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Chapter - 5

Corporate Governance – Analysis & Interpretation of Selected

Industry Group Companies

“The momentum of globalization is rapidly picking up. Competition in

business and trade is intensifying at an incredible pace. Technological

and market forces are throwing ever never economic challenges from

the furthest corners of the globe. Every business enterprise is striving

to run faster to safeguard its competitive standing in the constantly

realigning global marketplace. This zeal needs to be tempered by the

sobering values of business ethics and the enlightened fulfillment of

corporate social responsibility.”

- Y.C. Deveshwar, Chairman,

ITC Ltd.

111

In this Chapter, the researcher selected 50 listed companies for the financial

years 2006-07, 2007-08 and 2008-09 in order to analyze the structures and

processes for Corporate Governance followed by the Indian Corporate Houses

and their effectiveness in terms of substance and quality of disclosures on

corporate governance in the Annual Reports of the financial years 2006-07, 2007-

08 and 2008-09.

The following issues have been framed for the purpose of the study by the

researcher:

1. Did the Companies comply with all disclosure norms (both statutory and

non statutory) as required by the Clause 49 of the Listing Agreement as also

by the Companies Act, 1956? (Transparency and Disclosure)

2. What is the position of the Chairperson and Executive Director in

Companies? Is the post of Chairperson separate from the post of Executive

Director? (Board Independence & Chairperson - CEO Duality)

3. Has the requirement of Clause 49 of the Listing Agreement in respect of

minimum number of independent directors in the boards been maintained?

(Board Independence & Chairperson - CEO Duality)

4. What are the Structure, Strength and Size of the Company’s board of

Directors? (Structure & Strength of the Board)

5. Is there any disclosure, in the annual report of the companies, regarding

Certificate obtained from the Practicing Company Secretary or the

Authorized person as regards to Corporate Governance & Secretarial Audit?

(CG & Auditor’s Certificate)

6. Are there adequate disclosures about appointment of Independent directors

in various board committees in annual reports by the companies?

(Appointment of Independent directors – Board Committees)

7. Are there adequate disclosures about matters related to stakeholders Value

Enhancement like Earning per Share (EPS), Dividend, payment to debenture

– deposit holders, payment of taxes etc.? (Stakeholders Value Enhancement)

8. Is there adequate disclosure regarding effectiveness of board of directors in

terms of percentage of meetings attended by the Independent Directors in

112

various board committee meetings? (Effectiveness of BOD)

9. Are there adequate disclosures regarding Board Systems and Procedures in

relation to pre-meeting matters, number of meetings, code of conduct,

compliance officer etc.? (Board Systems & Procedures)

10. Did the companies disclose information about formation of Audit

committee? Did the companies comply with the minimum number of

independent directors in the Audit committee? Did the companies disclose

the information related to internal audit, meetings of the committee etc.?

(Board Committees – Audit Committee)

11. Did the companies disclose information regarding formation of Investor /

Shareholder grievance committee? Did the companies disclose in the annual

report, information related to shareholder complaints received and resolved

during the year? (Board Committees – Shareholder Grievance Committee)

12. Are there adequate disclosures of remuneration policy and remuneration of

directors in the annual reports? (Remuneration to BOD & its policy)

13. Are there adequate disclosures about the Social Activities undertaken by the

companies under the head of Corporate Social Responsibility (CSR)?

In light of the above issues enumerated, researcher has examined the Corporate

Governance practices followed by the selected 50 listed companies as disclosed

in their annual reports for the financial year 2006-07, 2007-08 and 2008-09 on the

following parameters. On the base of the following parameters, researcher

constructed CORPORATE GOVERNANCE INDEX. Each parameter has certain

weightage. This weightage was assigned on the basis of Company Secretaries’

Response, which was collected as primary data. A corporate governance index has been developed and constructed by the

researcher to understand the practices of corporate governance within the

capital market. The researcher has examined the Corporate Governance practices

followed by the selected 50 listed companies as disclosed in their annual reports

for the financial year 2006-07, 2007-08 and 2008-09 on the following parameters.

On the base of the following parameters, the researcher constructed a

CORPORATE GOVERNANCE INDEX. Each parameter had certain weightage.

113

The 100 score was assigned to various parameters on the basis of 100 Company

Secretaries’ Responses, which was collected as primary data, through a

questionnaire (question number 27 - page number 315). The data were averaged

and a weightage of appropriation was distributed accordingly. For example,

Transparency and Disclosure parameter, the respondents provided an average

score of 12 out of 100. Similarly, the respondents gave an average score of 10 out

of 100 for corporate social responsibility; and so on for other parameters. This

provided the basis for developing the Corporate Governance Index.

