully committed
to individuals’ development processes in our Group in a fair, equitable and transparent
manner. We encourage Employees to grow professionally and personally to their highest
capabilities, regardless of nationality, caste, religion colour or sex. We strive to provide an
environment that promotes achievement orientation and self-esteem. We view merit as the
sole criterion for all employee related decisions. A recognized responsibility is to ensure
that all of our policies, forward looking initiatives and goals are fully communicated and
that all employees understand and relate to these. Integrity, trust, fairness and honesty are
the basics that guide our strategies, our behaviour and the relationships we build with
people both internally and externally. Each of us will exercise the highest level of ethical
and professional behaviour.

Customer:

The customer is the focus of everything we do we are committed to our customers, for
fulfilling their present needs and anticipating their unmet needs. We are dedicated to
continuously improving the quality, usefulness and value of our products and services that
help our customers. In our business dealing we will treat all customers honestly, fairly and
objectively we provide value for customers through creativity, innovation, productive
relationships, quick response and simplicity in all that we engage in. We strive to make all
the ABFSG Companies the customer's business partner of choice.

29 | P a g e
The Government:

We respect the Government and maintain an open and co-operative relationship with our
regulators and comply with all the applicable laws, rules and regulations. While
participating in democratic processes, we remain apolitical.

Environment, Health & Safety:

Respect for the environment forms part of everything we do. As an environment

responsive Group, our ongoing endeavour is to operate through processes that have as little
impact on the environment as possible. We maximise ways to preserve the environment
and make personal commitment to reduce waste in all forms. We pledge to protect the
environment, the health and safety of our employees and are committed to the
development of the communities in which we operate.

About Birla Health Insurance Co. Limited

Aditya Birla Health Insurance Co. Limited (ABHICL) is committed to transforming the
perception of health insurance in India. We believe the emphasis of health insurance in the
country should be on health, rather than insurance, and this is what we are focusing on.
ABHICL serves as an enabler and influencer of health and healthcare choices that
customers make, in addition to being a payer of healthcare expenses. Thus, ABHICL acts
like the much-needed catalyst to grow the health insurance landscape in India through
product innovations and a wider choice of consumer-relevant products. Aditya Birla
Health Insurance Co. Limited (ABHICL) is a joint venture between Aditya Birla Group
and MMI Holdings of South Africa. ABHICL was incorporated in 2015 wherein Aditya
Birla Capital Limited (ABCL) and MMI Strategic Investments (Pty) Ltd. hold 51% and
49% shares, respectively. ABHICL commenced operations in October 2016 and its current
product portfolio includes unique offerings including chronic care and incentivized
wellness.

30 | P a g e
Board Composition:

According to the prescribed SEBI norms the ABHICL has an appropriate mix of
executive, non-executive and independent directors to maintain the independence of the
Board, and to separate the Board functions of governance and management.

Name of the Director Position

MR. AJAY SRINIVASAN Non-Executive Director

MR. SUSHIL AGARWAL Non-Executive Director

MR. ASOKAN NAIDU Non-Executive Director

MR. LOUIS VON ZEUNER Non-Executive Director

MR. DEVAJYOTI BHATTACHARYA Non-Executive Director

DR. AJIT RANADE Non-Executive Director

MR. DANIE BOTES Non-Executive Director

MR. RISTO SAKARI KETOLA Non-Executive Director

MR. MAYANK BATHWAL Whole-Time Director

MR. S. RAVI Independent Director

MS. SUKANYA KRIPALU Independent Director

MR. C. N. RAM Independent Director

MR. MAHENDREN MOODLEY Independent Director

LATE MR. P. VIJAYA BHASKAR Independent Director

Board Meetings:

The meetings of the Board of Directors are usually held at Mumbai. The Board meets at
least once in every quarter to review the Company’s quarterly performance and financial
results. As per the statutory requirements under the Companies Act, 2013, the meetings
are scheduled in such a manner that not more than one hundred and twenty days

31 | P a g e
intervenes between two consecutive meetings. The Company Secretary receives details on
matters which require the approval of the Board/ Board Committees, from various
departments of the Company in advance, so that they can be included in the Board/ Board
Committee agenda(s). All material information is incorporated in the agenda papers for
facilitating meaningful and focused discussions at the meetings. The Company also
complies with and follows the secretarial standards for Board and Committee Meetings.
As a part of information and agenda papers, following minimum information are provided
to the Directors for each meeting:

 Quarterly Performance and Financial results;

 Business review, plans and updates;

 Regulatory updates and compliances;

 Minutes of the previous Board and Committee meetings;

 Any material default, show cause, demand, and penalty notices forming part of
compliance report.

