Crm in Hdfc Standards Life Insurance

Only available on StudyMode
  • Download(s) : 229
  • Published : November 26, 2010
Open Document
Text Preview
CLAUSE 49 - AN ANALYSIS
3RD Directors’ Leadership Programme Organised by Centre for Corporate Governance Indian Institute of Management, Calcutta December 14, 2007 Dilip Kumar Sen

CLAUSE 49 OF

LISTING AGREEMENT WITH STOCK EXCHANGES

INTRODUCED BY SEBI WEF 1ST APRIL 2000 BASED ON BIRLA COMMITTEE RECOMMENDATIONS SIGNIFICANTLY REVISED FROM 1ST JANUARY 2006 BASED ON PROPOSALS OF MURTHY COMMITTEE-

CLAUSE 49 OF LISTING AGREEMENT WHICH APPLIES TO
ALL LISTED COMPANIES HAS BEEN ONE OF THE MOST TALKED ABOUT ISSUE. AFTER THE CLAUSE WAS FIRST INTRODUCED BASED ON THE PRACTICE FOLLOWED IN DEVELOPED COUNTRIES AND ALSO KEEPING IN MIND THE OECD PRINCIPLES ON CORPORATE GOVERNANCE THE CORPORATE WORLD HAS WITNESSED THE ENRON FIASCO AND THE ENACTMENT OF SARBANES OXLEY ACT IN THE USA .ARTHUR ANDERSEN THE AUDITORS OF ENRON WAS FOUND GUILTY BY THE US JURY

ENRON IS JUST AN EXAMPLE – THERE WERE MANY OTHER LARGE CORPORATES WHERE INVESTIGATIONS HAD REVEALED HOW INFLATED EARNINGS WERE REPORTED AND HOW FINANCIAL REPORTINGS WERE MANIPULATED. SOX ACT WHICH IS CONSIDERED AS A TOUGH ACT AIMED TO PLUG THE LOOPHOLES AND REQUIRED THE CORPORATES TO STRICTLY FOLLOW THE REQUIREMENTS OF THE ACT. OUR CG REQUIREMENTS HAVE BEEN REVISED KEEPING IN MIND SOME OF THE PROVISIONS OF THE SOX ACT EVEN THOUGH WE ARE SOMEWHAT LENIENT . A FLAVOUR OF A FEW ONEROUS CLAUSES OF SOX ACT ARE: 1. Section 201- List of services outside the scope of Auditors – Auditors cannot provide services such as Book keeping, financial information system design/implementation, internal audit, actuarial , valuation, investment adviser, expert srervices unrelated to audit etc. – we still do not have any such prohibition 2.SECTION 302- CEO/CFO CERTIFICATION OF FINANCIAL STATEMENTS and review of internal control system and its deficiencies

This requirement has been incorporated in clause 49 but an important requirement i.e. evaluation of the effectiveness of internal control systems as of a date within 90 days prior to the reporting date has not been adopted.Also in India CEO/CFO need to certify only annual financial statements and quarterly statements are still not required to be certified 3.Section 401- Financial statements are to be accurate and do not include incorrect statements or fail to include material information and in particular it should include off-balance sheet transactions/liabilities and obligations; 4. Section 404 – Management assessment of internal control- its adequacy and effectiveness – Auditors to report on efficiency of internal control structure and procedure for financial reporting 5.Section 406 – A code of ethics for senior financial officers 6. Section 409 – Real time disclosure on material changes in financial condition or operations- disclosure to be made in a manner easy to understand 7. Section 802- Penalties by way of fines and imprisonment upto 20 years for altering, falsifying, manipulating records/documents

CERTAIN BASIC REALITIES ON CG 1.LEGISLATION/REGULATIONS PER SE CANNOT AND PERHAPS WILL NEVER BRING IN GOOD GOVERNANCE 2.CG IS ALWAYS A TOP DOWN PROCESS 3. ORGANISATION CULTURE AND THE MINDSET OF THE PERSONS AT THE HELM OF IT ARE KEY TO ACHIEVING EXCELLENCE IN CG 4. BOARD ROOMS ARE NOT MEANT TO BE PLACES WHERE ONLY GOOD NEWS ARE TO BE MENTIONED. IT IS IMPORTANT IN MY VIEW TO SHARE WITH THE BOARD ALL BAD NEWS AT THE EARLIEST OPPORTUNITY WITHOUT CREATING ANY PANIC

5. INDEPENDENCE OF A DIRECTOR CAN NEVER BE ENSURED BY LEGISLATION – WHAT MAY WORK IS PERIODICAL TRAINING AND EDUCATION OF DIRECTORS A DIRECTOR WHO OSSESSES AN INDEPENDENT MIND IS MOST LIKELY TO FUNCTION INDEPENDENTLY EVEN IF LEGALLY HE IS NOT INDEPENDENT –DO WE LOOK FOR A TECHNICALLY INDEPENDENT DIRECTOR WHILE FILLING IN A VACANCY ? WHY DOES POST ANY ACQUISITION WHEN BOARD IS RESTRUCTURED THE ERSTWHILE IDs ALSO STEP DOWN

6. ARE BOARDS SUPPOSED TO INTERVENE IN TIMES OF CRISIS ONLY? DECISIONS HOWSOEVER UNPLEASANT IF NOT TAKEN TIMELY WOULD ONLY ADD TO COST AS TIME REQUIRED FOR...
tracking img