Table 5.1 Corporate Governance Index – Parameters Sr. No. Corporate Governance Index - Parameters Abbreviation

Used Score

1 Transparency & Disclosures T & D 12 2 Corporate Governance & Auditor's Certificate CG & AC 10 3 Structure & Strength S & S 10 4 Board Independence & Chairperson – Executive Director Duality BI 10 5 Appointment of Independent Director – Board Committee Apt. ID 8 6 Stakeholder Value Enhancement Stk VE 6 7 Effectiveness of Board of Directors E of BOD 8 8 Board Systems and Procedure BS&P 8 9 Board Committees - Audit Committee BC-AC 8 10 Board Committees - Shareholder Grievance Committee BC- SGC 5 11 Remuneration to Board of Directors & its Policy Rem BOD 5 12 Corporate Social Responsibility CSR 10 Corporate Governance Index CGI 100 (For sub parameters detailed disclosures: Appendix 3 -49) 5.1 Transparency & Disclosure

Transparency and Disclosure is of the utmost importance to corporate

governance in any company. The effectiveness of the corporate governance

principles and practices would depend upon strong management information

system, active role of board committees, proper internal control systems and

procedures. Therefore it is imperative for every corporate house to give

adequate, full and transparent disclosures of all information relating to business

and its performance on a real time basis.

114

In this Transparency and Disclosure parameter, the Researcher has considered

the following sub-parameters: Table 5.2 Transparency & Disclosures – Parameters

Parameters Sub-Parameters Highest Score

Total Score

Subsidiaries 5 Third Party Transactions Supply Chain Related Information 5

10

Annual General Meetings 3 Industry Information 4 Shareholders' Information 9 Stock Exchange 4 Company's Financial Performance 3 Company Operations Related Informations 6

Check List

Officers 3

32

Quarterly Results 1 Presentation made to Institutional investors or the analysts 1 Publications in Newspaper 1 Official News Releases on website 1 Analysis on Website 1 Annual Report 1

Means of Communication

Other Means to communicate with Shareholders 1

7

Debt Recovery Informations 2 Disclosures in annual Report Disclosures of Cases in Court 2

4

Information Updation on EDIFAR 2 Information Updation & Financial Performance Disclosure

Management Analysis & Financial Performance on website 5

7

Total Score of Transparency & Disclosure Parameter 60 Final weightage in Corporate Governance Index (60/5= 12) 12

5.1.1 Third Party Transactions

In third party transactions, the researcher has considered two sub- parameters.

Subsidiaries informations disclosures

Supply Chain Related Informations

If both the informations are disclosed by the company, then the researcher has

assigned maximum 10 score to the company. If only individual information is

disclosed by the company, then a 5 score is assigned to the company. If none of

the information is disclosed by the company, then the company scores a 0. Table 5.3 Third Party Transactions – Parameters

Parameter Sub – Parameters Highest Score

Total Score to Third Party Transactions

Subsidiaries 5 Third Party Transactions Supply Chain Related Information 5

10

115

Table 5.4 Third Party Transactions – Score Sector Third Party Transactions ( 10 ) Sr.

No. Company Name 06-07 07-08 08-09 AVG % 1 Allahabad Bank Ltd. Banking 5 5 10 6.67 67 2 Bank of Rajashthan Ltd. Banking 10 10 10 10.00 100 3 Bank of India Ltd. Banking 10 10 10 10.00 100 4 Bank of Baroda Ltd. Banking 10 10 10 10.00 100 5 Bank of Maharashtra Ltd. Banking 10 10 10 10.00 100 6 ICICI Bank Ltd. Banking 10 10 10 10.00 100 7 Axis Bank Ltd. Banking 10 10 10 10.00 100 8 State Bank of India Ltd. Banking 10 10 10 10.00 100 9 IDBI Bank Ltd. Banking 10 10 10 10.00 100

