Page 187 - DCOM106_COMPANY_LAW

Company Law

Notes (b) To suggest any other measures to improve the standard of corporate governance in
the listed companies, in areas such as continuous disclosure of material information,
both financial and non-financial, manner and frequency of such disclosures,
responsibilities of non-executive directors.
2. To draft a code of Corporate Best Practices.

3. To suggest safeguards that be installed within the companies to deal with inside trading.
The committee identified three constituents which have a key role to play in improving the
standard of corporate governance. These are the shareholders, the board of directors, and the
managerial personnel of the company. The responsibilities of these constituents were identified
to ensure effective corporate governance. Some of the recommendations of the committee are:

1. The Board of directors should have at least 50% non-executive directors. Further, the
Board should have at least 1/3 of the members as independent directors where the chairman
is non-executive, and at least 1/2 of the Board should be independent in case the chairman
is an executive.
2. The Board should constitute (a) an ‘Audit Committee’; and (b) a ‘remuneration Committee’
to determine remuneration package for executive directors.
3. The Board meetings should be held at least four times in a year, with a maximum gap of
four months between any two meetings.
4. The corporate governance section of the Annual Report should make disclosures on
remuneration paid to directors in all forms.

5. There should be a separate section on corporate governance in the Annual Report, with
details on the levels of compliance by the company of the mandatory recommendations of
the committee.
6. A separate section on compliance with the mandatory recommendations of clause 49 of
the Listing Agreement should form part of the report and the details of non-compliance
should be highlighted.

Self Assessment

State whether the following statements are true or false:
5. Society is dependent upon corporations for the supply of goods and services but they
cannot ignore the social consequences of their overall activities.
6. Business corporations can be regarded as a purely profit making organization.
7. Social consciousness and duty to the society must become an integral part of the norm of
manager’s responsibilities.
8. The Indian government is committed to remove poverty and bring about a socialist
society in which private interest will be subordinated to the national considerations.
9. The financial institutions and banks are not contributing a great part of the financial needs
of the corporate sector.

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