CORPORATE

GOVERNANCE
FRAMEWORK
MODULE 4

Dr. Raies Hamid

Assistant Professor
 Module 4 – Syllabus
Corporate governance framework- BOD, Board committees
– audit committee- remuneration committee- Auditors and
CG. Bankers and corporate governance-CG and business
ethics. Corporate governance and CSR- Corporate
governance and media- role of public policy and CG- Role
of government- role of regulators. Financial reporting-details
to be reported to external parties- whistle blowing
mechanism in CG.
WHAT ARE WE GOING TO LEARN
IN MODULE 4
 Corporate governance framework

 Corporate governance framework refers to;

 The structure of rules, practices, and

processes that govern

 The relationships and responsibilities

 Among a company's stakeholders, ensuring

accountability, transparency, and ethical
conduct in decision-making.
Corporate Governance Framework
Fundamental Pillars of CGF

Accountability Transparency Responsibility Fairness

• Encouraging
• Holding individuals • Ensuring openness companies to do the • Making sure
and entities and accessibility of right thing by everyone involved—
responsible for their information related making sure they shareholders,
actions and to the company's act ethically, care workers, customers,
decisions, both operations, financial about society, and suppliers, and the
internally to performance, and consider the long- community—is
shareholders and decision-making term impact on the treated fairly and
externally to processes. environment in their equally.
stakeholders. decisions and
actions.
 Corporate Governance Framework
Key Components
Disclosure and
Executive Regulatory Internal
Transparency
Management Framework Controls
Board of Directors
Shareholders

• Policies,
procedures, and • Timely and
• Responsible for • Responsible for accurate
• Compliance with systems to
• Owners of the overseeing the day-to-day communication
laws, regulations, manage risks,
company who company's operations and of financial and
and industry prevent fraud,
exercise control strategic implementing non-financial
standards to ensure and ensure
through voting direction, risk the board's information to
legal and ethical operational
rights and management, directives. stakeholders.
conduct. efficiency.
engagement with and
management. performance
evaluation.
 Principles

1. Shareholders are given necessary reports:

 Shareholders, as owners of the company, have the right to receive regular

reports about the company's financial performance, operations, and
significant developments.

 These reports help shareholders make sound decisions about their investments
and hold management accountable for the company's performance.
 Principles

2. There are many stakeholders in the company

 Stakeholders refer to individuals or groups who have an interest or

concern in the activities and outcomes of the company.

 Besides shareholders, stakeholders may include employees, customers,

suppliers, creditors, local communities, and regulatory authorities.

 Shareholders can be subdivided as general shareholders, employees who

have got ESOP(employee stock option plan), institutional
buyers/investors, and promotors.
 Principles

3. Reputational agents:

 Reputational agents are entities or individuals that influence or

contribute to the company's reputation.

 They can include customers, employees, suppliers, investors, media,

social media influencers, Accountants, Legal Experts, credit rating
agencies, and financial and investment advisors.

 Maintaining a positive reputation is crucial for building trust, attracting

investment, and retaining customers and talent.
 Principles

4. Regulatory framework:

 The regulatory framework consists of laws, regulations, and industry

standards that govern the operations and conduct of companies.

 It includes regulations related to corporate governance, financial

reporting, environmental protection, labor practices, consumer
protection, and competition.

 Compliance with the regulatory framework is essential to ensure legal and

ethical conduct and mitigate legal and reputational risks.

 This involves entities like SEBI and stock exchanges, ensuring adherence to
established principles.
Board committees These committees are
are specialized responsible for tasks
groups formed by such as financial
the Board of Board auditing, executive
Directors to focus on Committees compensation, and
specific areas of nominating new
corporate directors.
governance.
 Corporate Governance Framework
Under the Companies Act 2013, four committees are mandatorily constituted for
certain types of companies. These committees are:

1. Audit Committee
The audit committee is a small group of independent directors that oversee
financial reporting for compliance, enhancing transparency and accountability.

Members of the Audit Committee must be independent directors, with at least one
member having financial or accounting expertise.
 Audit committee

a. Applicability:
As per Section 177 of the Companies Act 2013, the Audit Committee is
mandatory for:
 Every listed company.
 Public companies with a paid-up capital of ₹10 crore or more.
 Public companies with turnover of ₹100 crore or more.
 Public companies with aggregate outstanding loans, debentures, and
deposits exceeding ₹50 crore.
 Audit committee

b. Composition:

As per Section 177(2), the Audit Committee must consist of a minimum of three
directors, with a majority being independent directors.

