Major recommendations of Kumar Mangalam Birla Committee

The board of directors of the company shall have an optimum combination of executive and non-executive directors with not less than fifty percent of the board of directors comprising of non-executive directors. All pecuniary relationship or transactions of the non-executive directors viz.-a-viz. the company, should be disclosed in the Annual Report. Board meeting shall be held atleast four times a year with a minimum time gap of atleast four months between any two meetings. The Committee recommended the constitution of Audit Committee in a listed company. The committee recommended that audit committee shall have minimum three members, all being non-executive directors, with the majority of them being independent, and with at least one director having financial and accounting knowledge, the chairman of the committee shall be an independent director. The audit committee shall meet at least thrice a year. One meeting shall be held before finalization of annual accounts and one every six months. The audit committee shall have powers which should include to investigate any activity within its terms of reference, to seek information from any employee, to obtain outside legal or other professional advice, to secure attendance of outsiders with relevant expertise, if it considers necessary. The committee will review with the management, the external and internal auditors, the adequacy of internal control systems, the adequacy of internal audit function including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure, discussion with internal auditors, reviewing the findings of any internal investigations by the internal auditors, discussions with external auditors. The audit committee will review the company’s financial and risk management policies and will look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors. The committee has recommended that remuneration of directors including non-executive directors will be decided by the board of directors. A director shall not be a member in more than 10 companies or act as chairman of more than 5 companies in which he is a director. He will keep informed the company about the committee positions he occupies in other companies. As part of the directors’ report or as an addition there to, a Management Discussion and Analysis Report should form part of the annual report to the shareholders. The management discussion and analysis will include industry structure and developments, opportunities and threats, segment–wise or product-wise performance, outlook, risks and concerns, internal control systems and their adequacy, discussion on financial performance with respect to operational performance, material developments in human resources / industrial relations front, including number of people employed. Disclosures must be made by the management to the board relating to all important financial and commercial transactions. In case of the appointment of a new director or re-appointment of a director, the shareholders must be provided with a brief resume of the director; nature of his expertise in specific function areas ; and names of companies in which the proposed directors holds directorship and the membership of committees of the board. Information like quarterly results and presentation made by companies to analysts, shall be put on company’s web-site, or shall be sent in such a form so as to enable the stock exchange on which the company is listed, to put it on its own web-site. A board committee under the chairmanship of a non-executive director shall be formed to specifically look into the redressing of shareholders and investors’ complaints like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends etc. To expedite the process of share transfers, the board of the company shall delegate the power of share transfer to an officer or a committee or to the registrar and share transfer agents. A company will have to include separate sections on corporate governance in its annual report with details on compliance, non-compliance of any mandatory requirement. The company will have to obtain a certificate from the auditors of the company regarding compliance of conditions of corporate governance. Almost all the companies listed on stock exchanges or seeking listing for the first time will have to complete all mandatory corporate governance requirements in a phased manner by March 31, 2003. The companies seeking listing for the first time will have to complete corporate governance at the time of listing. Top