a study on the stakeholders' perception of corporate governance

A STUDY ON THE STAKEHOLDERS’

PERCEPTION OF CORPORATE GOVERNANCE

PRACTICES WITH REFERENCE TO THE

SOFTWARE COMPANIES IN INDIA

A THESIS

Submitted By

N. NATARAJAN

for the award of the degree

of

DOCTOR OF PHILOSOPHY

in

DEPARTMENT OF MANAGEMENT STUDIES

DR. M.G.R.

EDUCATIONAL AND RESEARCH INSTITUTE

UNIVERSITY

(Declared u/s 3 of the UGC Act, 1956)

CHENNAI - 600 095

JULY – 2011

ii

CERTIFICATE

I certify that the thesis entitled “A Study on the Stakeholders’

Perception of Corporate Governance Practices with reference to the Software

Companies in India”, submitted for the Doctor of Philosophy by

Mr. N. Natarajan is the record of research work carried out by him during

the year 2006 to 2011 under my guidance and supervision, and that this work

has not formed the basis for the award of any degree, diploma, associate-ship,

fellowship or other titles in this University or any other University or

Institution of Higher Learning.

Dr. K Maran,

Research Supervisor,

Director,

Sri Sai Ram Institute of Management Studies,

Sri Sai Ram Engineering College,

Chennai – 600 044

iii

DECLARATION

I declare that the thesis entitled, “A Study on the Stakeholders’

Perception of Corporate Governance Practices with reference to the Software

Companies in India”, submitted by me for the degree of Doctor of Philosophy

is the record of work carried out by me during the year 2006 to 2011 under the

guidance of Dr. K Maran and has not formed the basis for the award of any

degree, diploma, associate-ship, fellowship, titles in this or any other

University or other similar Institution of Higher Learning.

N NATARAJAN

iv

ABSTRACT

Globally, Corporate Governance is gaining momentum and in India it

has made rapid development among corporates. It has not only been the basic

tenet of companies, but also to Government and other societal institutions.

Corporate Governance is the set of processes, customs, policies, laws and

institutions affecting the way a corporation is directed, administered or

controlled. Corporate Governance also includes the relationships among the

many players involved and the goals for which the corporation is governed.

The principal players are Shareholders, Management and Board of Directors.

Other stakeholders are employees, suppliers, customers, banks and other

lenders, regulators, the environment and community at large. The collapses of

corporates such as like Enron, WorldCom, Tyco etc., were obviously the key

motivators for the heightened interest in Corporate Governance studies around

the world including India. Corporate Governance seeks to establish a control

system and structure in an organization, guides decision making process to

ensure high degree of accountability to stakeholders and builds credibility by

creating and maintaining an effective channel of information and disclosure.

Thus good corporate governance implies transparency, accountability,

trustworthiness, investors’ protection, adherence to better compliance with

laws and regulations thereby fulfilling disclosure requirements and ultimately

assuring value creation for the stakeholders.

India has been establishing itself as a Software Services providing

Leader for the World. The software companies in India are doing well in spite

of certain hardships faced by them during their operations locally or

nationally. Unless they exhibit a clear, transparent, efficient system of

governance for their day to day operations not only at shop floor level but also

at management level is sine qua non for attracting more funds and other

v

facilities from India as well as from other global investors. They have to

come out clearly with their own policies and procedures for their governance

in addition to adhere the various Corporate Governance best practices and

codes issued by Government of India and other leading organizations in the

world. The stakeholders of the software companies should get the perception

that the corporate governance practices are followed by the companies

meticulously so that they can be convinced of the day to day operations are

done as per the law of the land.

The present study has got three objectives. First objective is to study

the existing corporate governance practices available in India and its

adherence by companies in general and software industries in particular,

second objective is to identify the stakeholders’ perception towards corporate

governance practices in software companies in India and the third objective is

to analyze the stakeholders’ perception towards their level of expectation and

satisfaction on corporate governance practices in software companies in India.

This study follows a formal research design. A well designed structured

undisguised questionnaire was administered for 625 respondents. The final

sample of the study consists of 530 investors both men and women in Chennai

belonging to any of the software companies taken for study, namely Infosys,

Wipro, TCS, HCL and Satyam ( now known as Mahindra Satyam). Statistical

tools such as "t test", ANOVA, Kruskal Wallis test, Mann-Whitney U test,

Factor Analysis, Bivariate Correlations were applied to analyze the data

collected to arrive at meaningful conclusions. An attempt is made to propose

a model to achieve the desired satisfaction of perception on corporate

governance practices by using the technique of Structural Equation Modelling.

The details collected from the respondents are in three parts, the first

being the demographic information, second being the perception of

expectation variables and third are perception of satisfaction variables. The

vi

Likert’s five point scale was used to capture the levels of perception by the

stakeholders. There are twelve hypotheses set to meet the objectives of the

study. The data were tabulated, coded and analysed to understand the pattern

of perception of the stakeholders towards corporate governance practices of

the software companies in India. The findings of the study reveal that Infosys

and Wipro are on the high side of the perception of satisfaction level, wherein

TCS and HCL are on moderate and Satyam at the low level. It addition, most

of the respondents belonging to companies like TCS, HCL and Satyam

requires exposure on corporate governance practices and to improve upon

some of the perception of satisfaction variables.

Good corporate governance ensures that corporations take into account

the interests of a wide range of constituents as well as the communities within

which they operate. Proper governance of a company depends upon certain

factors like professionalism, transparency, participation and relative

importance given to the interest of shareholders. This study focus on

corporate governance practices available in India and its adherence by

companies in general and software companies in particular. The perceptions

of expectations of stakeholders are in unison regarding corporate governance

practices of software companies under study. However there are palpable

differences in terms of perception of satisfaction of stakeholders of selected

software companies taken for study. The suggestions are given based on this

study to the corporates for taking appropriate steps, so as to improve upon the

satisfaction level of corporate governance.

vii

ACKNOWLEDGEMENT

I praise the Almighty Lord Natarajar and Balaji for their blessings

and merciful benediction on me to enable to complete this stupendous task of

this research work.

I express my gratitude to my guide and supervisor Dr. K. Maran,

Director, Sri Sai Ram Institute of Management Studies, Sri Sai Ram

Engineering College, West Tambaram, Chennai – 44, who’s constant

inspiration and support helped me to reach this goal. My heartfelt thanks are

due to him

I express my thanks to Chancellor, Vice-Chancellor, Registrar,

Dr. A. Thirunavukkarasu, Dean – Research and Dr. S. Ramalingam,

Professor and Head, Department of Management Studies, Dr.. M.G.R.

Educational and Research Institute, Dr. M.G.R. University, for having given

me an opportunity to do my doctoral program in their esteemed institution and

their constant encouragement and support.

My thanks are due to my Management, M/s.Intelligroup Asia (Pvt)

Ltd., Hyderabad for having allowed me to do the doctoral study and their

encouragement and support for completing the research.

I am thankful to Dr. Fatima Jacob, Professor, Dept. of Management

Studies, Anna University, Chennai for all her guidance and support.

I express my sincere thanks to Mr. S. Sankar, Asst. Professor and all

staff at the Department of Management Studies, Sri Sai Ram Institute of

Management Studies, Sri Sai Ram Engineering College, West Tambaram,

Chennai – 44, for their timely help and assistance for this study.

viii

I am thankful to Dr. R. Gowrisankar, Asst. Professor, Dept. of

English, Presidency College, Chennai for his support in manuscript correction

for English.

I am thankful to Mr. J. Poovaraaghavan, Statistical Analyst for all the

analysis work done on the research data and his team.

I express my sincere thanks to all who helped me in different ways

right from the start of this research work in terms of ideas, knowledge sharing,

and suggestions & advises on this subject till the completion of this thesis.

N. NATARAJAN

ix

CONTENTS

Chapter No. Title Page No.

Certificate ii

Declaration iii

Abstract iv

Acknowledgement vii

List of Tables x

List of Figures xix

List of Abbreviations xx

I INTRODUCTION 1

1.1 Evolution of Corporate Governance 1

1.2 Software Industries and Corporate

Governance 5

II REVIEW OF LITERATURE 27

III PROFILE OF SOFTWARE COMPANIES 90

IV METHODOLOGY 112

V RESULTS AND DISCUSSIONS 126

VI SUMMARY OF FINDINGS, 216

SUGGESTIONS AND CONCLUSION

BIBLIOGRAPHY

APPENDICES

x

LIST OF TABLES

Table No. Table Name Page No.

5.1.1 Stakeholder's Investment 127

5.1.2 Gender – wise Respondents 128

5.1.3 Age - wise Respondents 128

5.1.4 Educational Qualifications – wise Respondents 129

5.1.5 Occupation – wise Respondents 130

5.1.6 Income – wise Respondents 131

5.1.7 Awareness of Corporate Governance 132

5.1.8 Number of Years of Transaction in Stocks 133

5.1.9 Size of Investments 134

5.2.1 Mean & Standard deviation for the Expectation

variables 135

5.3.1 Mean & Standard Deviation for Satisfaction

variables 139

5.4.1

ANOVA for significant difference between

Software companies & the level of stakeholders

expectation of disclosure of information

145

5.4.2 t-test for Gender with respect to level of expectation

in Disclosure of information to stakeholders 146

5.4.3

ANOVA for Educational Qualifications with

respect to level of expectation of Disclosure of

information

146

5.4.4

ANOVA for Size of Investment with respect to

level of expectation in Disclosure of Information to

stakeholders

147

xi


5.4.5

Kruskal Wallis & Mann-Whitney U test for

significant difference for gender, educational

qualifications, and size of investments with respect

to expectation in disclosure of information to

stakeholders

148

5.4.6



expectation of Corporate communication

149

5.4.7

ANOVA for Educational qualifications with respect

to level of expectation in Corporate communication

to stakeholders

150

5.4.8 ANOVA for Occupation with respect to Corporate

Communication to stakeholders 150

5.4.9

ANOVA for Size of Investment with respect to

level of expectation in Corporate communication to

stakeholders

151

5.4.10

Kruskal Wallis test for significant difference among

educational qualifications, occupation and size of

investments with respect to level of expectation of

stakeholders in Corporate communication

152

5.4.11



expectation of Transparency

153

5.4.12

ANOVA for significant difference in Educational

qualifications & level of stakeholders expectation

of Transparency

154

5.4.13

Kruskal Wallis test for significant difference in

educational qualifications & level of expectation in

Transparency

154

5.4.14



expectation of General Meeting practices

155

xii


5.4.15


qualifications & level of stakeholders expectation

of General Meeting practices

156

5.4.16

ANOVA for significant difference in Occupation &

level of stakeholders expectation in General

Meeting practices

156

5.4.17

ANOVA for significant difference in Age & level

of stakeholders expectation in General Meeting

practices

157

5.4.18

ANOVA for significant difference in Size of

Investment & level of stakeholders expectation in

General Meeting practices

158

5.4.19


educational qualifications & level of expectation in

General Meeting practices

158

5.5.1



satisfaction of Disclosure of Information

160

5.5.2

Post hoc test for significant difference among


satisfaction of disclosure of information

161

5.5.3 t-test for Gender with respect to level of satisfaction

in Disclosure of information to stakeholders 162

5.5.4


qualifications & the level of stakeholders

satisfaction of Disclosure of Information

162

5.5.5


Investment & the level of stakeholders satisfaction

in Disclosure of Information

163

5.5.6

Post hoc test for Size of Investment with respect to

the level of satisfaction in disclosure of information

to stakeholders

164

xiii


5.5.7


Gender, Educational Qualifications & size of

investments & the level of satisfaction of Disclosure

of information

165

5.5.8



satisfaction of Corporate Communication

166

5.5.9



satisfaction of Corporate communication

167

5.5.10


qualifications & the level of stakeholders

satisfaction of Corporate communication

168

5.5.11

ANOVA for significant difference in Occupation

with respect to level of stakeholders satisfaction of

Corporate Communication

168

5.5.12


Investment & with respect to level of stakeholders

satisfaction of Corporate Communication

169

5.5.13


level of satisfaction in Corporate Communication

among stakeholders

170

5.5.14

Kruskal Wallis test for significant difference among

educational qualifications, occupation & size of

investments & level of satisfaction in Corporate

Communication

171

5.5.15



satisfaction in Transparency

172

5.5.16


software companies & the level of stakeholders


173

xiv


5.5.17


qualifications & level of stakeholders satisfaction in

Transparency

174

5.5.18

Kruskal Wallis test for significant difference for

educational qualifications & the level of


174

5.5.19

ANOVA for significant difference among Software

companies & the level of stakeholders satisfaction

in General Meeting

175

5.5.20



satisfaction in General Meeting

176

5.5.21


qualifications & level of stakeholders satisfaction in

General Meeting

177

5.5.22


level of stakeholders satisfaction in General

Meeting

177

5.5.23 ANOVA for significant difference in Age & level

of stakeholders satisfaction in General Meeting 178

5.5.24


Investment & level of stakeholders satisfaction in

General Meeting

179

5.5.25

Post hoc for Size of Investment with respect to level

to satisfaction in General Meeting among

stakeholders

179

5.5.26


educational qualifications, occupation, age, size of

investment & the level of satisfaction in General

Meeting practices

180

xv


5.5.27



in Performance of Board

182

5.5.28



satisfaction in Performance of Board

182

5.5.29 t-test for Gender with respect to level of satisfaction

in Performance of Board among stakeholders 184

5.5.30

ANOVA for significant difference in Age & level

of stakeholders satisfaction in Performance of

Board

184

5.5.31


Qualifications & level of stakeholders satisfaction

in Performance of Board

185

5.5.32


level of stakeholders satisfaction in Performance of

Board

186

5.5.33

ANOVA for significant difference in Number of

years of transaction & level of stakeholders


186

5.5.34



Performance of Board

187

5.5.35


level to stakeholders satisfaction in Performance of

Board

188

5.5.36

Kruskal Wallis test and Mann Whitney 'U' test for

significant difference for Gender, age, educational

qualifications, occupation, years of transaction, size

of investment & the level of satisfaction in

Performance of Board

189

xvi


5.5.37



of Corporate Management practices

190

5.5.38

Post hoc test for Significant difference among


satisfaction in Corporate Management practices

191

5.5.39



in Corporate Management practices

192

5.5.40

ANOVA for significant difference in Number of

years of transaction & level of stakeholders


193

5.5.41



Corporate Management practices

193

5.5.42


level of satisfaction in Corporate Management

practices among stakeholders

194

5.5.43


educational qualifications, years of transaction, size

of investment & the level of stakeholders


195

5.5.44



of Financial practices

196

5.5.45



satisfaction in Financial practices

197

5.5.46



in Financial practices

198

xvii


5.5.47


level of stakeholders satisfaction in Financial

practices

198

5.5.48

ANOVA for significant difference in Monthly

Income & level of stakeholders satisfaction in

Financial practices

199

5.5.49



Financial practices

200

5.5.50

Post hoc test for Size of Investment with reference

to level of satisfaction in Financial practices among

stakeholders

200

5.5.51


educational qualifications, Occupation, monthly

income, size of investment & the level of

satisfaction in financial practices

201

5.5.52



of Secretarial practices

203

5.5.53

Post hoc test for Size of Investment with reference

to level of stakeholders satisfaction in Secretarial

practices

203

5.5.54



in Secretarial practices

204

5.5.55


educational qualifications & the level of

stakeholders satisfaction in Secretarial practices

205

5.6.1

Comparison of variables disclosure, corporate

communications, transparency, general meeting

between Expectation & Satisfaction levels

206

5.6.2 Correlations for factors in Expectation 207

xviii


5.6.3 Correlation between Eight factors in Satisfaction

level 208

5.6.4

Correlation between Current Indian Corporate

Governance laws as eight factors of level of

satisfaction

209

5.6.5 Eigen values to identify the factors of satisfaction of

corporate governance practices 210

5.6.6 Table of factors and variables 211

xix

LIST OF FIGURES

Figure No. Figure Name Page No.

Figure 1

Model for increasing the stakeholders’

perception of satisfaction in Corporate

Governance practices

214

xx

ABBREVIATIONS

CEO Chief Executive Officer

CFO Chief Financial Officer

CG Corporate Governance

CGS Corporate Governance Score

CII Confederation of Indian Industries

CSR Corporate Social Responsibility

DCA Department of Company Affairs

GAAP Generally Accepted Accounting Principles

HCL HCL Technologies Ltd.,

ICAI Institute of Chartered Accountants of India

ICSI Institute of Company Secretaries of India

ICWAI Institute of Cost and Works Accountants of India

Infosys Infosys Technologies Ltd.

OECD Organization for Economic Co-operation and Development

R&D Research and Development

Satyam Mahindra Satyam Computer Services Ltd.,

SEBI Securities Exchange Board of India

SEC Securities Exchange Commission

SOX Sarbanes Oxley Act

TCS Tata Consultancy Services Ltd.,

TSE Tokyo Stock Exchange

UK United Kingdom

US United States

UTI Unit Trust of India

Wipro Wipro Technologies Ltd.,

xxi

CHAPTER – I

INTRODUCTION

1.1 EVOLUTION OF CORPORATE GOVERNANCE

Corporate Governance has become a key focus in the business around

the world not only for corporations, but also of Government and Quasi

Government authorities. The sudden collapse of business giants like Enron,

World Com and APP around the world sent shockwaves to the International

business community on the very basis of governance of these corporations,

which were key motivators for the heightened interest in Corporate

Governance.1 In Asia, Corporate Governance has further gained momentum,

since the Asian financial crisis in 1997. Good Corporate Governance is a

source of competitive advantage and critical to economic and social progress.2

Corporate Governance is the system of rights, structure and control

mechanism established internally over the management of a listed public

limited company, with the objective of protecting the interests of the various

stakeholders.3

Further it has argued that Corporate Governance is an indirect

mechanism in reducing agency costs and transaction costs imposed by

managers acting in their own interests at the expense of companies and

stakeholders.4 It is suggested that Corporate Governance is the system of

checks and balances, both internal and external to companies which ensures

that companies discharge their accountability to all their stakeholders and act

in a socially responsible way in all areas in their business activity.5 The

Corporate Governance structure specifies the distribution of rights and

responsibilities among different participants in the corporations, such as the

board, managers, shareholders and other stakeholders and spells out the rules

xxii

and procedure for making decisions on corporate affairs.6 In this way,

Corporate Governance is a philosophy by which companies are directed,

monitored, managed and controlled.7

However, the consequence of the

separation of ownership and management was ownership dispersion and that

such dispersion made subsequent monitoring and discipline of management

difficult.8

Corporate Governance is different from corporate management, as the

former is more ethical oriented and the later on operations specific.

Management has the specific connotations of using the available resources

comprising time, resources - finance & human, physical to get the result

delivered.9 Corporate Governance is needed to create a corporate culture of

consciences, transparency and operations.

The various players in Corporate Governance include, Board of

Directors, Non-Executive Directors, Institutional Directors, Audit Committee,

Company Secretary, Accounting Professional, Government and Law making

agencies, shareholders, consumer, vendors, employees and society. The Board

of Directors entrusted with overall directions and management of the affairs of

the company. The various provisions of the companies Act, SEBI Act,

Articles of Association of the company and other applicable Acts. In the

competitive world, Board of Directors must play their role effectively.10

As

the Board of Directors is in charge of the day to day business and management

of the company, it plays a pivotal role in ensuring good Corporate

Governance.11

The non-executive directors should bring in the independent of

thoughts and professional experience. Normally they are motivated by

Governments or by the Board of Directors with approval of members of the

company. They should try to protect the interest of all stakeholders rather than

being an “yes man” to the chairman.12

The concept of Corporate Governance

xxiii

hinges on total transparency, integrity and accountability of the management

which includes non-executive directors.13

The institutional directors are nominated to the Board of Directors, by

financial institutions. In addition to take care of the interest of their institution,

where they belong, they should play a key role in transparency and

accountability. The Government must act with respect to the appointment of

institutional director, in time and put certain amount of responsibility and

accountability towards the general public at large. Audit Committee is another

important instrument of Corporate Governance.14

This is the sub-committee of

the board with minimum three independent directors, having a function of

watchdog of all financial activities. Even though this concept was existing

earlier in West, in India it was brought first by Ministry of Petroleum and

Natural Gas by way of guidelines, and ONGC was the first to establish audit

committee in pursuance of these guidelines.15

The company secretary is an another pillar in Corporate Governance

area. He ensures that the provisions of company’s multifunction activities are

performed. The company secretary has to provide the professional advice to

the chairman and other directors of the Board in taking various decisions,

while observing the letter and spirit of various laws, rules, regulations and

modifications. In the changing scenario, the role of accounting professional is

also changed. They also provide non-financial professional services apart

from traditional auditing work. The auditors are not only responsible to

management and shareholders but also to other stakeholders. They should also

express their expert opinion regarding product profitability, strategic planning,

transparency etc.,.16

The Government and its agencies play a pivotal role in

ensuring Corporate Governance is best practiced. They should perform not

only to exact laws, but also exercise the required supervision that all the

provisions of law, rules, regulations and notifications are followed by

xxiv

corporates. Though by enacting laws, the level of responsibility and

accountability can be increased, the implementing agencies have to play a

major role for the implementations of enacted laws for good Corporate

Governance.17

The Shareholders are spread across the globe. Even though most of

them are satisfied with dividends, but still they should participate in annual

general meeting and try to find out the relevant information to make sure that

the company is run properly. They should not hesitate in demanding

additional information from the Directors and unite themselves for good

Corporate Governance.18

Consumers and vendors are other integral part of

Corporate Governance, since both procure and provide services respectively

to the company. Wherever the consumers have grievance, they are to be

properly redressed by company. The company should behave as a responsible

corporate citizen because the company has to sustain in a society and the

consumers are the inevitable part of the society.

SEBI is doing all within its

powers to protect the interests of and also educate the investors. 19

Vendors are to proactive and they want to deal with a company which

is transparent, fair and justified, hence companies should maintain cordial

relationship with their vendors. Some good companies offers shares to their

vendors as a strategic partners to make them more responsible vendors, by

becoming shareholders, they should work for good Corporate Governance.20

Employees also play a crucial role, as they know the correct inside

information about the company. In order to achieve a good Corporate

Governance, they should not be satisfied with their salary only, but also to

take part in day to day functioning of the company as their future is at stake

along with future of the company and wherever it is appropriate they have to

apply whistle blower method to inform appropriate authorities about mis-

happenings in the company.

xxv

1.2 SOFTWARE INDUSTRIES AND CORPORATE GOVERNANCE

Among the various industries present in an economy, software

industries have got a special status as being a major foreign revenue earner for

India. Lot of investors from India and abroad invested their money in leading

software companies in India. Also financial institutions have invested public

funds in such software companies. Hence the good governance in software

companies is the need of the hour, after witnessing lot of scandals across the

globe in corporate sector. India as well as International communities are

taking appropriate steps to ensure good corporate governance in corporates.

Various committees were appointed and based on their reports codes,

regulations and guidelines were issued.

A number of reports and codes on Corporate Governance have already

published and are being implemented internationally as well as in India.

Among the codes came internationally, the notable ones are the Cadbury

Committee report, the Hample Committee report, Blue Rippon Committee

report, the King committee report, the Organization for Economic

Cooperation and Development (OECD) code etc., The important codes and

reports from India include the Confederation of Indian Industry (CII) code,

Kumar Mangalam Birla Committee report, the Godbole Committee report,

Naresh Chandra Committee report and Narayana Murthy Committee report.

The Cadbury committee was under the chairmanship of Sir Adrian

Cadbury in 1992 by London Stock exchange and accounting profession of

U.K. the committee submitted its report wherein it recommended guidelines

for the Board of Directors.21

Committee gave twenty two recommendations,

with reference to Board of Directors, non-executive directors, executive

directors and independent directors.

xxvi

The Hample committee on the Corporate Governance was formed

under the chairmanship of Sir Ronald Hample in 1998 at U.K to review the

impact of Cadbury code. The committee has issued a list of governance

principles related to role of directors, remuneration, role of shareholders,

accountability and audit. The committee has also acknowledged the fact that

the importance of Corporate Governance lies in its contribution both in terms

of attaining business prosperity and insuring accountability of the board.22

The

Blue Rippon Company was jointly sponsored by the Newyork Stock

Exchange (NYSE) and National Association of Security Dealers (NASD) for

improving the working of corporate audit committees. The salient

recommendation given by the committee on audit committee were 1) the

members of the audit committee should be independent directors and financial

literate, 2) external auditors should periodically discuss quality of company’s

accounting principles in relation to Generally Accepted Accounting Principles

(GAAP) with the audit committee, 3) statutory auditors should maintain their

independence in discharging their professional responsibilities and 4) on an

annual basis the committee should review and discuss accountants all

significant relationship they have with the corporations to determine their

independence. The Blue Rippon committee also recommended a formal

written charter for audit committee.23

The King Committee was set-up in 1994 in South Africa at the instance

of the Institute of Directors of South Africa with support from the South

African Chamber of Business and the Chartered Institute of Secretaries and

Administrators. The committee was requested to enquire and recommend 1)

code of practice on the financial aspects of Corporate Governance of South

Africa, 2) simple reporting without sacrificing quality of information, 3)

guidelines for ethical practices and 4) to provide appropriate safeguards for

entry of disadvantaged communities in South Africa into business. The

xxvii

committee gave its detailed recommendation which includes among other

things which were said above, the corporate should have an effective internal

audit function and establish audit committee with written terms of reference

from the board.24

The Organization for Economic Cooperation and

Development (OECD), came out with its own “Principles of good

Governance”, which includes the majority of directors should come from

outside of the company, the board should protect the rights of shareholders

including the minority shareholders, provide timely and accurate disclosures

of company’s financial performance and effectively monitor management.25

The Confederation of Indian Industry (CII) was the first business

association to come out with a code of Corporate Governance in India. It has

suggested number of measures, which includes relevant details about Global

Depository Receipt issue, companies to follow the Generally Accepted

Accounting Principles (GAAP) with transparent accounting system, providing

the details of high and low monthly averages of share prices at all stock

exchanges where the companies listed for the reporting year and a value added

statement disclosing total income, cost of all inputs and all administrative

expenses, details of debt performance, interest costs, state of receivables and

foreign exchange risks and exposure.26

The Kumar Mangalam Birla

committee under the chairmanship of Kumar Mangalam Birla was constituted

by Security Exchange Board of India (SEBI) in May1999 to promote

investor’s interests and to raise the standards of Corporate Governance in

India. The committee stated the fundamental objective of the Corporate

Governance is the “enhancement of shareholder value, keeping in view the

interest of other stakeholders”.27

The committee came out with both mandatory and optional

recommendations. The listed companies are obliged to follow the mandatory

recommendations as these recommendations form a part of contractual

xxviii

obligations as per the listing agreement with Stock Exchange. The various

mandatory recommendations include holding minimum four board meetings

in a year, fifty per cent of the Directors of the Board should be non executive,

presence of audit committee recommended with minimum of three members

and the chairman being non-executive. Also committee various disclosures

like consolidated accounts of subsidiary, segmental reporting, details about

related party transactions social and environmental reporting, and formation of

investors grievances committee.28

The Godbole committee was setup by the

former union Home Secretary Madhav Godbole in 2001 to provide guidelines

on good governance for the Government. The committee came out with 190

recommendations for better governance. The salient recommendations

includes, compulsory retirement of Government officials and enacting a law

on fiscal responsibility and budget management etc., .29

The Naresh Chandra Committee gave both mandatory and non-

mandatory recommendations, for amending the listing agreement under clause

49. The salient recommendations were that all listed companies, there should

be a certification by the CEO (either the Executive Chairman or the Managing

Director) and the CFO (whole-time Finance Director or other person

discharging this function) which should state that, to the best of their

knowledge and belief - they have reviewed the balance sheet and profit and

loss account and all its schedules and notes on accounts, as well as the cash

flow statements and the Directors' Report; these statements do not contain any

material untrue statement or omit any material fact nor do they contain

statements that might be misleading; these statements together present a true

and fair view of the company, and are in compliance with the existing

accounting standards and or applicable laws / regulations; they are responsible

for establishing and maintaining internal controls and have evaluated the

effectiveness of internal control systems of the company; and they have also

xxix

disclosed to the auditors and the Audit Committee, deficiencies in the design

or operation of internal controls, if any, and what they have done or propose to

do to rectify them they have also disclosed to the auditors as well as the Audit

Committee, instances of significant fraud, if any, that involves management or

employees having a significant role in the company's internal control systems;

and they have indicated to the auditors, the Audit Committee and in the notes

on accounts, whether or not there were significant changes in internal control

and / or of accounting policies during the year. 30

The Narayana Murthy committee has given recommendations on audit

committees, audit reports and audit qualifications, related party transactions,

risk management, proceeds from Initial Public Offerings, Code of Conduct,

Nominee directors, non-executive director compensation, independent

directors, whistle blower policy, subsidiary companies, real time disclosures,

evaluation of board performance, analyst reports and touched upon the most

of the recommendations given by the Naresh Chandra committee. Also the

committee suggested for harmonization, removal of independent directors,

disgorgement of profits, term of office of non-executive directors, corporate

governance ratings, media scrutiny and the steps to be taken to implement the

recommendation of the committee. The committee came out with solid

recommendation which are mandatory, which needs to be incorporated in the

listing agreements by SEBI. It also gave voluntary recommendations which

the corporates may follow for their own benefit of transparency, good

governance and management.31

Further the three premier institutes of India

namely the Institute of Company Secretaries of India (ICSI), the Institute of

Chartered Accountants of India (ICAI) and the Institute of Cost and Works

Accountants of India (ICWAI) have contributed to the cause of Corporate

Governance growth in India.

xxx

There are certain remarkable developments happened in some of the

countries around the world which requires the attention. As the Corporate

Governance is important for each and every country, the countries have

developed their own codes and rules to best suit their societal requirements.

The required measures were taken by most of the companies and as per the

level of compliance reported by eStandardsforum.org, it varies from full

compliance, which is the highest form of adoption and compliance of

Corporate Governance principles as envisaged by OECD, to insufficient

information, being the lowest with varying levels as compliance in progress,

enacted, intent declared, and no compliance in the order of declining levels.

The OECD Principles represent the minimum standard on which countries

with different traditions could agree, without being unduly prescriptive. They

are meant to be equally applicable to countries regardless of prevailing

ownership structures, a civil or common-law tradition or the dominant model

of board representation. The World Bank benchmarks the corporate

governance framework and company practices of countries against the OECD

Principles as part of the "Reports on the Observance of Standards and Codes"

(ROSC) initiative. The summary about the corporate governance growth in

various countries were re-produced below as reported in their website by

eStandardsforum.org.32

In Australia, according to a 2006 report published by the International

Monetary Fund (IMF), the corporate governance framework in Australia is

"largely healthy and dynamic" and built on a solid legal and regulatory

foundation. The report finds that shareholder activism is high and periodic

disclosure requirements are in line with international best practices and exceed

the requirements in many other countries. Overall, implementation and

enforcement of disclosure and corporate governance requirements was found

to be strong, specifically among the top tier listed companies. However, there

xxxi

seems to be a significant gap in corporate governance disclosure compliance

between larger listed companies and smaller companies. The IMF notes that

following the implementation of the reforms introduced under the Corporate

Law Economic Reform Program Act (CLERP 9) of 2004, the Australian

Government strengthened auditor independence and improved financial

reporting and disclosure. In addition, in 2003, the Australian Securities

Exchange (ASX) Corporate Governance Council released its Principles of

Good Corporate Governance Practice and Best Practice. They were updated in

August of 2007, and in April 2010 a new draft of the Principles was released

for public comment. The draft includes recommendations on board diversity,

executive remuneration and trading policies. The ASX Principles are not

prescriptive and listed entities follow a comply-or-explain approach towards

compliance. The oversight authority for corporate governance is the

Australian Securities and Investments Commission which is considered to

have wide-ranging enforcement powers. The level of compliance is

“compliance in progress”

In China, a system of corporate governance has emerged as a result of

enterprise, legal, institutional and regulatory reforms. In January 2001, the

China Securities Regulatory Commission (CSRC) issued the Code of

Corporate Governance for Listed Companies in China. Based on the "comply

or explain" principle, the Code has “strictly followed” the Organization for

Economic Cooperation and Development Principles of Corporate Governance,

according to a 2003 article by Violet Xing. Revisions to the Company Law

and Securities Law in 2006 have also strengthened minority shareholder rights

and disclosure requirements for listed firms. The publication of Basic

Standard for Enterprise Internal Control in 2008, to be implemented over

time, signals another important step towards enhancing corporate governance.

However, highly concentrated ownership structure, the dominance of state

xxxii

owned enterprises, and the resulting weak minority shareholder protection

remain as major obstacles to develop a corporate governance culture in China.

Lu et al. also note that the gap between good and poor corporate governance

among listed companies is significant. Various recommendations are being

put forth to improve corporate governance in China, including speeding up

share reform, shareholding diversification, reducing Government intervention

in state owned enterprises, improving minority shareholder rights, and

enhancing board structure and responsibility. The level of compliance is

“intent declared”.

Over the last decade, major changes have occurred within the scope of

corporate governance in France. Two laws were passed to strengthen the legal

foundation of corporate governance: the May 2001 Law on New Economic

Regulations and the August 2003 Financial Security Law. These laws

specifically target transparency and ethics within companies. The unified

French financial regulator, the Financial Markets Authority (AMF) was

created by the 2003 Law. Since then, France seems to have continued to take

measures in strengthening its corporate governance framework. The AMF’s

2008 Annual Report states that the Act of 2008 (DDAC Act) transposed the

European Union Directives on statutory audits and company reporting into

French Law. According to the report, the DDAC Act reinforces the

transparency requirements for the corporate governance practices of

commercial firms. In December 2008, the French Association of Private

Enterprises (AFEP) and the French Employers’ Federation (MEDEF)

published a Corporate Governance Code. As of January 2010, most

companies currently included in the CAC 40 have adopted the AFEP-MEDEF

Corporate Governance Code as their reference code in the drafting of their

chairman’s report. On January 20, 2010, the French National Assembly

started debating a bill that would require management boards and boards of

xxxiii

directors to comprise of at least 40 per cent women, within the next 6 years.

