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Corporate Governance

Corporate Governance Report

"Corporate governance is about working ethically and finding a balance between economic and social goals. It includes the ability to function profitably while obeying laws, rules and regulations."

Smt. Pratibha Devisingh Patil, Hon. President of India, during the Lakshmipat Singhania-IIM Lucknow National Leadership Awards 2007 ceremony, New Delhi, February 12, 2008

In the last decade, two events significantly contributed to making corporate governance nearly a household term. The first was the wave of financial crises in Russia, Asia, and Brazil in 1998, when the activities of the corporate sector influenced entire economies and the global financial system. Three years later, the corporate scandals in the U.S. had highlighted the macroeconomic consequences of weak corporate governance systems. In the aftermath, economists, the corporate world, and policy makers everywhere began to recognize the importance of corporate governance.

The traditional analysis of corporate governance focused on the allocation of power and duty among the Board of Directors, management, and shareholders. As the sole residual claimants on company assets, shareholders were presumed to have the most incentive to maximize company value. According to that perspective, the Board of Directors acted as the shareholders' agent and management was responsible for daily operations. In today's scenario, the Board and the Management play the role of trustees.

Effective corporate governance requires a clear understanding of the respective roles of the Board and the senior management, and their relationships with others in the corporate structure. The relationship of the Board and the Management with stockholders should be characterized by candor; their relationship with employees should be characterized by fairness; their relationship with the communities in which they operate should be characterized by good citizenship; and their relationship with the government should be characterized by a commitment to compliance.

We believe that sound corporate governance is critical to enhance and retain stakeholders' trust. Accordingly, we always seek to ensure that we attain our performance rules with integrity. Our Board exercises its fiduciary responsibilities in the widest sense of the term. Our disclosures always seek to attain best practices in international corporate governance. We also endeavor to enhance long-term shareholder value and respect minority rights in all our business decisions.

Our corporate governance philosophy is based on the following principles:

Satisfy the spirit of the law and not just the letter of the law.Corporate governance standards should go beyond the law
Be transparent and maintain a high degree of disclosure levels. When in doubt, disclose
Make a clear distinction between personal conveniences and corporate resources
Communicate externally, in a truthful manner, about how the Company is run internally
Comply with the laws in all the countries in which we operate
Have a simple and transparent corporate structure driven solely by business needs
Management is the trustee of the shareholders' capital and not the owner

The Board of Directors is at the core of our corporate governance practice and oversees how the Management serves and protects the long-term interests of all our stakeholders. We believe that an active, well-informed and independent Board is necessary to ensure highest standards of corporate governance.

The majority of our Board, 8 out of 15, are independent members. Further, we have audit, compensation, investor grievance, nominations, and risk management committees, which comprise only independent directors.

As a part of our commitment to follow global best practices, we comply with the Euroshareholders Corporate Governance Guidelines, 2000, and the recommendations of The Conference Board Commission on Public Trusts and Private Enterprises in the U.S. We also adhere to the UN Global Compact Programme. Further, a note on our compliance with the corporate governance guidelines of six countries - in their national languages - is presented elsewhere in the Annual Report.

Corporate governance ratings
CRISIL

CRISIL assigned us the "CRISIL GVC Level 1" rating. This Governance and Value Creation (GVC) rating indicates our capability to create wealth for all our stakeholders while adopting sound corporate governance practices.

ICRA

ICRA assigned "CGR 1" rating to our corporate governance practices. The rating is the highest on ICRA's Corporate Governance Rating (CGR) scale of CGR1 to CGR 6. We are the first company in India to be assigned the highest CGR by ICRA. The rating reflects our transparent shareholding pattern, sound Board practices, interactive decision-making process, high level of transparency, and disclosures encompassing all important aspects of our operations, and our track record in investor servicing. A notable feature of our corporate governance practices is the emphasis on "substance" over "form," besides our transparent approach to following such practices.

Corporate governance guidelines

Over the years, the Board has developed corporate governance guidelines to help fulfill our corporate responsibility to various stakeholders. These guidelines ensure the Board will have the necessary authority and practices in place, to review and evaluate our operations when required. Further, these guidelines allow the Board to make decisions that are independent of the Management. The Board may change these guidelines from time to time to effectively achieve our stated objectives.

Corporate Governance Compliance
Euroshareholders Corporate Governance Guidelines 2000
Compliance with findings and recommendations of The Conference Board, Commission on Public Trust and Private Enterprises in the US
United Nations Global Compact Programme
Corporate Governance Report - Other Countries

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