Page 178 - DMGT401Business Environment

Unit 7: Socio-cultural Environment

Notes
Example: Surf Excel launched its campaign for water conservation with its "2 bucket
pani bachao" line. Whisper advertised that every time you purchase their product, a certain
amount would go towards charity. All this resulted in more sales.
SHELL invested heavily on environment conservation, which makes its image as an environment
friendly company.
It can thus be seen that while corporate social responsibility reduces costs, it also enhances sales
and brand loyalty. What else does a business need?

Case Study Narayan Murthy Committee: An Approach
towards Corporate Governance

EBI constituted a committee on corporate governance under the Chairmanship of
N.R. Narayana Murthy. The committee included representatives from the stock
Sexchange, chamber of commerce and industry, investor associations and professional
bodies. They debated key issues and made recommendations as under:

1. All audit committee members should be 'financially literate'. At least one member
should possess accounting or related financial management expertise.
2. Mere explanation as to why a company has followed a different accounting standard
from the prescribed standards will not be sufficient.
3. Board members should be informed about risk assessment and risk minimisation
procedures.
4. Board members should be trained in the business model of the company as well as
the risk profile of the business parameters, their responsibilities as directors, and
the best way to discharge them.
5. Use of proceeds of IPO should be disclosed to the audit committee.
6. There shall be no nominee directors when a director is to be appointed on the board
and such appointment shall be made by shareholders.
7. Compensation paid to Non-executive Directors may be fixed by the Board of Directors,
limiting the maximum number of stock options that can be granted to non-executive
directors in any financial year.
8. The performance evaluation of non-executive board members should be made by a
peer group comprising the entire Board of Directors, and excluding the director
being evaluated.

The Narayana Murthy Committee has identified about the correct approach for successful
corporate governance. It has said:
"Corporate governance is beyond the realm of law. It stems from the culture and mindset of
management, and cannot be regulated by legislation alone. Corporate governance deals with conducting
the affairs of a company such that there is fairness to all stakeholders and that its actions benefit the
greatest number of stakeholders. It is about openness, integrity, and accountability. What legislation
can and should do, is to lay down a common framework - the 'form' to ensure standards. The

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