The level of compliance is “enacted”.

According to a 2003 Financial System Stability Assessment by the

International Monetary Fund, Germany has taken steps to improve corporate

governance in line with international best practices. In 2002, the Government

Commission of the German Corporate Governance Code (Cromme

Commission) established a Corporate Governance Code for listed companies

based on the comply-or-explain principle. The Code has been continuously

revised, with the latest amendment as recent as 2009, to strengthen disclosure

and shareholder rights. Previously, other initiatives targeted at strengthening

the functioning of the corporate governance structure included the prohibition

of insider trading in 1994, the 1998 Law for Reinforcement of Control and

Transparency (KonTraG) which aimed to enhance the control of the

supervisory board, and the 1998 Antitrust Act. More recently, the German

Parliament also adopted the Appropriateness of Management Board

Remuneration Act in September 2009 The Act introduces changes with

respect to the remuneration of the management board and also introduces

“say-on-pay’, a non-binding advisory vote on remuneration for listed

company shareholders. Nonetheless, in a 2008 IMF Working Paper, Odenius

notes that despite far-reaching reforms of the last decade, concentrated

ownership and “insider” control remain distinguishing features of Germany’s

corporate governance system. Furthermore, ownership structures remain

complex and work against transparency in corporate control. The author

points out that improvement is required in internal control mechanisms,

particularly with respect to the two-tier board structure. The level of

compliance is “enacted”.

The Japanese corporate governance framework is based on codes,

regulations and laws. The Tokyo Stock Exchange (TSE) issued Principles of

xxxiv

Corporate Governance for Listed Companies in 2004 which were revised in

December 2009 and a new Company Law came into force in May 2007,

replacing provisions of the Commercial Code that relate to companies. In

response to the corporate governance scandals of 2007, the Japanese

Government also introduced guidelines informally known as Japanese

Sarbanes-Oxley or J-SOX which became effective in April 2008. Despite this

progress, the Asian Corporate Governance Association's (ACGA) 2008 White

Paper asserts that the lack of shareholder activism and extensive cross-

shareholding impede structural change. Multiple sources on the subject point

out that the biggest issue in Japanese corporate governance is the lack of

independence in the composition of boards of directors which are largely

dominated by management. Contrary to good corporate governance practices,

a high proportion of company board members are promoted from among

employees. Efforts are on-going to address some of these issues. For instance,

the TSE published new rules in December 2009 relating to independent

directors. Earlier, in September 2009 the TSE laid out its Listing System

Improvement Action Plan proposing at least one independent director or

auditor and disclosure of names of the independent director/auditor. The

Ministry of Economy, Trade and Industry established a Corporate Governance

Study Group to deliberate on rules for improving corporate governance and

the Financial Services Agency in 2009 issued a set of reports and proposals in

order to address investor complaints about deficiencies in corporate

governance. The level of compliance is “intent declared”.

In Russia, during 2004, the European Bank for Reconstruction and

Development's (EBRD) Corporate Governance Sector Assessment concluded

that Russian corporate governance legislation was in "high compliance" with

the Organization for Economic Cooperation and Development (OECD)

Principles of Corporate Governance. These results, as reported in the EBRD

xxxv

2009 Country Strategy report, were reiterated in a 2007 EBRD evaluation on

the corporate governance related “laws on the books.” In addition to the law

on the books, in 2002, the securities market regulator issued a Code of

Corporate Governance Conduct, which is voluntary and is implemented on a

"comply or explain" basis. The Code is based on the OECD principles of

corporate governance. A 2010 draft law amending the Law on Joint Stock

companies introduced restrictions for cross holding of a company through its

subsidiary structures. However, various sources point out that corruption and

lack of corporate transparency pose significant challenges in Russia. In

addition, a number of reports indicate that shareowner rights are not

effectively implemented and that law enforcement remains inconsistent. There

is also increasing state intervention in businesses further impeding

implementation of shareholders rights. A 2004 Institute of International

Finance report noted that equity culture in Russia has historically been weak,

undermining minority shareholders' rights and called for a significant reform

of the court system to secure minority shareholders' rights. The level of

compliance is 'enacted'.

South Africa has made significant progress in its corporate governance

reform since the mid-1990s. The breadth and sophistication of its practices

and rules qualify them as some of the best among emerging market

economies, according to assessments by both the World Bank and the Institute

of International Finance (IIF). The New Partnership for Africa's Development

states in a 2007 report that South Africa has adopted the Principles of

Corporate Governance developed by the Organization for Economic

Cooperation and Development. It also complimented South Africa for its

promulgation of the King I and II Reports, which has strengthened the

corporate governance framework. South Africa has been relying on a self-

regulation corporate governance approach as evidenced by the comply-or-

xxxvi

explain format of compliance with the King Code. However, according to the

IIF assessment, the spirit of the disclosure required under a voluntary

compliance environment has been embraced by only a few South African

companies. In addition, enforcement has been fragmented between three

different institutions, the Financial Services Board, the Department of

Trade and Industry, and the Companies and Intellectual Properties

Registration Office, creating a weak enforcement culture. A new Companies

Act was signed into law in 2009 and will take effect on July 1, 2010. The Act

is expected to enhance corporate governance and empower shareholders. It

also codifies the standard for directors' conduct and holds directors

accountable where the standard is not met. Also in 2009, the King Committee

released the draft King III, which applies to all entities and takes an "apply or

explain" approach. King III has taken effect in March 2010 and replaced. King

II. The level of compliance is “enacted”.

According to 2008 report by Roger Barker published on the Institute of

Directors website, the UK model for corporate governance is a good balance

between law and self – regulation. A 2003 International Monetary Fund

assessment noted that the UK is among the leading countries globally in

setting standards for corporate governance, including public disclosure

practices. Due to its success, 26 out of 27 European Union Member States

have adopted UK-style corporate governance codes in the last few years. The

paper argues that the current financial crisis should be interpreted as a failure

of the UK corporate governance regime and therefore, the focus should

remain on improving the practical application of the existing corporate

governance framework rather than introducing new initiatives. For instance,

the revised combined code, adopted in 2003 and further amended in 2006 and

2008, contains some of the most advanced recommendations internationally in

such areas as board independence, the separation of CEO and chairman

xxxvii

positions, and information disclosure. In March 2009, the Financial Reporting

Council initiated another review of the combined code to further update and

strengthen its recommendations in light of recent developments. Based on the

comply-or-explain rule, the code requires companies to report annually on

their corporate governance practices, and account for deviation from the

code’s recommendations. The new companies act of 2006 provides a number

of changes to increase directors’ accountability to the company as a whole,

strengthen shareholder rights minority shareholders in particular and require a

Business Review to encourage transparency and improve shareholders’ ability

to assess progress, or lack thereof. In addition, the European Union’s

Takeover Directive and Transparency Directives introduced new criteria for

transparency and disclosure. The level of compliance is “compliance in

progress”

Over the last decade, following various corporate scandals, corporate

governance has risen to the forefront of public attention in the United States.

Recently, the debate became even more relevant as the financial crises

highlighted corporate governance failures and lack of adequate risk

management procedures and in general weaknesses of the arm’s length system

in which responsibility for supervising managers is delegated to a board

representing external shareholders. The lapses in financial reporting in the

early 2000s resulted in the 2002 Sarbanes-Oxley Act (SOX), which brought

about significant changes in the U.S. corporate governance regime. The Act

strengthened rules on board independence and the role of audit committees,

tightened reporting and disclosure requirements, made certification by chief

executive officers of quarterly financial statements mandatory, and

established the Public Company Accounting Oversight Board, with a mission

to oversee audits of public companies and related matters. The recent crisis

moved the spotlight on to issues such as board practices, implementation of

xxxviii

risk-management, remuneration processes, and the exercise of shareholder

rights. Changes on these issues are on-going and concerned authorities are

working towards overhauling the regulatory framework. According to a

2010 PricewaterhouseCoopers (PWC) report, the Securities Exchange

Commission (SEC) is working on a package of reform measures directed at

improving the quality of information provided by companies and

strengthening the rights of shareholders, i.e. by allowing them to nominate

directors. Most significantly, given the controversy surrounding executive

compensation, a proposal was made in July 2009 that would require

companies to describe their controls over employee compensation policies.

The level of compliance is “intent declared”.

1.3 PROBLEM FOCUS

With the advent of liberalization process, India’s economic scenario

has begun to alter radically with global impacts. As the growth of various

industries scaled up in terms of turn over with huge revenue and export

business, it also brought in the risk of finance mismanagement and arbitrary

decisions which eventually affected the stakeholders by way of business

losses, exodus of valuable cash reserves, no-accountability by officers of the

company on the pre-text of economic meltdowns. Among the various

industries that were suffered because of this scenario, the one that was hit is

software industries in India. Hence this study is aimed to understand as what

are the corporate governance practices that are followed by industries in

general and software companies in particular in Indian context, to identify the

stakeholders perception towards corporate governance practices in software

companies in India and their level of expectation and satisfaction on various

factors that run across the corporate world.

1.4 OBJECTIVES OF THE STUDY

xxxix

1. To study the existing corporate governance practices available in

India and its adherence by companies in general and software

industries in particular.

2. To identify the stakeholders’ perception towards corporate

governance practices in software companies in India.

3. To analyze the stakeholders’ perception towards their level of

expectation and satisfaction on corporate governance practices in

software companies in India.

1.5 SCOPE OF THE STUDY

The study proposes to analyse the present corporate governance

practices in software companies in India in five select companies, Infosys,

Wipro, TCS, HCL and Satyam. A questionnaire was prepared and

administered to the respondents to elicit required information about their

perception on corporate governance in those software companies where they

invested. The corporate governance as such is very wide, encompassing

different key areas like Board of Directors, their appointment, separation of

Chairmanship and CEO duties, Independent Directors and their role, tenure,

remuneration, various committees of Board like Audit, Remuneration etc.,

their responsibilities, Auditors appointment and their duties, Secretarial Audit

and Whistle Blowing mechanism etc., Since to evaluate the perception of all

these things requires a high calibre and professional skills in stakeholders, the

questionnaire is restricted with general questions which they can comprehend

and understand and through which the study tried to conceive stakeholders

perception.

There is a great demand and growth in software industry especially the

products and services selling by Indian software companies. The software

xl

companies continue to be the major foreign revenue earner for the country.

Hence the software companies’ stability and growth is vital for India's

continuous growth and corporate governance plays an important role in

ensuring such stability. Every effort is taken to collect as much information as

possible to reach plausible inference on various variables thus collected.

1.6 SIGNIFICANCE OF THE STUDY

The significance of corporate governance is now widely recognised,

both at National and International level. Corporate governance is not at its

core about power; it is about finding way to ensure that decisions are made

effectively. 33

The stakeholder’s expectations require the addressing of the

converging interests of competitiveness, corporate citizenship, and social and

environmental responsibility. Now the trend is to report on triple bottom line

rather than single, which includes economic, environmental and social aspects

of a company’s activities. The economic aspect involves the well-known

financial aspects as well as the non-financial ones relevant to that company’s

business. The environmental aspects include the effect on the environment of

the product or services produced by the company. The social aspects includes

values, ethics and the reciprocal relationships with stakeholders other than just

the shareowners. There is an endeavour now through the Global Reporting

Initiative, IFRS (International Financial Reporting Standards) to lay down

guidelines on how a company should report on the triple bottom line.

The Investor Opinion Survey published in June 2000 by McKinsey &

Co.,34

working with Institutional Investors Inc., found that good governance

could be quantified and was significant. The survey found that, more than

84% of the more than 200 global institutional investors, together representing

more than US$3 trillion in assets, indicated a willingness to pay a premium for

the shares of a well-governed company over one considered poorly governed

xli

but with a comparable financial record; and in developed markets the

premium could go as high as 18%: in emerging markets or markets perceived

to have poor governance practices, this premium escalated to 22%.

The implications for companies are profound as considerable

shareowner value can be added by simply developing good governance

practices. The creation of a good governance culture can make companies and

countries, especially in emerging markets, attractive to global investors.

Whilst there can be no single generally applicable corporate governance

model, international guidelines have been developed by the Organization for

Economic Co-operation and Development (OECD), the International

Corporate Governance Network, and the Commonwealth Association for

Corporate Governance.

1.7 ORGANIZATION OF THE STUDY

The whole study is divided into six chapters, starting with Introduction

as chapter 1 which was discussed so far is introductory in nature, tracing the

evolution of the corporate governance and its practices highlighting the

problem focus, objectives, scope, significance and organization of the study.

The chapter II discusses with a comprehensive review of various research

studies conducted in foreign countries and India. Literature survey suggests

how the progress in the CG compliance, the research work done by various

investigators over the period of time in corporate governance, the research gap

identified and how the present study aims to bridge the gap. Chapter III

provides a vivid description about the select software companies taken for

study namely Infosys, Wipro, TCS, HCL and Satyam, their profile, business

activities, products and services offered etc., Chapter IV elaborates on the

research design followed in this study, the source of data, research techniques,

statistical tools used, hypotheses set for the study and the limitation of the

xlii

present study etc., Chapter V narrates the results of the analysis done on the

survey taken up through questionnaire, the inferences arrived at and their

interpretation thereof. An attempt is made to propose a model to achieve the

desired level of satisfaction of various factors deduced in the study for the

stakeholders and to increase the company’s value to attract more inflow of

funds locally and globally. The last Chapter, VI summarises the findings of

the study along with their interpretations and conclusions based on the

evaluation made in the previous chapters and appropriate suggestions for

future research have been presented.

1.8 CONCLUSION

The corporate governance is still on evolving stage

in different countries, India being at a crucial stage of

growth, requires an organised and well implemented

CG in all sectors of business activities. In the wake of

the recent corporate turbulence, it raises the question at

the top of the mind of the stakeholders as whether good

corporate governance is totally legally enforceable.

Therefore a conscientious approach to achieve good

practices of CG and to continuously create value to the

stakeholders and to the nation through both regulatory

system as well as voluntary mode is the paramount

importance.

xliii

END NOTES

1. Anandarajah, K., 2004, ‘Corporate Governance in Asia in a Post-Enron

World’ in The Practitioner’s Guide to Corporate Governance in Asia,

ISI Publications Limited, Hong Kong.

2. Iskander, M.R., and Chamlou, N., 2000. ‘Corporate Governance: A

Framework for Implementation’. World Bank Group, Washington.

D.C., U.S.A

3. Nielsen, J. D., 2000, ‘The Role of Institutional Investors in Corporate

Governance’.

4. Kidd, J. B. and Richter, F., 2003, ‘Corruption and Governance in Asia’,

Palgrave Macmillan, New York.

5. Solomon, J., and Solomon, A., 2004, ‘Corporate governance and

accountability’ John Wiley & Sons Ltd, England.

6. Clarke, T., 2004, ‘Cycles of Crisis and Regulation: the enduring agency

and stewardship problems of corporate governance’ Corporate

Governance An International Review, Vol.12 (Apr).Issue 2:pp153-161.

7. Mehta, G.S., ‘Dharma in Corporate Governance,” The Chartered

Accountant, December 2003, pp. 677-78.

8. Berle and Means' , A monograph on "The Modern Corporation and

Private Property" Macmillan, 1932

9. Vittal, N., “Corporate Governance: Principles and Objectives,” Vision,

Vol. 2, No. 2, July-December 1998, pp. 18-22

xliv

10. Lobwo, Samir, Kr., “Corporate Governance: Role of the Board of

Directors,” The Management Accountant, Vol. 35, No. 10, October

2000, pp. 770-73.

11. Narayanaswamy T.V. 2002, “Corporate Governance and Board of

Directors”, The Chartered Secretary, Journal of The ICSI, New Delhi,

200212420404

12. Datta, S., “Role of Non-Executive Directors in Corporate Governance,”

Chartered Secretary, Vol. XX VIII, No.9, September 1998, pp. 849-51.

13. Sanjiv Agarwal 2002, “Corporate Excellence – A Product of good

Corporate Governance”, The Chartered Secretary, Journal of The ICSI,

New Delhi, 200212420604

14. Gopalswamy, N., “Corporate Governance; The New Paradigm,”

Wheeler Publishing, New Delhi, 2002, pp. 64-65

15. Datta, S., “Corporate Governance; Role of Audit Committee,” The

Management Accountant, Vol. 35, No. 7, July 200, pp. 502-09.

16. Ghosh, T.P., “The Role of. Chartered Accountants - The Three Pillars

of Wisdom,” The Chartered Accountant, August 2000, pp. 13-20.

17. Israni, S.D., “It’s Time or Better Governance,” The Economic Times, 9

December 2000, p. 5

18. Daryal, V., and Sehgal, V.K., “Corporate Governance in India— A

Challenge before Different Players,” Edited book by Singh, D. and

Garg, S., First Edition, Wheeler Publishing, New Delhi, 2000, pp. 46-

47.

19. Sridhar, J., “SEBI’s Role in Enhancing the Image of Indian Corporate

Sector,” Chartered Secretary, August 2001, pp. 869-77.

20. Pati, A.P., and Moharana, S., “Redefining the Role of Major Players in

Corporate Governance,” The Indian Journal of Commerce, Vol. 51,

No. 4, October-December 1998, pp. 139-45.

xlv

21. Boyd, Colin, “Ethics and Corporate Governance: The Issues Raised by

the Cadbury,” Report in UK, Journal of Business Ethics, Vol. 15, 1996,

pp. 167-82.

22. Mayer, Cohn, “Financial Systems and Corporate Governance: A

Review of International Evidence,” Journal of Institutional and

Theoretical Economics, Vol. 154, No. 1, 1998, pp. 45-55.

23. Tricker, Robert I., “international Corporate Governance,” Third

Edition, Prentice Hall, Singapore, 1998, pp. 465-70.

24. Naughton, T., “Corporate Governance: An International Perspective,”

The ICFAJ Journal of Corporate Governance, Vol. II, No. 3, July 2003,

p. 90.

25. www.oecd.org / Daly corporate-affairs / governance

26. Goswami, “Desirable Corporate Governance: A Code (CII Code), “in

Gopalsamy, Corporate Governance - The New Paradigm, Wheeler

Publishing, New Delhi, 1998, p. 74.

27. Report of the Committee Appointed by the SEBI on Corporate

Governance under the Chairmanship of Kumar Mangalam Birla,

Chartered Secretary, March 2000, pp. 373-85.

28. www.sebi.gov.in

29. Godbole, M., “GodBole Releases Good Governance Report,” The

Economic Times, 26 July 2001, p.3.

30. www.dca.nic.in

31. Report of the SEBI committee on Corporate Governance, 2003

32. eStandardsforum.org, Principles of Corporate Governance compliance,

Financial Standards Report

33. Harvard Business Review on Corporate Governance 2000, “The

Promise of the Governed Corporation” – John Pound, HBS Press,

Boston, MA, pp. 79-103

34. Investor Opinion Survey, June 2000, McKinsey & Company

http://www.sebi.gov.in/

http://www.dca.nic.in/

xlvi

xlvii

CHAPTER – II

REVIEW OF LITERATURE

2.1 INTRODUCTION

It is essential to go through and review the literature available in the

field of research study. Even though the way and method by which the

corporate governance practiced may differ in different countries, the objective

and basic principles are similar. Several studies have been undertaken to

understand the corporate governance and its implications in different

economies around the world. This chapter presents some of the studies done

in the past by the corporate analysts.

2.2 REVIEW OF LITERATURE

Adam Smith’s (1776)1 view on the investors was that they seldom

pretend to understand anything of the business of the company. According to

him, “Directors, being the managers of other people's money rather than of

their own, it cannot well be expected that they should watch over it with the

same anxious vigilance with which the partners in a private co-partnership

frequently watch over their own.”

Jenson and Fama (1983)2 found that in modern corporations,

especially in United States and United Kingdom, primary objectives of

corporate governance is to ensure that the interests of top-level managers are

aligned with shareholder’s interests. Corporate Governance involves oversight

in areas where owners, managers and board of directors may have conflicts of

interests. The areas include the selection of directors, supervision of Chief

xlviii

Executive Officer and director pay; and the corporation’s overall structure and

strategic direction.

Tricker (1984)3 explained that there is a difference between

management and governance. He is of the view that while management is

about running the business, governance is for running it properly.

Governance identifies rights and responsibilities, legitimizes actions and

determines accountability.

Jensen (1989)4 in his study observed that companies having outside

directors with little or no equity stake in the company are proven not effective

in terms of monitoring and disciplining the manager.

Bradbury (1990)5 in his study came out that by appointing an audit

committee, the companies a) Impose costs unevenly if differences exist

between companies in the costs and benefits of monitoring packages; b)

transfer resources from existing monitoring activities on the assumption that

monitoring expenditure is limited; and c) prevent from signaling information

by the choice of an audit committee as monitoring mechanism.

Roe (1990)6 in this study stated that governance could be seen as

competition’s assistant; good governance speeds competitive adaptation; bad

governance slows it down. He concluded that the main function of corporate

governance system is to improve efficiency by providing adequate incentives

for value enhancing investments.

Tuteja (1992)7 in his study found that there is no co-relation between

the size of the board and governance objectives. He further added that an

average size of the board should be 10, though the range can vary from three

to fifteen members.

xlix

Humphery (1993)8 stated that third parties have a key role to play in

ensuring the accountability of directors and management, especially auditors

and non-executive directors. This in turn raises the question of what their

roles are expected to be and the difficulties in carrying them out. The

existence of a gap between what auditors are legally required to do and what

they are expected to do by society in general is a manifestation of the

problem.

Charkham (1994)9 pointed out that every country wants the firms that

operate within its territories to flourish and grow to such ways as to provide

employment, wealth and satisfaction not only to improve standards of living

materially but also to enhance social cohesion. These aspirations cannot be

met unless those firms are competitive internationally in a sustained way and

it is this medium and long-term perspective that makes good governance so

important,

Conyon and Leech (1994)10

studied the influence of corporate

governance variables upon executive pay awards. They found that whilst

ownership control and concentration depress the level of director pay, these

variables have no effect on the growth in the director’s pay. Moreover,

separating the role of chairman and chief executive has no effect on the level

or growth in directors pay.

Robert A.G. Monks and Nell Minow (1995)11

have shown concern

on the shareholder’s interest stating that there should be a system to make the

manager care as much about the company’s performance as the shareholders.

They opine that the shareholders should know that the assets they own are not

being mismanaged or even embezzled.

l

Felton, Hudnet and Witt (1995)12

in their study pointed out that the

decisions and actions of a corporation’s board of directors can be effective

deterrent to unethical behaviours. In fact, the most effective boards participate

actively in setting boundaries for business ethics and values.

Mehran (1995)13

in his study found that unless a substantial

component of outside director’s compensation is tied to firm performance,

that is by stock options, their capital risk may not be large enough to motivate

them to monitor the management team. Further he suggested that

outside/independent director should be suitably compensated for their services

so that they work effectively.

Wolneizer (1995)14

in his study found that although audit committees

may strengthen auditor independence and enhance public confidence in the

integrity of the financial reporting process, the objective of an improvement in

the quality of financial reporting is unlikely to be fulfilled. The advocates of

Cadbury style audit committee need to be careful not to claim too much.

Redikar and Seth (1995)15

were of the view that firm’s owners should

not expect any single mechanism to govern the company effectively across

time. It is through the proper use of several mechanisms that the owners are

able to govern the company in ways that maximize strategic competitiveness

and increase the financial value of their firm.

Beasley (1996)16

in his empirical study examined the link between

financial statement fraud and board of director compensation. He found that a

higher proportion of outside directors on the board reduced the likelihood of

fraud. The results support the view that boards with more outside directors

provide more effective corporate governance.

li

Bogert (1996)17

in his study observed that institutional owners because

of their prominent ownership position are a powerful governance mechanism.

Delorme (1996)18

suggested that corporate governance can be

improved by adoption of strategic planning process, communication policy,

integration of company’s internal information, management system and

identification of risks including those arising out of the use of derivative

instruments.

Rao and Lee Sing (1996)19

investigated that a good governance

practices entail active participation of shareholders in the direct and indirect

management of corporation through the board of directors and an arrangement

of productive checks and balances among shareholders, board of directors and

management of corporations.

Byrne (1997)20

observed that large-block shareholders (who own at

least five per cent of a company’s issued shares) are increasingly active in

their demands that companies adopt effective governance mechanisms to

control the decisions of their managerial agents.

Catalyst (1997)21

a non-profit group that studies women in business

noted that among the Fortune 500, 84 per cent have at least one woman on

their board. However, the increase in 1997 was only three per cent, following

jumps of nine per cent and ‘seven per cent the previous two years, thus,

among Fortune 500 firms the rate of inclusion of women in business is

slowing.

Coulson (1997)22

in his study stressed that training and changing

composition of a board to be most common means of improving the collective

effectiveness of directors. The highest training priority was the development

lii

of strategic awareness and business understanding. The efforts will develop a

strong corporate governance system in the organization.

Fernando (1997)23

in his study stressed that in India, corporate

governance has acquired a new urgency due to changing profiles of corporate

ownerships, preferential allotment of shares to promoters, increasing inflow of

foreign capital and deliberate dismantling of control mechanism with

economic liberalization that had hitherto provided protective cover to even

poorly managed corporate.

Grover, Byrne and Melcher (1997)24

were of the view that if the

board makes the wrong decision in selecting the firm’s strategic leader, the

CEO, the whole firm as well as its share holders suffers. On the other hand,

solid; governance procedures can create credibility for the firm and its

strategy.

Kroll, Wright, Toombsand Leavell (1997)25

suggested that a well-

functioning corporate governance and control system could result in a

competitive advantage for an individual firm.

Lubin (1997)26

as of the view that CEOs that are on too many boards

have been criticized and a number of CEOs are deciding to decline to be

outside directors on other firm’s boards. Instead of serving on other firm’s

boards, top-level managers increasingly desire spend time improving their

own firm’s performance. Improved performance reduces the likelihood that a

firm will become a takeover candidate.

Mejia and Wiseman (1997)27

in their study indicated that the purpose

of executive compensation is to improve the alignment of management and

shareholder interests and reward managers for efforts rendered.

liii

Shleifer and Vishny (1997)28

in their study observed that the purpose

of corporate governance is to ensure that investors (suppliers of finance,

shareholders or creditors) get a return on their money. They also stated that a

firm has many stakeholders other than shareholder (e.g. employees, creditors,

customers, suppliers, public and the Government) whose welfare must be

taken into account.

Srikant (1997)29

in his work analyzed that corporate governance

ensures how effectively the board of directors and management are

discharging their functions in building and satisfying shareholder’s

confidence.

Westphal and Zajac (1997)30

in their study found that board of

directors is an important governance mechanism in United States

Corporations and thus the board’s role is rapidly evolving as a major strategic

force in U.S. business firms.

Business today – aims (1997)31

in their survey of the best board of

directors among the country’s 100 most valuable corporates on the basis of

four parameters of corporate governance, i.e. accountability, transparency,

quality and independence found that the best five boards in India are

Hindustan Lever Limited, Telco Limited, Bajaj Auto Limited, HDFC Limited

and Larsen & Toubro Limited.

Balasubramanian (1998)32

in his study stated that there is no

guarantee that implementing good governance rules and following best

practices in business will completely eliminate undesirable corporate practices

or substantially protect shareholder interest. Rather it is internal audit function

that contributes towards better governance of the enterprise. He also found

that independence of board of directors could be compromised by a number of

liv

factors like their allegiance, loyalty and friendship with the management

group or even lack of time to devote to company affairs.

Boyd (1998)33

observed that executive compensation is a governance

mechanism that seeks to align manager’s and owner’s interests through salary,

bonuses and long-term incentive compensation such as stock options. Stock

options are a mechanisms used to link executive’s performance to the

performance of their company’s stock.

Cadbury (1998)34

in his work emphasized that there is an increasing

need among growing companies to tap international capital markets for funds.

As they compete to attract investment and raise capital world wide, high

standard of governance is demanded by investors. Hence corporate

governance is emerging as an important issue in the international business.

Dadiseth (1998)35

made a thoughtful attempt that corporate

governance envisages a set of systems and processes which ensures that a

company is managed to the best interests of all shareholders. In its broader

connotations, corporate governance is like a trusteeship. It is not simply a

matter of creating checks and balances, but creating an outperforming

organization which leads to increasing customer satisfaction and shareholder

value.

Jay A . Conger, David Finegold and Edward E. Lawler III (1998)36

in their study of the performance evaluation has suggested that the changing

roles and rewards for corporate directors create a compelling reason to review

board performance regularly. As greater attention has focused on corporate

governance, directorships that were once relatively low-paid and essentially

honorary positions have become demanding and well compensated. If the

right evaluation process is in place, self- evaluation need not be self-serving

lv

evaluation. They referred to the survey of directors at Fortune 1000 companies

conducted in 1996 by Korn/Ferry International which indicated that even

though 70% of the largest US companies have adopted a formal process for

evaluating their CEOs, only one quarter evaluate their board’s performance.

Evaluations of individual directors are even rarer and more controversial,

occurring in just 16% of the companies surveyed. They also conducted

interviews and gathered written surveys from CEOs and board members at a

dozen companies that are aggressive pioneers in performing and applying

boardroom appraisals. Their research has allowed them to develop a set of

best practices that represent a composite of the most effective techniques used

by all these organizations. Their results finally covered mainly on two broad

areas what the board does and how the board does an effective job.

Kathuria and Dash (1999)37

in their empirical study found that the

size of the board plays an important role in influencing the financial

performance of corporations. They concluded that the performance improves

if the board size increases, but the contribution of an additional board member

decreases as the size of the board increases. In other words, corporations

which already have a high average board size do not gain much if an

additional board member joins.

William R. Emmons and Frank A. Schmid (1999)38

had found that

National corporate-governance traditions are distinctive, deeply rooted, and

difficult to change. Recent research points to a country’s legal traditions and

its stage of economic development as important determinants of corporate

governance institutions. Common-law countries tend to provide more explicit

investor protections than civil – law countries. Richer countries tend to

enforce corporate laws more strictly. Broader and deeper financial markets

emerge in the presence of strong investor protections, fostering more outside

financing and better corporate financial performance. Corporate governance

lvi

systems a1so influence resident firms capital structures and ownership

structures. However, a broader perspective on corporate performance suggests

that no country’s system of corporate governance is without shortcomings.

CIMA (2000)39

in a survey of European corporate governance

practices acknowledged that Continental model (with two boards supervisory

and management) seems to prioritize the company’s role in society over the

generation of increased returns for shareholders; when compared with the

Anglo-American (unitary board) model.

Xavier Vives (2000)40

has studied that different systems of corporate

governance have different impacts on the degree of competition in the

economy. The picture that emerges of the role and effectiveness of corporate

governance is mixed from both the theoretical and the empirical perspective.

However, taking for granted that competition is the main driving force

towards efficiency, it does not follow that corporate governance does not

matter. In relation or bank-based systems, external control is weak and webs

of cross-participations may weaken product market competition. There has

been limited evidence of the effectiveness of internal and external

mechanisms of governance, managers seem to get their way most of the time,

non-profit institutions fare well in competition with for - profit firms, and

other factors like competition in the product market, seem to be more

important for economic performance.

Franklin Allen and Douglas Gale (2000)41

have observed that the

agency approach to corporate governance is somewhat inadequate because it

ignores that, in many instance managers are not only responsible to outside

investors but other stakeholders, such as employees may be legally entitled to

exert control on the firm’s policy. Also the separation of ownership and

control is a much less frequent phenomenon and top managers are rather

lvii

entrepreneurial. They have also concluded that the existing mechanisms for

corporate governance, whether based on external market discipline or internal

monitoring are not particularly effective because, there do not seem to be

comparable cross-country differences in the way firms operate or in their

profitability. Moreover, competition in product and input markets is the main

factor in ensuring efficient resource allocation since, in the absence of good

information about the optimal management strategy, where standard

governance mechanisms are ineffective almost by definition; a Darwinian

Process of competition may ser e to select the best management teams. The

reason is that firms run by opportunistic or plainly incompetent managers will

not be able to survive in a competitive environment. Hence according to the

authors, corporate governance system appears to be defined as the set of

institutions that guide the firm’s policies and strategies to maximize

shareholder’s value. As per this definition, the main function of a corporate

governance system is to improve exante efficiency by providing adequate

incentives for value enhancing investments.

Simon Johnson, Peter Boone, Alasdair Breach and Eric Friedman

(2000)42

presented evidence that the weakness of legal institutions for

corporate governance intensified the depreciations and stock market declines

in the Asian crisis. Furthermore, Johnson and others believed on the

importance of the law, i.e. countries with more investor protection have better

developed financial markets and more growth. The determinants of law are

complex, but the origin of the legal system is an important factor. Legal

reform works and the change may come slowly which may have setbacks, but

a sustained effort to improve investor protection definitely payoff.

Martin Hellwig (2000)43

has called for a reassessment of the

significance of corporate finance for corporate control and for a reorientation

of the theory of corporate governance through his paper on economics and

lviii

politics of corporate governance in Europe. He is skeptical about the top-down

legal and corporate governance reform and for a good reason. The first order

effect of such a reform is to redistribute wealth from the controlling families

to minority shareholders and creditors of public firms, since the private

benefits of control are likely to diminish, Not surprisingly, the controlling

shareholders do not welcome such reforms and hence their political prospects

are relatively dim in contrast, principal beneficiaries of corporate governance

reforms, who are the owners of private companies that are thinking of going

public as well as the would be entrepreneurs, do not have nearly as much

political influence as the controlling shareholders of the major public firms

and hence their voice is nowhere near as loud. There are of course other ways

for firms to improve their corporate governance, and thus to enhance their

access to external finance. Among the most important strategies is to opt into

a legal regime more supportive of outside investors, for example by listing the

stock in New York or London. However, an alternative way to opt into a

better legal regime is to be acquired by a company operating in such a regime

or by a company that has better access to external finance.