At least one member of the committee should have accounting or financial

management expertise, as per Rule 6 of the Companies (Meetings of Board and its
Powers) Rules, 2014.
 Audit committee

c. Meetings:

The committee is required to meet at least four times a year, with a maximum gap
of four months between two meetings, as per Section 177(4).
 Audit committee
d. Role and Responsibilities:

 Oversees financial reporting and disclosure.

 Reviews internal control effectiveness.
 Monitors adequacy and effectiveness of internal audit function.
 Recommends external auditor appointment, remuneration and terms of appointment.
 Reviews auditor independence and performance & it compliance with Audit Standards.
 Reviews the findings of any internal and external audit investigations.
 Audit committee
e. Powers:

 As per Section 177(5), the committee has the authority to investigate any matter
within its terms of reference.

 It can seek external professional advice or engage with auditors without board
approval.

 The committee has access to company records, facilities, and employees as necessary
for carrying out its duties.
 Audit committee
f. Reporting:

 The committee must report its findings and recommendations to the Board of
Directors, as per Section 177(7).

 It is also required to provide disclosures related to its composition, meetings, and

activities in the company's annual report, as per Section 177(10)
 Committees Cont…
2. Nomination and Remuneration Committee
 The Nomination and Remuneration Committee is a corporate governance committee
mandated by the Companies Act 2013.

 It is responsible for identifying suitable candidates for Board and senior management
positions, formulating policies for appointment and remuneration.

 It also oversee the performance evaluations and succession planning.

 Nomination and Remuneration Committee
a. Applicability and Composition (Section 178(2)):

 Applicable to listed companies and certain other specified

companies.

 Must consist of at least three directors, all of whom should be

non-executive directors (who does not hold executive office),
and at least half should be independent directors.
 Nomination and Remuneration Committee
b. Meetings (Section 178(3)):

The committee should meet at least once a year and as necessary

to fulfill its responsibilities.
 Nomination and Remuneration Committee
c. Role and Powers (Section 178(4)):
• Identify suitable candidates for Board and senior management positions.

• Formulate policies for appointment, evaluation, and remuneration of

directors and executives.

• Recommend appropriate remuneration structures and incentive schemes.

• Oversee performance assessments, succession planning, and talent

development initiatives.
 Nomination and Remuneration Committee
d. Additional Requirements:
The committee may be chaired by an independent director.
The chairperson of the company, if he/she is an executive director, may be a member,
but not the chairperson, of the committee.

e. Reporting:
The committee's recommendations should be disclosed in the company's annual
report.

f. Non-compliance Consequences:
Non-compliance may result in penalties or other regulatory actions by authorities like
SEBI.
 Committees Cont….
3. CSR Committee
The CSR committee, as per the Companies Act, supervises the implementation of
Corporate Social Responsibility initiatives within the company

a. Applicability and Composition (Section 135(1)):

a. Applicable to companies meeting specified criteria related to turnover, net profit,
or net worth.
b. Must consist of at least three directors, with at least one being an independent
director.
b. Meetings (Section 135(5)):
a. The committee should meet at least once a year to review CSR policies and
initiatives.
 CSR Committee
d. Reporting (Section 135(2)):
• The committee's recommendations should be disclosed in the company's
annual report, including the CSR policy, projects undertaken, and expenditure
incurred.

e. Non-compliance Consequences (Section 135(7)):

• Failure to comply with CSR requirements may result in penalties, as specified
by the Act.
Risk Management/Compliance Committee
Applicability

•Scope: Applicable to organizations facing significant operational,

financial, strategic, or regulatory risks—especially public
companies and those in highly regulated industries.

