Tuesday, September 25, 2007

Corporate Governance & Disclosures

Courtesy-Satish Toran

Cadbury Report on Corporate Governance recommends:

•Disciplined Freedom
–Freedom to Drive with Accountability
•Compliances with the code
•Code Principles
•Openness with in the competitive limits
•Open approach to disclosure of Info

CII Report: Disclosures to Board

•Informed Participation of all Non-Executive Directors.
–In the Interest of Good Governance
–Financial Disclosures along with Audit report boost shareholders participation.
•Annual operating plans and budget
–Capital, Manpower & Overhead
•Quarterly Results
–Aggregated & Individual SBUs
•Internal Audit Reports
•Notices from Revenue authorities
•Safety and Environmental impacts
•Default on payment of interest or principle
–To Depositors, FI & Secured Creditors
•Non payment of substantial material goods sold by company
•Non payment of Inter-corporate deposits by or to the company
•Public or Product Liability Claims
–Strictures passed on the code of conduct
–Consequence of adverse view on the company
•Details of JV & Collaboration
•Transaction involving substantial involvement in IP, Brands & Goodwill.
•Recruitment & Removal of Senior employees just below Board
•Labor problem
•Exposure to adverse fluctuation of exchange rate if any

CII Report: Non- Financial Disclosure

•Comprehensive report on Relatives of Director in the company or board integral part of director’s report
•Register for Interests of Director in any contract or arrangement & Shareholding
•Loans to the Director as annexure to the Director’s report
•Prior Approval from shareholders for sole selling agent in India, his interest in company & relation to the director, disclosed as part of Director’s report.
•Secretarial Compliance certificate attached to the report

CII Report: Financial Disclosure

•Details of Directors remuneration & commissions in addition to the note for P&L account.
•Cost Incurred using the service of group resource company in financial statements
•Key information on its division
–Turnover, future prospects, market conditons

•Status of fund application (utilized & unutilized) raised through shares, debentures & other securities in the balance sheet as separate note
•Disclosure on the debt exposure
•Foreign currency transaction
•Foreign Holdings in the share capital
•Loans raised through foreign exchange

•Diff b/w fixed asset and long term liabilities as at the end of financial year shall be disclosed.
•Acquisition and Lease of any fixed asset to be given as separate note to the balance sheet.
•Any inappropriate treatment of an item in BS or P&L should be explained in Director’s Report ONLY.

CII Report: Additional Shareholder’s Information

•Monthly average, high & low of stock prices of major exchanges.
•Greater details of business segments contributing to more than 10% of revenue.
•Consolidation of group accounts
–FIs allowing leverage on basis of group asset
–Income tax using group concept
–Use of Term “group” to represent Company & Subsidiary.

•Compliance certificate signed by the Director and CFO
–Management responsible for fairness and integrity of Fin Statement
–Accounting policies and principles confirm to standards and in case of exception need to disclose.
–Board has reviewed the internal accounting system and administrative control

K M Birla Report

On Disclosure:

•Strong CG is prerequisite for proper disclosure
•Extends Disclosure norms to FI, Mutual Funds, Exchanges & Intermediaries

On Remuneration

•All elements of remuneration package of all the directors i.e. salary, benefits, bonuses, stock options, pension etc.
•Details of fixed component and performance linked incentives, along with the performance criteria.
•Service contracts, notice period, severance fees.
  • Stock option details, if any – and whether issued at a discount as well as the period over which accrued and over which exercisable

Disclosures by Management :

•Material, Financial & Commercial Transaction
–Personal interests of Management in any issue
–Conflicting Interests with Company

Disclosures to Shareholders

•Material Transactions with Promoters
•Non Compliance by the company
•Strictures, Notices, Legal battles

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