Syamal Ghosh (2000)44

has observed that the styles of corporate

governance vary widely across countries for understandable reasons. The

uniqueness of history, cultural and institutional factors and the habits and

attitudes of the people influence their approach towards corporate governance.

According to him, since the attainment of independence in India, the style of

corporate governance has been influenced by the Government, the regulatory

agencies, the major providers of private capital in the country and legacies

from the colonial past.

T.P. Ghosh (2000)45

has discussed the three pillars of Corporate

Governance, i.e. the nomination committee, the remuneration committee and

the audit committees and their role or absence in the SEBI guidelines. He has

lix

concluded that the corporate governance code in India should have these

committees in place which are also relevant from the aspect of decision-

making by the shareholders and other interest groups. The proposition of

compliance certificate in India although takes care of ensuring the pursuance

of desired governance policy, disclosure may help the shareholders to get

some more additional information. Thus it helps to improve transparency in

the governance.

Dr. Surendar Kumar (2000)46

has pointed out that, although there are

various attributes of corporate governance, it must he appreciated that the

subject is mainly based on the question of ethics which is the core of good

corporate governance in the day to day management functions. He has dealt

with the analysis of cases studies, illustrating the ethical dilemmas faced in

real life situations and the importance of values and ethics in all decisions and

actions, According to him, the overall scenario calls for setting up

ofbehaviora1 standards ably supported by structural system under the full

glare of public accountability.

Centre for Monitoring Indian Economy (2001)47

in its survey of

major unlisted companies observed that unlisted companies report poor profit

margins, pay lower salaries and wages, and lower dividends. It is also being

argued that due to considerably higher level of corporate governance, listed

companies are better performers and hence have greater access to additional

capital. CMIE has strongly suggested that there is a necessity to have good

corporate governance in sizeable unlisted companies for the protection of the

interests of other stakeholders if not the shareholders.

Kluth (2001)48

in his survey of the corporate governance practices of

South-East Asia, America and South Korean business found that corporate

culture in the Singapore and Hong Kong is very strong. While in the absence

lx

of sound regulations South Korea and Indonesia’s position is worst. On the

issue of transparency and investor care China performed badly but the

Singapore and Hong Kong were very much conscious about such issues and

were at the top. This survey also found that company’s directors not simply

comply with the rules but try to do better realizing that best practice is a

competitive advantage.

Mehra (2001)49

in his study mentioned that according to a millennium

survey of 25000 people across 23 countries and six continents for the year

2000, 56 per cent said that the brand equity of the company depended on its

corporate citizenship while 40 per cent said it was because of quality. Only 34

per cent said it was because of their management practices.

Misra (2001)50

in his study found that in case of unlisted companies,

firm value may be dependent on the nature and extent of family influence.

Undoubtedly, there is a unique corporate governance scenario under which

family control may be more effective.

Ray (2001)51

in his study found that though many reputed companies

are not listed in any stock exchange yet they are performing well on the issue

of corporate governance. He also observed that, unlisted companies have been

spared and kept away from observing the code of corporate governance. But

there are many large family-run multinationals and public sector unlisted

companies which are very well known and have large stakeholders are

adopting the codes and following the good corporate governance practices.

Schoormàn and Donaldson (2001)52

in their study suggested that the

mechanisms such as ownership concentration, board of directors, executive

compensation, and mu1ti divisional organizational structure and market for

corporate control have the potential to influence positively the governance of

lxi

the modern companies. This evidence is important because the development

of the modern companies have placed significant responsibility and authority

in the hands of top-level managers.

Barua (2002)53

in his study stated that there is no model that would

guarantee ethical corporate behavior. He stated that not only improvements in

disclosure norms, changing of the composition of boards by including non-

executive directors and setting up of audit committees would lead to increase

in the level of corporate governance but as long as social atmosphere in which

the Indian corporate sector operates remains corrupt, there is little hope for

significant improvement in the behavior of corporate sector in India. Till then

ethics in business and good corporate governance must remain the dream of

an inveterate optimist.

Bazerman, Loewenstein and Moore (2002)54

in their study found that

some time corporate governance system does not work efficiently because of

the often subjective nature of accounting and the tight relationships between

accounting firms and their clients. Even the most honest and meticulous

auditors can unintentionally distort the numbers in ways that mask a

company’s true financial status thereby misleading investors, regulators and

management. They concluded that the real problem is not a conscious

corruption. It is unconscious bias.

Business Standard (2002)

55 quoted that a report has been prepared for

an investors’ forum in Malaysia. The report has examined and ranked 495

companies in 25 markets on their corporate governance scores. The report

found that better governed companies have higher return on equity (ROE),

higher economic value added and higher price to book premium.

lxii

Chakarawati (2002)56

in his study found that until the issue of

relationship between company and its auditors, conflict of interest between the

rating agencies and companies, banks acting as lenders and their work as

investment bankers are properly addressed, the efficiency of corporate

governance across the world can not be enhanced.

Chaudhary (2002)57

in his study stated that in order to implement

good governance practices “transparency and honesty” elements should be

involved in business. He stated that every policy should be cleared enough to

those who would be affected by the decision system. If it is not cleared to the

concerned persons being affected, the affected persons may consider the

action as imperfect, dishonest and biased thereby creating dissatisfaction

among the employees of different groups, sectors, religions, etc.

Chikodikar (2002)58

in his study found that those companies which

practice high standard of ethics and. corporate governance have number of

benefits in the form of increased shareholder value and also rewarded with

higher valuation by investors.

Fleming (2002)59

in his study observed that not only the external’

market forces but also the internal constitution of the company has a lot of

impact on the standing of a company in the eyes of the investors. When a new

high-flier Chief Executive Officer is appointed in company, the share prices

moves up. He pointed out that in the corporate governance system

shareholders and other market players are considering the composition of the

board of directors as a key parameter in judging the value and performance of

the company.

Maheshwari (2002)60

in his study stated that there are many loopholes

in the India’s Company Act, 1956, that’s why the system of corporate

lxiii

governance is not working efficiently. He found that instead of providing

protection to shareholders, making directors more responsible and looking

into the optimum structure of board, companies are concerned with board

room battles, takeover traumas, etc. He suggested that transparency in the

system, sound regulations, disclosures of financial statements and

accountability of the board of directors are to be considered for good

governance practices.

Mckinsey (2002)61

in its survey of 30 leading family-owned businesses

found that most of the family-owned businesses are facing threat because of

conflict of interests among members of families. Such businesses are moving

towards third generation ownership. However, their counterparts in the west

had been wiser in this regard and had introduced best practices. The study also

depicts that only seven per cent of the family-owned businesses will survive

beyond the third generation. It also stressed the importance of establishing a

clear and valid role for the family in a business, equal treatment of

professionals and remuneration of family members. The report suggested that

family owned businesses must introduce best practices and lay down clear

rules on governance and leadership.

Pai (2002)62

in his study elucidated that the quarterly results model

believe that markets should be kept informed about corporate performance on

an ongoing basis rather than at the end of the year. He stated that corporate

that had shown rosy quarter - end reports got rewarded sharp increase in

market cap and vice versa.

Panchalj and Baid (2002)63

in their study stated that there has been

considerable acceptance of principal of shareholder wealth. Maximization by

companies in actual practices. It implies that maximizing the shareholders’

wealth will lead to optimizing the interests of other stakeholders. There have

lxiv

been evidences where companies have done well not only by maximizing

wealth of their shareholders but by optimizing the interest of stakeholders. For

lasting success of the business, its top priority need not be its shareholders. In

fact, precedence of shareholders’ interests (who are generally interested in

financial terms) over other stakeholders may adversely affect the long-term

survival and success of the business. It requires optimization of interest of

various groups of stakeholders over lop-sided maximization of one class of

stakeholders. So companies have to strike a balance among the interests of the

various stakeholders.

Prasuna (2002)64

in his study found that companies are loosing their

credibility due to not following good governance practices. He concluded that

in order to restore lost credibility and to win shareholder confidence

independent board of directors, audit committees and accountability of Chief

Executive Officer should be considered.

Saha, Y., and Bandyopadhya (2002)65

in their empirical survey of

corporate governance of 350 largest companies across the globe has found

that two Indian companies Infosys Technologies Limited and Software

Solution Integration United received the highest rating in corporate

governance as they have very good system of transparency and disclosure of

the information in their companies. They also took into account information

available in the annual reports of the company.

Sonnenfeld (2002)66

in his empirical study found that the highest

performing companies’ have extremely contentious boards that regard dissent

as an obligation and treat no subject as undiscussàble. He stated that good

board of governance can’t be legislated, but it can be built over time. Not only

good governance guidelines such as setting up of audit committees,

importance of independent directors and ethical guidelines have helped

lxv

companies avoid problems related to boards but also if a board is to fulfill its

mission it must become a robust team.

Subrahrnanyam and Merril (2002)67

in their study stated that in

India, Infosys Limited is setting up benchmark for other companies for

corporate governance practices. In its initiatives it is providing a methodology

for improving transparency and providing the capital markets with

information needed to accurately access future value. Company has adopted

the unique globally recognized Value Reporting model that provides both

historical and predictive indicators of shareholder value.

Yamaoka (2002)68

in its comparative study of Japanese and Korean

banks found that different corporate governance approaches are followed by

their banking systems. While the Korean Government has placed a high

priority on increasing shareholder value in banks, the Japanese Government

appears to be less focused on this issue. He also stated that the Korean banks

have at least half of their boards constituting outside directors, while outside

directors have a minimal presence in Japanese banks.

Marco Becht, Patrick Bolton, Ailsa Roell (2002)69

in their research

working paper have revealed that, Corporate governance is concerned with the

resolution of collective action problems among dispersed investors and the

reconciliation of conflicts of interest between various corporate claimholders.

In their survey they reviewed the theoretical and empirical research on the

main mechanisms of corporate control, discussed the main legal and

regulatory institutions in different countries, and examined the comparative

corporate governance literature. Further, a fundamental dilemma of corporate

governance emerges from this Overview: large shareholder intervention needs

to be regulated to guarantee better small investor protection; but this may

lxvi

increase managerial discretion and scope for abuse. However, alternative

methods of limiting abuse have yet to be proven effective.

Agarwal (2003)70

in his study found that corporate governance leads to

improved long-term performance and important criteria for investment

decisions in other countries. India has been excluded from any investment

being made due to inadequate corporate governance practices. He stressed that

with increasing globalization and international competition it is necessary for

Indian corporations to adopt good corporate governance in order to tap global

financial markets.

Bhasa (2003)71

in his study of shareholder theory found that now a

days companies are focusing only on shareholder wealth maximization.

Companies are taking care of only shareholders while other stakeholders are

ignored. He suggested that all parties who are either directly or indirectly

affected by the corporation’s operations are to be compensated either in

pecuniary or non-pecuniary terms. This line of thought led to the argument

that corporations must attempt to maximize stakeholders’ interests instead of

plainly focusing on shareholders’ benefits.

Bujaki and McConomy (2003)72

in their study of 300 firms listed on

Toronto Stock Exchange (TSE) found that very few firms have fully adopted

the TSE corporate governance guidelines and the extent of disclosure on

corporate governance varies widely among these firms. They further found

that the annual report is the preferred disclosure medium for those firms

planning a stock offering. The extent of disclosure is found to be higher for

more highly leveraged firms, those with a majority of unrelated directors,

firms planning stock offerings and for large firms.

lxvii

Dwivedi (2003)73

in his study found that most of the companies in

India and at the global level are following the corporate governance norms or

code. They are just trying to comply with the code in letter and not in spirit.

He suggested that directors should be made personally liable for corporate

wrongdoings. He further stated that it is high time India Inc. should come out

of the practice of following the law in letter and, strives to raise the standards

of corporate governance to global benchmarks.

Ernest (2003)74

in his study observed that now-a-days company are

blaming only small outside investors for creating problems in corporate

governance. He also cited that the main corporate governance problem is self-

interested management and weak, dispersed shareholders.

Grosfeld and Tressel (2003)75

in their study found that competition

has a positive influence on productivity and that product market competition

may be an effective way of ensuring efficient restructuring and productivity

growth during the transition. However, they also found strong evidence that

the impact of product market competition depends on the ownership structure

of firms considered. They stated that competition has no significant effect on

performance for the firms with ‘poor’ governance; on the contrary, it has a

significant positive effect in the case of firms with ‘good’ corporate

governance.

Gunasingh (2003)76

in his study stated that in order to regulate and

ensure good corporate governance practices in the companies different bodies

are functioning like Securities and Exchange Board of India, Department of

Company Affairs, Stock Exchanges and Professional Bodies. But there is

problem of coordinating all such bodies. So Lie suggested that instead of

different regulating bodies a separate body in India for corporate governance

should be established which would take care of only corporate governance

lxviii

matters. This will help in saving time and financial resources of the

Government.

Helman (2003)77

in his study found that in the public sector it is the

corruption that decides the direction of governance, i.e. it is good or bad. In

his Business Environment and Enterprise Performance Survey he found that

countries with high level of corruption at the different level have less

governance practices while on the other hand countries which have less

corruption in the organizations, the level of governance practices were

reasonable.

Jain (2003)78

in his empirical study observed that family- owned

businesses are increasingly adopting corporate governance practices

voluntarily. He also found that domestic Indian companies are being seen to

have taken the lead. More than 71 per cent business owners have already

tightened internal controls as a safeguard while 25 per cent have appointed

non-executive or independent directors and formalized policies on director’s

pay. The country is much ahead with 46 per cent having formed audit

committees Compared to the global average of 34 per cent. While about .9 per

cent of the Indian companies surveyed expect new corporate governance

regulations to affect their businesses, globally 56 per cent feel likewise.

Khanna (2003)79

in his study found that domestic financial institutions

in India are ineffective monitors where association with foreign institutional

investment provides significant monitoring benefits. Firm performance is

positively correlated with the presence of foreign institutional ownership and

negatively correlated with the presence of domestic institutional ownership.

He also concluded that more transparent groups are more likely to attract

investments.

lxix

Loke (2003)80

in his study of Corporate Governance Practice of Asian

Firms stated that now a days not only small investors but also institutional

investors and international agencies are demanding better corporate

governance. He further stated that rules are important - they form the ‘internal

skeleton’ of the corporate governance. If rules and mechanisms are missing,

corporate governance is likely to be dysfunctional

Mckinsey (2003)81

a research-based company in its Investor Opinion

Survey of 200 institutional investors showed that three-quarters of investors

polled regarded board practices to be as important as financial performance.

The share premium institutional investors are willing to pay for companies

with good corporate governance practices over equivalent companies without

good corporate governance practices range from 18 per cent for companies in

the U.K. to 27 per cent for companies in Indonesia.

Mehra (2003)82

in his study found that 71 per cent of Indian business

owners have already tightened up internal controls of their companies as a

safeguard. In case of India, 39 per cent of independent businesses were

expecting the new corporate governance regulations to impact their

organizations. He further found that Indian businesses along with those in

Mexico, Singapore, and the United States lead in having already formed an

audit committee as another line of defense.

Price Water House Coopers (2003)83

a research survey of different

UK companies revealed that almost of industrial and service sector companies

have nomination committee and where there is such a 61 per cent are chaired

by the company chairman rather than an independent director. Their survey

revea1ed that such companies are also following the recommendations given

by Higgs report on corporate governance.

lxx

Spenger (2003)84

in his empirical study found that today the

companies are violating the shareholder rights in various aspects. He also

elaborated’ the best-known violation techniques of shareholder rights adopted

by the companies from time to time like share dilution, delayed dividend

payments, asset stripping or transfer pricing, disinformation and outright

deception, etc.

Srinivasan (2003)85

in his study stated that the greater the

concentration of power with the Chief Executive Officer, the higher their

influence over crucial decisions. The personal characteristics of the CEO

some times tend to distort decision- making on investments. He also stated

that it would not be right to blame only CEO for the recent corporate scandals.

These problems had arisen due to the failure of governance in boards, which

didn’t exhibit enough independence and the failure of the auditing profession

to separate its audit function from consultancy operations. This led to a

conflict of interest and the consequent loss of auditors’ independence. He

concluded that organizations with active and vigilant boards tend to have

much better and efficient governance.

Thompson and Ting (2003)86

in their empirical study of two South-

East Asian airlines found that segment reporting plays a major role in making

financial statements more useful to investors They stated that segment

disclosures allow investor to conduct an in-depth analysis of a company’s

financial performance and make more meaningful comparisons between

compet1torsspecially those using the same segment categories. Such reporting

plays a key role in improving transparency and the governance of concerned

enterprise.

Sir Adrian Cadbury (2003)87

conveyed that the very essence of

corporate governance is based upon the principles of transparency,

lxxi

accountability, fairness and responsibility and their application is universal

nature. According to him, a code of corporate governance cannot be imported

from outside but, it has to be developed based on the country’s experience.

There cannot he any compulsion on the corporate sector to follow a particular

code. Equilibrium should be struck so that corporate governance is not

achieved at the cost of the growth of the corporate sector. The way they are

put into practice has to be determined by those with responsibility for

implementing them.

Dr. Donna M. Faltin and Frederick W. FaItin (2003)88

have put

forth how six sigma monitoring of the propounded financial quality matrix,

might have prompted inquires well before any fraud actually takes place

which ultimately facilitate better management and restore investor confidence.

They have illustrated the case of the demise of Worldcom, the largest

corporate bankruptcy in U.S. history and suggested that six sigma can address

the issues and provide a uniform disciplined framework for reliably tracking

financial results and corporate governance metrics, when augmented with

techniques from economics, finance and operations management. According

to their experience, the application of the paradigm, i.e. define, measure,

analyze, design and verify (DMADV) is the best way to develop a corporate

financial quality system. Thus, financial quality practices, rooted in Six Sigma

can help define a culture that will respond to these needs, promote legal and

regulatory compliance, facilitate better management and restore investor’s

confidence.

Nick Bradley (2003)89

has advocated the importance of measuring the

corporate governance standards in the present scenario. According to him, the

rating of the corporate governance standards provides an independent

assessment of an entity’s current performance and expectation on its balanced

value creation and corporate governance practices in future. It also indicates

lxxii

the capability of the rated company with respect to wealth creation for all its

stakeholders while adapting sound corporate governance practices. He has,

conspicuously planned out the extensive exercise of rating a corporate for

governance norms through the launch of corporate governance scores by

Standard and Poor’s in evaluating corporate governance practices both at a

country and at a company level. The analysis started an evaluation of

governance issues at the country level by focusing on main areas like, legal

infrastructure, regulation, information infrastructure and market infrastructure.

The second part of the analysis evaluated corporate governance practices at

individual companies using a synthesis of the OECD’s and other international

codes and guidelines of best practices and assigned scores to a company’s

overall practices, focusing on ownership structure, financial stakeholder

relations, financial transparency and information disclosure, and board

structure and process.

Donald J. Johnson (2003)90

has observed that living in a multilateral

network requires rules hut a system based on principles and values makes it

strong. According to him, no doubt rules are needed, especially in this

complex environment, to endeavor to elicit the desired behaviour of corporate

executives. Rules are also needed to provide the means to decide and make

choices and to know what to comply. They are needed to provide rules to have

a list of what is encouraged and prohibited since it conveys a certain order in

the corporate arena. It thus, defines the relationships of the various corporate

actors and stakeholders. Moreover, rules theoretically put everyone on the

same plane but whether everyone follows the rules is another thing.

Ismail Adams (2003)91

has examined the different paradigms of

corporate governance that is the Anglo American model, Japan or Germany

model and the Family Capitalism model. The Anglo- American capital

market-based model emphasizes the maximization of shareholder value. On

lxxiii

the other hand, the Japan or German model is focused on a relationship-based

model that emphasizes the maximization of the interest of a broader group of

shareholders. For family business or family capitalism, family values appear

to have significant influence on the outcomes of family capitalism and

therefore corporate governance. According to him, the corporate governance

of large corporations following these paradigms in a way is entrusted to the

CEOs and other professional managers. Thus, the monitoring of corporate

governance is focused on the management running the business. Moreover,

Adams emphasized that corporate governance has a major indirect effect on

the socio-economic-growth-development nexus of a country, because finance

and investment decisions impact either positively or negatively on the

development process and thus the quality o life of people. He then

recommends that corporate governance should go beyond the functional

framework of Focusing on rule-based environment or the quantitative aspects

of governance and towards important social goals such as poverty alleviation,

improved quality of life, enhanced opportunities for better education, health

and more.

Lynn McGregor (2003)92

has recognized the key human components

of corporate governance as, knowledge of the key business issues, the key

people and the capacity of the company to deliver sound results with no

unpleasant surprises; The right composition, balance of power and succession

planning; High level decision making, including the ability to deal with

complex information; and Effective working relationships between the hoard,

fund managers, other shareholders and owners, management and other

stakeholders.

According to her, while risk management is an important element of

good board performance, the key purpose is to increase shareholder value,

placing the locus on gaining competitive advantage by being better at wealth

lxxiv

creation. This calls for a broader understanding of the meaning of corporate

governance that is, showing direct correlation between a company’s

exponential growth and active recognition of the human factors in business

leadership.

Dr. P.L. Sanjeeva Reddy (2003)93

has explained the link between the

governance principles to Kautilya’s Arthashastra and goes on to draw

taxonomy of legislative framework and growth of corporate reforms in the

country. According to him, there is no inherent contradiction between

improving competitive context and making a sincere commitment to bettering

society. If systematically pursued in a way that maximizes the value created,

context focused philanthropy can offer companies a new set of competitive

tools that well justifies the investment of resources. At the same time, it can

unlock a vastly more powerful way to make the world a better place.

V.K. Sareen and Dr. Subhas Chander (2003)94

have examined the

corporate voluntary disclosure practices of the private sector in Indian

studying on both the item-wise and corporate-wise disclosure of the selected

50 companies. He concluded that the most vital document containing

comprehensive information for the users which have both non-financial

statistical and other information as per the manner that suits the requirements

of the corporate sector. However, the style of presentation and the method of

accounting treatment and reporting vary and hence there is a need to improve

the corporate disclosure laying emphasis on corporate governance by

following the principles of accounting standards and the requirements of

companies Act and other relevant Acts, to be in consonance with the

international practices

Punit K. Abrol and Rakesh Kumar Gupta (2003)95

analyzed the

need of corporate governance through the separate laws so as to build up the

lxxv

confidence of the domestic as well as the international community. They also

highlighted the need of various types of information which could help the

investor to invest in a particular company. They concluded that the needs of

the community require to be translated into corporate governance by the

professionals of various national and international bodies. They have also

examined the corporate philosophy of a number of companies through the

study of their annual reports.

Dr. Neelam Jani (2003)96

observed that in the recent past the Indian

economy had witnessed many structural changes through the rules governing

the Indian industry, in order to bring in efficiency and competitiveness which

has compelled the Indian companies not to ignore the adoption of best

corporate practices. Further, she has highlighted the significance of

transparency in financial reporting to establish the quality of good corporate

governance, as in Indian companies the investors in India and abroad are

demanding greater disclosures and transparency in major decisions for better

corporate values. She had examined the legal requirements and guidelines of

regulatory bodies regarding the corporate disclosures and recommendations of

working group on corporate governance with the actual practices of corporate

governance in the Indian corporate sector.

Girish Jaiswal (2003)97

has emphasized on the increased concern for

corporate governance, all over the world. He stressed on the composition and

role of board of directors in proper direction and control of the company. He

is of the opinion that in the changing global business environment only those

companies are going to survive which have renewed focus on social

responsibility, responsible board of directors and transparency and

accountability.

lxxvi

Anil Arora and Madan M. Singh (2003)98

have explained the factors

influencing the quality of governance such as integrity of the management,

ability of the board, adequacy of the process, commitment level of individual

hoard members, quality of corporate reporting and the participation of

stakeholders in the management, by taking the case study of Ranbaxy Ltd He

has also discussed the concept, structure and process of corporate governance

and the importance of the constitution of the four committees as per the

corporate governance code adopted by Ranbaxy Ltd.

V.K. Pandey and Rajeev Prabhakar (2003)99

has traced the

emergence of the concept of corporate governance as a growing role in the

market-oriented economy in the later part of the 20th

century. According to

them, this has led to the spread of capitalism, globalization, liberalization, and

privatization with demanding efficiency, corporate culture, and model code of

conduct and business ethics for the very survival of the corporate world. They

are of the opinion that the success of corporate governance is based on

complete transparency and arms length relationship between owners and

managers.

V.M. Budhiraja (2003)100

has described the evolution of the concept

of corporate governance in the light of increased corporatization and growing

stock markets. He has stressed the procedural aspect of the corporate

governance in complying with the social responsibility and accounting

standards. He is of the opinion that the board of directors should play the role

of visionary in terms of implementation of strategies of the company and

ensuring that the board members do not have direct interest in any of the

business contracts, etc.

Bikram Hundal and Suresh Seth (2003) 101

has elaborated the

benefits accruing due to good corporate governance in an environment of

lxxvii

trust, ethics, moral values and confidence. They have attempted to explain the

fundamental objective of the Desirable Code of Conduct in ensuring the

commitment of the board in managing the company in a transparent manner

for maximizing long term shareholder value. This code seeks to include the

board of directors, its composition, role of non-executive directors, and code

of conduct for directors, audit committee, disclosure of financial and other

relevant information for improving the quality of corporate governance.

Vibha Mahajan (2003) 102

holds the opinion that a social institution

including a corporate entity derives its legitimacy from its ability and desire to

fulfill social needs and hence accountable to the members of the society. The

recurring financial crises and the scams that rocked the nation in the recent

past call for a sharper focus on corporate governance. Therefore, the only way

the interest of the public at large could be protected is, by building the

firewalls in the form of practices of good corporate governance. This has been

advocated by the growing role of the regulators such as SEBI and Stock

Exchanges in putting emphasis on ethics, transparency and voluntary

disclosures.

Prabhdeep Singh Sandhu and Manjit Kaur Sandhu (2003)103

have

examined the accountability of management to shareholders and role of

corporate governance in creating value for shareholders by taking the example

of UTI and Enron fiascos. They have also taken up key issues in corporate

governance guidelines and codes such as board responsibilities, board

compositions board committees and disclosure norms. In this regard, they

have examined the corporate governance codes and guidelines in the Indian

context and suggested that the best results would be achieved when the

companies begin to treat the code as their way life.

lxxviii

Karamjit Singh (2003)104

has hold a firm opinion that there are no

successful systems of corporate governance, past or present, without

committed and knowledgeable long-term shareholders and accountability of

the management. He suggested that both for reasons of power legitimacy and

business competitiveness a real governance system for large corporations are

desirable. Further, nothing meaningful will occur, unless the parties most

affected realize that it is in their self-interest for the changes to take place

because ultimately, it is the corporate governance that is likely to affect the

value of the company in the market.

Prof. M.R. Khurana (2003)105

has examined some of the issues

pertaining to the theme of corporate governance in India and seeks to identify

issue, which need to be considered in improving the corporate governance. He

argues that the national strategy must encompass measures to enforce the

system of accountability to the shareholders, strengthening of the democratic

process and strengthening the media to ensure public awareness, undertaking

the regular policy reviews and effective corporate leadership. According to

him, accountability, transparency, efficiency and discipline are the important

ingredients which will go a long way in building and promoting trust of the

shareholders in the corporate world. Hence, in this regard, a well planned

synchronization is necessary between various factors underlying corporate

governance together with complementary institutions providing enforcement.

Dr. Paramjit Kaur (2003)106

has examined the corporate governance

practices in India and abroad and the impact of Globalization on the

significance of the corporate governance for the long- term corporate

existence. According to her, risks, protection, insider trading and transparency

are the key constituents of corporate governance which are important

considering the enhanced role of shareholders, board of directors and auditors.

lxxix

Dr. Harpeet Singh (2003) 107

has discussed the cases of the vanishing

companies and the growing relevance of the concept of corporate governance

in regard to the corporate responsibility of the promoters and directors of such

companies. He also discussed certain peculiarities in the Indian corporate

governance such as influence of the ascribed authority, effect of education (as

a blend of scientific approach and Indian values), good traditions, belief in

dignity of labour and commitment to the purpose.

A.K. Vashisht, Puja Gaur and Liaqat Ali (2003)108

have stated that

corporate governance stipulates the accountability, control and reporting

functions of board of directors and encompasses the relationship among the

various participants in determining the direction and the performance of the

corporation. They have observed in case of the top performers in Indian

corporate sector, i.e. Reliance, L&T and HLL that, the composition of the

board of directors and the role of chairman call for setting up of behavioral

standards, ably supported and protected by structural system under the full

glare of public responsibility.

Vibha Sinha (2003)109

has equated the terms satisfactory accounting

and disclosure with corporate governance. She has emphasized that proper

working and appropriate board structure are the keys to good corporate

governance apart from their fundamental functions in regard to ensuring

transparency, accountability, fairness and responsibility. She measures the

efficiency of board in terms of monitoring company’s performance against its

objectives. Finally, she has strongly stressed the idea of corporate governance

rating to improve the standard of corporate governance in India.

R. Rajagopalan (2003)110

has felt that, on core corporate issues like

governance imperatives, the perspective of corporate managers in India are

not sufficiently articulated. The reason could be that there is long-standing

lxxx

organized body of corporate directors and executives in India, as in developed

countries. Such bodies are only now evolving in our country. He has basically

focused on two areas, i.e. firstly, the role of the independent directors who

hold the key for ensuring good governance in a corporate organization, are in

a position to check and stop the corporate misdemeanors in the initial stages

of happening; and secondly, the other area of concern is the short-term

approach of corporate managements leading to manipulations, for deriving the

habit of attaining the short-term success, ultimately impairing the long-term

health of the organization.

Anil Kumar Angrish (2003)111

stated that corporate governance is a

set of systems and processes which ensures that a company is managed to the

best interests of all stakeholders. The set of systems that aid the task of

corporate governance, which include certain structural and organisational

aspects and the process vacillating corporate governance that embrace how

things are done within such structure and organizational systems. He

examined the ways through which disclosure norms that are the part of the

control mechanism, keep a tab on corporate sector. He has also elaborated the

various provisions contained in various legislative pieces having a bearing on

corporate governance.

Daisy Chauhan and S.P. Chauhan (2003)112

examined that how the

quality of corporate governance could shape the growth and the future of any

capital market and thereby the economy. According to his study, sound

corporate governance is possible in situations of total transparency, integrity

and accountability of the management while otherwise it can create great

liability for both individual companies and society. Thus, he concluded that

good corporate governance is state of mind and originates from the core

values and needs that is to be institutionalized at all levels of the organization

making it a necessity and not a choice for the Indian economy.

lxxxi

Dr. Madhav Mehra (2004) 113

in his keynote address at the ASEAN

Round Table 2004 organized by Singapore’s Institute of South East Asian

Studies stated that, “Independent directors are the cornerstones of corporate

governance. But excessive remunerations paid to them have made a mockery

of their independence. Analyses of 2004 compensation data showed

independent directors of top 200 companies are being paid £97000 for barely

7 days work in a year.” Moreover, according to him, there are a lot of lessons

for developing and emerging economies like India in the way corporate

governance has been practiced in the west. While these markets are highly

sophisticated, their governance systems are far from satisfactory. They cannot

serve as role models for Asian and African economies but their scandals such

as Enron, Anderson, Worldcom, Parmalat, Scandia, Vivendi, Equitable Life,

Computer Associates, Ahold and Shell offer great lessons.

Arif Khurshed, Susanne Espenlaub & Marc Goergen (2004) 114

have observed that, in the field of corporate governance, the study of lock-in

agreements in initial public offerings (IPO) has recently started to attract a lot

of academic attention. IPO’s are usually characterized by uncertainty, agency

conflicts and sometimes big changes in corporate control structures. Lock-in

agreements can be seen as one of the tools that can help reduce agency

problems since they lead to an alignment of the interests of the insiders with

that of the minority shareholders. They further help to practice good corporate

governance since they reduce the chance of informed insiders taking

advantage of their private information, thus allowing more time for small

investors to resolve the uncertainty in the firm value without the adverse effect

of insider selling.

Jane Fiona Cumming (2004)115

has hold the opinion that, the leading

companies recognize the importance of sophisticated (formal and informal)

networks in the planning and delivery of appealing business solutions; and

lxxxii

indeed, many multi- stakeholder partnerships may have unexpected and

remarkable consequences, possessing the potential to transform the vision and

strategy of the organization. Innovation in corporate governance will become

an essential component in the delivery of sustainable business concept

innovation. Corporate governance procedures are critical to the generation and

ongoing viability of the innovation. Key elements include:

a) Board training and development processes that generate high levels of

awareness and understanding of critical global issues and their potential

impact on the organization;

b) Risk management procedures that enable the board to identify strategic

opportunities as well as recognize critical risks;

c) Board structures that ensure stakeholder perspectives on company

activities and performance are integral to the business decision-making

process;

d) Forward-looking approaches to the assurance of financial and non-

financial information, addressing corporate capacity to handle complex

global issues;

e) Disclosure and transparency processes that facilitate more effective

relationships with stakeholders, and hence support organizational

learning and innovation.

Dr. Giovanni D’Orio and Dr. Rosetta Lombardo (2004)116

has

observed that rules and norms of corporate governance are important

components of the framework for successful market economies and a source

of competitive advantage for emerging economies. But excessive attention to

rules and financial incentives can have the wrong effect of sending a signal of

lxxxiii

a competitive game rather than’ a cooperative one to all the actors of a

corporate enterprise. The success of a corporation depends almost completely

on trust being placed in corporate directors and officers and, obviously, on the

trustworthiness of those directors and officers. If people trust each other in a

perfect way, norms of corporate governance are useless. Instead, the recent

stories of lack of trustworthy behaviour have shown the weakness of many

common law systems of corporate governance. They have concluded that, in

economics, the best way to cope with the concept of system of values, system

of rules, culture or any factor which structures the economic environment is to

understand it as a system of norms (institutions) of democracy and capitalism

are to work, they must coexist with certain pre-modern cultural habits that

ensures their proper functioning.