10 HDFC Bank Ltd. Banking 10 10 10 10.00 100 11 ONGC Ltd. BSE 30 10 10 10 10.00 100 12 NTPC Ltd. BSE 30 10 10 5 8.33 83 13 Tata Steel Ltd. BSE 30 10 10 5 8.33 83 14 Larsen & Toubro Ltd. BSE 30 10 10 10 10.00 100 15 Reliance Infrastructure Ltd. BSE 30 10 10 5 8.33 83 16 Reliance Communication Ltd. BSE 30 10 10 10 10.00 100 17 Bharti Airtel Ltd. BSE 30 10 10 10 10.00 100 18 ACC Ltd. BSE 30 10 10 10 10.00 100 19 Hindalco Industries Ltd. BSE 30 10 10 10 10.00 100 20 Maruti Suzuki India Ltd. BSE 30 10 10 10 10.00 100 21 Colgate-Palmolive (India) Ltd. FMCG 10 10 10 10.00 100 22 Pidilite Industries Ltd. FMCG 10 10 10 10.00 100 23 Britannia Industries Ltd. FMCG 10 10 10 10.00 100 24 Nestle India Ltd. FMCG 10 10 10 10.00 100 25 ITC Ltd. FMCG 10 10 10 10.00 100 26 Hindustan Unilever Ltd. FMCG 10 10 10 10.00 100 27 Dabur (India) Ltd. FMCG 10 10 10 10.00 100 28 Marico Ltd. FMCG 10 10 10 10.00 100 29 Nirma Ltd. FMCG 10 10 10 10.00 100 30 Godrej Industries Ltd. FMCG 10 10 10 10.00 100 31 Infosys Technologies Ltd. IT 10 10 10 10.00 100 32 Tata Consultancy Services Ltd. IT 10 10 10 10.00 100 33 First Source Solution Ltd. IT 10 10 10 10.00 100 34 Polaris Software Lab Ltd. IT 10 10 10 10.00 100 35 Tech Mahindra Ltd. IT 10 10 10 10.00 100 36 Patni Computer Systems Ltd. IT 10 10 10 10.00 100 37 Wipro Ltd. IT 10 10 10 10.00 100 38 Mindtree Ltd. IT 10 10 10 10.00 100 39 CMC Ltd. IT 10 10 10 10.00 100 40 MphasiS Ltd. IT 10 10 10 10.00 100 41 Cipla Ltd. Pharma 10 10 10 10.00 100 42 Aventis Pharma Ltd. Pharma 10 10 10 10.00 100 43 Divi's Laboratories Ltd. Pharma 10 10 10 10.00 100 44 Dr. Reddys Laboratories Ltd. Pharma 5 10 10 8.33 83 45 Glenmark Pharmaceuticals Ltd. Pharma 10 10 5 8.33 83 46 GlaxoSmithKline Pharma Ltd. Pharma 10 10 5 8.33 83 47 Ipca Laboratories Ltd. Pharma 10 10 5 8.33 83 48 Sun Pharma Industries Ltd. Pharma 10 10 10 10.00 100 49 Torrent Pharmaceuticals Ltd. Pharma 10 10 5 8.33 83 50 Ranbaxy Laboratories Ltd. Pharma 10 10 10 10.00 100

116

In the banking sector, only Allahabad Bank showed a variation. In fact it

improved its score in year 2008-09. In general all the other selected banks were

seen fulfilling compliance.

In the BSE30 group companies sector, the selected companies were seen fulfilling

compliance except NTPC Ltd, Tata Steel and Reliance Infrastructure Ltd. which

showed a decline in their position due to non disclosure of subsidiary company

information.

In the FMCG sector, all the selected companies were seen fulfilling compliance.

In the IT sector, all the selected companies were seen fulfilling compliance.

In the pharmaceutical sector, there was mixed observation. While some

companies were seen fulfilling compliance, others like Glenmark

Pharmaceuticals Ltd. and GlaxoSmithKline Pharma Ltd. showed a decline due

to non disclosure of supply chain information, whereas Ipca Laboratories Ltd.

and Torrent Pharmaceuticals Ltd. showed a decline due to non disclosure of

subsidiary company information. On the other hand, Dr. Reddys Laboratories

Ltd. showed an upgradation due to disclosure of supply chain information.

5.1.2 Check List

In the check list parameter, the researcher has considered seven sub- parameters.

And each sub-parameter has certain information disclosures. For each such

disclosure, 1 score is assigned.

Table 5.5 Check List - Parameters Rating Parameters

Check List (Sub-

Parameters) Information Disclosures

If the information

is not disclosed

If the information is disclosed

Total Rating for Parameters

No. of General Body Meetings 0 1 Details of AGM - Time, Place, Date 0 1 -Annual

General Meetings

Special Resolutions put through postal Ballot in the last financial year and details of Voting Pattern 0 1

3

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Rating Parameters Check List

(Sub- Parameters)

Information Disclosures If the

information is not

disclosed

If the information is disclosed

Total Rating for Parameters

Industry Structure & Development 0 1 Risks and concerns 0 1 Opportunities & Threats 0 1

- Industry Information

Outlook 0 1

4

Distribution of Shareholding 0 1 Categories of Shareholding as per the format prescribed in Clause 35 0 1 Top ten shareholders 0 1 Change in Equity during the FY 0 1 Outstanding ADRs/GDRs/Warrants 0 1 Convertible conversion date and likely impact on Equity 0 1 Registrar and Transfer Agent - Address, Phone, Fax and E-mail 0 1 Dividend payment date 0 1

