Corporate Governance 2

Assignment – A

Question 1. What is a code of good Corporate Governance? Do you consider it can serve any useful purpose in improving governance? Support you answer with examples.

Question 2. Chairman of the BOD has a pivotal role in the performance of BOD, Do you agree? Support your answer with reasons and example.

Question 3. What are the three major committees of the Board? Discuss their role and usefulness?

Question 4. The concept of the Chairman cum Managing Director in Public Sector Undertakings has been in vogue for quite some time. This defeats the purpose of Chairman of Board for Directors exercising checks and balances on the performance of Managing Director / Chief Executive Officer. Discuss

Question 5. Write short notes on any three of the following:
a. Legal aspects and liabilities of directors.
b. The Cadbury Code of best practices.
c. Corporate social Responsibility
d. CII’s Recommendation on Corporate governance
e. Sexual Harassment in work place

Assignment – B

Question 1. The CII’s desirable code of corporate governance stresses more on the role of Board of Directors and therefore has limited values. Comment.

Question 2. Performance evaluation of the BOD seems to be an Essential component in. Improving corporate governance. Do you agree? Who should do this evaluation and how?

Question 3. Discuss the various developments in the field of Corporate Governance in India in recent Years?

Case Study

MADHYA PRADESH MEDICAL EQUIPMENTS LIMITED (MPMEL)

Ram Krishan Dhir (RKD) was extremely happy to be selected as the corporate MD of the United Group at Indore. The United Group consisted of three industries, all located within 30 Km of the corporate office, Indore. Madhya Pradesh Medical Equipments Ltd. (MPMEL) was one of the industries of this group. Each industry of the group had its own CEO who was directly answerable to the corporate MD.

MPMEL established in 1980, with Japanese collaboration, had soon earned a name for its quality and customer responsiveness. By 1983, with employee strength of around 300 MPMEL with very harmonious industrial relations, and the latest technology had registered a good turn over o over Rs. 80 Crores. But there the success story ended. Mr. Raj Anand , The original promoter of the group died in an air crash and his eldest son Mr. Virat Anand (VA) took control of entire business in January ,1984. Virat was a spoiled brat, lived in luxury, had no qualms about swindling money wherever possible and had least regards and considerations for the professional management and the employees.

MPMEL’s down ward journey had truly begun. By 1987, it had witnessed change of 4CEOs and 12 middle /junior levels managers. Most of present set of managers were hand picked by Virat and groomed in his culture of scant concern for the employees and the organizational growth. In the following years, the MPMEL lost many of its major customers, Performance, quality of its medical equipment and industrial relations deteriorated. It was defaulting often on its payment to the lending bankers and even the salary payment to its employees was often delayed and even withheld. By February 1989, when RKD was taking over as corporate MD, the situation was:
a. Two of its leading lending banks (Syndicate Bank and Bank of Baroda) had stopped further payments & over drafting to MPMEL and had served notices to MPMEL for clearance of its dues.
b. Four of its old and professional directors of the Boars of Directors, had resigned and replaced by cronies and relatives of VA
c. Industrial relations in the MPMEL were bad and there was total lack of trust between the management and employees. A number of local “DADAS” were in control of the employees and MPMEL employees had gone on a violent strike in November, 1988 for irregular payment of salaries, adhoc promotions and inaction of outstanding issues. The striking employees had physically beaten up the CEO and some other managers and damaged a number of buildings and windows. They had however, spared the main air- conditioned production complex. The strike had ended by police intervention and signing of a Long -Term Agreement (LTA)with the Union employees. Promised actions by the management were over due.
d. The other two industries of the United Group were only slightly better but heading downwards.
e. MPMEL was still operative and producing good quality equipment at about 50% capacity. The rejection rate however, had increased considerably and there was a large dump of rejected quality equipment. The quality control department was totally disheartened due to dismissal of its good manager six months ago without any replacement and no one was paying any attention to their concerns and suggestions.
f. The turn over in 1988 had dropped to Rs. 36 crore.