Lynn McGregor (2004)117

has observed, based on over twenty years

experience of working with boards and executive committees, how widely

diverse leaders succeed in building and maintaining competitive advantage.

As per her observation, every winning team she worked with was totally

committed to winning. Also present is an inspirational vision and sense of

shared purpose, challenging goats and everyone pledged to do their best.

When the team is winning, there is a buzz of heightened energy that fires the

individual and team to express all the knowledge, experience and skills at

their command. She thus concluded that, governance is a powerful tool for

encouraging healthy competitive performance because; a key role for the

board is to promote the executive’s ability to create wealth. To neglect this is

to forget that the purpose of a company is to serve the interests of

shareholders, employees and community in the best possible manner.

Stephen M. Ruckman ( 2004)118

has examined that, just having access

to a company’s financial report is not enough; unintelligible reports can easily

be mistaken for misleading reports. Thus, improving board transparency

lxxxiv

means both making board activities more transparent and communicating

them in a transparent, intelligible manner. By taking these steps, corporate

boards will be able to help their shareholders and stakeholders get the message

that, their globalizing operations are not necessarily sources of deception.

Likewise, shareholders and stakeholders will be able to help hoard members

get the message that they are accountable for their actions, and that they

would do well to listen to those affected by their company’s participation in

economic globalization. He concluded that, poor communication fuels distrust

and discontent with corporate boards. Trusted communication, however,

ensures trusted hoards.

Janis Sarra (2004)119

has concluded in her paper that while more

empirical study is necessary before definitive conclusions can be drawn

regarding indicia of effective stewardship of corporations across different

systems, there are at least four key indicia that are signs of effective

governance across diverse regimes: independent oversight, strategic planning,

effective monitoring and risk assessment, and the relational aspects of

governance. However, how they are applied and the benchmarks against

which they are measured vary considerably, given the regulatory and

normative framework in which corporations operate. The governance debate

has resulted in some convergence towards a conceptual understanding of

effective corporate governance as necessary to enhancing corporate

performance, effectively monitoring activities of managers, and protecting

shareholder rights. Finally, governance of the corporation includes the

structure by which corporate decisions are made such that capital can be

raised cost-effectively, assets are utilized in efficient generation of wealth, and

corporate officers are accountable to those investing in the firm in a manner

that controls agency costs. Thus governance is influenced by three key factors:

lxxxv

the regulatory framework, corporate governance norms and the underlying

objectives of corporate activity.

A.M. Ahmadi (2004)120

has stated that law has a three dimensional

impact; it serves as a deterrent as well as a guide, it obliges the administrative

machinery to apply the laws and it imposes a duty on the courts to enforce the

laws. Hence, it is essential to focus on the methods by which effective

implementation of legal and statutory norms can be ensured; because only

then will it strengthen the compliance with norms of good governance.

Statutory and legal norms are merely spokes of a wheel which requires to be

peddled to ensure movement in the right direction. The machinery has to be

kept road-worthy for effective implementation of norms for good governance.

However, corporate governance system must therefore be so designed that it

presents a friendly to those who are to work the process day in and day out.

He concluded that, what legislation can and should do is to lay down a

common framework - the 'form' to ensure standards. The 'substance' will

ultimately determine the credibility and integrity of the process. Substance is

inexorably linked to the mindset and ethical standards of management.

Ashish Makhija (2004) 121

has explained the core of the corporate

governance principles stating that the debate over self-regulation or legislation

in corporate world is quite old now. The Indian corporate scenario would

justify the legislation of corporate practices. The Confederation of Indian

Industries codified the corporate governance practices many year ago but its

compliance was non-existent until and unless the securities and Exchange

Board of India made it mandatory on the recommendation of Kumar

Mangalam Birla Committee. Thus he concluded that, the compliance with

legislated corporate governance practices must be considered as corporate

governance practices at minimum level. What is desired, at the moment, is

change in perception of persons charged with governance. The regulatory

lxxxvi

pressure is indispensable but voluntary compliance to more than minimum is

desirable. The need of the hour is effective and continuous control system

hacked by independent and effective monitoring system.

N.R. Narayana Murthy (2003) 122

has avowed that ethics, however

intangible play a prominent part in a corporate’s performance, if practiced by

heart can prevent the erosion of standards and serve as a yardstick for

measurement of a corporate’s overall progress. According to him, building

trust and confidence requires an environment where there is premium on

transparency, openness, lack of fear, fairness and justice which should he

encouraged by the chief executive officer of the company. Through this,

excellence can be achieved which is not just a product or a process but it is an

attitude that says ‘nothing else will do’.

Dr. P.K. Chakroborthy (2004) 123

has observed that while the primary

responsibility for good corporate governance rests with the board of directors,

the role played by the auditors along with other agencies like Government,

regulators, industry association, chamber of commerce, etc. are equally

important. The auditor should command an acceptance to this role so that the

advantages of good corporate governance can be availed by all concerned.

Pradeep Godbole (2004) 124

observed that Sarbanes Oxley Act (SOX),

2002 has created ripples in corporate governance arena following the recent

corporate scandals hitting America. SOX has received criticism and described

as a knee jerk reaction to corporate scandals in the US rather than a proper,

well thought out plan to propagate good corporate governance. This may

impede its effect to a certain extent, but the fact remains that with its cutting

edge penalties, SOX acts as blessing in disguise and fosters interest in

corporate governance. Efforts are already underway in Europe and rest of the

World to develop laws similar to SOX, 2002.

lxxxvii

James Nelson (2005)125

has observed the Various facts about corporate

governance practices and details how governance practices have evolved over

time, the link between firm performance, CEO characteristics and changes in

corporate governance practices using an unbalanced panel of 1721 US large

firms from 1980 to 1995. According to him, by 1995, the majority of firms

had implemented differing types of charter amendments, poison pills or other

governance provisions that are potentially harmful to shareholders. Most firms

have adopted multiple and even redundant governance provisions.

Shareholders are more likely to approve an increase in the power of the boards

of directors of better performing firms, while the boards of poorly performing

firms are much more likely to initiate governance changes, such as poison

pills, that circumvent shareholder approval. I find no relationship between

CEO age, tenure or compensation and governance changes.

P.K. Banerjea (2005) 126

have concluded in his redefinition concept of

corporate governance in the new millennium by taking into account various

complicated issues on the all-important Corporate Governance and Ethical

issues, they are, Business Model has changed a lot, and keeping with this,

composition of board should change by inducting technologists who are again

time limited by the relevance of their technology. Hence the key innovators

are to be on the Board. Leadership should be distributed to provide ownership

to the innovators and actual man on the job. Boards are to be formed on the

basis of structure, process, culture and remuneration, and Corporate

Entrepreneurship or Community to be formed to encourage self-governance.

Ethical issues will dominate with more technological development, hence

ethical codes has to be formulated in all corporate entity. Environment

management will hold the key for future hence corporate social responsibility

will be crucial. Ethics will be redefined as goodness advances with a mix of

altruism and self-interest. Corporations can no longer see themselves as self-

lxxxviii

centered concerns; they should look into their higher self and make positive

commitments to larger issues that confront the mankind. Corporations have to

pledge to honour their obligation to the society by becoming an economic,

intellectual and social asset to each nation and each community in which they

operate and it should be freedom from greed.

Richard Leblanc and James Gillies (2005) 127

have made studies

based on the observation of boards and board committee in real time and

almost two hundred interviews with directors, regulators and students of

corporate governance over a five year period, undertaken. They confirmed

that there is a casual relationship between governance and performance

suggesting, those boards constructed on the competencies and behavioural

characteristics of individual directors lead to superior corporate performance.

Everyone that is, stakeholders, the community and the economy benefits from

well run corporations operating profitably within fair, efficient capital

markets, and everyone suffers when corporations fail. Their research

continued to flesh out the competency, behavioural, strategy and recruitment

model in establishing the relationship between corporate returns and a certain

pattern of corporate governance, although no practitioners or scholars is quite

sure what that pattern is.

Atty. Rene G. Banez & Jilla S. Decena (2005) 128

has concluded that

the basic problem besetting the corporate world today is simply the absence of

trust or the lack of it. The challenge is now to go back to basics and to stick to

the fundamentals by rediscovering, relearning and reliving the old fashioned

values of integrity, honesty, transparency and accountability. This is the key to

restoring and enhancing trust in the workplace because the foundation of good

corporate governance is trust. This could have prevented the corporate

scandals in the world if better disclosure would have been trust affected. The

excesses and greediness of the corporate world could only have been

lxxxix

prevented the executives involved have the right and correct values. They

have also stressed that credibility and utility of corporate governance are

compliance and enforceability which are very much interrelated. Compliance

will be enhanced if regulators are competent and capable to enforce the laws

and rules. Thus, compliance is expected and even exceeded if values are

rooted in the organization and ethics is observed.

Y.M. Kale (2005) 129

has observed that moves are afoot globally to

promote convergence of good corporate governance practices. International

Accounting Standards with linkages to International Organization of

Securities Commission, which represents most of the world’s regulating Stock

exchanges, are pulling towards a harmonization of desirable corporate

governance practices. Yet the sober truth is that corporate governance

practices in various countries remain divergent. India can be proud of what it

has achieved so far incorporate governance practices but, of course, much

more needs to be done.

Nitin Agarwal (2005) 130

has explained the issues to be considered,

while reviewing the recent changes in clause 49 in the listing agreement of

SEBI. According to him, the issues are related to policing and punishment,

apprehension about excessive interference and the practice of companies

ticking checklists instead of focusing on the spirit of good governance. Hence,

the compliance of the corporate governance practices has to come through

conviction and self-discipline of top management. In order to ensure that the

companies adopt corporate governance in letter and spirit, a small corpus of

legally mandated rules is needed along with a larger body of self-regulation

and voluntary compliance.

Suresh C. Senapathy (2005) 131

has observed that one of the most

powerful notions in corporate governance is the presence of independent or

xc

non-executive directors on the board of a company. These are the white

knights of shareholders, expected to provide an ongoing strategic direction

and support to the executive management through their expertise, experience

and most critically, their independence. Bringing in ‘stakeholder interest first’

in every corporate decision and action is the key expectation from these

stalwarts. However, some of the recent examples in corporate history have

questioned this very fundamental premise-independence of a Independent

director. Hence, it is early days to reach any judgment, as having independent

directors on the board is a more recent phenomenon in India than in west. He

concluded that India Inc. is on right track so far, and the journey should be

continued through regulation and practice, as it can take the companies to

greater heights of value creation by following the best corporate governance

practices.

Niu(2006) 132

examined the association between corporate governance

mechanisms (including board composition, management shareholding,

shareholders rights and the extent of disclosure of governance practices) and

earnings quality, measure in two ways, namely, earnings management and

earnings informativeness. Using a sample of Canadian firms and applying

Kothari et al. and Larcker and Richardson as earnings quality measurements,

her empirical tests demonstrate that the level of independence of board

composition is negatively related to the level of abnormal accruals.

Abdul Rahman and Ali (2006) 133

investigated the extent of the

effectiveness of the board of directors, the audit committee and concentrated

ownership in constraining earnings management among Malaysian listed

firms. Their study reveals that earnings management is positively related to

the size of the board of directors.

xci

Mallin, (2007) 134

conceded that NEDs should be paid a fee

commensurate with the amount of time that they are expected to devote to

their role, but she argues that remunerating NEDs with share options is

inappropriate as it may give NEDs a rather unhealthy focus on the short term

share price of the company.

Osma (2008) 135

explored different types of earnings manipulation and

analyses the effect of independent boards on constraining research and

development (R&D) spending manipulation. They surveyed all UK non-

financial firms and the results indicate that independent directors are

capable of identifying and constraining earnings management represented by

R&D cuts and can see through this type of manipulation

Siregar and Utama (2008) 136

investigated the effect of ownership

structure, firm size and corporate governance practices on earnings

management using Indonesian companies listed on the Jakarta Stock

Exchange. They do not find evidence that firms with independent boards

engage in informative earnings management.

Adams et. al. (2009) 137

conducted a large survey to investigate outside

directors roles as advisors and monitors of management. He found that

directors who primarily monitor management perceive that they

participate less in boardroom discussion than other directors and that the CEO

often asks them for advice.

Dimitropoulos and Asteriou (2010) 138

examined the impact of

board independence on earnings management for 97 non-financial firms listed

on the Athens Stock Exchange in Greece for the years 2000 through 2004.

They use discretionary current accruals to measure earnings management and

consistent with Anglo-American countries studies, they find that board

independence is significantly and negatively related to their EM proxy.

xcii

2.3 RESEARCH GAP

The review of literature indicates that even though there is a plethora of

research literature on CG, most of the studies have been done on its

conceptual framework, the practices of CG, and the Chief Executive Officer

characteristics influencing company’s performance, the role of the board and

shareholders wealth maximisation for the efficient markets of the developed

nations of the world like US, UK etc., In India, very limited research work is

done on perception of the stakeholders on CG practices and the prevalent

situation in listed software companies is rarely studied even though as per the

code issued by Government they have to follow CG practices mandated in the

listing agreement. Hence this study is taken up to identify and analyse the

stakeholders’ perception towards their level of expectation and satisfaction on

CG practices in the select software companies in India.

2.4 CONCLUSION

A review of literature has been made to establish

the validity of the research topic, “ A Study on the

Stakeholders’ Perception of Corporate Governance

Practices with reference to the Software Companies in

India”. The different theories pertaining to CG put forth

by various corporate analysts have been reviewed. Thus

the study has embarked upon the analysis of perception

towards the expectation and satisfaction on CG

practices in select software companies, in the light of the

recent recommendations and codes issued by

Government and quasi-judicial authorities, fastening the

gap in the field of research on CG.

xciii

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CHAPTER - III

PROFILE OF SOFTWARE COMPANIES

3.1 INTRODUCTION

There are five software companies chosen for the study, namely

Infosys, Wipro, TCS, HCL and Satyam. A brief profile of these software

companies are discussed below, which are relevant for the research topic, "A

study on the stakeholders’ perception of corporate governance practices with

reference to the software companies in India".

3.2 INFOSYS TECHNOLOGIES LTD.1

Infosys Technologies Ltd., (NASDAQ: INFY) was started in 1981 by

seven people with US$ 250. Today, they are a global leader in the “next

generation” of IT and Consulting with revenue of US$ 5.4 billion (LTM Sep-

10). Infosys defines, designs and delivers technology-enabled business

solutions that help Global 2000 companies win in a Flat World. Infosys also

provides a complete range of services by leveraging their domain and business

expertise and strategic alliance with leading technology providers. Their

offerings span business and technology consulting application services,

system integration, product engineering, custom software development,

maintenance, re-engineering, independent testing and validation services, IT

infrastructure services and business process outsourcing. Infosys pioneered

the Global Delivery Model (GDM), which emerged as a disruptive force in

the industry leading to the rise of offshore outsourcing. The GDM is based on

the principle of taking work to the location where the best talent is available,

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where it makes sense the best economic sense, with the least amount of

acceptable risk.

Infosys has declared its vision, mission and values. Vision - “To be a

globally respected corporation that provides best-of-breed business solutions,

leveraging technology, delivered by best-in-class people”. Mission – “To

achieve the objectives in an environment of fairness, honesty and courtesy

towards the clients, employees, vendors and society at large” Values - Infosys

believe that the softest pillow is a clear conscience. The values that drive

Infosys underscore is commitment to: Customer Delight - To surpass

customer expectation consistently, Leadership by Example - To set standards

in our business and transactions and be an exemplar for the industry and

Infosys, Integrity end Transparency - To be ethical, sincere and open in all the

transactions, Fairness - To be objective and transaction -oriented, and thereby

earn trust and respect, Pursuit of Excellence - To strive relentlessly, constantly

improve the teams, and services end products to become the best.

Fortune magazine identified Infosys among the top companies that

“inspire, nurture and empower a new generation of global leader’s they are

committed to remain among the industry’s leading employees. ‘In God we

trust, everyone else must come with data’ is an off-heard phrase at Infosys.

The consultancy benchmarks the services and processes against globally

recognized quality standards. Infosys certification includes SEI-CMMI Level

5, CMM Level 5, PCMM Level 5, TL 9000 and ISO 9001-2000. In February

2007, Infosys BPO was certified for ESCM level 4.0, the E-Sourcing

Capability Model for Service Providers developed by a consortium led by

Carnegie Mellon University’s Information technology services qualification

center.

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Infosys began its journey in India’s business environment in the 1980’s

in an era when endless red tapism was imposed on the private sector. In this

environment building a company whose long-term objectives included

operational longevity, high ethical standards and global respect demanded

commitment to a core set of values. For Infosys, these values focus on

instilling trust in relationships with all stakeholders, including employees,

investors, clients, society and the communities in which Infosys operates.

Infosys believe that they must develop trust with the communities in which

they operate to achieve longevity as a corporation. Through the Infosys

Foundation, which receives a grant every year from Infosys, the last year's

grant was US $ 3 million, Infosys contribute to betterment of healthcare

(hospitals, infrastructure), education (books, scholarships, refurbishment of

infrastructure) and skills. Infosys emphasizes its commitment to investors

through stringent corporate governance. Infosys was also among the first

Indian companies to voluntarily comply with the US Generally Accepted

Accounting Principles (GAAP) and now provides financial results in the

GAAP of six countries.

Employees hailing from over 70 nationalities, Infosys have built an

enduring value system based on openness, honesty, fairness and transparency,

which has earned them the confidence and trust of Infosys clients. Infosys

enjoy plus 95 per cent customer retention. Infosys has built one of the largest

corporate education centers in the world. This “finishing center”, with an

annual capacity of’ 15,000, provides engineering graduates who aspire to be

employees with the equivalent of a Bachelor of Science degree in Computer

Science from an American university. The partnership focuses on developing

solutions that incorporate Infosys IP and the alliance partners’ technology and

services. Infosys jointly deliver and market Infosys solutions to clients across

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multiple industries and geographies in different technologies like SAP,

Oracle, and Microsoft.

Infosys has a global footprint with 63 offices and development centers

in India, China, Australia, the Czech Republic, Poland, the UK, Canada and

Japan. Infosys and its subsidiaries have 1,22,468 employees as on Sep 30th

2010. Infosys takes pride in building strategic long term client relationship.

Over 97% of their revenues come from existing customers (FY’10)

3.3 WIPRO TECHNOLOGIES LTD.2

Wipro is at the forefront of technological and business co-innovation

with 136 patents and invention disclosures. With enhanced business

performance at the core of its deliveries due to its strong R&D and Innovation

focus, Wipro gets an enviable 95 per cent repeat business. With more than

100,000 associates from over 70 nationalities and 72 plus global delivery

centers in over 55 countries, Wipro’s services span financial services, retail,

transportation, manufacturing, healthcare services, energy and utilities,

technology, telecom, and media. Wipro’s unwavering focus has been on

business transformation with matchless innovation in service delivery and

business models. More than 800 active clients that include Governments,

educational institutes, utility services, and over 150 Global Fortune 500

enterprises have benefited from this approach.

Wipro’s complete range of IT Services addresses the needs of both

technology and business requirement to help organizations leverage leading-

edge technologies for business improvement. Wipro takes change of the IT

needs of the entire enterprise. The gamut of services extends from enterprise

application Service (CRM, ERP, e-Procurement and SCM), to e-Business

solutions. Wipro enterprise solutions have served and continue to serve clients

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from a range of industries including energy and Utilities, finance, Telecom,

and Media and Entertainment. Wipro’s Technology Infrastructure services

(TIS) is the largest Indian IT infrastructure Services provider in terms of

revenue, people and customers with more than 200 customers in US, Europe,

Japan and over 650 customers in India. It is powered expert skills of over one

lakh technical specialists and state-of-the-art BS 15000 certified infrastructure

for operations support. A phased approach towards process standardization,

process optimization and process re-engineering is achieved. Wipro BPO

provides a board range of services from customer relationship management,

back office transaction processing to industry specific solutions. The key

element of services delivery is an integrated approach towards providing

increasing value over the entire course of the client relationships. This

involves a phased approached towards process standardization, process

optimization and process re-engineering.

Reinvention and Wipro go hand-in-hand as far as technology and

process advancement is concerned, Wipro Technologies is a global IT

services company that provides Consulting, Business Process Outsourcing,

Business Technology Services, Enterprise application Services, Infrastructure

management, Testing, Products Engineering, Engineering Design and Product

Support. Wipro services arc spread across a range of strategic domains.

Wipro is the first CMM1 Level 5 certified software services company

and the first outside USA to receive the IEEE Software Process Award.

However, when Wipro was formed as a vegetable oil refining company in

1947 the dramatic change in the company’s industry dynamics could only

have been predicated considering the fact that it was always reinventing itself.

Now, after three decades in the IT industry, backed with unmatched technical

expertise and insights, Wipro have maintained the highest levels of

compliance and quality that go with the changing times and technologies. The

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knowledge investments are backed by years of R & D and have led to the

creation of labs and ‘Centers of Excellence’ that have produced innovative

Solutions. Wipro Technologies is a global services provider delivering

technology-driven business solutions. Wipro is the No.1 provider of integrated

business, technology and process solutions on a global delivery platform.

Azim Premji is the Chairman of Wipro Technologies. He took over the

mentor of leadership of Wipro at the age of 21 in 1966. Under his leadership,

the fledging US$ 2 million hydrogenated cooking fat company has grown to a

US$ 1.76 billion IT services organization serving customers across the globe.

Wipro is presently ranked among the top 100 Technology companies in the

world. It has more than one lakh employees, serves 592 clients, and has 46

development centers across globe.

Wipro is the largest independent provider of R&D services in the

world. Using 'Extended Engineering' model for leveraging R&D investment

and accessing new knowledge and experience across the globe, people and

technical infrastructure. Wipro enables firms to introduce new products

rapidly. Business Process Outsourcing - Wipro provides business process

outsourcing services in areas finance & accounting, Procurement, HR

services, Loyalty Services and Knowledge Services. IN 2002, Wipro

acquiring Spectra mind and became one of the largest BPO service players.

Consulting Services - Wipro offers services in Business Consulting, Process

Consulting, Quality Consulting, and Technology Consulting.

Wipro group includes, a) Wipro Infrastructure Engineering - It has

emerged as the leader in the hydraulic cylinders and truck tipping systems

market in India. b) Wipro InfoTech - It is one of the leading manufacturing of

computer hardware and a provider of systems integration services in India.

c)Wipro Lighting - It manufactures find markets the Wipro brand of

luminaries. Wipro Lighting offers lighting solutions across various application

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areas such as commercial lighting for modern work spaces, manufacturing and

pharmaceutical companies, designer petrol pumps and outdoor architecture.

Some of the achievements of Wipro includes, first Indian IT Service Provider

to be awarded Gold — Level Status in Microsoft’s Windows Embedded

Partner Program, World’s largest independent R&D Services Provider,

World’s 1st ICMM Level 5 software company, World’s 1

st IT Services

Company to use Six Sigma, The first to get the BS 15000 certification for its

Global Command Centre, among the top 3 Offshore BP0 service providers in

the world, only Indian Company to be ranked among the ‘Top 10 global

Outsourcing Providers’ in the IAOP-Fortune Global 100 listings, first

company in the world to be certified in BS 7799 (2002) security standards.

Wipro’s IT division provides solutions and services including systems

integration, information systems outsourcing, IT enabled services, package

implementation, software application development and maintenance, and

research and development services to corporations. The company provides

PCMM Level 5 and SEI CFMM Level 5 certified IT services. It also provides

IT solutions and services for the corporate segment in India, offering system

integration, network integration, software solutions and IT services. In the

Asia Pacific and Middle East markets, Wipro provides IT solutions and

services for global corporations. Wipro is also engaged in market segments of

consumer products, lighting, furniture, eco energy, water treatment and

hydraulic business. It operates in four segments. IT services, IT Products,

Consumer Care and Lighting, and Others. On December 9, 2009, it acquired

Lornamead FZE and Lornamead Personal Care Private Limited.

One of the world’s largest third party R&D services provider, Wipro

caters to product engineering requirements in multiple domains. Most of the

technology that come across in daily life - airplanes, automobile navigation

systems, cell phones, computing servers, drug delivery devices, microwaves,

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printers, refrigerators, set top boxes, TVs - will find a Wipro component in

them. The service portfolio includes product strategy and architecture,

application and embedded software, electronic and mechanical hardware,

system testing, compliance and certification and product sustenance and

support. Wipro believes that certain core technologies have a significant

impact on business competitiveness going forward. Towards that direction,

Wipro’s Research and Development activity is currently focused on Cloud

Computing, Collaboration, Green Technologies, Mobility Applications, Social

computing, information management and security.

3.4 TATA CONSULTANCY SERVICES LTD.3

TCS is Software services consulting company headquartered in

Mumbai, India. TCS is the largest provider of information technology and

business process outsourcing services in Asia. TCS has offices in 42 countries

with more than 142 branches across the globe. The company is listed on the

National Stock Exchange and Bombay Stock Exchange of India. Tata

Consultancy Services started in 1968, as a division of Tata Sons Limited. In

August 2004 Tata Consultancy Service Limited made its IPO. Mr. Ratan Tata

who is presently the Chairman was entrusted with the job of Steering TCS.

The early days marked TCS responsibility in managing the punch card

operations of Tisco. The company, which was into management consultancy

from day one, soon felt the need to provide solutions to its clients as well.

TCS was the first Indian company to make forays into the US market with

clients ranging from IBM, American Express, Sega etc. TCS is presently the

top software services firm in Asia. During the Y2K buildup, TCS had setup a

Y2K factory in Chennai as a short-term strategy. Now, with e-business being

the buzzword, the factory is developing solutions for the dotcom industries.

Today, about 90 per cent of TCS revenue comes from consulting, while the

rest from other products. TCS has great training facilities, in addition to

http://en.wikipedia.org/wiki/Mumbai

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/Information_technology

http://en.wikipedia.org/wiki/Business_process_outsourcing

http://en.wikipedia.org/wiki/National_Stock_Exchange_of_India

http://en.wikipedia.org/wiki/Bombay_Stock_Exchange

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training around 5 per cent of the revenue is spent upon its R&D centers like

the Tata Research Design and Development Centre at Pune, along with a host

of other centers at Mumbai and Hyderabad.

It benchmarked its quality standing, invested heavily in software

engineering practices and built intellectual property-in terms of patents, code

and branded products. At the same time, it expanded its relationships with

technology partners and organizations, increased linkages with academic

institutions and incubated technologies and ideas of people within TCS and

outside. TCS has already patented 12 e-Commerce solution product packages

and has filed six more applications for patent licenses. Over $25 million were

spent on enhancing hardware and software infrastructure. The company now

has 72 offices world wide. As many as seven centers were assessed at SEI

CMM Level 5 last year (3.4 mistakes in a million opportunities).These include

Chennai, Mumbai, Bangalore, Calcutta, Hyderabad and Lucknow. Several

business and R&I relationship with global firms like IBM, General Electric,

and Unigraphics Solutions have been made. The present CEO of the company

is Mr. S.Ramadorai. The company’s employee’s strength is more than one

lakh.

TCS uses its industry experience and technology expertise to

effectively develop products, tools and methodologies that help bring

solutions to the fore more quickly and with higher quality. These tools helped

them achieve a customer satisfaction rating of 87 per cent a figure much

higher than the industry standards for on-time project delivery. Over the

years, TCS have evolved processes and systems that capture critical client

needs, survey the set of existing third-party tools technologies, and then

develop solution accelerators that help clients achieve quicker outcomes. TCS

have over 50 Centers of Excellence which track domain and technology trends

and address the most critical client needs through specific frameworks or

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methodologies that accelerate the implementation process for third-party

products. TCS is a preferred alliance partner for most leading IT product and

platform companies, including Oracle, SAP, Microsoft, IBM and HP, among

others. With intimate knowledge of their technologies and products, TCS

build complementary solution accelerators that help clients in specific

industries such as textile manufacturing, or with specific needs (e.g., an ERP

platform upgrade) that leverage the true potential of these technologies.

A pioneer in software R&D, TCS, today, has an innovative

environment that offers a research-based solutions in leading edge

technologies that will help to meet your IT expectation and support business

objectives. Innovation Ecosystem includes TCS Innovation Labs, TCS Co-

Innovation Network (COIN), incubation Group. Innovation Events are

'Innovation Days' help key customers and TCS researchers to collaborate on

specific solutions. 'Innovations Forums' held annually in the UK and USA

helps to build as confidence of thought leaders and researchers from

academia, start-ups and customers, bringing value through shared experiences

and offering a preview of technologies and solutions of the coming decade.

Innovation Culture helps for Awards for young innovators, coding

competitions, research workshops and conferences where scientists of

international repute participate and create a fertile environment for TCSers,

enabling them to think creatively around customer solutions. TCS has created

a strong IPR base and has stepped up invested such as patents, copyrights and

trademarks. TCS have a strong network of partners with a joint objective of

helping the TCS customers become high-performance businesses by

maximizing the value of their technology investments. TCS partner programs

are specifically designed to jointly work on partner tools and receive the

necessary training, support and resources on partner technology products. This

enables TCS customers to advance their businesses. TCS global alliance

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mission in partnering with various organizations is to ensure that both TCS

and the partner organizations derive the maximum benefits for TCS

relationship, in terms of growth of services and products.

The Business Value for TCS clients includes, reduced risks and costs

associated with the technology procurement process and technology

ownership, competitive advantage by leveraging TCS industry, product and

service expertise and the partner’s technology products and services, reduced

IT costs with cost-effective solutions at scale, reduced risks through end-to-

end solutions, ability to leverage training resources to help plan and build

solutions using Partner products and seamless solutions. The TCS-Alliance

Partner Advantage includes, partner organizations and TCS work together to

create new offerings, privileged access to development software, architectural

expertise and sizing and configuration assistance, key benefits and resources

for building and selling solutions supporting Partner systems and joint go-to-

market initiatives.

Both on its own and as part of the Tata Group, TCS has actively

implemented programs and initiatives for the betterment of society,

communities and the environment, since its inception. TCS believe in giving

back to all the communities to operate with and in utilizing IT as an

instrument for social development and progress. TCS is deeply committed to

the causes of’ education and the environment and the setting up and

maintenance of infrastructure for urban beautification, pollution reduction and

healthcare, waste management in the office environment, tree plantation and

water treatment.

IT Solutions and Services (74.9 per cent of net sales) of TCS, is a

segment that develops IT products for and offers IT services to customers.

Some of these IT products include software applications and systems for

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performance management, customer relationship management and supply

chain management. Some of the company’s IT services include software

application management, system integration, data mining and data quality

management. Business Process Outsourcing (6.2 per cent o net sales) of TCS

is another segment that helps customers automate and complete specific non-

core business tasks. Some of these non-core business tasks include payroll,

finance and accounting, and human resources. The Engineering and Industrial

Services (5.4 per cent of net sales) of TCS. Segment helps customers engineer

and manage products, design and Automate Plants, and source for and

manufacture components. IT Infrastructure Services (6.5 per cent of net sales)

of TCS builds and maintains IT infrastructure for customers, Asset Based

Offerings (3.6 per cent of net sales) of TCS develops IT products for and

offers IT services to customers that Operate specifically in the banking,

financial services and insurance industries.

Now, with a presence in 34 countries across 6 continents, & a

comprehensive range of services across diverse industries, TCS is one of the

world’s leading Information technologies companies. Six of the fortune top 10

companies arc among the TCS valued customers. TCS is the part of one of

Asia’s largest conglomerates - the TATA Group - which, with its interests in

Energy, Telecommunications, Financial Services, Chemicals, Engineering &

Materials, provides us with a grounded understanding of specific business

challenges facing global companies. TCS is a leading IT services provider,

with a wide breadth of services across the entire Information technology

spectrum. TCS provides following services & solutions; Consulting, IT

Services, BPO, IT Infrastructure Services, Engineering and Industrial

Services, Product Based Solutions. Over $25 million were spent on

enhancing hardware and software infrastructure.

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3.5 HCL Ltd.4

HCL is a leading global Technology and IT Enterprise with annual

revenues of US$ 5.9 billion. The 3 decade old enterprise, founded in 1976, is

one of India's original IT garage start ups. Its range of offerings span R&D

and Technology Services, Enterprise and Applications Consulting, Remote

Infrastructure Management, BPO services, IT Hardware, Systems Integration

and Distribution of Technology and Telecom products in India. The HCL

team comprises 80,000 professionals of diverse nationalities, operating across

31 countries including 500 points of presence in India. HCL has global

partnerships with several leading Fortune 1000 firms, including several IT and

Technology majors. From aeronautics to life sciences, HCL touches millions

of people through technology across the world every day. Developed the first

indigenous micro-computer at the same time as Apple and 3 years before

IBM's PC – in 1978. This micro-computer virtually gave birth to the Indian

computer industry. Shiv Nadar is the founder of HCL.

HCL Technologies is a leading global IT services company, working

with clients in the areas that impact and redefine the core of their businesses.

Since its inception into the global landscape after its IPO in 1999, HCL

focuses on 'transformational outsourcing', underlined by innovation and value

creation, and offers integrated portfolio of services including software-led IT

solutions, remote infrastructure management, engineering and R&D services

and BPO. HCL leverages its extensive global offshore infrastructure and

network of offices in 26 countries to provide holistic, multi-service delivery in

key industry verticals including Financial Services, Manufacturing, Consumer

Services, Public Services and Healthcare. HCL takes pride in its philosophy of

'Employees First' which empowers our transformers to create a real value for

the customers. HCL Technologies, along with its subsidiaries, had

cxxiii

consolidated revenues of US$ 2.9 billion (Rs. 13,145 crores), as on 30th

September 2010 (on LTM basis).