•Regulatory Requirements: Often mandated by stock exchanges,

securities regulators, and corporate governance codes to ensure
transparent risk oversight.
Risk Management/Compliance Committee
Composition
Membership:
Primarily composed of board members, with a strong preference for independent
directors to ensure unbiased oversight.
Inclusion of directors with specific expertise in risk management, legal compliance,
finance, or industry-specific risks.
Chairperson:
Ideally an independent director with a strong understanding of risk frameworks
and compliance standards.
Advisory Support:
May engage external experts or consultants to provide specialized risk assessments
and regulatory updates.
Risk Management/Compliance Committee
Key Responsibilities
Risk Identification and Assessment:
Systematically identify, analyze, and prioritize key risks facing the
organization.
Policy and Framework Development:
Develop and implement risk management policies, procedures, and
frameworks (e.g., (COSO)Committee of Sponsoring Organizations of the
Treadway Commission, ISO 31000).
Regulatory Compliance Oversight:
Monitor changes in laws, regulations, and industry standards.
Ensure that internal processes and business practices comply with legal
requirements.
 Risk Management/Compliance Committee
Key Responsibilities
Internal Controls and Audit Coordination:
Oversee the effectiveness of internal controls.

Coordinate with the Audit Committee and internal/external auditors to review

risk-related issues.

Monitoring and Reporting:

Regularly review risk mitigation strategies and the performance of risk
management initiatives.

Report findings and recommendations to the full board, ensuring transparency in

risk exposure and compliance status.
 Risk Management/Compliance Committee
Meetings and Procedures
Frequency:
Typically meets quarterly, with additional meetings convened as needed
in response to emerging risks or significant regulatory changes.
Meeting Agenda:
Review of risk assessment reports and internal control evaluations.
Discussion of regulatory updates and compliance issues.
Evaluation of risk mitigation strategies and any incidents or near
misses.
Setting priorities for risk management initiatives.
 Risk Management/Compliance Committee

Meetings and Procedures

Documentation:
Detailed minutes are recorded, outlining discussions, decisions,
and action items.
Regular reporting to the board ensures that risk management
remains integrated with overall corporate governance.
 Risk Management/Compliance Committee

Integration with Corporate Governance

Strategic Alignment:
Works in close coordination with other board
committees (e.g., Audit Committee) to integrate risk
management into strategic planning and decision-
making.
 Why Auditors are most important?
 Ensuring the accuracy and reliability of financial information,
which is important for stakeholders, investors, and regulators.
 Auditors should be a watchdog of the organisation
 They are responsible to ensure the corporate fairness,
transparency, accountability in every sphere of the organisation
Recent unearthing corporate frauds revealed the fact that, Auditors
had failed to do, what they were assigned to do.
 TYPES OF AUDITORS
1. External Auditor: Independent accounting Professionals
Conducts independent audits of a company's financial statements.
Expressing their findings and conclusions on the fairness and accuracy of the financial
statements.
2. Internal Auditor: Employees of the company
Evaluates internal controls and processes within the organization.
Evaluates risk management practices, internal controls, and governance processes.
3. Government Auditor:
Such as the Comptroller and Auditor General (CAG) in India
Audits government entities and public sector organizations.
Examine financial records, assess compliance with laws and regulations
 TYPES OF AUDITORS
4. Forensic Auditor:
Specialists trained in forensic accounting and investigative techniques
Investigates financial fraud and misconduct.

5. Tax Auditor:
Professionals specialized in tax law and regulations
Ensures compliance with tax laws and regulations.
Yes Bank Crisis : Decoding the RBI takeover
 Bankers role in Corporate Governance
Lending Practices: Banks check how companies manage risks and handle finances,
looking at things like who's on the board and how transparent they are.
Financial Oversight: Banks set money rules for borrowers, pushing
POV 3for
16clear money
9 Ratio
reports and sticking to accounting rules.
Risk Management: Banks review how companies handle risks and checks inside
controls to ensure they can pay back loans.
Disclosure and Transparency: Banks like companies that share clear financial info
on time, making lending safer.
Stakeholder Relations: Banks watch how companies deal with shareholders and
others, seeing it as a sign of good management, which affects loan decisions.
 International standards for corporate governance in banks
International standards for corporate governance in banks ensure
transparency, accountability, and stability.
They safeguard the interests of stakeholders and support confidence in the
financial system.
Key standards come from bodies like the
 Basel Committee on Banking Supervision,
 International Organization of Securities Commissions,
 The Financial Stability Board.
 The IMF, World Bank, and
 Local regulatory authorities also contribute by providing guidance and enforcing
compliance.
 Primary elements of corporate governance in banks
[Link] Oversight:
 Strong leadership from the board guides the bank's direction and ensures it
follows rules.
[Link] Management:
 Keeping an eye on potential problems helps the bank stay safe and stable.
[Link] and Reporting:
 Sharing clear and honest information builds trust with everyone involved.
[Link] with Stakeholders:
 Talking to shareholders, customers, and regulators helps keep everyone happy
and informed.
[Link] Rules and Being Ethical:
 Playing by the rules and doing the right thing keeps the bank trustworthy.
[Link] Pay for Leaders:
 Making sure bosses get paid fairly and for doing a good job keeps everyone
motivated.
What does these pictures describe?
 Business Ethics
Business ethics means following moral principles and values in how
people and companies behave at work.