The attendance of the Directors at the above Board meetings was as under:

S. No. Name of the Directors No. of Board Attendance in the last

Meetings Held: 5 AGM dated June 2, 2017
Attended Held: 1 Attended

1 Mr. Ajay Srinivasan 5 Yes

2 Mr. Sushil Agarwal 5 Yes

3 Mr. Devajyoti Bhattacharya 4 Yes

4 Dr. Ajit Ranade 3 No

5 Mr. Asokan Naidu 5 Yes

6 Mr. Danie Botes 1 No

32 | P a g e
 7 Mr. Risto Sakari Ketola 1 Not Applicable

8 Mr. Louis Von Zeiner 3 No

9 Mr. S. Ravi 4 No

10 Ms. Sukanya Kripalu 3 No

11 Mr. P. Vijaya. Bhaskar 4 No

12 Mr. C.N. Ram 5 No

13 Mr. Mahendren Moodley 1 No

14 Mr. Mayank Bathwal 5 Yes

Employees’ Code of Conduct:

This section sets out the minimum standards of conduct that ABHICL expects from
employees.

 ACTING ETHICALLY: All employees are expected to display responsible and

ethical behavior, to follow consistently both the meaning and intent of this Code
and to act with integrity on a daily basis.

 COMPLYING WITH THE LAW: You must comply with all the applicable
laws and regulations and should understand the laws, rules and regulation that
affect or are relevant to your job. It also requires you to adhere to the spirit of the
law and violation of law must be avoided under any circumstances.

 SPECIAL RESPONSIBILITY OF SUPERIORS AND MANAGERS: As a

responsible Manager/Functional Head, in keeping with the Performance Appraisal
Policy, you will conduct the mid-term review and performance appraisal of your
team members in a professional manner within the stipulated time.

33 | P a g e
  EMPLOYEE ENTITLEMENTS: At the time of appointment or promotion of a
team member, you will provide him/her accurate and complete information on
his/her entitlements.

Annual Performance Evaluation:

A formal evaluation mechanism has been adopted for evaluating the performance of the
Board, Committees thereof, individual Directors and the Chairman of the Board. The
evaluation is based on criteria which includes, among others, providing strategic
perspective, Chairmanship of Board and Committees, attendance and preparedness for the
meetings, contribution at meetings, effective decision making ability and role of the
Committees. Pursuant to the requirement of the Companies Act, 2013, the annual
performance evaluation of the Board, the Directors (Independent and others) individually,
Chairperson, as well as applicable Committees of the Board viz. Audit Committee,
Nomination and Remuneration Committee, Investment Committee, Risk Management
Committee, Policyholders Protection Committee, was carried out for FY 2017-18. The
outcome of the said performance evaluation was placed at the Board Meeting held on
April 20, 2018. The Committees and the Board as a whole are functioning effectively.

34 | P a g e
CONCLUSION

35 | P a g e
 CHAPTER -5 CONCLUSION

CONCLUSION

Today the World focuses on the dimensions of corporate governance such as

accountability and transparency. Several countries have adopted country codes and best
practices. India needs to learn a great deal from the experiences of U.K., U.S.A., Canada
and Europe in evolving an appropriate framework for enforcing highest standards of
corporate governance. At ABHICL the core of the corporate governance practice consists
of Board of Directors. Further various committees comprise of independent directors.
ABHICL continues to be a pioneer in benchmarking the corporate governance policies
with the best in the country.

36 | P a g e
REFERENCES

37 | P a g e
 REFERENCES

BOOKS:

 Goswami, Omkar, 2002 “Corporate Governance in India,” Taking action

against Corruption in Asia and the Pacific.”

JOURNALS:

 Securities and Exchange Board “Report of the Kumar Mangalam Birla

Committee on Corporate Governance.”

 Aditya Birla Health Insurance Co. Ltd “Annual Report of the Organisation.”

 Business News Papers Economic Times “The Times of India.”

 The Hindu Business Line Hindustan Times “The Economist.”

INTERNET SOURCES:

 http://www.adityabirlacapital.com

 http://www.econopapers.com

 http://www.hbr.harvardbusiness.org

38 | P a g e