HCL Infosystems Ltd., is India’s premier hardware, services and ICT

systems integration company offering a wide spectrum of ICT products that

includes Computing, Storage, Networking, Security, Telecom, Imaging and

Retail. HCL is one-stop-shop for all the ICT requirements of an organization.

India’s leading System Integration and Infrastructure Management Services

Organization. HCL has specialized expertise across verticals including

Telecom, BFSI, eGovernance & Power, HCL has India’s largest distribution

and retail network, taking to market a range of Digital Lifestyle products in

partnership with leading global ICT brands, including Apple, Cisco, Ericson,

Kingston, Kodak, Konica Minolta, Microsoft, Nokia, Toshiba, and many

more.

The TIME magazine has referred to HCL as an "intellectual clean room

where its employees could imagine endless possibilities". The fact is, over the

last thirty years that HCL has been operational, the company has stood by its

values and core philosophy. Fuelled by the entrepreneurial zeal of its

founders, HCL developed the first indigenous micro-computer in 1978, at the

same time as Apple. Since then, HCL has had a 3 decade rich history of

inventions and innovations. Intrapreneur is the term that best describes the

HCL employees. Ever since HCL entered into an alliance in 1970s,

partnerships and HCL have been inseparable. Bonds have been forged with

partners to co - create value. Strong inorganic growth is a testimony to the

spirit of partnerships. This entrepreneurial and win-win relationship driven

culture continues to guide HCL in all its endeavours.

HCL Technologies has been declared as one of Britain’s Top

Employers for 2011 for the fifth consecutive year by the Corporate Research

cxxiv

Foundation (CRF) Institute. HCL was valuated in a Gartner report - ‘HCL

positions itself as 'CIO's Best Friend' at its 2010 North American and

European Analyst Events’ by Arup Roy et al, 19 January 2011. HCL has

been positioned as a Leader in a recently published Gartner report titled

‘Magic Quadrant for Help Desk Outsourcing, North America’ by William

Maurer, Bryan Britz, Helen Huntley and David Edward Ackerman, 29 March

2011” (The Magic Quadrant is copyrighted 2011 by Gartner, Inc. The Magic

Quadrant is a graphical representation of a marketplace and for a specific time

period. It depicts Gartner’s analysis of how certain vendors measure against

criteria for that marketplace, as defined by Gartner. Gartner does not endorse

any vendor, product or service depicted in the Magic Quadrant, and does not

advise technology users to select only those vendors placed in the 'Leaders'

quadrant. The Magic Quadrant is intended solely as a research tool, and is not

meant to be a specific guide to action. Gartner disclaims all warranties,

express or implied, with respect to this research, including any warranties of

merchantability or fitness for a particular purpose). HCL has been named as a

Leader in the report titled ‘Forrester Wave™: Global IT Infrastructure

Outsourcing, Q1 2011’, published in March 2011 by Forrester Research, Inc.

HCL emerged as one of the strongest India-centric Infrastructure Management

Providers in this report.

Forrester Research, Inc. recognized HCL as a consultancy that offers

professional services in smart grid IT capabilities and service in its February

2011 report ‘Market Overview: Smart Grid IT Vendors’. IDC in a report

titled ‘Vendor Assessment: HCL's Profile for Asia/Pacific (Excluding Japan)

Public Sector IDC Government Insights #AP9694204S’ said, “HCL is poised

to compete in the region among other Indian multinational companies, and

undertake more complex transformation-related SI and managed services

engagements typically characterized by public sector projects” . In another

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report titled ‘HCL: Vendor Profile Series for Cloud Professional Service

Offerings(IDC #225071)’, IDC recognized HCL’s unique Cloud offerings -

“HCL's strategy focuses not only on being a systems, or service integrator but

also on being a cloud service provider with unique offerings related to its

engineering services heritage”. Springboard Research has adjudged HCL as

the ‘Indian IT Company of the Year 2010 for the Domestic Market’ in report

titled India IT Market Predictions 2011 published on Jan 5, 2011. TPI has

named HCL amongst Top 15 Service Providers by total contract value (TCV)

in the Americas and amongst the Top 7 Service Providers by TCV in APAC

in its report titled The TPI Index: An Informed View of the State of the Global

Commercial Outsourcing Market Fourth Quarter and Full Year 2010,

published on Jan 20th, 2011.

TowerGroup, a leading research and advisory services firm for

financial services industry, has recognized HCL as a vendor who can help

financial institutions ensure they are in compliance with the regulations such

as CARD Act and the Dodd-Frank Act in its December 2011 report ‘The

Consumer Financial Protection Bureau: Threat for Banks, Opportunity for

Vendors’ . Novarica, a division of Novantas LLC, a leading management

consultancy and information services provider for the financial services

industries has recognized HCL as one of the major IT services providers to

North American banks in a report titled ‘Novarica Market Navigator’

published in February, 2011. The International Association of Outsourcing

Professionals (IAOP) has named HCL a Leader in the 2011 HCL has been

felicitated with the prestigious QCI-DL Shah National Award 2011 on

Economics of Quality for the second consecutive year. The Quality Council

of India (QCI) and the DL Shah Trust honoured HCL with its most prestigious

citation - the ‘National Best of All Award’. The award was presented to HCL

at the 6th National Quality Conclave held in New Delhi. HCL Technologies

cxxvi

has won three REMMY (the Recruitment Marketing Awards) awards for

2011. These annual awards, presented by the Times Group, recognize and

felicitate the creative genius behind the best advertisements in the field of

recruitment marketing. HCL won the Best Recruitment Ad in IT and Telecom

industry, the Best Art Direction, and the Grand Prix Award (Best Recruitment

Ad across industries).

3.6 SATYAM COMPUTER SERVICES LTD.5

Satyam Computer Services Limited, now known as Mahindra Satyam

(OTC: SAYCY), a leading information, communications and technology

(ICT) company providing top-class business consulting, information

technology and communication services. Leveraging deep industry and

functional expertise, leading technology practices and a global delivery

model, they enable companies achieve their business goals and transformation

objectives. They are part of the $7.1 billion Mahindra Group, a global

industrial conglomerate and one of the top 10 industrial firms based in India.

The Group’s interests span financial services, automotive products, trade,

retail and logistics, information technology and infrastructure development.

Satyam Computer Services Limited offers consulting and information

technology (IT) services worldwide. The company operates in three segments:

IT services, Business Process Outsourcing (BPO), and Software Products. The

IT services segment provides a range of services, including software

development, packaged software integration, system maintenance and

engineering design services. Its BPO segment provides services covering

human resources, finance and accounting, customer contact and transaction

processing. Its software products segment engages in the product development

and creation of propriety software. The company offers services to customers

in a range of industries, including insurance, banking and financial services,

cxxvii

manufacturing, telecommunications, transportation and engineering services.

The company markets its services primarily to companies in the United States,

Europe, the Middle East, and the Asia-Pacific region. The company has a

strategic alliance with Mind Flow Technologies Inc.

Satyam offers end-to-end IT solutions for a range of key verticals and

horizontals. Satyam Computers has domain expertise in verticals such as

Automotive, Banking & Financial Service, Insurance & Healthcare,

Manufacturing, Telecom, Infrastructure, Media, Entertainment, and

Semiconductors. Satyam has more than 40,000 employees on its rolls,

working in development centers in India, the USA, the UK, the UAE, Canada,

Hungery, Singapore, Malaysia, China, Japan and Australia. Satyam

Computers network is spread over 55 countries across 6 continents. Satyam

serves over 558 global companies including over 163 Fortune 500

corporations.

Satyam Computers was founded in June 1977 as a private limited

company at Hyderabad by Ramalinga Raju along with one of his brothers-in-

law, DVS Raju. In June 1991, Satyam Computers got its first Fortune 500

Client. In the same year in August, Satyam Computers was recognized as a

Public Limited company. Satyam went public in May 1992 and its issue was

oversubscribed 17 times. In July 1993, Satyam entered into a joint venture

with Dun & Bradstreet. Satyam was awarded ISO 9001 Certification in March

1995. In December 1995, satyam Infoway was incorporated. In May 1997,

Satyam became the first IT Company to get ITM Certification for Y2K

solutions. In November 1998, Satyam became one of the first companies to

enter Indian internet service market with the launch of Satyam Info way’s ISP

service. In the same year satyam entered into a joint venture with GE. In 1999,

satyam infoway became first Indian Internet Company to be listed on

NASDAQ. In February 2000 Satyam was declared one of 100 most

cxxviii

pioneering Technology Companies by World Economic Forum, Davos. In

May 2000 satyam became the first organization in the world to launch

Customer-Oriented Global Organization training. In March 2001 satyam

became first ISO 9001:2000 Company in the world as certified by BVQI. In

May 2001 satyam was listed on New York Stock Exchange. In 2003, satyam

announced business continuity center in Singapore, the first of its kind outside

India. In 2004, satyam opened new development center in Mississauga,

Canada. In 2005 satyam acquired 100% stake in Singapore based Knowledge

Dynamics, a leading Data Warehousing and Business Intelligence solutions

Provider.

The Achievements of Satyam Computers include, first Indian IT

Company to get ITM Certification for Y2K Solutions, Satyam Info way is the

first Indian Internet company to be listed On NASDAQ, declared one of ‘100

Most Pioneering Technology Companies’ by World Economic Forum, Davos.

in the year 2000, first organization in the world to launch Customer-Oriented

Global Organization training, first ISO 9001:2000 Company in the world as

certified by BVQI, ranked by the Brown-Wilson Group as the number two

outsourcing vendor globally in the year 2006.

Satyam Computer Services Ltd. the group’s principal activities are to

provide ‘information technology services, internet services and develop

software products. The ranges of services include consulting, system design.

Software development, system integration and application maintenance. The

Group provides its services to a wide range of industries including insurance,

banking and financial services, manufacturing, tele-communications,

transportation and engineering services. The Group has offshore development

centers located throughout India.

cxxix

In 1993 company has entered into a joint venture agreement with Dun

& Bradstreet Corporation, U.S.A. for development of software. In 1994

January 26th a joint venture company called Dun & Bradstreet Satyam

Software (P) Ltd. was incorporated. In 1995 company issued 37,17,000 12%

unsecured fully convertible debentures part “A” of Rs.100 each on right basis

for the shareholders in proportion of 1 FCD for every 5 shares held. The

company also issued 37, 17,000-12 per cent FCD’s-part ‘B’ Rs.60 per

debentures in August which can be converted into equity shares of Rs. 10 each

at premium of Rs.50 per share on August 1996. During the year two offices

were setup, one in USA and other in Japan. And the company has added new

business partners in Australia, Canada, Japan and Europe. During the year

company promoted subsidiaries, namely Satyam Renaissance Consulting Ltd.,

Satyam Enterprise Solutions Pvt. Ltd., and Satyam Infoway Pvt. Ltd.

In 1997 company has added additional space in Secunderabad and

Bangalore. And new software development centers were opened in

Hyderabad, Pune, Chennai and Bhubaneswar during the year. The company

has established a school at Indian Institute of Information Technology at

Hyderabad, joining a select band of global corporations like IBM, Microsoft

and oracle who are also participating in lIT’s activities.

In the year 1999 the company has set up offsite development centers

which had high margin business and also ventured into the euro conversion

business which is slowly taking-off. Satyam Computer Services Ltd. set up

two offsite development centers in addition to the existing seven centers

across the world. Satyam Computer Services Ltd., one of the fastest growing

IT companies in the country, took significant decisions recently including the

merger of three of its subsidiaries with the parent company and a 1:1 bonus

issue. The company has also set up India’s first Indian Institute of Information

cxxx

Technology and is the first software company in India to get accredited by

(SET CMM) level 5 certificates.

In 2008 Satyam Computer Services Ltd. has informed that Satyam

BPO, the business process outsourcing arm of Satyam, a leading global

business and information technology services Company, on April 10, 2008

announced that it has won two prestigious Shared Services Excellence awards

from the International Quality and Productivity Council. Satyam Computer

has announced it has inked a pact with Info spectrum to give third-party

maintenance, repair and overhaul (MRO) and component repair services for

the global aviation industry. The company acquired Caterpillar Market

Research & Customer Analytics Operations. At present the company has

acquired by Tech Mahindra has been announced the name change of scam hit

Satyam Computers as Mahindra Satyam. This rebranding exercise symbolizes

an amalgamation of the values of’ Mahindra Group with Satyam’s expertise.

3.7 CONCLUSION

As the understanding of the software companies taken for study is

required, the profile of select software companies were discussed. Each

company has got its own unique operations and service to their customers.

The mission and vision of the companies have an underlying importance

towards their corporate governance goals. The nature, services offered and

their corporate social responsibility indicates their commitment and passion

towards their customer satisfaction.

cxxxi

END NOTES

1. www.infosys.com

2. www.wipro.com

3. www.tcs.com

4. www.hcl.com

5. www.satyam.com

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CHAPTER - IV

METHODOLOGY

4.1 INTRODUCTION

In this chapter, the research methodology used in this study is

described and the research propositions relating to the objectives of the study

are stated. Methods available for collecting data and the characteristics of the

sample group are set out in this chapter. The rights and safety of the

participants and rules on ethics and confidentiality in collecting data are

described. In addition, the variables, questionnaire design and techniques

used to analyse data are stated.

4.2 RESEARCH DESIGN

Research Design is the overall plan for conducting the research in order

to find out the answers for the research questions / hypotheses set in the

beginning. It should be comprehensive and to include all the relevant aspects

for conducting the research at a reasonable cost and time. This includes the

sampling technique, the collection of data through various instruments, proper

statistical tools to do the data analysis and interpreting the same. This study is

basically an explorative one, wherein the primary data is sought through a

questionnaire to answer the questions based on the relevant hypothesis.

4.3 SOURCES OF DATA

The survey method was deployed in this study to gain insight and

knowledge as how the stakeholders’ perception at various levels namely

expectation and satisfaction in various software companies taken for study,

the intricacies in terms of differences among companies the way it was

perceived by the stakeholders. The primary data of the study was collected

cxxxiii

through a structured questionnaire. The relevant secondary data was collected

through journals, magazines, newspapers, research articles, published

information and details from websites of the software companies taken for

study.

4.3.1 Selection of respondents

In India, there are four major metropolitan cities present, out of which

Chennai is located in South India. The Madras Stock Exchange Ltd., is

located in Chennai, which has got a trading activity on major listed companies

including software companies in India. Since Chennai represents the good

section of respondents belonging to different software companies, the

respondents residing in Chennai were taken for the study. Both male and

female investors were approached and requested for filling out of the

questionnaire, irrespective of their age, educational qualifications, occupation,

monthly income, number of years of transaction, and size of investments they

held. Each of the research subjects responded to a questionnaire on

demographical details and other variables related to study.

4.3.2 Selection of Companies

The software companies were chosen based on their volume of

business and spread of their business locations across India. Infosys. Wipro,

TCS, HCL and Satyam were the highest in terms of volume of their business

and spread across India and globe. The corporate governance guidelines

issued by the Government of India is applicable to all listed companies. Since

the listing with stock exchanges in India is a pre-requisite for selecting the

software companies, the above companies were shortlisted for the study.

Some of the select companies are listed with Nasdaq, New York, US to

provide the international requirements in terms of corporate governance.

cxxxiv

4.3.3 Sampling Design

It is the theoretical basis and the practical means by which data are

collected so that the characteristics of a population can be inferred with known

estimates of error. The following subdivisions explain the sampling design of

this thesis.

4.3.3.1 Selection of Sampling Area

Chennai is the fourth largest metropolis in India. It has got the mix of

all range of people, spreading from school level to post graduate /

professional level studied investor having different background in terms of

their income, age occupation etc., Also it has the migrant residents moved

from different parts of India, say, North, East and West, representing a

population across India. This research has been carried out in Chennai as it is

a place with different profiles of the people available and thus can be used to

arrive at meaningful conclusion regarding the perception of the stakeholders

in corporate governance.

4.3.3.2 Sampling Technique

The sampling technique used in this study is convenience sampling.

Convenience sampling is a type of nonprobability sampling which involves

the sample being drawn from that part of the population which is close to

hand. That is, a sample population selected because it is readily available and

convenient. It may be through meeting the person or including a person in the

sample when one meets them or chosen by finding them through

technological means such as the internet or through phone.

4.3.3.3 Sample Size

cxxxv

As the population is finite but huge in numbers convenience sampling

was adopted for the study. There are several approaches to determining the

sample size. These include a census for small populations, imitating a sample

size of similar studies, using published tables, and applying formulae to

calculate a sample size. For populations that are large, Cochran developed the

equation given below to yield a representative sample for proportions:

Equation : no = 2

2

e

pqZ

which is valid where n0 is the sample size, Z2

is the abscissa of the normal

curve that cuts off an area at the tails (1-equals the desired confidence level,

eg. 95% ) e is the desired level of precision, p is the estimated proportion of an

attribute that is present in the population, and q is 1-p. The value of Z is

found in statistical tables which contains the area under the normal curve. In

this study, we presume that population size is finite and unknown, the formula

was applied to know the sample size, and found the sample size 530 meets the

requirements.

4.3.4 Questionnaire

A structured questionnaire was administered to collect the primary

data. The Likert’s 5 point scale method was found suitable for the study, as it

has a good viability and most importantly it is easy for the respondents of

varying educational level to understand and respond. This is also the most

widely used method among the researchers and easy to construct. However

the researcher is aware of the limitations of the tool as it may not have equal

appearing intervals and requires validation of the data before analysis..

However researchers by convention treat is as an interval scale, with due

validation of the data, the same being observed in this study also.

cxxxvi

4.3.5 Pre-test

The pretesting or pilot study was conducted with an idea of testing the

reliability of the designed questionnaire. A sample of 100 respondents from

Chennai both male and female investors were selected for this purpose. Based

on the responses and views of the participants, confusing as well as difficult

questions were slightly modified to ease the responses and the questionnaire

was standardized. The prepared questionnaire was tested for reliability using

Cronbach’s Alpha, which is discussed subsequently. The non-response bias

checks were done initially by the researcher from the survey carried out and

was deemed as acceptable as the calculated final response rate was high (84%)

4.4 RELIABILITY

The Cronbach’s Alpha test was applied to find the reliability of the

following factors and the results were given in parentheses: Expectation –

Disclosure (0.765), Corporate Communication (0.782), Transparency (0.812),

General Meeting (0.712) and Overall (0.752) and Satisfaction – Disclosure

(0.876), Corporate Communication (0.959), Transparency (0.901), General

Meeting (0.958), Performance of Board (0.966), Corporate Management

Practices (0.956), Financial Practices (0.833), Secretarial Practices (0.955)

and Overall (0.924).

4.5 VARIABLES STUDIED

The variables are basically grouped into three parts, namely

demographic, expectation and satisfaction. A total of eight variables in

demographic were studied, such as gender, age, educational qualifications,

occupation, monthly income, number of years of transaction in shares, size of

investment in companies and awareness about the corporate governance

practices which forms the first part of the questionnaire.

cxxxvii

The second part of the study contains the perception of the stakeholders

on expectation towards corporate governance practices. There are in total

twenty four variables studied. The expectation variables studied are,

disclosure of income & expenditure, actual profitability, actual risk, dividend

declaration, investor relations, grievance resolution, bonus shares declaration,

cash dividend, property and paper dividend, growth information, winding up

status, financial transactions, corporate communication of allotment, issue and

transfer of shares, transparency of share allotment, borrowing loan, accessing

minutes of AGM and getting copies thereof, appointment of

directors/auditors, calling for AGM, demand for poll, inspection of books of

accounts / records and suing the officers of the company on wrongful acts.

The third part of the study contains the perception of the stakeholders

on satisfaction towards corporate governance practices. There are in total

thirty nine variables studied. The satisfaction variables studied are, disclosure

of income & expenditure, actual profitability, actual risk, dividend







accounts / records, suing the officers of the company on wrongful acts,

composition and performance of BOD, performance of chairman, leadership,

investor relations officer/company secretary, retention of shares, happy with

corporate governance practices, performance of chairman, board, dividend,

growth of the company, CSR activities, recommendation to invest, satisfaction

with current corporate governance laws and recommendation on changes in

reporting.

cxxxviii

4.6 HYPOTHESES OF THE STUDY

A hypothesis is an assumption to be tested. The statistical testing of

hypothesis is the most important technique in statistical inference. Hypothesis

tests are widely used in business and industry for making decisions. It is here

that probability and sampling theory plays an ever-increasing role in

constructing the criteria on which business decisions are made.

1. There is no significant difference in the level of expectation of the

stakeholders’ amongst software companies with respect to the

disclosure of information to Stakeholders.


stakeholders’ amongst software companies with respect to corporate

communication to Stakeholders.



transparency in sharing the shares allotment / borrowing information

with stakeholders


stakeholders’ amongst software companies with respect to general

meeting related practices

5. There is no significant difference in the level of satisfaction of the


disclosure of information to Stakeholders.



corporate communication to Stakeholders.



cxxxix

transparency in sharing the shares allotment / borrowing information

with stakeholders.


stakeholders’ amongst software companies with respect to General

meeting related practices.



performance of the board.



corporate management practices.


stakeholders’ amongst software companies with respect to financial

practices


stakeholders’ amongst software companies with respect to secretarial

practices.

4.7 FRAMEWORK OF DATA ANALYSIS

To analyse the data collected on perception of stakeholders on

corporate governance practices in software companies in India, the following

statistical tools have been applied for arriving out the relevant inferences on

the data.

Statistical Tools used:

4.7.1 t Test

The t-test is the most commonly used method to evaluate the

differences in means between two groups. In this study, the t test is used to

cxl

find the difference between genders with reference to various factors of level

of expectation and level of satisfaction.

4.7.2 ANOVA

Analysis of variance is used to compare means and variability of more

than two groups. In this study, the ANOVA is used to find the difference

between age, educational qualifications, occupations, monthly income,

number of years of transactions, size of investments and corporate invested

with respect to various factors of level of expectation and level of satisfaction.

4.7.3 Mann-Whitney U Test

Mann-Whitney U test a non-parametric test which is used to compare

two groups by ranking the observations. In this study, the Mann-Whitney U

test is used to find the difference between genders with reference to various

factors of level of expectation and level of satisfaction within the company.

4.7.4 Kruskal Wallis Test

The Kruskal–Wallis one-way analysis of variance by ranks (named

after William Kruskal and W. Allen Wallis) is a non-parametric method for

testing equality of population medians among groups. It is identical to a one-

way analysis of variance with the data replaced by their ranks.. Kruskal

Wallis Test is used to compare means and variability of more than two groups.

In this study, the Kruskal Wallis Test is used to find the difference

between age, educational qualifications, occupations, monthly income,

number of years of transactions, size of investments and corporate invested

with respect to various factors of level of expectation and level of satisfaction

within the company.

cxli

4.7.5 Wilcoxon Signed Rank Test

The Wilcoxson Signed Rank Test is a non-parametric statistical

hypothesis test, used to find out any significant difference between paired

observations. In this study the test is used to compare and find out four factors

in expectation and satisfaction. The four factors studied are disclosure of

information, Corporate Communication, Transparency and General Meeting

related practices.

4.7.6 Factor Analysis

Factor analysis is a statistical method used to describe variability

among observed variables in terms of a potentially lower number of

unobserved variables called factors. In other words, it is possible, for example,

that variations in three or four observed variables mainly reflect the variations

in a single unobserved variable, or in a reduced number of unobserved

variables. Factor analysis searches for such joint variations in response to

unobserved latent variables. The observed variables are modelled as linear

combinations of the potential factors, plus "error" terms. The information

gained about the interdependencies between observed variables can be used

later to reduce the set of variables in a dataset. In this study principal

component analysis with varimax rotation is done to reduce the variables in

satisfaction into factors.

4.7.7 Bivariate Correlations

Bivariate analysis is one of the simplest forms of the quantitative

(statistical) analysis. It involves the analysis of two variables (often denoted as

X, Y), for the purpose of determining the empirical relationship between

them. In order to see if the variables are related to one another, it is common

to measure how those two variables simultaneously change together. Bivariate

cxlii

analysis can be helpful in testing simple hypotheses of association and

causality – checking to what extent it becomes easier to know and predict a

value for the dependent variable if we know a case's value on the independent

variable. Bivariate analysis can be contrasted with univariate analysis in

which only one variable is analysed. Furthermore, the purpose of a univariate

analysis is descriptive. Subgroup comparison – the descriptive analysis of two

variables – can be sometimes seen as a very simple form of bivariate analysis

(or as univariate analysis extended to two variables). The major

differentiating point between univariate and bivariate analysis, in addition to

looking at more than one variable, is that the purpose of a bivariate analysis

goes beyond simply descriptive: it is the analysis of the relationship between

the two variables.

In this study, bivariate correlation (Karl-Pearson) is done for factors of

expectation with each other, factors of satisfaction with each other and current

Indian Corporate Governance laws.

4.7.8 Structural Equation Modelling

Structural equation modelling (SEM) is a statistical technique for

testing and estimating causal relations using a combination of statistical data

and qualitative causal assumptions. This definition of SEM was articulated by

the geneticist Sewall Wright (1921), the economist Trygve Haavelmo (1943)

and the cognitive scientist Herbert Simon (1953), and formally defined by

Judea Pearl (2000) using a calculus of counterfactuals. Structural Equation

Models (SEM) allow both confirmatory and exploratory modelling, meaning

they are suited to both theory testing and theory development. Confirmatory

modelling usually starts out with a hypothesis that gets represented in a causal

model. The concepts used in the model must then be operationalized to allow

testing of the relationships between the concepts in the model. The model is

cxliii

tested against the obtained measurement data to determine how well the

model fits the data. The causal assumptions embedded in the model often have

falsifiable implications which can be tested against the data.

Modelling is done based on the factor reduction in the level of

satisfaction by principle component analysis (PCA). A proposed model will

be done using the structural equation modelling to attain satisfaction level in


4.8 LIMITATIONS OF THE STUDY

The study is a sample based study and the inferences derived from the

analysis and interpretation are expected to be representative of the total

population However the study is subject to following limitations:

1. The area of the study is limited to city of Chennai, State of Tamil

Nadu, India. Hence the sample may have the limitations pertaining to

the area, tradition, custom and culture of the people in that place.

2. The respondents belong to the companies taken for study, namely

Infosys, Wipro, TCS, HCL and Satyam only, hence the data may

represent only to the above companies.

3. The survey was conducted during the first half of the year 2009, in

which the Satyam Scam came into prominence and the company was

subsequently taken over by Tech Mahindra. The study may have

impact of this.

4. The variables which directly affect the investors were taken for study,

the other variables, which also require the attention for the study of

Corporate Governance may not be included for their nature, want of

cxliv

time, awareness of the respondents, and other considerations. Hence to

that extent the study will not reflect those variables / factors.

5. As the investment in shares of companies is a volatile subject, changes

with sentiments of the people with stock market fluctuations which

may limit the study to that extent the perception of the respondents

also.

4.9 CONCLUSION

A research analysis requires a good research design to arrive at desired

results. Since the survey method needs a good sampling technique together

with proper selection of sampling area and sample size to effectively study the

population, appropriate steps were taken to ensure that a proper research

design is drawn with statistically reliable sampling with tested questionnaire.

The requisite variables were chosen for study, relevant hypotheses were set

and specific statistical tools were applied for arriving at inferences on the data.

The structural Equation Modelling technique was used to propose a model

that may be followed by software companies to achieve a higher level of the

perception of satisfaction of CG practices by stakeholders. Further the

limitations of the study are listed.

cxlv

CHAPTER - V

RESULTS AND DISCUSSIONS

INTRODUCTION

This chapter provides the details of analysis done on the data collected

and the interpretations arrived thereon. It is divided into seven major sub-

topics covering such as 5.1 Analysis of demographic variables for company-

wise, 5.2 Analysis of Expectation variables for company-wise, 5.3 Analysis of

Satisfaction Variables for company-wise, 5.4. Stakeholders’ perception on

Expectation levels in Corporate Governance practices in software companies,

5.5 Stakeholders’ perception on Satisfaction levels in Corporate Governance

practices in software companies, 5.6 Analysis of comparison of variables

between expectation, satisfaction and factors and 5.7 Modeling. The tools

such as t test, ANOVA, Mann-Whitney U test, Kruskal Wallis test, Factor

Analysis, Bivariate Correlations were used to test the hypotheses and arrive at

inference. Finally a structural equation modeling was attempted to come out

with a model to achieve good corporate governance from the perception of

stakeholders as observed from the study.

5.1 ANALYSIS OF DEMOGRAPHIC VARIABLES COMPANY WISE

The first part of the study in the questionnaire pertains to personal and

demographic details of the respondents. There were a total of eight

demographic variables, which were analyzed company wise. The various

demographic variables are gender, age, educational qualifications, occupation,

monthly income, number of years of transaction in shares, size of investment

cxlvi

and awareness about the corporate governance practices. Each variable is

analyzed as follows:

Table 5.1.1

Stakeholders Investment

Company Number of Stakeholders Percentage

Infosys 105 19.8

Wipro 103 19.4

TCS 111 20.9

HCL 107 20.2

Satyam 104 19.6

Total 530 100.0

Source: Primary Data

Table 5.1.1 indicates the investment pattern of the respondents in the

select software companies namely Infosys, Wipro, TCS, HCL and Satyam.

The percentage of respondents were of the order of 19.8, 19.4, 20.9, 20.2 and

19.6 respectively for the listed companies which indicates almost an equal

distribution of the number of respondents per company to weed out any bias

or prejudice to the sample.

cxlvii

Table 5.1.2

Gender-wise Respondents

Gender Company

Infosys Wipro TCS HCL Satyam Total

Male 86 81.9 78 75.7 73 65.8 82 76.6 85 81.7 404 76.2

Female 19 18.1 25 24.3 38 34.2 25 23.4 19 18.3 126 23.8

Total 105 100 103 100 111 100 107 100 104 100 530 100

Source: Primary Data, bold figure indicates Percentage

Table 5.1.2 shows that how the gender distributed to various companies

under study. The percentage of male and female stakeholders are distributed

company–wise as 81.9 and 18.1 for Infosys, 75.7 and 24.3 for Wipro, 65.8 and

34.2 in TCS, 76.6 and 23.4 in HCL and 81.7 and 18.3 in Satyam. Highest

number of male stakeholders is found in Infosys and lowest with TCS;

whereas highest female stakeholders are with TCS and lowest with Infosys.

Table 5.1.3

Age-wise Respondents

Age Company


25-35 years 16 15.2 18 17.5 21 18.9 17 15.9 23 22.1 95 17.9

36-45 years 27 25.7 24 23.3 24 21.6 27 25.2 28 26.9 130 24.5

46-55 years 36 34.3 33 32 35 31.5 29 27.1 29 27.9 162 30.6

Above 55

years 26 24.8 28 27.2 31 27.9 34 31.8 24 23.1 143 27

Total 105 100 103 100 111 100 107 100 104 100 530 100


Table 5.1.3 illustrates the age distribution of respondents company-

wise. Four age groups were identified, namely 25-35years, 36-45, 46-55 and

cxlviii

above 55years for the study. 25-35 years age group respondents are very high

in Satyam whereas very low in Infosys, high, moderate and low in TCS,

Wipro and HCL respectively. In the case of 36-45 years, the very high to very

low was of the order of Satyam, Infosys, HCL, Wipro and TCS. For the age-

group 46-55years, the very high to very low respondent distribution was

Infosys, Wipro, TCS, Satyam and HCL, but for above 55 years it was HCL

followed by TCS, Wipro, Infosys and Satyam.

Table 5.1.4

Educational Qualifications – wise Respondents

Edu.Quali-

fication

Company


School level 11 10.5 9 8.7 8 7.2 9 8.4 12 11.5 49 9.2

Graduate 23 21.9 25 24.3 28 25.2 28 26.2 29 27.9 133 25.1

Post -

Graduate 29 27.6 28 27.2 33 29.7 31 29 28 26.9 149 28.1

Professionals 42 40 41 39.8 42 37.8 39 36.4 35 33.7 199 37.5

Total 105 100 103 100 111 100 107 100 104 100 530 100


Table 5.1.4 depicts the educational qualifications of the respondents

company-wise. The distribution of school level respondents from very high to

very low was Satyam, Infosys, Wipro, HCL and TCS respectively. Graduate

respondents were distributed in the above order was of Satyam, HCL, TCS,

Wipro and Infosys. Post graduates and Professionals were distributed as TCS,

HCL, Infosys, Wipro, Satyam and Infosys, Wipro, TCS, HCL and Satyam

respectively.

cxlix

Table 5.1.5

Occupation – wise Respondents

Occupation Company


Business 21 20 19 18.4 18 16.2 16 15 23 22.1 97 18.3

Private 37 35.2 37 35.9 34 30.6 35 32.7 41 39.4 184 34.7

Public 33 31.4 31 30.1 36 32.4 32 29.9 29 27.9 161 30.4

Government 14 13.3 16 15.5 23 20.7 24 22.4 11 10.6 88 16.6

Total 105 100 103 100 111 100 107 100 104 100 530 100


Table 5.1.5 denotes the occupation of the

respondents of various companies. Basically the

respondents belong to four categories, namely business,

private, public and government. The distribution of

business respondents was very high in Satyam and very

low in HCL with high, moderate and low in the order of

Infosys, Wipro and TCS respectively. In the case of

respondents belonging to private category from very

high to very low was distributed to Satyam, Wipro,

Infosys, HCL and TCS. The respondents belonging to

public were distributed as TCS, Infosys, Wipro, HCL

and Satyam whereas respondents from government

occupation were spread across HCL, TCS, Wipro,

Infosys, and Satyam from very high to very low.

cl

Table 5.1.6

Income – wise Respondents

Monthly

Income

Company


Below

Rs.14,999 11 10.5 13 12.6 12 10.8 11 10.3 14 13.5 61 11.5

Rs.15,000 to

Rs.24,999 13 12.4 11 10.7 14 12.6 12 11.2 13 12.5 63 11.9

Rs.25,000 to

Rs.44,999 24 22.9 21 20.4 28 25.2 25 23.4 38 36.5 136 25.7

Rs.45,000 to

Rs.64,999 22 21 38 36.9 42 37.8 41 38.3 14 13.5 157 29.6

Above

Rs.65,000 35 33.3 20 19.4 15 13.5 18 16.8 25 24 113 21.3

Total 105 100 103 100 111 100 107 100 104 100 530 100


Table 5.1.6 narrates the spread of respondents with different monthly

income in different companies. There are five categories of month-income

earners, namely income less than Rs 14,999 per month, Rs 15,000-24,999, Rs

25,000-44,999, Rs 45,000-64,999 and above Rs 65,000. The spread of first

category, less than Rs 14,999 was Satyam, Wipro, Infosys, HCL, and TCS

from very high to very low respectively. In the case of salary range of Rs

15,000-24,999, it was TCS, Satyam, Infosys, HCL and Wipro. For third

category, the spread was Satyam, TCS, HCL, Infosys and Wipro. The fourth

one was spanned across HCL, TCS, and Wipro. Infosys and Satyam and the

category of above Rs 65,000 was of the order of Infosys, Satyam, Wipro,

HCL and TCS.