It involves making decisions and conducting business activities

ethically and responsibly.

Business ethics encompasses integrity, honesty, fairness, and respect

for stakeholders' rights and interests.
Do you know what are the core ethical value of TATA?

1. Integrity: Always acting with honesty and fairness.

2. Excellence: Striving for the highest standards in everything.

3. Unity: Working together collaboratively and respectfully.

4. Responsibility: Taking ownership and accountability for actions.

5. Pioneering: Innovating and leading with creativity and courage.

 (303) THE WHISTLEBLOWER (Full Movie) - Bhojpuri Dubbed |
Hollywood Bhojpuri Movie - YouTube
1:50 minute

FIRST TIME WATCHING: The Whistleblower (2010) REACTION (

Movie Commentary) *PATREON REQUEST*
Michael Caine - The Whistle Blower (Full Movie)
Whistleblower 2010 - Rachel Weisz Full English Movie facts an
d review, Monica
Belluci ([Link])

WHISTLE BLOWING MECHANISM

The Whistleblower (2010) New Tamil Dubbed Movie Review i
n Tamil by Top Cinemas | Rachel Weisz ([Link])

Whistle Blowing Mechanism

 Questions:
1. What was the main ethical dilemma faced by the protagonist in the movie?

2. How did the whistleblower's actions impact her personally and professionally?

3. What were the organizational factors that enabled corruption and wrongdoing to occur?

4. Do you think the whistleblower's actions were justified? Why or why not?

5. What role did institutional and legal systems play in supporting or hindering the whistleblower's efforts?

6. How did the movie portray the importance of whistleblowing in promoting transparency and
accountability?

7. What lessons can be learned from this story in terms of corporate governance, ethics, and accountability?

8. How might the events depicted in the movie influence your perspective on corporate culture and ethical
decision-making?

9. What changes, if any, would you suggest to prevent similar incidents from happening in the future?

10. Did the movie change your understanding of whistleblowing, and if so, how?

11. Which type of whistleblower she was and why?

Corporate Social Responsibility

CSR, or Corporate Social Responsibility,

Is about companies acting responsibly by considering the social,

environmental, and ethical impacts of their actions,

Beyond just making profits.

CSR and CG are both about doing the right thing in business

1. Stakeholder Focus: They both aim to benefit everyone involved,

not just shareholders.
2. Transparency: Both emphasize openness and honesty in how
companies operate.
3. Risk Management: They help companies identify and manage
risks, including those related to social and environmental issues.
4. Ethical Behavior: Both promote ethical conduct and responsible
business practices.
Top Socially Responsible Corporates in
the world?
TATA VIDEO
Mahindra Video

COCA COLA VIDEO

GIVING BACK BMW

 What are companies expected to do?
 Giving back
 Corporates depend on society for several public facilities
 It should make its contribution towards the society
 It must behave as a good citizen
 Moral responsibility towards their values, practices etc…,
 Ensures the country’s fair name
 Creates the employment opportunities
 Role of Media in CG
Transparency and Accountability: Media reports show what companies are doing and make sure
they take responsibility.
Risk Identification: Media attention finds problems in companies, showing where things need to
get better.
Stakeholder Awareness: Media keeps everyone in the loop about how companies are run, so
people can ask for improvements.
Reputation Impact: Good media coverage makes a company look good, but bad coverage can make
it look bad.
Regulatory Influence: Media stories might make regulators check companies more to make sure
they're following the rules.
Market Reaction: Media stories about companies can make investors feel good or bad about them,
which affects their stock prices.
 Why supporting media is important?