RKD, an MBA and an ex DIG Police, with an excellent track record as a good administrator and a person of high integrity was determined to bring about a major change in MPMEL. Within a month of his taking over, after his discussions with a section of employees and their union leaders, senior managers, some experts (two of them were ex-MDs) and the Chairman of the BOD, he realized that their problems had nothing to do with their products and technology but they seem to weave around the management of Human Resources and excessive withdrawal of funds by the Chairman. There were strong indications of continuing rumblings, dissatisfaction among employees and lack of faith in management despite the LTA.

Question 1. Analyze the situation, as RKD, as you see it and suggest a course of action you propose to take?

Question 2. What actions in particular you plan to take to change the culture of MPMEL?

Assignment – C

1. Essence of Corporate Governance is–
(a) Effective accountability
(b) Good management
(c) Codes of conduct
d)Transparency

2. Corporate Governance is a system of–
(a) Structuring, operating and controlling a company
(b) Good management
(c) Codes of conduct
(d) Ensuring maximum profits for the share holder

3. The concept of Corporate Governance is application to–
(a) Private sector only
(b) Public sector only
(c) Government only
d)Both private and public sector

4. The questions of Corporate Governance have come up mainly due to–
(a) Liberalization of economy
(b) Deregulation of industry and business
(c) Public demand for better performance
(d) All the above

5. As per Raja J Chelliah weakness in the system of governance in India can only be remedied through–
(a) Stricter laws
(b) Movement of moral regeneration
(c) Codes of conduct
(d) More privatization

6. A Corporate must be socially responsible for–
(a) Society expect so
(b) It is in the self inter of the corporate
(c) It mitigate pressure and government regulations
(d) All the above

7. Corporate Governance is poorly defined even today because–
(a) Values and ethics cannot be typecast into a one – size -fits -all frameworks.
(b) The Cadbury Committee of 1992 has erected a convention of severity of standards.
(c) At the end of the day , giant corporations will continue to dominate society
(d) None of these

8. Which one of the following is not a category of share- holders in India?
(a) Promoters
(b) Financial Institutions
(c) Individual Investors
(d) Ministries of Government of India

9. In the private sector who has the firm hold over the companies?
(a) Individual investors
(b) Promoters
(c) Financial Institutions
(d) Customers

10. In the public sector who selects/ appoints the board members?
(a) The PSU concerned
(b) Controlling administrative ministry
(c) The BOD
(d) Financial Institutions

11. The head of the BOD is normally called–
a)CEO
b)President
(c) Chairman
(d) Managing Director

12. For effective corporate governance CEO of the company–
(a) Should always head the BOD
(b) Should never head the BOD
(c) Be allowed to exercise his choice to head the board
(d) Should be allowed to appoint the head of the BOD

13. The BOD should consists of–
(a) Only executive directors
(b) Majority of executive directors
(c) Only non-executive director
(d) A good mix of executive and non – executive directors

14. Which one of the following is not a parameter of best boards?
(a) Accountability of share holders
(b) Maximization of profits
(c) Independence of decision making
(d) Transparency of disclosures

15. Desirable corporate governance in India – A code was prepared by–
(a) Government of India
(b) FICCI
(c) Confederation of Indian Industries
(d) None of these

16. Directors are Liable for–
(a) Negligence and breach of trust
(b) Misfeasance
(c) None of the above
(d) Both (a) and (b) above

17. The directors appointed by financial institutions on the BOD are called–
(a) Non-Executive directors
(b) Executive directors
(c) Nominee directors
(d) Institutional directors

18. The Companies Act 1956 came into force on–
(a) 1 January, 1956
(b) 1January, 1957
(c) 1Apirl, 1956
(d) 1April, 1957

19. One of the terms of reference for SEBI’s committee on corporate governance in May 1999 was–
(a) To draft a code of corporate best practices.
(b) To offer comments on the Sir Cadbury’s report.
(c) To draft instructions for an effective BOD.
(d) None of these