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Table 5.1.7

Awareness of Corporate Governance

Company Awareness of Corporate Governance

Total Yes No

Infosys 71 34 105

67.6 32.4 100

Wipro 64 39 103

62.1 37.9 100

TCS 59 52 111

53.2 46.8 10

HCL 62 45 107

57.9 42.1 100

Satyam 55 49 104

52.9 47.1 100

Total 311 219 530

58.7 41.3 100


Table 5.1.7 illustrates the level of respondents’

awareness towards corporate governance practices in

various companies. The respondents who aware of

corporate governance practices were very high in

Infosys, followed by Wipro, HCL, TCS, and Satyam

respectively whereas those who were not aware of such

practices were very high in Satyam followed by TCS,

HCL, Wipro and Infosys. The study indicates that the

Infosys stakeholders were more aware of the practices

and Satyam stakeholders were least aware of the


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Table 5.1.8

Number of years of transaction in stocks

Company

Number of years of transaction in shares

Total 1-2.11

years

3 - 5.11

years

6 - 8.11

years

Above 9

years

Infosys 19 40 25 21 105

18.1 38.1 23.8 20.0 100

Wipro 35 33 18 17 103

34.0 32.0 17.5 16.5 100

TCS 39 41 19 12 111

35.1 36.9 17.1 10.8 100

HCL 35 43 15 14 107

32.7 40.2 14.0 13.1 100

Satyam 33 46 14 11 104

31.7 44.2 13.5 10.6 100

Total 161 203 91 75 530

30.4 38.3 17.2 14.2 100


Table 5.1.8 depicts the number of years of transactions in shares in

various companies by respondents. Basically four categories of transaction

periods were identified, with ranges as 1-2.11 years, 3-5.11, 6-8.11 and above

9 years. The first category has a spread of TCS, Wipro, HCL, Satyam and

Infosys from very high to very low respectively. The second category of 3-

5.11 years was spread across from Satyam, HCL, Infosys, TCS and Wipro

with very high to very low respectively. In the case of 6-8.11 years, the

spread was Infosys, Wipro, TCS, HCL and Satyam whereas above 9 years

spanned across Infosys, Wipro, HCL, TCS and Satyam in the order of very

high to very low.

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Table 5.1.9

Size of Investments

Company

Size of investments

Total Rs.10,000 -

Rs.24,999

Rs. 25,000 -

Rs. 99,999

Above

Rs.1,00,000

Infosys 0 16 89 105

0 15.2 84.8 100

Wipro 0 19 84 103

0 18.4 81. 100

TCS 14 32 65 111

12.6 28.8 58.6 100

HCL 12 28 67 107

11.2 26.2 62.6 100

Satyam 18 34 52 104

17.3 32.7 50.0 100

Total 44 129 357 530

8.3 24.3 67.4 100


Table 5.1.9 narrates the size of investments held by

the respondents. There were three sizes of investments

identified namely, Rs 10. 000-24,999, 25,000-99,999

and Rs 1 lakh and above. In the first category, the

investments were of the magnitude with very high at

Satyam followed by TCS and HCL, No investments

were reported for Infosys and Wipro. In the category of

Rs 25,000-99,999 the spread of very high to very low

was Satyam, TCS, HCL, Wipro and Infosys. The Rs 1

lakh and above category has a spread of starting with

Infosys followed by Wipro, HCL, TCS and Satyam.

This illustrates that the size of investments were made in

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Infosys were high by individual respondents and very

low size investments at Satyam. 5.2 ANALYSIS OF EXPECTATION VARIABLES FOR COMPANY-

WISE

The second part of the study contains the perception of the stakeholders

on expectation towards corporate governance practices. There are in total

twenty four variables studied. The expectation variables studied are,

disclosure of income & expenditure, actual profitability, actual risk, dividend







accounts / records and suing the officers of the company on wrongful acts.

The details of the analysis are as follows:

Table 5.2.1

Mean & Standard deviation for the Expectation variables

S.

No

Expectation

Variable

Infosys Wipro TCS HCL Satyam

Mean S.D. Mean S.D. Mean S.D. Mean S.D. Mean S.D.

1. Disclosure of

Income and

Expenditure 4.71 0.5 4.78 0.4 4.76 0.4 4.81 0.4 4.806 0.4

2. Disclosure of

Actual

Profitability 4.71 0.5 4.63 0.5 4.65 0.5 4.61 0.5 4.605 0.49

3. Disclosure of

Actual Risk 4.78 0.4 4.79 0.4 4.76 0.4 4.78 0.4 4.75 0.44

4. Dividend

Declaration 4.82 0.4 4.59 0.5 4.63 0.5 4.76 0.4 4.76 0.43

5. Investor

Relations 4.71 0.5 4.81 0.4 4.46 0.5 4.81 0.4 4.8 0.4

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6. Grievance

Resolution 4.83 0.4 4.84 0.4 4.53 0.7 4.79 0.4 4.81 0.4

7. Bonus shares

declaration 4.71 0.5 4.71 0.5 4.43 0.5 4.78 0.4 4.73 0.45

8. Cash Dividend 4.82 0.4 4.81 0.4 4.39 0.5 4.87 0.3 4.86 0.35

9. Property and

Paper Dividend 4.58 0.5 4.64 0.5 4.37 0.5 4.55 0.5 4.54 0.5

10. Growth

Information 4.68 0.5 4.51 0.5 4.72 0.5 4.54 0.5 4.49 0.5

11. Winding Up

Status 1.13 0.3 1.25 0.4 1.3 0.5 1.19 0.4 1.22 0.41

12. Financial

Transactions 4.82 0.4 4.73 0.5 4.79 0.4 4.82 0.4 4.84 0.37

13. Corporate

Communication

of Allotment of

shares 4.71 0.5 4.64 0.5 4.62 0.5 4.72 0.5 4.71 0.46

14. Corporate

Communication

of Share

certificates issue 4.67 0.5 4.71 0.5 4.69 0.5 4.72 0.5 4.69 0.46

15. Corporate

Communication

of Transfer of

Shares 4.83 0.4 4.79 0.4 4.76 0.4 4.78 0.4 4.75 0.43

16. Transparency of

Share Allotment 4.77 0.4 4.64 0.5 4.66 0.5 4.63 0.5 4.58 0.5

17. Transparency of

Borrowing loan /

loan capital 4.7 0.5 4.73 0.5 4.66 0.5 4.73 0.5 4.73 0.45

18. Minutes of

AGM 4.7 0.5 4.91 0.3 4.91 0.3 4.84 0.4 4.88 0.33

19. Copies of

Minutes 4.89 0.3 4.92 0.3 4.94 0.2 5 0 4.98 0.15

20. Appointment of

Directors/

Auditors 4.72 0.5 4.72 0.5 4.68 0.5 4.68 0.5 4.62 0.49

21. Calling for

EGM 4.79 0.4 4.99 0.1 4.95 0.2 4.92 0.3 4.94 0.23

22. Demand for Poll 4.73 0.4 4.64 0.5 4.65 0.5 4.67 0.5 4.69 0.46

23. Inspection of

books of

accounts/records 4.76 0.4 4.63 0.5 4.65 0.5 4.69 0.5 4.65 0.48

24. Suing on

wrongful acts 4.72 0.5 4.72 0.5 4.68 0.5 4.63 0.5 4.59 0.49


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In order to find out that is there any significance of difference between

stakeholders’ expectation in the selected five software companies namely

Infosys, Wipro, TCS, HCL and Satyam, mean and standard deviations were

used. The result infers that all the five selected software companies

stakeholders’ expectation on disclosure of income and expenditure was very

high for all five companies (mean value is more than 4.75), The expectation

of disclosure of actual profitability was high (mean value is 4.63) . The

expectation of disclosure of actual risk was very high (mean value is 4.76).

The expectation of dividend declaration was very high in Infosys, HCL and

Satyam (mean value is 4.76) and high in Wipro and TCS (mean value is 4.61).

The expectation of investor relations and grievance resolution was very high

(mean value is 4.8) on Infosys, Wipro TCS HCL and Satyam and it is high

in TCS (mean value is 4.5).

The expectation on bonus declaration was very high (mean value is

4.73) on all companies namely Infosys, Wipro, HCL and Satyam but it was

high in TCS (mean value is 4.43). The expectation on cash dividend was very

high on four companies, namely Infosys, Wipro, HCL and Satyam (mean

value is 4.81) and it was high in TCS (mean value is 4.39). The expectation

of property and paper dividend is high in all companies (mean value is 4..55).

The expectation on growth information was high in all companies (mean

value is 4.54). As far as the expectation of winding up information is

concerned it was very low (mean value is 1.19). The expectation of financial

transaction information is uniformly very high in all companies (mean value is

4.82). The expectation on corporate communication on share allotment, share

issue were uniformly high in all companies (mean value is 4.71) . However

the expectation of corporate communication on share transfer it was very high

in all companies (mean value is 4.79). The expectation on transparency of

share allotment was high in all companies (mean value is 4.63) except Infosys

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in which it was very high (mean value is 4.77). The expectation on

transparency of loan capital is high in all companies (mean value is 4.73).

The expectation on access to minutes and copies thereof was very high for all

companies (mean value is 4.88) and copies thereof (mean value is 4.94). The

expectation on appointment of directors / auditors by stakeholders in Annual

General Meeting was high in all the companies (mean value is 4.68). The

expectation on calling an Extra-ordinary General Meeting was very high in all

the companies (mean value is 4.95), wherein demand for poll was high.

(mean value 4.67). The expectation of inspection of books of accounts was

high (mean value is 4.65) in all companies except Infosys in which it was very

high (mean value is 4.76) and suing the officers of the company for wrongful

acts was uniformly high in all companies (mean value is 4.68)..

5.3 ANALYSIS OF SATISFACTION VARIABLES FOR

COMPANY-WISE

The third part of the study contains the perception of the stakeholders

on satisfaction towards corporate governance practices. There are in total

thirty nine variables studied. The satisfaction variables studied are, disclosure

of income & expenditure, actual profitability, actual risk, dividend







accounts / records, suing the officers of the company on wrongful acts,

composition and performance of BOD, performance of chairman, leadership,

investor relations officer/company secretary, retention of shares, happy with

corporate governance practices, performance of chairman, board, dividend,

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growth of the company, CSR activities, recommendation to invest, satisfaction

with current corporate governance laws and recommendation on changes in

reporting. The details of the analyses are as follows:

Table 5.3.1

Mean & Standard Deviation for Satisfaction variables

S.

No

Satisfaction

Variable


Mean S.D. Mean S.D. Mean S.D. Mean S.D. Mean S.D.

1. Disclosure of

Income and

Expenditure 4.8 0.4 4.76 0.4 4.54 0.5 4.64 0.5 3.29 0.9

2. Disclosure of

Actual

Profitability 4.8 0.4 4.91 0.3 4.37 0.5 4.23 0.5 2.84 0.8

3. Disclosure of

Actual Risk 4.76 0.4 4.82 0.4 4.35 0.5 4.1 0.5 2.88 0.7

4. Dividend

Declaration 4.92 0.3 5 0 4.63 0.5 4.05 0.4 3.15 0.5

5. Investor

Relations 5 0 4.9 0.3 4.46 0.5 4.31 0.6 2.81 0.9

6. Grievance

Resolution 4.88 0.3 4.76 0.4 4.53 0.7 3.86 0.4 2.38 0.7

7. Bonus shares

declaration 4.92 0.3 4.91 0.3 4.43 0.5 4.33 0.6 2.94 0.8

8. Cash Dividend 4.92 0.3 4.91 0.3 4.39 0.5 4.4 0.5 3.06 0.8

9. Property and

Paper Dividend 4.84 0.4 4.9 0.3 4.37 0.5 4.22 0.7 2.64 0.9

10. Growth

Information 5 0 4.82 0.4 4.72 0.5 4.23 0.5 2.58 0.9

11. Winding Up

Status 1 0 1 0 1.46 0.5 1.45 0.5 2.4 0.7

12. Financial

Transactions 4.92 0.3 5 0 4.54 0.5 4.29 0.5 1.73 1.2

13. Corporate

Communication

of Allotment of

shares 5 0 5 0 4.46 0.5 4.37 0.6 2.85 0.9

14. Corporate

Communication

of Share

certificates issue 4.88 0.3 5 0 4.72 0.5 4.27 0.6 2.78 0.8

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15. Corporate

Communication

of Transfer of

Shares 5 0 5 0 4.63 0.5 4.21 0.6 2.88 0.9

16. Transparency

of Share

Allotment 4.76 0.4 4.81 0.4 4.56 0.5 4 0 3 0.7

17. Transparency

of Borrowing

loan / loan

capital 5 0 4.91 0.3 4.63 0.5 4.36 0.5 3.15 0.7

18. Minutes of

AGM 4.72 0.5 4.81 0.4 4.91 0.3 4.65 0.6 2.86 1

19. Copies of

Minutes 4.88 0.3 4.75 0.4 4.81 0.4 4.4 0.6 2.87 0.9

20. Appointment of

Directors/

Auditors 4.92 0.3 4.91 0.3 4.55 0.5 4.13 0.5 2.52 0.8

21. Calling for

EGM 5 0 5 0 4.46 0.5 4.05 0.4 2.58 0.8

22. Demand for

Poll 4.84 0.4 4.9 0.3 4.52 0.5 4.55 0.5 2.84 0.9

23. Inspection of

books of

accounts /

records 5 0 4.91 0.3 4.89 0.3 4.26 0.4 2.82 0.8

24. Suing on

wrongful acts 4.88 0.3 4.82 0.4 4.83 0.4 4.27 0.5 2.85 0.8

25. Composition of

BOD 4.84 0.4 5 0 4.89 0.3 3.96 0.5 2.73 0.8

26. Performance of

Chairman 4.8 0.4 4.84 0.4 4.46 0.5 4.35 0.6 2.96 0.8

27. Performance of

BOD 4.8 0.4 4.9 0.3 4.63 0.5 4.42 0.6 1.95 1.2

28. Performance of

Leadership 4.8 0.4 4.81 0.4 4.79 0.4 4.21 0.5 1.76 1.2

29. Performance of

Investor

Relations

Officer/Compan

y Secretary 4.72 0.5 4.72 0.5 4.72 0.5 4.37 0.6 2.62 0.9

30. Retention of

Shares 4.92 0.3 4.83 0.4 4.71 0.5 4.19 0.4 1.76 1.2

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31. Happy with

Corporate

Governance 4.84 0.4 4.9 0.3 4.91 0.3 4.15 0.6 2.36 0.9

32. Happy with

Performance of

Chairman 4.84 0.4 4.82 0.4 4.72 0.5 4.15 0.6 2.91 0.8

33. Happy with

Performance of

BOD 4.8 0.4 4.84 0.4 4.55 0.5 4.07 0.6 2.52 0.9

34. Happy with

Dividend 4.92 0.3 5 0 4.54 0.5 4.32 0.6 2.59 0.9

35. Happy with

Growth of

Company 5 0 5 0 4.72 0.5 4.72 0.7 2.48 1.2

36. Happy with

CSR activities 5 0 4.91 0.3 4.81 0.4 3.94 0.2 3.39 0.5

37. Recommenda-

tions to invest 3 0 2.9 0.3 2.63 0.5 2.55 0.5 1.65 0.7

38. Satisfied with

the current CG

laws 4.8 0.4 4.56 0.5 4.27 0.5 3.95 0.5 2.17 1

39. Recommenda-

tion on changes

in reporting 2 0 2 0 2 0 1.94 0.2 1.16 0.4


The statistical tools, such as mean and standard deviation were used to

find out that, is there any significance of difference between the perception of

stakeholders’ satisfaction in selected five software companies. The study

reveals that the perception of the satisfaction on disclosure of income and

expenditure was very high in Infosys and Wipro (mean value is 4.76), high in

TCS and HCL (mean value is 4.54)and moderate in Satyam (mean value is

3.29). The satisfaction of disclosure of actual profitability was high in Wipro

and Infosys ( 4.8), low in TCS and HCL (4.23) and low in Satyam (2.84),

wherein actual risk, it was very high in Wipro and Infosys ( 4.76), high in

TCS and HCL (4.1) and low in Satyam (2.88). The perception of the

satisfaction of dividend declaration was high in Wipro, and Infosys (4.92),

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high in TCS and HCL (4.05 and moderate in Satyam(3.15). The perception of

the satisfaction of investor relations was very high in Infosys and Wipro (4.9),

high in TCS and HCL (4,31) and low in Satyam (2.81). The perception of the

satisfaction of grievance resolution was very high in Infosys and Wipro(4.76),

high in TCS (4.53) , moderate in HCL (3.86 ) and low in Satyam(2.38). The

perception of the satisfaction of bonus shares, was very high in Infosys and

Wipro(4.91), moderate in TCS and HCL (4.33) and low (2.94)in Satyam. The

perception of the satisfaction of cash dividend was very high in Infosys and

Wipro (4.91), high in TCS and HCL (4.39) and moderate in Satyam (3.06).

The perception of the satisfaction of property and paper dividend was very

high in Infosys and Wipro (4.84), high in TCS and HCL (4.22) and low in

Satyam (2.64). As far as the perception of satisfaction of growth information

is concerned, all the three companies namely Infosys, Wipro and TCS were

very high (4.82), HCL was moderate (4.23) and Satyam was low (2.58). In

the case of perception of satisfaction of winding up, Infosys and Wipro were

very low (1.0), HCL and TCS ((1.45)were low and Satyam was moderate

(2.4).

The perception of the satisfaction of financial transactions was very

high in Wipro and Infosys, (4.92), high in TCS and HCL (4.29) and very low

in Satyam (1.73). In the case of perception of satisfaction of corporate

communication of share allotment, it was very high for Infosys and Wipro

(5.0), high in TCS and HCL (4,37) and low in Satyam (2.85). The perception

of the satisfaction of issue of share certificate is very high in Wipro, Infosys

and TCS (4.88), high in HCL (4.27) and moderate in Satyam (2.78). The

perception of the satisfaction of share transfer is very high in Infosys and

Wipro (5.0), high in TCS and HCL (4.21) and low in Satyam (2.88). In the

case of perception of satisfaction of transparency of share allotment, it is very

high in Wipro and Infosys, followed by TCS and HCL as high (4.0) and

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Satyam was moderate (3.0). The perception of the satisfaction of

transparency of loan capital is very high in Infosys and Wipro (4.91), high in

TCS and HCL (4.36) and moderate in Satyam (3.15). The perception of the

satisfaction of access to minutes of AGM is very high in TCS and Wipro

(4.81) high in Infosys and HCL (4.65), low in Satyam (2.86). The perception

of the satisfaction of taking copies of the minutes of AGM is very high in

Infosys, TCS and Wipro (4.81), high in HCL (4.4) and low in Satyam (2.87).

As far as the perception of satisfaction of appointment of Directors/Auditors,

it is very high in Infosys and Wipro (4.91) high in TCS and HCL (4.13), and

low in Satyam (2.52). In the case of perception of satisfaction of calling an

EGM, it is very high in Infosys and Wipro (5.0), TCS and HCL (4.05) and

low in Satyam (2.58).

The perception of the satisfaction of demanding a poll is very high in

Wipro and Infosys (4.84), high in HCL and TCS (4.52) and low in Satyam

(2.84). The perception of the satisfaction of inspection of books of

accounts/records is very high in Infosys, Wipro and TCS (4.91), high in HCL

(4.26) and low in Satyam (2.82). In the case of perception of satisfaction of

suing the officers of the company on wrongful acts, it is very high in Infosys,

TCS and Wipro (4.83), high in HCL (4.27) and low in Satyam (2.85). In the

case of perception of satisfaction of composition of BODs, it was very high in

Wipro, TCS and Infosys (4.89), moderate in HCL (3.96) and low in Satyam

(2.85). The perception of the satisfaction of performance of chairman, it is

very high in Wipro and Infosys (4.8), high in TCS and HCL (4.35) and low in

Satyam (2.96). The perception of the satisfaction of performance of BOD it

is very high in Wipro and Infosys (4..8), TCS and HCL (4.42) and very low in

Satyam (1.95). The satisfaction of performance of leadership it is very high in

Wipro, Infosys and TCS, (4.8) high in HCL (4.21) and very low in Satyam

(1.76).

clxiii

In the case of satisfaction of performance of investor relations officer /

company secretary s it was very high in all the three companies, namely

Infosys, Wipro and TCS (4.72), high in HCL (4.37) and low in Satyam (2.62).

The satisfaction of retention of shares is very high in Infosys, Wipro and TCS

(4.83), high in HCL (4.19) and very low in Satyam (1.76). As far as the

satisfaction of corporate governance practices for retention of shares , it was

high for TCS, Wipro and Infosys (4.84), high for HCL (4.15) and low in

Satyam(2.36). The satisfaction of performance of the chairman for retention

of shares was very high in Infosys, Wipro, and TCS (4.82) high in HCL (4.15)

and low in Satyam (2.91). In the case of satisfaction of performance of the

BOD for retention of shares, it is Wipro and Infosys (4.8), high in TCS and

HCL (4.07) and low in Satyam (2.52). The satisfaction of dividend

declaration for retention of shares is very high in Wipro and Infosys (4.92),

high in TCS and HCL (4.32) and low in Satyam (2.59). In the case of

satisfaction of growth of the company for retention of shares, it is very high in

Infosys, Wipro (5.0), high in TCS and HCL (4.72) and low in Satyam (2.48).

The satisfaction of corporate social responsibilities activities are concerned, it

was very high in Infosys, Wipro and TCS (4.91), low in HCL and Satyam

(339). The satisfaction of recommending to invest by others in their

companies, it was moderate in Infosys (3.0), low in Wipro, TCS and HCL

(2.63) and very low in Satyam (1.65). The satisfaction of current corporate

governance laws was very high in Infosys (4.8) high in Wipro and TCS (4.27)

moderate in HCL (3.95) and low in Satyam (2.17). The satisfaction of

recommendations to change the reporting was low in Infosys, Wipro and TCS

(2.0), very low in HCL and Satyam (1.16).

5.4 STAKEHOLDERS’ PERCEPTION ON EXPECTATION LEVELS

IN CORPORATE GOVERNANCE PRACTICES IN SOFTWARE

COMPANIES

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5.4.1 Analysis of level of expectation in Disclosure of information to

Stakeholders

Null hypothesis Ho-1: There is no significant difference in the level of

expectation of the stakeholders’ amongst software companies with respect to

the disclosure of information to Stakeholders.

Table 5.4.1

ANOVA for significant difference between Software Companies & the

level of stakeholders expectation of Disclosure of information

Company Mean S.D F p-value

Infosys 14.21 0.78

0.063 .993

Wipro 14.19 0.77

TCS 14.16 0.79

HCL 14.20 0.78

Satyam 14.17 0.81

Source : Primary Data

In order to find out that there is any difference between software

companies by stakeholders and expectation in disclosure of information of

selected five software companies, the ANOVA test was used to find out the

significant difference between two variables. Since the p value is greater than

0.05, the null hypothesis is accepted at 5% level of significance, hence there is

no significant difference between level of expectation of stakeholders and

disclosure of information of selected software companies.

Table 5.4.2

t-test for Gender with respect to level of expectation in Disclosure of

information to Stakeholders

Gender Mean S.D t p-value

Male 14.15 0.78 2.152 0.032

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Female 14.32 0.79

Source: Primary Data, Shaded figures indicates significance

In order to find out that there is any difference between gender with

respect to the level of expectation by stakeholders and expectation in

disclosure of information of selected five software companies, the t test was

used to find out the significance of difference between two variables. Since

the p value (0.032) is lesser than the (0.05), there is significant difference

between gender of stakeholders and disclosure of information of selected

software companies.. Means in the above table shows females’ expectations

are more compared to males.

Table 5.4.3

ANOVA for Educational Qualifications with respect to level of

expectation of disclosure of information

Educational Qualifications Mean S.D F p-value

School level 14.12 0.86

0.518 0.67 Graduate 14.26 0.72

Post-Graduate 14.16 0.79

Professionals 14.18 0.80


In order to analyse that there is any difference between educational

qualifications of the stakeholders and expectation in disclosure of information

of selected five software companies, the ANOVA test was used to find out the

significance of difference between two variables. Since the p value (0.67) is

greater than the (0.05), there is no significant difference between educational

qualifications of stakeholders and disclosure of information of selected

software companies.

clxvi

Table 5.4.4

ANOVA for Size of Investment with respect to level of expectation in

Disclosure of information to Stakeholders

Size of Investment Mean S.D F p-value

Rs.10,000 - Rs.24,999 14.20 0.82

0.142 0.868 Rs. 25,000 - Rs. 99,999 14.16 0.81

Above Rs.1,00,000 14.20 0.77


In order to find out that there is any difference between size of

investments of stakeholders and expectation in disclosure of information of



greater than the (0.05), there is no significant difference between size of

investments of stakeholders and disclosure of information of selected software

companies.

Table 5.4.5

Kruskal Wallis & Mann-Whitney U test for significant difference for

gender, educational qualifications and size of investments with respect to

expectation in disclosure of information to stakeholders

Compa

ny Variables p-value

Infosys

Gender 0.929

Educational Qualifications 0.469

Size of Investment 0.444

Wipro

Gender

0.817



TCS

Gender 0.035


clxvii


HCL

Gender 0.227



Satyam

Gender 0.029




In order to analyse out that there is any difference among gender,

educational qualifications and size of investments of stakeholders of

stakeholders and expectation in disclosure of information of selected five

software companies, the Kruskal Wallis & Mann-Whitney U test were used to

find out the significance of difference among variables. Since the calculated

values (0.035), (0.029) and (0.028) are lesser than the table value (0.05),

there is significant difference among gender, educational qualifications and

size of investments of stakeholders and disclosure of information of selected

software companies. Significant difference is observed between genders in

TCS and Satyam. Also significant difference is observed between educational

qualifications in Satyam with respect to level of expectation in disclosure of

information to stakeholders.

5.4.2 Analysis of level of expectation in Corporate Communication



corporate communication to Stakeholders.

Table 5.4.6


level of stakeholders expectation of Corporate Communication

clxviii


Infosys 14.21 0.80

Wipro 14.14 0.84

TCS 14.07 0.83 0.563 0.689

HCL 14.22 0.79

Satyam 14.14 0.83



companies by stakeholders and expectation in corporate communication of



greater than the (0.05), hence there is no significant difference between level

of expectation of stakeholders and corporate communication of selected

software companies and the null hypothesis is accepted.

Table 5.4.7

ANOVA for Educational Qualifications with respect to level of

expectation in Corporate Communication to Stakeholders

Educational

Qualifications Mean S.D F p-value


1.132 0.335 Graduate 14.23 0.78

Post – Graduate 14.09 0.80



In order to find out that there is any difference between educational

qualifications of the stakeholders and expectation in corporate communication


clxix



qualifications of stakeholders and corporate communication of selected

software companies.

Table 5.4.8

ANOVA for Occupation with respect to Corporate

Communication to Stakeholders

Occupation Mean S.D F p-value

Business 14.25 0.83

0.786

0.502

Private 14.09 0.81

Public 14.16 0.82

Government 14.17 0.81


In order to analyse that there is any difference between occupation of

the stakeholders and expectation in corporate communication of selected five

software companies, the ANOVA test was used to find out the significance of

difference between two variables. Since the p value (0.502) is greater than the

(0.05), there is no significant difference between occupation of stakeholders

and corporate communication of selected software companies.

Table 5.4.9

ANOVA for Size of Investment with respect to level of expectation in

Corporate Communication to Stakeholders


Rs.10,000 - Rs.24,999 14.09 0.77

0.254

0.776

Rs. 25,000 - Rs. 99,999 14.13 0.84

Above Rs.1,00,000 14.17 0.82

clxx



investments of the stakeholders and expectation in corporate communication




investments of stakeholders and corporate communication of selected

software companies.

Table 5.4.10

Kruskal Wallis test for significant difference among educational

qualification, occupation & size of investment & level of expectation of

Stake holders in Corporate Communication

Company Variables p-value

Infosys Educational Qualifications 0.178

Occupation 0.897


Wipro Educational Qualifications 0.235

Occupation 0.987


TCS Educational Qualifications 0.875

Occupation 0.273


HCL Educational Qualifications 0.309

Occupation 0.677


Satyam Educational Qualifications 0.101

Occupation 0.322

clxxi



In order to analyse out that there is any difference among educational

qualifications, occupation and size of investments of stakeholders of

stakeholders and expectation in corporate communication of selected five

software companies, the Kruskal Wallis test is used to find out the

significance of difference among variables. Since the p values given in the

table above are greater than the (0.05), there is no significant difference

among educational qualifications, occupation and size of investments of

stakeholders and corporate communication of selected software companies.

5.4.3 Analysis of level of expectation in Transparency



the transparency in sharing the shares allotment / borrowing information with

stakeholders.

Table 5.4.11

ANOVA for significant difference between Software companies & level of

Stakeholders expectation of Transparency


Infosys 9.47 0.50

1.991

0.095

Wipro 9.37 0.48

TCS 9.32 0.47

HCL 9.36 0.48

Satyam 9.30 0.46

clxxii



companies by stakeholders and expectation in transparency of selected five



(0.05), hence there is no significant difference between level of expectation of

stakeholders and transparency in sharing the shares allotment / borrowing

information with stakeholders of selected software companies and the null

hypothesis is accepted.

Table 5.4.12

ANOVA for significant difference in Educational Qualifications & the

level of stakeholders’ expectation of Transparency



0.445 0.721

Graduate 9.36 0.48

Post - Graduate 9.40 0.49




qualifications of the stakeholders and expectation in transparency of selected

five software companies, the ANOVA test was used to find out the



qualifications of stakeholders and transparency in sharing the shares allotment

/ borrowing information with stakeholders of selected software companies.

clxxiii

Table 5.4.13

Kruskal Wallis test for significant difference in educational qualifications

& the level of expectation in Transparency.



Wipro Educational Qualifications. 0.568

TCS Educational. Qualifications 0.488

HCL Educational. Qualifications 0.237

Satyam Educational. Qualifications 0.229


In order to analyse out that there is any difference between educational

qualifications of stakeholders of stakeholders and transparency of selected

five software companies, the Kruskal Wallis test was used to find out the

significance of difference between variables. Since the p values given in the

above table are greater than the (0.05), there is no significant difference

between, educational qualifications of stakeholders and transparency of

selected software companies.

5.4.4 Analysis of level of expectation in General meeting



general meeting related practices

Table 5.4.14


level of Stakeholders expectation of General Meeting practices


Infosys 19.01 0.60

0.505

0.732

Wipro 18.98 0.64

TCS 18.94 0.65

HCL 18.96 0.64

clxxiv

Satyam 18.89 0.62



companies by stakeholders and expectation of general meeting of selected five



(0.05), hence there is no significant difference between level of expectation of

stakeholders of general meeting, and the null hypothesis is accepted.

Table 5.4.15

ANOVA for significant difference in Educational Qualification & the

level of stakeholders’ expectation of General Meeting practices



1.159

0.324

Graduate 19.07 0.62





qualifications of the stakeholders and expectation in general meeting of




qualifications of stakeholders and general meeting related practices of selected

software companies.

Table 5.4.16

ANOVA for significant difference in Occupation & the level of

stakeholders’ expectation of General Meeting practices

clxxv


Business 19.01 0.67

0.491

0.689

Private 18.92 0.63

Public 18.98 0.61



In order to find out that there is any difference between occupation of

the stakeholders and expectation in general meeting practices of selected five


difference between two variables. Since the p value (0. 689) is greater than the


and general meeting related practices of selected software companies.

Table 5.4.17

ANOVA for significant difference in Age & the level of stakeholders’

expectation of General Meeting practices

Age Mean S.D F p-value

25-35 years 18.86 0.61

1.482

0.218

36-45 years 18.92 0.61

46-55 years 18.98 0.64

Above 55 years 19.03 0.65


In order to find out that there is any difference between age groups of

the stakeholders and expectation in general meeting practices of selected five


difference between two variables. Since the p value (0. 218) is greater than the

(0.05), there is no significant difference between age groups of stakeholders

and general meeting related practices of selected software companies.

clxxvi

clxxvii

Table 5.4.18

ANOVA for significant difference in Size of Investment & the level of

stakeholders’ expectation of General Meeting practices


Rs.10,000 - Rs.24,999 18.89 0.62

1.198 0.303 Rs. 25,000 - Rs. 99,999 18.90 0.62

Above Rs.1,00,000 18.99 0.63


In order to analyse that there is any difference between size of

investments of the stakeholders and expectation in general meeting practices


significance of difference between two variables. Since the p value (0. 303) is


investments of stakeholders and general meeting related practices of selected

software companies.