Transparency Information Public Oversight

Watchdog Role
Media provides Media acts as a Media scrutiny
Media keeps companies encourages companies
accountable by stakeholders with crucial watchdog, uncovering
information about to uphold ethical
reporting on their
corporate governance governance issues and standards and comply
actions, ensuring promoting better with regulations,
practices, empowering
transparency in them to make Important practices within enhancing trust and
decision-making and decisions and demand confidence among
operations. companies.
better accountability. stakeholders.
 Role of Public Policy in
CG

1. Setting Standards: Public policy establishes laws and

guidelines that shape corporate governance practices, promoting
transparency, accountability, and ethical behavior.

2. Promoting Accountability: Public policies encourage

companies to disclose information, adhere to regulations, and act
responsibly toward stakeholders.

3. Addressing Social Issues: Public policy addresses societal

concerns by promoting corporate responsibility toward
environmental sustainability, social equity, and community welfare.
 Role of Government in
CG

1. Legislation: Governments enact laws and regulations to govern

corporate behavior, ensuring compliance with legal requirements and
ethical standards.

2. Oversight: Governments oversee corporate governance practices

through regulatory agencies, monitoring compliance and enforcing
penalties for misconduct.

3. Protection of Stakeholders: Governments protect the interests

of stakeholders by safeguarding shareholder rights, ensuring fair
treatment, and promoting transparency in corporate decision-making.
 Role of Regulators in
CG

1. Enforcement: Regulators enforce laws and regulations governing corporate

governance, ensuring that companies comply with legal requirements and
ethical standards.

2. Supervision: Regulators supervise corporate activities, conduct audits, and

investigate misconduct to maintain transparency and accountability within
companies.

3. Guidance: Regulators provide guidance and assistance to companies in

understanding and implementing corporate governance practices, promoting
best practices and continuous improvement.
 Why Whistle Blowing in CG?
 Ensures the early detection or the tendency of organisation in
pursuing the undesirable courses like unethical practices,
nepotism, political favours etc..,
 Corporate Governance is incomplete without whistleblowing
 Creates the confidence in the stakeholders
 In USA & UK, this is like a stringent law.
 Corruption comes into light only with whistle blowing
 Types of Whistle Blowers
 Peer reporting
 Internal whistle blowing
 External whistle blowing
 Open & Anonymous whistle blowing
 Dutiful & freewill whistle blower
 What we learn?

1. Corporate Governance Basics: How companies are directed and controlled, including roles like the board,
committees, auditors, and bankers.
2. Bankers and Good Governance: The role of banks in ensuring companies follow good governance practices
for financial integrity.
3. Ethics in Business: The link between corporate governance and ethical business behavior.
4. CSR and Governance: How corporate governance aligns with Corporate Social Responsibility for
responsible business practices.
5. Media's Impact: The media's crucial role in promoting transparency and accountability in corporate
governance.
6. Government and Regulations: How governments and regulators set and enforce rules for corporate
governance.
7. Financial Reporting and Whistle-blowing: The importance of accurate financial reporting and mechanisms
to report misconduct
 Presentation
Whistleblower
You will analyze a documentary, "Whistleblower" focusing on the theme of corporate misconduct and whistle-blowing. You will
watch the assigned movie and critically analyze its portrayal of corporate wrongdoing, the role of whistle-blowers, and the
implications for corporate governance.

Through group discussions and individual reflections, you will explore ethical dilemmas, societal impacts, and the importance of
transparency and accountability in organizational settings.

You will prepare a presentation summarizing your analysis and insights, which will be shared with you. (Evaluation will not be
done based on this).

You are directed to present on the same day. (You will be evaluated based on the assignment).
Rubrics & Evaluation Criteria given in separate file.
(303) THE WHISTLEBLOWER (Full Movie) - Bhojpuri Dubbed | Hollywood Bhojpuri Movie - YouTube 1:50 minute

FIRST TIME WATCHING: The Whistleblower (2010) REACTION (Movie Commentary) *PATREON REQUEST*
Michael Caine - The Whistle Blower (Full Movie)
Whistleblower 2010 - Rachel Weisz Full English Movie facts and review, Monica Belluci ([Link])
The Whistleblower (2010) New Tamil Dubbed Movie Review in Tamil by Top Cinemas | Rachel Weisz ([Link])