20. The formula for Economic Value Added is–
(a) Operating expenses (+) overhead expenses (-) Interest
(b) ROI (-) Weighted average cost of capital (x) capital invested
(c) Operating Profit (+) Capital Cost (-) Taxes
(d) None of these

21. Cadbury Committee report was publishes in UK in–
(a) 1990
(b) 1980
(c) 1992
(d) 1993

22. Cadbury Committee was set up to address the–
(a) Problem of good corporate governance
(b) Financial aspects of corporate governance
(c) Problem of degeneration of values
(d) Malpractices in the corporate

23. Cadbury Committee along with its report published a document which was called–
(a) Code of conduct for corporate
(b) Code of ethical conduct
(c) Code of best practices
(d) None of the above

24. Desirable Corporate Governance in India – A code had recommended that a full board’s meeting agenda item should require at least——-discussion.
(a) 2 days
(b) 1 day
(c) half a day’s
(d) None of these

25. In Indian conditions a voluntary code of Corporate Governance would be more meaningful, which out of the following supported the comment–
(a) Greenburg Committee
(b) Kumar Mangalam Birla Committee
(c) CII National Council
(d) Institute of Company Secretaries of India

26. Which out of the following is not expected out of an effective BOD?
(a) Transparency of disclosure
(b) Accountability to shareholders
(c) Dependency of decision making
(d) Responsiveness to society

27. Who prepared the report titles “Desirable Corporate Governance in India – A Code “?
(a) Government of India
(b) FICI
(c) CII’s Task Force
(d) UTI

28. The above report was based on the draft report prepared by–
(a) Dr. Goswami
(b) FICCI
(c) Dr. CV Alexander
(d) Mr Kumaramangalam

29. The major roadblock for effective Governance has been–
(a) Political Interference
(b) Vested interests of management
(c) Lack of control mechanism
(d) Lack of societal pressure

30. Desirable Corporate Governance: A Code (DCGC) recommends that the full board. should meet minimum of following items–
(a) Six times a year
(b) Once a year
(c) Twice a year

31. The National Task Force on Corporate Governance (set up by CII) was headed by —
(a) Dr. Goswami
(b) Mr. Rahul Bajaj
(c) Dr. Omkar Goswami
(d) Mr C K Birla

32. The word “value” is derived from the French /Latin word–
(a) Valeo
(b) Vaelram
(c) Valoir
(d) Valer

33.A value is a —————– concept– ( choose the word most suited to fill the blank )
(a) Behavioral
(b) Perceptual
(c) Management
(d) Decision

34. Conflict of interest–
(a) Situation where Shareholders are in conflict with other Stakeholders
(d) Different stakeholder groups and individual employees trying to balance their various interests
(c) Dispute between the Boards of Directors
(d) Situation where company and the Government is at loggerheads.

35. The ethics of Corporate Governance is therefore the determination of what is right proper and—-
(a) Good
(b) Pleasing
(c) Just
(d) Practical

36. The word “Ethics” is derived from–
(a) The Greek word “Ethos”
(b) The French word “Valoir”
(c) The Latin word “Valeu”
(d) The Latin word “Vallis”

37. The subject of business ethics is multi- leveled. The three levels normally considered are individual, organization and —
(a) Government
(b) Society
(c) Industry
(d) Business

38. Misrepresentation is referred as–
(a) Error in a Court of Law committed by a Pubic Limited Company
(b) Making false and misleading statements
(c) Misunderstanding consumer needs
(d) None of above

39. Ethical issues are truly managerial dilemma they represent a conflict between an organization economic performance and its–
(a) Reputation
(b) Growth
(c) Social / ethical performance
(d) Employees job satisfaction

40. A good Corporate Governance structure is a working system for–
(e) Recognizing the myth that is ‘democracy’
(f) Appropriate monitoring of compliance and performance
(g) Lobbying for necessary legislation when the courts do not give favorable decisions
(h) None of these