Table 5.4.19

Kruskal Wallis test for significant difference in educational qualifications

& the level of expectation in General Meeting practices.

Compan

y Variables p-value

Infosys


Occupation 0.223

Age 0.494



clxxviii

Wipro

Occupation 0.712

Age 0.352


TCS


Occupation 0.334

Age 0.487


HCL


Occupation 0.647

Age 0.065


Satyam


Occupation 0.11

Age 0.726



In order to find out that there is any difference among educational

qualifications, occupation, age and size of investments of stakeholders and

general meeting practices of selected five software companies, the Kruskal

Wallis test was used to find out the significance of difference between

variables. Since the p values given in the above table are greater than the

(0.05), there is no significant difference among, educational qualifications,

occupation, age and size of investments of stakeholders and general meeting

practices of selected software companies.

clxxix

5.5 STAKEHOLDERS’ PERCEPTION ON SATISFACTION LEVELS

IN CORPORATE GOVERNANCE PRACTICES IN SOFTWARE

COMPANIES

5.5.1 Analysis of level of satisfaction in Disclosure of information to

Stakeholders


satisfaction of the stakeholders’ amongst software companies with respect to

the disclosure of information to Stakeholders.

Table 5.5.1

ANOVA for significant difference between Software companies & the

level of Stakeholders’ Satisfaction of Disclosure of information


Infosys 14.36 0.62

104.72 .001

Wipro 14.49 0.65

TCS 13.26 0.87

HCL 12.97 0.85

Satyam 8.22 0.98

Source: Primary Data, shaded figures indicates significance

In order to find out that there is any difference among software

companies by stakeholders and level of satisfaction of disclosure of

information of selected five software companies, the ANOVA test was used to

find out the significance of difference between two variables. Since the p

value (0.001) is lesser than the (0.05), hence there is significant difference

between level of satisfaction of disclosure of information, and the null

hypothesis is rejected.

Table 5.5.2

Post hoc test for significant difference among software companies & the

level of stakeholders’ satisfaction of disclosure of information

clxxx

(I) corporate invested (J) corporate invested p-value

Infosys

Wipro 0.632

TCS 0.000

HCL 0.000

Satyam 0.000

Wipro

Infosys 0.632

TCS 0.000

HCL 0.000

Satyam 0.000

TCS

Infosys 0.000

Wipro 0.000

HCL 0.000

Satyam 0.000

HCL

Infosys 0.000

Wipro 0.000

TCS 0.099

Satyam 0.000

Satyam

Infosys 0.000

Wipro 0.000

TCS 0.000

HCL 0.000


In order to find out that which two groups are significantly different in

the selected five software companies, the Post hoc test was used. It is

observed from the above table that the p value is less than the (0.05) there is

significant difference between all the companies in level of satisfaction with

respect to the disclosure of information to Stakeholders, but the significance is

not seen between Infosys and Wipro

Table 5.5.3

t-test for Gender with respect to level of satisfaction in Disclosure of

information to Stakeholders

Gender Mean S.D t p-

clxxxi

value

Male 12.60 2.46 1.123 0.262

Female 12.88 2.29



respect to the level of satisfaction in disclosure of information by

stakeholders of selected five software companies, the t test was used to find

out the significance of difference between two variables. Since the p value

(0.262) is greater than the (0.05), there is no significant difference between

gender with respect to the level of satisfaction in disclosure of information to

stakeholders of selected software companies.

Table 5.5.4

ANOVA for significant difference in Educational qualification & the level

of stakeholders’ satisfaction in Disclosure of information

Educational



0.558 0.643

Graduate 12.50 2.54





qualifications of the stakeholders and satisfaction in disclosure of information



clxxxii


qualifications of stakeholders and level of satisfaction of disclosure of

information of selected software companies.

Table 5.5.5

ANOVA for significant difference in size of investment & the level of

stakeholders’ satisfaction in Disclosure of information

Size of Investments Mean S.D F p-value

Rs.10,000 - Rs.24,999 11.30 2.48

16.373 .001 Rs. 25,000 - Rs. 99,999 12.08 2.54

Above Rs.1,00,000 13.05 2.26



investments of the stakeholders and satisfaction in disclosure of information



lesser than the (0.05), there is significant difference between size of

investments of stakeholders and level of satisfaction of disclosure of

information of selected software companies.

Table 5.5.6

Post hoc test for Size of Investment with respect to for level of satisfaction

in Disclosure of information to Stakeholders

(I) Size of investments (J) Size of investments p-value

Rs.10,000 – Rs.24,999 Rs. 25,000 - Rs. 99,999 0.179

Above Rs.1,00,000 0.000

clxxxiii

Rs. 25,000 - Rs. 99,999 Rs.10,000 - Rs.24,999 0.179

Above Rs.1,00,000 0.000

Above Rs.1,00,000 Rs.10,000 - Rs.24,999 0.000

Rs. 25,000 - Rs. 99,999 0.000



the selected five software companies, the Post hoc test was used as significant

difference is seen between sizes of investments. The p value is lesser than the

(0.05) which is observed that significance is seen between stakeholders whose

investment is between Rs.10,000 - Rs24,999 and stakeholders who investment

is above Rs.1,00,000. with respect to the level of satisfaction in disclosure of

information to stakeholders. Also significant difference is seen between

stakeholders whose investment is Rs.25,000 – Rs.99,999 and whose

investments are more than Rs.1,00,000. Satisfaction is more in the

respondents whose investment is more than Rs.1,00,000.

Table 5.5.7

Kruskal Wallis test for significant difference in Gender, Educational

Qualifications and Size of Investments the level of satisfaction of

Disclosure of information


Infosys

Gender 0.802


Size of Investments 0.023

Wipro Gender 0.255



clxxxiv

TCS Gender 0.432



HCL Gender 0.723



Satyam Gender 0.531




In order to find out that there is any difference among gender,

educational qualifications, and size of investments of stakeholders and level of

satisfaction of disclosure of information of selected five software companies,

the Kruskal Wallis test was used to find out the significance of difference

between variables. Since the p values given in the above table are greater than

the (0.05), there is no significant difference among, educational qualifications,

occupation, age and size of investments of stakeholders and general meeting

practices of selected software companies, except the significant difference was

observed between size of investments with respect to level of satisfaction in

disclosure of information in Infosys.

5.5.2 Analysis of level of satisfaction in Corporate communication



the corporate communication to Stakeholders.

Table 5.5.8

ANOVA for significant difference between Software companies & the

level of Stakeholders’ satisfaction of Corporate communication

clxxxv


Infosys 14.88 0.33

880.84

.001

Wipro 15.00 0.00

TCS 13.81 1.13

HCL 12.86 1.59

Satyam 7.65 1.20


In order to analyse that there is any difference between software

companies by stakeholders and satisfaction in corporate communication of



lesser than the (0.05), hence there is significant difference between level of

satisfaction of stakeholders and corporate communication of selected software

companies and the null hypothesis is rejected.

clxxxvi

Table 5.5.9

Post hoc test for Significant difference among software companies & the

level of stakeholders’ satisfaction of Corporate communication


Infosys

Wipro 0.002

TCS 0.000

HCL 0.000

Satyam 0.000

Wipro

Infosys 0.002

TCS 0.000

HCL 0.000

Satyam 0.000

TCS

Infosys 0.000

Wipro 0.000

HCL 0.000

Satyam 0.000

HCL

Infosys 0.000

Wipro 0.000

TCS 0.000

Satyam 0.000

Satyam

Infosys 0.000

Wipro 0.000

TCS 0.000

HCL 0.000

Source: Primary Data, shaded figures indicate significance





respect to the corporate communication to Stakeholders. Wipro tops in the

satisfaction and Satyam are giving low satisfaction in terms of corporate

communication to stakeholders.

clxxxvii

Table 5.5.10

ANOVA for significant difference in Educational Qualifications & the

level of Stakeholders’ satisfaction of Corporate communication

Educational



0.337 0.799 Graduate 12.71 2.97





qualifications of the stakeholders and satisfaction in corporate communication




qualifications of stakeholders and level of satisfaction of corporate

communication disclosure of information of selected software companies.

Table 5.5.11

ANOVA for significant difference in Occupation with respect to level of

stakeholders satisfaction of Corporate Communication


Business 12.79 3.07

0.684 0.562 Private 12.68 3.01

Public 12.89 2.82



clxxxviii


the stakeholders and satisfaction in corporate communication of selected five




and level of satisfaction of corporate communication of selected software

companies.

Table 5.5.12

ANOVA for significant difference in Size of Investment with respect to

level of stakeholders' satisfaction of Corporate Communication


Rs.10,000 - Rs.24,999 11.14 2.97

13.297

.001

Rs. 25,000 - Rs. 99,999 12.38 3.14

Above Rs.1,00,000 13.24 2.67



investments of the stakeholders and satisfaction in corporate communication




investments of stakeholders and level of satisfaction of corporate

communication of selected software companies.

Table 5.5.13

Post Hoc test for Size of Investment with respect to level of satisfaction

in Corporate Communication among Stakeholders

clxxxix


Rs.10,000 - Rs.24,999 Rs. 25,000 - Rs. 99,999 0.053

Above Rs.1,00,000 0.000

Rs. 25,000 - Rs. 99,999 Rs.10,000 - Rs.24,999 0.053

Above Rs.1,00,000 0.000

Above Rs.1,00,000 Rs.10,000 - Rs.24,999 0.000

Rs. 25,000 - Rs. 99,999 0.000


In order to analyse that which two groups are significantly different in




investment is between Rs.10,000 - Rs24,999 and stakeholders who investment

is above Rs.1,00,000 with respect to the level of satisfaction in corporate

communication to Stakeholders. Also significant difference is seen between

stakeholders whose investment is Rs.25,000 - Rs.99,999 and whose


respondents who invested more than Rs.1,00,000

Table 5.5.14

Kruskal Wallis test for significant difference among educational

qualifications, occupation & size of investment and level of satisfaction

in Corporate communications

Compan

y Variables p-value

Infosys


Occupation 0.28

cxc


Wipro


Occupation 0.916


TCS


Occupation 0.243


HCL


Occupation 0.655


Satyam


Occupation 0.283



In order to find out that there is any difference among, educational

qualifications, occupation and size of investments of stakeholders and level of

satisfaction in corporate communication of selected five software companies,

the Kruskal Wallis test was used to find out the significance of difference

between variables. Since the p values given in the above table are greater than

the (0.05), there is no significant difference among, educational qualifications,

occupations and size of investments of stakeholders with respect to level of

satisfaction of corporate communication.

5.5.3 Analysis of Satisfaction level in Transparency



the transparency in sharing the shares allotment / borrowing information with

stakeholders.

Table 5.5.15

cxci

ANOVA for significant difference among Software companies & the level

of Stakeholders’ satisfaction in Transparency


Infosys 9.76 0.43

763.916

.001

Wipro 9.72 0.45

TCS 9.19 0.72

HCL 8.36 0.48

Satyam 5.71 0.89


In order to analyse that there is any difference between software

companies by stakeholders and satisfaction in transparency of selected five


difference between two variables. Since the p value (0.001) is lesser than the

(0.05), hence there is significant difference between level of satisfaction of

stakeholders and transparency in sharing the shares allotment / borrowing

information of selected software companies and the null hypothesis is

rejected.

Table 5.5.16

Post hoc test for Significant difference among software companies & the

level of stakeholders’ satisfaction in Transparency


Infosys

Wipro 0.954

TCS 0.000

HCL 0.000

Satyam 0.000

Wipro

Infosys 0.954

TCS 0.000

HCL 0.000

cxcii

Satyam 0.000

TCS

Infosys 0.000

Wipro 0.000

HCL 0.000

Satyam 0.000

HCL

Infosys 0.000

Wipro 0.000

TCS 0.000

Satyam 0.000

Satyam

Infosys 0.000

Wipro 0.000

TCS 0.000

HCL 0.000




observed from the above table that the p value is less than the (0.05), there is


respect to the transparency in sharing the shares allotment / borrowing

information with stakeholders, but significant difference is not seen between

Infosys and Wipro.

Table 5.5.17

ANOVA for significant difference in Educational Qualification & level of

stakeholders' satisfaction in Transparency

Educational Qualifications Mean

S.D F p-value


0.318 0.812 Graduate 8.49 1.58




cxciii


qualifications of the stakeholders and satisfaction in disclosure of information




qualifications of stakeholders and level of satisfaction of in transparency in

sharing the shares allotment / borrowing information with stakeholders of


Table 5.5.18

Kruskal Wallis test for significant difference in Educational

Qualifications & the level of satisfaction in Transparency








In order to analyse out that there is any difference between educational

qualifications of stakeholders and level of satisfaction of transparency of

selected five software companies, the Kruskal Wallis test was used to find out

the significance of difference between variables. Since the p values given in

the above table are greater than the (0.05), there is no significant difference

between, educational qualifications of stakeholders and level of satisfaction of

transparency of selected software companies.

5.5.4 Analysis of Satisfaction level in General meeting practices

cxciv



General meeting practices.

Table 5.5.19

ANOVA for significant difference among Software companies & the

level of Stakeholders’ satisfaction in General meeting


Infosys 19.76 0.43

2688.00

.001

Wipro 19.73 0.45

TCS 18.42 1.02

HCL 16.99 1.04

Satyam 9.52 0.99



companies by stakeholders and satisfaction in general meeting of selected five


difference between two variables. Since the p value (0.001) is lesser than the

(0.05), hence there is significant difference between level of satisfaction of

stakeholders and level of satisfaction in general meeting practices of selected

software companies and the null hypothesis is rejected.

Table 5.5.20


level of stakeholders’ satisfaction in General meeting


Infosys

Wipro 0.981

TCS 0.000

HCL 0.000

cxcv

Satyam 0.000

Wipro

Infosys 0.981

TCS 0.000

HCL 0.000

Satyam 0.000

TCS

Infosys 0.000

Wipro 0.000

HCL 0.000

Satyam 0.000

HCL

Infosys 0.000

Wipro 0.000

TCS 0.000

Satyam 0.000

Satyam

Infosys 0.000

Wipro 0.000

TCS 0.000

HCL 0.000






respect to the general meeting to stakeholders, but significance is not seen

between Infosys and Wipro.

Table 5.5.21

ANOVA for significant difference in Educational Qualifications & level

of stakeholders' satisfaction in General meeting



0.601 0.615 Graduate 16.62 4.10




cxcvi


qualifications of the stakeholders and satisfaction in general meeting practices




qualifications of stakeholders and level of satisfaction of general meeting


Table 5.5.22

ANOVA for significant difference in Occupation & level of stakeholders'

satisfaction in General meeting


Business 16.67 4.21

0.76 0.517 Private 16.68 4.07

Public 17.07 3.68




the stakeholders and satisfaction in general meeting of selected five software

companies, the ANOVA test was used to find out the significance of



and level of satisfaction in general meeting practices of selected software

companies.

Table 5.5.23

ANOVA for significant difference in Age & level of stakeholders

satisfaction in General meeting

Age Groups Mean S.D F p-value

cxcvii

25-35 years 16.39 4.09

1.021 0.383 36-45 years 16.73 4.06

46-55 years 17.14 3.67



In order to analyse that there is any difference between age group of the

stakeholders and satisfaction in general meeting practices of selected five



(0.05), there is no significant difference between age group of stakeholders

and level of satisfaction of general meeting practices of selected software

companies.

Table 5.5.24

ANOVA for significant difference in Size of Investment & level of

stakeholders satisfaction in General meeting


Rs.10,000 - Rs.24,999 14.48 4.23

16.291

.001

Rs. 25,000 - Rs. 99,999 16.11 4.21

Above Rs.1,00,000 17.49 3.55



investments of the stakeholders and satisfaction in general meeting practices




cxcviii

investments of stakeholders and level of satisfaction of general meeting


Table 5.5.25

Post Hoc Test for Size of Investment with respect to level of satisfaction in

General meeting among Stakeholders


Rs.10,000 - Rs.24,999 Rs. 25,000 - Rs. 99,999 0.076

Above Rs.1,00,000 0.000

Rs. 25,000 - Rs. 99,999 Rs.10,000 - Rs.24,999 0.076

Above Rs.1,00,000 0.003

Above Rs.1,00,000 Rs.10,000 - Rs.24,999 0.000

Rs. 25,000 - Rs. 99,999 0.003






investment between Rs.10,000 – Rs.24,999 and stakeholders who investment

is above Rs.1,00,00 with respect to the level of satisfaction in General meeting

practices to stakeholders. Also significant difference is seen between

stakeholders whose investment is Rs.25,000 – Rs.99,999 and whose


respondents who invested more than Rs.1, 00,000.

Table 5.5.26


Qualifications, Occupation, Age, Size of investment & the level of

satisfaction in General Meeting practices.

cxcix

Compa

ny Variables p-value

Infosys


Occupation 0.274

Age 0.018


Wipro


Occupation 0.848

Age 0.011


TCS


Occupation 0.714

Age 0.03


HCL


Occupation 0.864

Age 0.649


Satyam


Occupation 0.016

Age 0.856



In order to find out that there is any difference among Educational

qualifications, Occupation, Age and Size of investment of stakeholders and

level of satisfaction of general meetings practices disclosure of information of

selected five software companies, the Kruskal Wallis test was used to find out

the significance of difference between variables. Since the p values given in

the above table are greater than the (0.05), there is no significant difference

cc

among, educational qualifications, occupation, age and size of investments of

stakeholders and general meeting practices of selected software companies,

except the significance was observed between age groups in Infosys, Wipro

and TCS with respect to level of satisfaction in General meetings. Also

significance was observed between occupations in Satyam with respect to

level of satisfaction in general meeting.

5.5.5 Analysis of level of satisfaction in Performance of Board



the performance of the board.

Table 5.5.27


of Stakeholders’ satisfaction in Performance of Board


Infosys 29.40 0.49

1870.00 .001

Wipro 29.48 0.50

TCS 28.25 1.16

HCL 25.36 2.61

Satyam 14.37 1.63


In order to study that there is any difference between software

companies by stakeholders and satisfaction in performance of board of




cci

satisfaction of stakeholders and performance of board of selected software


Table 5.5.28


level of stakeholders’ satisfaction in Performance of Board


Infosys

Wipro 0.807

TCS 0.000

HCL 0.000

Satyam 0.000

Wipro

Infosys 0.807

TCS 0.000

HCL 0.000

Satyam 0.000

TCS

Infosys 0.000

Wipro 0.000

HCL 0.000

Satyam 0.000

HCL

Infosys 0.000

Wipro 0.000

TCS 0.000

Satyam 0.000

Satyam

Infosys 0.000

Wipro 0.000

TCS 0.000

HCL 0.000

ccii



the selected five software companies, the post hoc test was used. It is observed

from the above table that the p value is less than the (0.05) there is significant

difference between all the companies in level of satisfaction with respect to

the performance of the board to stakeholders, but significance is not seen


Table 5.5.29

t-test for Gender with respect to level of satisfaction in Performance of

Board among Stakeholders

Gender Mean S.D t p-value

Male 25.25 5.99 1.144 0.253

Female 25.93 5.38



respect to the level of satisfaction in performance of board by stakeholders of

selected five software companies, the t test was used to find out the


greater than the (0.05), there is no significant difference between gender with

respect to the level of satisfaction in performance of board to stakeholders of


Table 5.5.30

ANOVA for significant difference in Age & level of stakeholders'


cciii

Age Groups Mean S.D F p-value

25-35 years 24.67 6.21

1.015

0.385

36-45 years 25.09 6.13

46-55 years 25.80 5.60



In order to analyse that there is any difference between age groups of

the stakeholders and satisfaction in performance of board of selected five



(0.05), there is no significant difference between age groups of stakeholders

and level of satisfaction of performance of board of selected software

companies.

Table 5.5.31


of stakeholders' satisfaction in Performance of Board



0.674

0.568

Graduate 24.95 6.20





qualifications of the stakeholders and satisfaction in performance of board of


cciv



qualifications of stakeholders and level of satisfaction in performance of board

of selected software companies.

Table 5.5.32




Business 25.09 6.27

0.789 0.501 Private 25.06 6.15

Public 25.61 5.60




the stakeholders and satisfaction in performance of board of selected five




and level of satisfaction of performance of board of selected software

companies.

Table 5.5.33

ANOVA for significant difference in Number of Years of Transaction &

level of stakeholders' satisfaction in Performance of Board

Number of Years of

Transaction Mean S.D F p-value

1-2 . 11 years 25.26 5.94 1.731 0.16

3 - 5 . 11 years 24.86 6.11

ccv

6 - 8 . 11 years 26.12 5.34



In order to find out that there is any difference between number of

years of transaction of the stakeholders and satisfaction in performance of

board of selected five software companies, the ANOVA test was used to find

out the significance of difference between two variables. Since the p value

(0.16) is greater than the (0.05), there is no significant difference between

number of years of transactions of stakeholders and level of satisfaction of

performance of board of selected software companies.

Table 5.5.34


stakeholders' satisfaction in Performance of Board


Rs.10,000 - Rs.24,999 22.09 6.46

Rs. 25,000 - Rs. 99,999 24.36 6.45 12.923 .001

Above Rs.1,00,000 26.20 5.35



investments of the stakeholders and satisfaction in performance of the board




investments of stakeholders and level of satisfaction of performance of the

board of selected software companies.

ccvi

Table 5.5.35

Post hoc test for Size of Investment with respect to level of satisfaction in

Performance of Board among Stakeholders


Rs.10,000 - Rs.24,999

Rs. 25,000 - Rs. 99,999 0.117

Above Rs.1,00,000 0.001

Rs. 25,000 - Rs. 99,999 Rs.10,000 - Rs.24,999 0.117

Above Rs.1,00,000 0.012

Above Rs.1,00,000 Rs.10,000 - Rs.24,999 0.001

Rs. 25,000 - Rs. 99,999 0.012



the selected five software companies, the post hoc test was used as significant



investment is Between Rs.10,000 – Rs.24,999 and stakeholders who

investment is above Rs.1,00,000 with respect to the level of satisfaction in to

performance of the board to stakeholders. Also significant difference is seen

between stakeholders whose investment is Rs.25, 000 - Rs99, 999 and whose


respondents who invested more than Rs.1, 00,000.

ccvii

Table 5.5.36

Kruskal Wallis test and Mann Whitney U test for significant

difference in Gender, Age, Educational qualifications,

occupation, years of transaction, size of investment & the level of



Infosys

Gender 0.748

Age 0.573


Occupation 0.517

Years of Transactions 0.535


Wipro

Gender 0.683

Age 0.643


Occupation 0.653



TCS

Gender 0.715

Age 0.047


Occupation 0.362



HCL

Gender 0.748

Age 0.573


Occupation 0.517



Satyam

Gender 0.748

Age 0.573


Occupation 0.517




ccviii

In order to find out that there is any difference among gender, age

groups, educational qualifications, occupation, years of transactions and size

of investments of stakeholders and level of satisfaction of performance of

board of selected five software companies, the Kruskal Wallis test was used to

find out the significance of difference between variables. Since the p values

given in the above table are greater than the (0.05), there is no significant

difference among, gender, age groups, educational qualifications, occupation,

years of transactions and size of investments and performance of board of

selected software companies, except the significant difference was observed

between age groups in TCS with reference to level of satisfaction in

performance of board.

5.5.6 Analysis of level of satisfaction in Corporate management



the corporate management practices.

Table 5.5.37


of Stakeholders’ satisfaction of Corporate Management practices


Infosys 24.11 0.71

2622.00 .001

Wipro 24.37 0.66

TCS 23.60 0.83

HCL 21.21 1.61

Satyam 10.46 1.64

Source: Primary Data , shaded figures indicates significance

ccix


companies by stakeholders and satisfaction in corporate management practices




satisfaction of stakeholders and corporate management practices of selected

software companies and the null hypothesis is rejected.

Table 5.5.38


level of stakeholders’ satisfaction in Corporate Management practices


Infosys

Wipro 0.060

TCS 0.000

HCL 0.000

Satyam 0.000

Wipro

Infosys 0.060

TCS 0.000

HCL 0.000

Satyam 0.000

TCS

Infosys 0.000

Wipro 0.000

HCL 0.000

Satyam 0.000

HCL

Infosys 0.000

Wipro 0.000

TCS 0.000

Satyam 0.000

Satyam

Infosys 0.000

Wipro 0.000

TCS 0.000

HCL 0.000


ccx


the selected five software companies, the post hoc test was used. It is observed

from the above table that the p value is less than the (0.05) there is significant

difference between all the companies in level of satisfaction with respect to

the corporate management practices to stakeholders, but significance is not

seen between Infosys and Wipro.

Table 5.5.39


of stakeholders' satisfaction in Corporate Management practices

Educational



0.684

0.562

Graduate 20.55 5.35





qualifications of the stakeholders and satisfaction in corporate management

practices of selected five software companies, the ANOVA test was used to


value (0.562) is greater than the (0.05), there is significant difference between

educational qualifications of stakeholders and level of satisfaction of

corporate management practices of selected software companies.

ccxi

Table 5.5.40

ANOVA for significant difference in number of years of transaction &

level of stakeholders' satisfaction in corporate management practices

Number of years of Transaction Mean S.D F p-value

1-2 . 11 years 20.68 5.35

1.698 0.166 3 - 5 . 11 years 20.28 5.69

6 - 8 . 11 years 21.46 5.04



In order to analyse that there is any difference between numbers of

years of transaction of the stakeholders and satisfaction in corporate

management practices of selected five software companies, the ANOVA test

was used to find out the significance of difference between two variables.

Since the p value (0.166) is greater than the (0.05), there is no significant

difference between numbers of years of transaction of stakeholders and level

of satisfaction of corporate management practices of selected software

companies..

Table 5.5.41


stakeholders' Satisfaction in Corporate management practices


Rs.10,000 - Rs.24,999 17.59 6.26

13.858

.001

Rs. 25,000 - Rs. 99,999 19.85 5.82

Above Rs.1,00,000 21.53 4.86



investment of the stakeholders and satisfaction in corporate management

ccxii

practices of selected five software companies, the ANOVA test was used to


value (0.001) is lesser than the (0.05), there is significant difference between

size of investment of stakeholders and level of satisfaction of corporate

management practices of selected software companies..

Table 5.5.42

Post hoc test for Size of Investments with respect to level of satisfaction in

Corporate Management practices among Stakeholders


Rs.10,000 - Rs.24,999 Rs. 25,000 - Rs. 99,999 0.097

Above Rs.1,00,000 0.001

Rs. 25,000 - Rs. 99,999 Rs.10,000 - Rs.24,999 0.097

Above Rs.1,00,000 0.010

Above Rs.1,00,000 Rs.10,000 - Rs.24,999 0.001

Rs. 25,000 - Rs. 99,999 0.010





(0.05) which is observed that significance is seen between Rs.10,000 –

Rs.24,999 and stakeholders who investment is above Rs.1,00,00 with respect

to the level of satisfaction in to corporate management practices to

stakeholders. Also significant difference is seen between stakeholders whose

investment is Rs.25,000 – Rs.99,999 And whose investments are more than

Rs.1,00,000. The satisfaction is more in the respondents who invested more

than Rs.1,00,000.

ccxiii

Table 5.5.43


Qualifications, years of transaction, size of investment & level of

stakeholders' satisfaction in Corporate Management practices



Years of transaction 0.066


Wipro Educational Qualifications

0.75






HCL








In order to analyse that there is any difference among educational

qualifications, years of transactions and size of investments of stakeholders

and level of satisfaction of corporate management practices of selected five

software companies, the Kruskal Wallis test was used to find out the

significance of difference between variables. Since the p values given in the

above table are greater than the (0.05), there is no significant difference

among, educational qualifications, years of transactions and size of

investments of stakeholders and corporate management practices of selected

software companies, except the significant difference was observed between

ccxiv

educational qualifications in Satyam with respect to level of satisfaction in

corporate management practices.

5.5.7 Analysis of level of satisfaction in Financial practices



financial practices

Table 5.5.44

ANOVA for significant difference among Software companies & the

level of Stakeholders’ satisfaction in financial practices


Infosys 28.53 0.64

2425.00

.001

Wipro 28.63 0.48

TCS 26.45 1.18

HCL 25.29 1.57

Satyam 16.00 1.13



companies by stakeholders and satisfaction in financial practices of selected




satisfaction of stakeholders and financial practices of selected software


ccxv

Table 5.5.45


level of stakeholders’ satisfaction of Financial practices


Infosys

Wipro 0.724

TCS 0.000

HCL 0.000

Satyam 0.000

Wipro

Infosys 0.724

TCS 0.000

HCL 0.000

Satyam 0.000

TCS

Infosys 0.000

Wipro 0.000

HCL 0.000

Satyam 0.000

HCL

Infosys 0.000

Wipro 0.000

TCS 0.000

Satyam 0.000

Satyam

Infosys 0.000

Wipro 0.000

TCS 0.000

HCL 0.000






respect to the financial practices to stakeholders, but significance is not seen


ccxvi

Table 5.5.46

ANOVA for significant difference in Educational Qualification & level of

stakeholders' satisfaction in Financial practices

Educational



0.614

0.606

Graduate 24.654 5.029





qualifications of the stakeholders and satisfaction in financial practices of




qualifications of stakeholders and level of satisfaction of financial practices of


Table 5.5.47


satisfaction in Financial practices


Business 24.7 5.1

0.841 0.472 Private 24.7 5.0

Public 25.2 4.5

Government 25.6 4.3



the stakeholders and satisfaction in financial practices of selected five

ccxvii




and level of satisfaction of financial practices of selected software companies.

Table 5.5.48

ANOVA for significant difference in Monthly Income & level of


Monthly income Mean S.D F p-value

Below Rs.14,999 24.74 5.23

3.325 0.311

Rs.15,000 - Rs. 24,999 24.94 4.97

Rs.25,000 - Rs.44,999 24.11 5.21

Rs.45,000 - Rs. 64,999 26.06 3.60

Above Rs.65,000 24.78 4.99


In order to analyse that there is any difference between monthly income

of the stakeholders and satisfaction in financial practices of selected five



(0.05), there is no significant difference between monthly income of

stakeholders and level of satisfaction of financial practices of selected

software companies.

Table 5.5.49



ccxviii


Rs.10,000 - Rs.24,999 21.98 4.95

16.339

.001

Rs. 25,000 - Rs. 99,999 24.06 5.13

Above Rs.1,00,000 25.71 4.38



investments of the stakeholders and satisfaction in financial practices of




investments of stakeholders and level of satisfaction of financial practices of


Table 5.5.50

Post hoc test for Size of Investment with reference to level of satisfaction

in Financial practices among Stakeholders


Rs.10,000 - Rs.24,999 Rs. 25,000 - Rs. 99,999 0.094

Above Rs.1,00,000 0.000

Rs. 25,000 - Rs. 99,999 Rs.10,000 - Rs.24,999 0.094

Above Rs.1,00,000 0.004

Above Rs.1,00,000 Rs.10,000 - Rs.24,999 0.000

Rs. 25,000 - Rs. 99,999 0.004



the selected five software companies, the post hoc test was used as significant


(0.05) which is observed that significance is seen between Rs.10,000 –

ccxix

Rs.24,999 and stakeholders who investment is above Rs.1,00,00 with respect

to the level of satisfaction in financial practices to stakeholders. Also

significant difference is seen between stakeholders whose investment is

Rs.25,000 – Rs.99,999 and whose investments are more than Rs.1,00,000.

The satisfaction is more in the respondents who invested more than

Rs.1,00,000.

Table 5.5.51


Qualifications, Occupation, Monthly Income, Size of investment & the

level of satisfaction in Financial practices.

Compan

y Variables p-value

Infosys


Occupation 0.251

Monthly Income 0.88


Wipro


Occupation 0.170

Monthly Income 0.580


TCS


Occupation 0.011



HCL


Occupation 0.346




ccxx

Occupation 0.009




In order to find out that there is any difference among educational

qualifications, occupation, monthly income and size of investment and level

of satisfaction of financial practices of selected five software companies, the

Kruskal Wallis test was used to find out the significance of difference between

variables. Since the p values given in the above table are greater than the

(0.05), there is no significant difference among, educational qualifications,

occupation, monthly income and size of investment of stakeholders and

financial practices of selected software companies, except significant

difference was observed between occupation and monthly income in Satyam

and with reference to satisfaction levels in financial practices. Also

significant difference is observed between occupation with respect to level of

satisfaction in financial practices in TCS.

5.5.8 Analysis of level of satisfaction in Secretarial practices



secretarial practices.

ccxxi

Table 5.5.52


of Stakeholders’ satisfaction of Secretarial practices


Infosys 24.32 0.88

1938.00

.001

Wipro 23.99 0.88

TCS 23.62 0.75

HCL 21.97 2.07

Satyam 12.09 0.89

Source: Primary Data shaded figures indicates significance


companies by stakeholders and satisfaction in secretarial practices of selected




satisfaction of stakeholders and software practices of selected software


Table 5.5.53

Post hoc test for size of investments with reference to level of

stakeholders’ satisfaction in Secretarial Practices


Infosys

Wipro 0.053

TCS 0.000

HCL 0.000

Satyam 0.000

Wipro

Infosys 0.053

TCS 0.011

HCL 0.000

Satyam 0.000

TCS Infosys 0.000

Wipro 0.011

ccxxii


HCL 0.000

Satyam 0.000

HCL

Infosys 0.000

Wipro 0.000

TCS 0.000

Satyam 0.000

Satyam

Infosys 0.000

Wipro 0.000

TCS 0.000

HCL 0.000






respect to the secretarial practices to stakeholders, but significance is not

seen between Infosys and Wipro.

Table 5.5.54


of stakeholders' satisfaction in Secretarial practices

Educational



0.628

0.597

Graduate 20.84 4.90





qualifications of the stakeholders and satisfaction in secretarial practices of

ccxxiii




qualifications of stakeholders and level of satisfaction of secretarial practices

of selected software companies.

Table 5.5.55


Qualifications & the level of stakeholders' satisfaction in Secretarial

practices









qualifications of stakeholders and level of satisfaction of secretarial practices

of selected five software companies, the Kruskal Wallis test was used to find

out the significance of difference between variables. Since the p values given

in the above table are greater than the (0.05), there is no significant difference

between, educational qualifications of stakeholders and level of satisfaction of

secretarial practices of selected software companies.

5.6 ANALYSIS OF COMPARISON OF VARIABLES BETWEEN

EXPECTATION AND SATISFACTION AND FACTORS

ccxxiv

An Analysis is done to understand any significant difference between

expectation and satisfaction variables.

Table 5.6.1

Comparison of variables-Disclosure, corporate communications,

transparency, general meeting between Expectation & Satisfaction level

S.No Variables Mean Rank Z-value p-value

1 Disclosure Expectation 123.16

12.132 .001 Satisfaction 219.05

2 Corporate

communication

Expectation

127.58

7.969 .001 Satisfaction 244.4

3 Transparency Expectation 118

10.029 .001 Satisfaction 216.68

4 General

meeting

Expectation 129.52 9.888 .001

Satisfaction 265.13


In order to compare the perception level of expectation and perception

level of satisfaction for four factors namely disclosure of information,

corporate communication, transparency and general meeting practices,

Wilcoxson Signed rank test for paired observations is used It is observed that

there is significant difference between level of expectation and level of

satisfaction with respect to disclosure, corporate communication, transparency

and general meeting.

Table 5.6.2

Correlations for factors in Expectation

ccxxv

Factors Disclosure Corporate

communication Transparency General

meeting

Disclosure 1

Corporate

communication

r =.696**

1

p =.000

Transparency r =.439**

r =.098* 1

p =.000 p =.023

General

meeting

r =.683**

r =.736**

r =.139**

1

p =.000 p =.000 p =0.001


* indicates correlation is significant at 5% level and ** indicates correlation is

significant at 1% level.

In order to find out that is there any correlation exists among the

factors, Karl Pearson’s coefficient of correlation test was done. It is observed

that a good significant positive correlation exists between corporate

communication and disclosure (.696), good positive correlation is observed

between General meetings and Disclosure (.683), good positive correlation is

observed between general meeting and corporate communication (.736).

Moderate positive correlation observed between disclosure and transparency

(.439). Also significant correlation is observed between Transparency and

corporate communication, Transparency and general meeting, but the

correlation coefficient was not healthy.

Table 5.6.3

Correlation between Eight factors in Satisfaction level

ccxxvi

Factors Disclosure

Corporate

communi-

cation

Transparency General

meeting

Performan

ce

of Board

Corporate

manage-

ment

practices

Financial

practices

Secre-

tarial

practices

Disclosure 1

Corporate

communi-

cation

r =.931**

1

p =.000

Transparency r =.869

** r =.878

** 1

p =.000 p =.000

General

Meeting r =.940

** r =.933

** r =.905

** 1

p =.000 p =.000 p =.000

Performance

of Board r =.935

** r =.937

** r =.899

** r =.982

** 1

p =.000 p =.000 p =.000 p =.000

Corporate

management

practices

r =.930**

r =.927**

r =.889**

r =.956**

r =.959**

1

p =.000 p =.000 p =.000 p =.000 p =.000

Financial

Practices r =.955

** r =.934

** r =.915

** r =.972

** r =.976

** r =.948

** 1

p =.000 p =.000 p =.000 p =.000 p =.000 p =.000

Secretarial

Practices r =.940

** r =.933

** r =.885

** r =.963

** r =.967

** r =.968

** r =.955

** 1

p =.000 p =.000 p =.000 p =.000 p =.000 p =.000 p =.000

** indicates the correlations are significant at 1% level.

shaded figures indicate significance In order to find out that is there any correlation exists among the

factors, Karl Pearson’s coefficient of correlation test was done. From the

above table it is observed that there is significant high positive correlation

observed between all the eight factors of the level of satisfaction of

stakeholders between each other.

Table 5.6.4

Correlation between Current Indian Corporate Governance laws as

Eight factors of level of Satisfaction

ccxxvii

S.

No. Variables

Reliability

Coefficient Mean S.D

Correlation with

current Indian

Corporate

Governance laws

1 Disclosure 0.876 4.22 0.9 .886**

2

Corporate

communication 0.959 4.28 0.99 .889**

3 Transparency 0.901 4.28 0.85 .880**

4

General meeting—

satisfaction 0.958 4.23 1.03 .918**

5

Performance of

Board 0.966 4.23 1.06 .931**

6

Corporate

management

practices 0.956 4.16 1.16 .893**

7 Financial practices 0.833 3.57 0.96 .922**

8

Secretarial

practices 0.955 4.25 1.03 .912**

** indicates Correlations is significant at the 1% level

In order to find out the correlation between eight factors and current

Indian corporate governance laws, the correlation analysis was done. From

the above table there is significant high positive correlation observed between

Disclosure and current Indian Corporate Governance laws (.886). There is

significant high positive correlation observed between Corporate

communication and current Indian Corporate Governance laws (.889). There

is significant high positive correlation observed between transparency and

current Indian Corporate Governance laws (.880). There is significant high

positive correlation observed between general meeting and current Indian

Corporate Governance laws (.918). There is significant high positive

correlation observed between performance of board and current Indian

Corporate Governance laws (.931). There is significant high positive

correlation observed between corporate management practices and current

Indian Corporate Governance laws (.893). There is significant high positive

ccxxviii

correlation observed between financial practices and current Indian Corporate

Governance laws (.922). There is significant high positive correlation

observed between Secretarial practices and current Indian Corporate

Governance laws (.912). Also reliability of eight factors of level of

satisfaction is also shown in the above table which is good.

Table 5.6.5

Eigen values to identify the factors of satisfaction of corporate

governance practices

Factors Initial Eigen values

Eigen Value Percentage of Variance Cumulative Percentage

1 4.024 47.73 47.73

2 2.185 6.97 54.70

3 2.054 6.19 60.90

4 1.965 5.16 66.06

5 1.852 5.02 71.08

6 1.596 4.96 76.04

7 1.232 3.58 79.62

8 1.012 2.23 81.85

There are 36 variables to measure the stack holder’s satisfaction, which

are reduced into fewer factors by analyzing correlation between variables

(satisfaction). In this case 36 variables are reduced in to 8 factors which

explain the much of the original data. From the cumulative percentage

column, the eight factors extracted together accounts for 81.85 % of the total

variance (information contained in 36 variables).

Table 5.6.6

Table of Factors and Variables

ccxxix

F

actor

Variables Factor Scores

1

Dividend Declaration 0.839

Bonus Shares Declaration 0.830

Cash Dividend 0.802

Property and Paper Dividend 0.801

Winding Up Status 0.795

Financial Transactions 0.793

Recommendations to invest 0.792

2

Happy with Corporate Governance 0.791

Happy with Performance of Chairman 0.786

Happy with performance of BOD 0.785

Happy with Dividend 0.782

Happy with growth of company 0.781

Happy with CSR activities 0.771

3

Suing on wrongful acts 0.770

Composition of BOD 0.761

Performance of Chairman 0.755

Performance of BOD 0.751

Performance of Leadership 0.742

4

Investor Relations 0.732

Grievance Resolution 0.721

Growth Information 0.712

Minutes of AGM 0.702

Copies of Minutes 0.701

Performance of IRO / CS 0.699

5

Appointment of Directors/Auditors 0.698

Calling EGM 0.657

Demand for Poll 0.652

Inspection of books of accounts / records 0.632

ccxxx

F

actor

Variables Factor Scores

6

Corporate Communication of Allotment of

Shares

0.621

Corporate Communication of Share Certificates

Issue

0.612

Corporate Communication of Transfer of

Shares

0.602

7

Disclosure of Income and Expenditure 0.601

Disclosure of Actual Profitability 0.589

Disclosure of Actual Risk 0.574

8 Transparency of Share Allotment 0.536

Transparency of Borrowing Loan/ Loan Capital 0.526

In order to find out is there any grouping of variables possible by way

of factor analysis was explored The details of such grouping are inferred from

the above table are that:

Factor 1 is a combination of 7 original variables such as Dividend

declaration, Bonus shares declaration, Cash Dividend, Property and paper

dividend, winding up status, Financial transactions of the company and

recommendation to invest which is named as stake holder’s perception

towards financial practices of corporate governance

Factor 2 is a combination of 6 original variables such as happy with

corporate governance, happy with performance of Chairman, happy with

performance of the BOD, happy with declaration of dividend, happy with

current growth of the company and happy with current corporate social

responsibility which is named as stake holder’s perception towards

performance of the board

ccxxxi

Factor 3 is a combination of 5 variables such as Right to Suing on

wrongful acts, Composition of BOD, Performance of Chairman, Performance

of BOD and Performance of Leadership which is named as stake holder’s

perception towards corporate management practices.

Factor 4 is a combination of 6 variables such as Investor Relations,

Grievance Resolution, Growth Information, Minutes of AGM, Copies of

Minutes and Performance of IRO / CS and which is named as stake holder’s

perception towards Secretarial practices.

Factor 5 is a combination of 4 variables such as Appointment of

Directors/Auditors, Calling EGM, Demand for Poll and Inspection of books of

accounts / records which is named as stake holder’s perception towards

General meeting related practices.

Factor 6 is a combination of 3 variables such as Corporate

Communication of Allotment of Shares, Corporate Communication of Share

Certificates Issue and Corporate Communication of Transfer of Shares which

is named as stake holder’s perception towards corporate communication

practices.

Factor 7 is a combination of 3 variables such as Disclosure of income

and expenditure are transparent, Disclosure of actual profitability of the

company and Disclosure of actual risk in business which is named as stake

holder’s perception towards disclosure practices.

Factor 8 is a combination of 2 variables such as which is named as

Transparency of Share Allotment and Transparency of Borrowing Loan/ Loan

Capital stake holder’s perception towards transparency practices.

5.7 MODELING

ccxxxii

Figure 1 : Model for increasing the stakeholders’ perception of

satisfaction in Corporate Governance practices.

A model is developed to see whether all the eight factors of satisfaction

lead to satisfaction in corporate governance. In this model all the eight factors

are observed factors through the variables measured in the questionnaire.

Satisfaction in corporate governance is unobserved variable. The above model

meets the requirement of correlating all the eight factors so as to increase the

satisfaction level. The model fit the Chi-square having 123(p = .000), which

has goodness of fit index GFI as .946. The Root Mean Square Error of

Approximation (RMSEA) is 0.04, which shows this as a better model.

5.8 CONCLUSION

ccxxxiii

From the above analysis, it is observed that the stakeholders’’

perception levels of expectations of CG practices are almost the same in all

the companies, but there is a clear difference in their levels of satisfaction in

the companies in which they invested. There is a conspicuous difference in

satisfaction levels in the case of stakeholders’ of Infosys and Wipro and other

companies. A model is proposed to achieve a higher level of satisfaction with

the variables identified so as to gain higher satisfaction of stakeholders in the

software companies.

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CHAPTER – VI

SUMMARY OF FINDINGS, SUGGESTIONS AND

CONCLUSION

6.1 INTRODUCTION

The study on stakeholders’ perception of corporate governance

practices with reference to select software companies was taken with the

prime objective of analysing stakeholders’ perception towards their level of

expectations and satisfactions on CG practices in select software companies in

India. A questionnaire survey was conducted, data collected therein were

analyzed with statistical tools and the findings were arrived. A summary of

findings, suggestions, scope for further future research and conclusion were

discussed below:

6.2 FINDINGS

The study reveals out the major findings that were distilled from the

analysis using various tools as enumerated earlier, are summarized below:

1. The study of the demographic variables shows the inference that, male

stakeholders were high in Infosys and low in TCS and female were high in

TCS and low in Infosys. The age groups distribution was high in the case

of 25-35 and 36-45 years with Satyam, 46-55 with Infosys and above

55years with HCL. The spread of educational qualifications among the

respondents were school level and graduates were high at Satyam, post-

graduates with TCS and professionals with Infosys. The occupation of the

respondents of various companies taken for study was, business and

private were high in Satyam, public in TCS and government respondents

high in HCL. The monthly income of the respondents was distributed in

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the study was high in Satyam for the categories of less that Rs 15,000 and

Rs 25,000-44,999, TCS was having high in Rs 15,000-24,999, HCL with

Rs. 45,000-64,999 and above Rs 65,000 with Infosys. The number of

years of transaction was high in the category of 1-2.11 years with TCS, 3

to 5.11 years with Satyam, and Infosys had high for 6-8.11 and above 9

years. As far as size of investments are concerned, Satyam had high in

both Rs 10,000-24,999 and Rs 25,000-99,999 categories and Infosys had

high in Rs 1,00,000 and above category. Further the study indicates that

the Infosys stakeholders were more aware of the practices and Satyam

stakeholders were least aware of the corporate governance.

2. The analysis of expectation variables indicates that the respondents’

expectation was uniformly high in all variables with various companies, as

they seek them as a matter of stakeholders in those companies. The

expectation variables namely, disclosure of income and expenditure,

disclosure of actual profitability and actual risk, were uniformly high in all

companies. It is the same with the case of variables like financial

transactions, access to minutes of annual general meeting and copies

thereof, calling an extra-ordinary general meeting; Moderate levels were

found in the case of property and paper dividend, growth information,

transparency of shares allotment. Low expectations were reported on the

expectation variable, winding up. The other expectation variables spread

across from high to low, namely dividend declaration, investor relations,

corporate communication on shares allotment, issue and transfer,

transparency of loan capital, appointment of directors / auditors.

3. The findings on the satisfaction variables analysis are that in most of the

variables the respondents highly satisfied with Infosys and Wipro, where

as it was moderate for TCS and HCL and low in Satyam. Respondents

reported that Infosys was high in satisfaction of variables namely

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disclosure of income and expenditure, investor relations, bonus dividend,

cash dividend, property and paper dividend, corporate communication on

share allotment, its issue and transfer, loan capital, inspection of books of

accounts/records, suing the officers of the company, performance of

chairman, corporate social responsibility and satisfaction of current

corporate governance laws. Wipro was high compared to other companies

for the satisfaction variables namely, disclosure of actual profitability and

actual risk, dividend declaration process, financial transactions,

transparency of share allotment, demand for poll, composition of board,

retaining the shares due to happy with performance of chairman,

performance of board and leadership, happy with dividend declaration and

growth. TCS was high compared to other companies, in the satisfaction

variables namely, access to minutes of the annual general meeting and its

copies thereof, corporate governance practices. In the case of satisfaction

of performance of investor relations officer / company secretary and

retention of shares it was high in three companies, namely Infosys, Wipro

and TCS. The satisfaction of recommendations to change the reporting

was low in all companies.


stakeholders’ amongst software companies with respect to the disclosure

of information to Stakeholders. Since p>0.05, the null hypothesis is

accepted at 5% level of significance. Hence there is no significant

difference in the level of expectation of the stakeholders’ amongst

software companies with respect to the disclosure of information to

Stakeholders. There is significant difference between male and females,

females’ expectations are more compared to males. There is no significant

difference between educational qualifications with respect to expectations

regarding disclosure of information to stakeholders. There is no

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significant difference between size of investment with respect to

expectations regarding disclosure of information to stakeholders.

Significant difference is observed between genders of TCS and Satyam.

Also significant difference is observed between educational qualifications

with reference to disclosure.


stakeholders’ amongst software companies with respect to corporate

communication to Stakeholders. Since p>0.05, the null hypothesis is

accepted at 5% level of significance. Hence there is no significant

difference in the level of expectation of the stakeholders’ amongst

software companies with respect to corporate communication to

Stakeholders. There is no significant difference between educational

qualifications with respect to expectations regarding corporate

communication to stakeholders. There is no significant difference between

occupations with reference to expectations regarding corporate

communication to stakeholders. There is no significant difference between

size of investments with respect to expectations regarding corporate

communication to stakeholders. No significant difference is observed

among educational qualifications, occupation and size of investments in

any company with reference to corporate communication.



transparency in sharing the shares allotment / borrowing information with

stakeholders. Since p>0.05, the null hypothesis is accepted at 5% level of

significance. Hence there was no significant difference in the level of

expectation of the stakeholders’ amongst software companies with respect

to the transparency in sharing the shares allotment / borrowing information

with stakeholders. There is no significant difference between qualification

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with respect to expectations in transparency in sharing the share allotment/

borrowing information to stakeholders. No significant difference is

observed between educational qualifications with reference to transparency

in any of the companies.


stakeholders’ amongst software companies with respect to general meeting

related practices. Since p>0.05, the null hypothesis is accepted at 5%

level of significance. Hence there was no significant difference in the

level of expectation of the stakeholders’ amongst software companies with

respect to general meeting related practices. There is no significant

difference observed between educational qualifications with respect to the

expectations of the stakeholders in general meeting related practices.

There is no significant difference between occupations with respect to the

expectation of the stakeholders’ in general meeting related practices. There

is no significant difference between age groups with respect to the

expectation of the stakeholders’ in general meeting related practices.

There is no significant difference between size of investment with respect

to the expectation of the stakeholders’ in general meeting related practices.

There is no significant difference is observed between educational

qualifications, occupation, age and size of investment with respect to level

of expectation in general meeting in any of the companies.


stakeholders’ amongst software companies with respect to the disclosure

of information to Stakeholders. Since p<0.05, the null hypothesis is

rejected at 5% level of significance. Hence there is significant difference

in the level of satisfaction of the stakeholders’ amongst software

companies with respect to the disclosure of information to Stakeholders.

There is a significant difference was observed among all the companies in

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the level of satisfaction with respect to disclosure of information to

stakeholders, but the significance is not seen between Infosys and Wipro.

There is no significant difference between genders with respect to the level

of satisfaction in disclosure of information to stakeholders. There is no

significant difference seen between education levels with respect to the

level of satisfaction in disclosure of information to stakeholders. There is

significant difference seen between size of investments with respect to the

level of satisfaction in disclosure of information to stakeholders. The

satisfaction is more in the respondents whose investments is more that Rs

1,00,000. Significant difference was observed between size of investments

with respect to level of satisfaction in disclosure of information in Infosys.


stakeholders’ amongst software companies with respect to the corporate

communication to Stakeholders. Since p<0.05, the null hypothesis is

rejected at 5% level of significance. Hence, there is significant difference

in the level of satisfaction of the stakeholders’ amongst software

companies with respect to the corporate communication to Stakeholders.

There is significant difference between all the companies in level of

satisfaction with respect to the corporate communication to Stakeholders.

Wipro tops in the satisfaction and Satyam are giving low satisfaction in

terms of corporate communication to Stake holders. There is no

significant difference seen between education levels, occupation, with

respect to the level of satisfaction in corporate communication to

Stakeholders. There is significant difference seen between size of

investment with respect to the level of satisfaction in corporate

communication to stakeholders. Satisfaction is more in the respondents

who invested more than Rs.1,00,000. No significant difference was

observed between educational qualifications, occupations and size of

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investments with respect to level of satisfaction in corporate

communication.



transparency in sharing the shares allotment / borrowing information with

stakeholders. Since p<0.05, the null hypothesis is rejected at 5%level of

significance. Hence there is significant difference in the level of

satisfaction of the stakeholders’ amongst software companies with respect

to the transparency in sharing the shares allotment / borrowing information

with stakeholders. Even though significant difference is seen in general,

but between Infosys and Wipro, the difference was insignificant.


stakeholders’ amongst software companies with respect to general meeting

practices. Since p<0.05, the null hypothesis is rejected at 5%level of



to General meeting practices. There is significant difference seen between

all the companies in level of satisfaction in General meeting practices, but

significance is not seen between Infosys and Wipro. No significant

difference is seen between education levels, occupation, age groups with

respect to level of satisfaction in General meeting practices to

stakeholders. There is significant difference seen between size of

investment with respect to the level of satisfaction in General meeting to

stakeholders. Satisfaction is more in the respondents who invested more

than Rs.1, 00,000. Significance was observed between age groups in

Infosys, Wipro and TCS with respect to level of satisfaction in General

meetings. Also significance was observed between occupations in Satyam

with respect to level of satisfaction in general meeting.

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stakeholders’ amongst software companies with respect to the performance

of the board. Since p<0.05, the null hypothesis is rejected at 5%level of



to the performance of the board, however significance is not seen between

Infosys and Wipro. There is no significant difference seen between

genders, age, educational qualifications, occupation, and number of years

of transactions with respect to level of satisfaction in performance of the

board to stakeholders. But significant difference observed between sizes of

investment with respect to level of satisfaction in performance of the board

to stakeholders. Satisfaction is more in the respondents who invested more

than Rs.1, 00,000. Significant difference was observed between age

groups in TCS with reference to level of satisfaction in performance of

board.


stakeholders’ amongst software companies with respect to the corporate

management practices Since p<0.05, the null hypothesis is rejected at

5%level of significance. Hence there is significant difference in the level

of satisfaction of the stakeholders’ amongst software companies with

respect to the corporate management practices, but significant difference is

not seen between Infosys and Wipro. Significant difference is seen

between educational qualifications with respect to level satisfaction in

corporate management practices. No significant difference is seen

between numbers of years of transaction with respect to level of

satisfaction in corporate management practices. There is significant

difference observed between size of investment with respect to level of

satisfaction in performance of the board to stakeholders. Satisfaction is

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more in the respondents who invested more than Rs.1,00,000.

Significance was observed between educational qualifications in Satyam

with respect to level of satisfaction in corporate management practices.


stakeholders’ amongst software companies with respect to financial

practices Since p<0.05, the null hypothesis is rejected at 5%level of



to financial practices, but the significance is not seen between Infosys and

Wipro. There is no significant difference seen between educational

qualifications, occupation, and monthly income with respect to level of

satisfaction in financial practices. There is significant difference observed

between sizes of investment with respect to level of satisfaction in

financial practices to stakeholders. Satisfaction is more in the respondents

who invested more than Rs.1,00,000. Significant difference was observed

between occupation and monthly income in Satyam and occupation in

TCS with reference to satisfaction levels in financial practices.


stakeholders’ amongst software companies with respect to secretarial

practices. Since p<0.05, the null hypothesis is rejected at 5%level of



to secretarial practices. There is significant difference between all the

companies in level of satisfaction with respect to Secretarial Practices, but

significant difference is not seen between Infosys and Wipro. There is no

significant difference seen between educational qualifications with respect

to secretarial practices.

ccxliii

16. Wilcoxon signed rank test is used to compare four factors in expectation

and satisfaction. Significant difference is observed between level of

expectation and level of satisfaction with respect to Disclosure, Corporate

communication, Transparency and General meeting. The respondents

have differences in expectation level and satisfaction level.

17. Correlation for factors in Expectation - There is good significant positive

correlation observed between corporate communication and disclosure,

General meetings and Disclosure, general meeting and corporate

communication. Moderate positive correlation observed between

disclosure and transparency. Also significant correlation is observed

between Transparency and corporate communication, Transparency and

general meeting, but the correlation coefficient was not healthy.

18. Correlation between eight factors in Satisfaction level - There is significant

high positive correlation observed between all the eight factors of the level

of satisfaction of stakeholders between each other.

19. Correlation between Current Indian Corporate Governance laws as eight

factors of level of Satisfaction - There is significant high positive

correlation observed between the factors namely disclosure, corporate

communication, transparency, general meeting, performance of Board,

corporate management practices, financial practices, Secretarial practices

and current Indian Corporate Governance laws. Also reliability of eight

factors of level of satisfaction are good.

20. A model has been built with eight factors as how it contributes to the

increased satisfaction level for the stakeholders’ perception on corporate

governance.

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6.3 SUGGESTIONS

After analyzing the data using various statistical tools, the suggestions

based on the findings of the study are as follows:

1. The study reveals that the awareness about the corporate governance

practices of Wipro, TCS HCL was moderate and Satyam was low. They

can educate the stakeholders by way of literature and through investor

meetings, the various aspects of corporate governance practices prevailing

in their companies.

2. The satisfaction of the stakeholders towards various variables taken for

study demonstrates that Infosys needs to concentrate more on disclosure of

actual profitability and actual risk, dividend declaration process, financial

transactions, transparency of share allotment, demand for poll,

composition of board, retaining the shares due to happy with performance

of chairman, performance of board and leadership, happy with dividend

declaration and growth.

3. The satisfaction variables namely disclosure of income and expenditure,

investor relations, bonus dividend, cash dividend, property and paper

dividend, corporate communication on share allotment, its issue and

transfer, loan capital, inspection of books of accounts/records, suing the

officers of the company, performance of chairman, corporate social

responsibility and satisfaction of current corporate governance laws are

required to be given extra emphasis by Wipro.

4. In general both TCS and HCL were of the moderate level in various

satisfaction variables. They need to take appropriate steps to improve the

satisfaction of the stakeholders in those variables.

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5. The satisfaction of most of the variables in Satyam were low and it

requires the serious attention of the management. They have to revamp the

whole corporate governance set up in the company and disseminate

appropriate information to give a better idea about the various practices

followed in Satyam.

6. As to get the overall satisfaction in corporate governance, a model has

been arrived, which indicates that the companies need to pay more

attention to improve the satisfaction variables discussed herein, will in

turn increase the overall satisfaction of the stakeholders.

6.4 SCOPE FOR FURTHER RESEARCH

The present study analysed the perception levels of stakeholders in

select listed software companies in India. Further research can be done in

other sectors such as manufacturing, pharma, oil and gas, chemicals and so on,

as the stakeholders perceptions may vary. It is pertinent that the companies

need to know before they go for any Initial Public Offer (IPO) as where they

stand in good CG practices to attract more capital from India and abroad.

Studies can be taken up at institutional levels to have a wide spread reach of

different companies across India so as to broaden the practices at Industry

level as well as national level, since individual means may not permit to take

up a huge study, which involves cost and resources. Further, Government

may conduct periodic research on CG practices in terms of stakeholders’

perception so as to amend the laws and regulations to best suit the present day

requirements and to align with the codes of other nations and international

bodies / organizations.

6.5 CONCLUSION

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On the basis of this study, “A study on the stakeholders’ perception of

corporate governance practices with reference to the software companies in

India”, it is observed that:

The Corporate Governance is the key for a good corporate growth and

its success. The efficiency, transparency and fulfilling the laws of the land are

measured through the way company follows and maintains its corporate

governance practices. It is the requirement of most of the countries that those

corporates who trade on public money needs to follow some of the basic

corporate governance practices that are prescribed by way of code, law or

guidelines given by the country’s apex stock exchange body or government

agency which monitors those corporations. After witnessing some of the big

business corporations ending up with bankruptcy due to mismanagement and

fraudulent activities by the people who are at the helm of affairs, the

governments of those corporations came out with stringent laws to curb such

things in the future. Some of the important such promulgations were SOX

compliance, reforms based on Cadbury Committee report, the Hample

Committee report, Blue Rippon Committee report, the King committee report,

the Organization for Economic Cooperation and Development (OECD) code

etc.,

In India, similar enactments were made to safeguard the interests of

investing public. It can be traced back to the announcement of good corporate

governance code issued by Confederation of Indian Industries and various

reports given by the high powered committees appointed by Government of

India and Securities and Exchange Board of India, namely Kumar Mangalam

Birla Committee report, the Godbole Committee report, Naresh Chandra

Committee report and Narayana Murthy Committee report. Unless the

corporate governance practices as pronounced by various committees through

their report, which were mandated by government are followed in letter and

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spirit by companies in general and software companies in particular in India, it

will not achieve the desired result of globalization and attraction of capital

from abroad. The software companies are the leading foreign revenue earners

to the country in addition to creating lot of job opportunities to local Indians.

Hence it is very important to check and confirm that the corporate governance

practices as perceived by stakeholders are satisfactory and upto the

expectation and requirements of law. Therefore the aim is to study on the

stakeholders’ perception of corporate governance practices with reference to

the software companies in India. Based on the objectives of this research, the

study has analyzed the variables of stakeholders’ expectation and satisfaction.

The leading software companies were taken for study. The primary data was

collected from sample respondents by way of a structured questionnaire and

data was analysed using some of the statistical tools namely t test, ANOVA,

Kruskal Wallis test, Mann Whitney U test, Factor Analysis, Bivariate

Correlations and a model was proposed as how to achieve better satisfaction

of corporate governance in software companies.

The first part of the study analyse the demographic variables of the

respondents, the second part on stakeholders’ perception on expectation from

software companies and the third part on their perception on satisfaction of the

chosen variables. The findings indicate certain strengths and the weaknesses

of the chosen software companies for the study, namely Infosys, Wipro, TCS,

HCL and Satyam. Most of the stakeholders’ perception on satisfaction were

met by Infosys and Wipro as high, wherein TCS and HCL it was moderate

and it was low for Satyam. Based on the outcome of the study, the Infosys

and Wipro needs to concentrate in fewer areas of corporate governance

practices, TCS and HCL requires a broad approach to meet the perception

requirements of the stakeholders and Satyam has to do a revamp of its whole

corporate governance practices as it was faring low in almost all satisfaction

ccxlviii

variables. The proposed model may be followed by the software companies

to achieve the desired result of higher satisfaction of stakeholders.

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APPENDIX – I

Dear Sir / Madam,

I wish to introduce myself that I am a Research Scholar in Business Administration

at Dr. MGR University, on the title of thesis, “A study on the stakeholders’

perception of corporate governance practices with reference to the software

companies in India”. I seek your valuable time in filling up the below questionnaire

in helping me to complete my study. The information filled in this questionnaire are

treated as personal and confidential.

Thanks in advance for your kind support for my study.

Regards,

N Natarajan

Personal Information:

1. Gender Male Female

2. Age: 25 – 35 , 36 –45 , 46 – 55 , 56 and above .

3. Qualifications: School Level , Graduate , Post-Graduate ,

Professional .

4. Occupation: Business , Employed . If employed, Private /Public ,

Government .

5. Income (per month): INR – 14,999 & below , 15,000 to 24,999 , 25,000

to 44,999 ,

45,000 to 64,999 , 65,000 & above .

Shareholding information:

6 Which corporate you have invested:

Infosys , Wipro , TCS , HCL , Satyam

7. How many years you are transacting in shares of software companies?

1 – 2.11 3 – 5.11 6 – 8.11 9 and above

8. Size of investments in software companies – INR-9,999 & Below ,

10,000 – 24,999 25,000 – 99,999 , 1,00,000 and above

ccl

9. Do you aware of Indian corporate governance practices before investing your

hard-earned money in software companies: Yes No

Note for filling up:

Please give your level of expectation on corporate governance practices.

(5 – indicates very high indicates highest favorable expectation and 1 – indicates very low

indicates the lowest)

VH – Very High (5), H – High (4), NNH – Neither Nor High (3), L – Low (2)and VL –

Very Low (1)

Level of Expectation on corporate governance practices


a Disclosure of income and expenditure are

transparent

b Disclosure of actual profitability of the

company

c Disclosure of actual risk in business

d Dividend declaration process

e Investor Relations

f Grievance resolution process

g Bonus shares declaration

h Cash Dividend

i Property and paper dividend

j Growth information about the company

k How you feel the winding up status of the

company?

l How you feel the financial transactions of

the company?

m How you feel about the corporate

communication for the following:

Allotment of shares

Share certificates issue:

Transfer of Shares:

n Level of transparency for the following

Share Allotment

Borrowing loan / loan capital

ccli

o Access to the minutes of AGM

p Possibilities of getting copies of minutes if

requested

q Participation in appointment of

directors/auditors

r Possibilities of calling for EGM

s Procedure for demand of poll for any

resolution

t Opportunity to inspect corporate books of

accounts and records

u Right to sue on wrongful acts

Note for filling up:

Please give your level of expectation on corporate governance practices.

(5 – indicates very high indicates highest favorable expectation and 1 – indicates very

low indicates the lowest)

VH – Very High (5), H – High (4), NNH – Neither Nor High (3), L – Low (2)and VL –

Very Low (1)

Level of satisfaction of corporate governance practices


a

Disclosure of income and expenditure are

transparent

b

Disclosure of actual profitability of the

company

c Disclosure of actual risk in business

d Dividend declaration process

e Investor Relations

f Grievance resolution process

g Bonus shares declaration

h Cash Dividend

i Property and paper dividend

j Growth information about the company

k

How you feel the winding up status of the

company?

l

How you feel the financial transactions of

the company?

m

How you feel about the corporate

communication for the following:

i Allotment of shares

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ii Share certificates issue:

iii Transfer of Shares:

n Level of transparency for the following

i Share Allotment

ii Borrowing loan / loan capital

o Access to the minutes of AGM

p

Possibilities of getting copies of minutes if

requested

q

Participation in appointment of

directors/auditors

r Possibilities of calling for EGM

s

Procedure for demand of poll for any

resolution

t

Opportunity to inspect corporate books of

accounts and records

u Right to sue on wrongful acts

v

Did you satisfy with the current

composition of BOD?

w

How do you feel about the performance of

the chairman of the company?

x


the BOD of the company?

y


the Leadership of the company?

z


the Investor Relations Officer / Company

Secretary of the company?

aa

Do you continue to hold shares in your

company, because of the following?

i

I am happy with their corporate

governance

ii

I am happy with the performance of

Chairman

iii

I am happy with the performance of the

BOD

iv

I am happy with the declaration of

dividend

v

I am happy with the current growth of the

company

vi

I am happy with the current corporate

social responsibility (CSR) activities of the

company

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ab Do you like to recommend to your friends

to invest into your company (Certainly /

Probably / Not interested – pl indicate in your

companies (use C, P N for the same)

22. Are you satisfied with the current Indian corporate governance laws?

(a) Highly satisfied (b) Satisfied (c) Neither Nor satisfied (d)

Dissatisfied (e) Highly dissatisfied

23. Would you like to recommend any changes on the reporting of information for

shareholders..??

(a) Yes (b) No

If yes, please list out your suggestions in the order of ranking (B/S items, P/L items

etc.)

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