- Shareholders' Information

Share transfer system/ Dematerialization and liquidity 0 1

9

Financial year 0 1 Date of Book Closure 0 1 Listing of Stock Exchanges 0 1

- Stock Exchange

Stock Code 0 1

4

Market Price Data for each Month of last Financial Year 0 1 Performance in comparison of board based indices 0 1

Company's Financial Performance Discussion on Financial

performance with respect to operational performance 0 1

3

Plant Location 0 1 Address for correspondence 0 1 Product disclosure about segment-wise information-financial as well as operating details 0 1 Status of projects announced /approved/money raised 0 1 Internal Control systems and their adequacies 0 1

Company Operations Related Information

Details on developments like R&D, restructuring etc. 0 1

6

Compliance Officer 0 1 Transcript of conference/meeting with analysts. 0 1

Officers Reporting on conciliation of accounts with GAAP (if applicable) or other Indian accounting standards 0 1

3

Total 32

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Table 5.6 Check List – Score Sector Check List ( 32 ) Sr.

No. Company Name 06-07 07-08 08-09 AVG % 1 Allahabad Bank Ltd. Banking 27 27 30 28.00 87.50 2 Bank of Rajashthan Ltd. Banking 29 29 30 29.33 91.67 3 Bank of India Ltd. Banking 29 29 32 30.00 93.75 4 Bank of Baroda Ltd. Banking 30 30 32 30.67 95.83 5 Bank of Maharashtra Ltd. Banking 29 29 30 29.33 91.67 6 ICICI Bank Ltd. Banking 30 30 31 30.33 94.79 7 Axis Bank Ltd. Banking 30 30 31 30.33 94.79 8 State Bank of India Ltd. Banking 32 32 28 30.67 95.83 9 IDBI Bank Ltd. Banking 31 31 30 30.67 95.83

10 HDFC Bank Ltd. Banking 30 30 27 29.00 90.63 11 ONGC Ltd. BSE 30 31 25 32 29.33 91.67 12 NTPC Ltd. BSE 30 30 29 32 30.33 94.79 13 Tata Steel Ltd. BSE 30 32 32 32 32.00 100.00 14 Larsen & Toubro Ltd. BSE 30 29 29 30 29.33 91.67 15 Reliance Infrastructure Ltd. BSE 30 31 31 32 31.33 97.92 16 Reliance Communication Ltd. BSE 30 32 32 30 31.33 97.92 17 Bharti Airtel Ltd. BSE 30 31 31 32 31.33 97.92 18 ACC Ltd. BSE 30 31 31 31 31.00 96.88 19 Hindalco Industries Ltd. BSE 30 32 32 28 30.67 95.83 20 Maruti Suzuki India Ltd. BSE 30 30 32 32 31.33 97.92 21 Colgate-Palmolive (India) Ltd. FMCG 29 29 30 29.33 91.67 22 Pidilite Industries Ltd. FMCG 31 31 32 31.33 97.92 23 Britannia Industries Ltd. FMCG 30 30 30 30.00 93.75 24 Nestle India Ltd. FMCG 29 29 29 29.00 90.63 25 ITC Ltd. FMCG 30 30 30 30.00 93.75 26 Hindustan Unilever Ltd. FMCG 30 28 31 29.67 92.71 27 Dabur (India) Ltd. FMCG 31 32 30 31.00 96.88 28 Marico Ltd. FMCG 29 30 30 29.67 92.71 29 Nirma Ltd. FMCG 30 30 30 30.00 93.75 30 Godrej Industries Ltd. FMCG 29 29 31 29.67 92.71 31 Infosys Technologies Ltd. IT 30 30 31 30.33 94.79 32 Tata Consultancy Services Ltd. IT 31 31 31 31.00 96.88 33 First Source Solution Ltd. IT 30 30 32 30.67 95.83 34 Polaris Software Lab Ltd. IT 31 31 30 30.67 95.83 35 Tech Mahindra Ltd. IT 32 32 29 31.00 96.88 36 Patni Computer Systems Ltd. IT 31 31 29 30.33 94.79 37 Wipro Ltd. IT 32 31 30 31.00 96.88 38 Mindtree Ltd. IT 29 29 29 29.00 90.63 39 CMC Ltd. IT 32 32 32 32.00 100.00 40 MphasiS Ltd. IT 30 30 29 29.67 92.71 41 Cipla Ltd. Pharma 31 31 32 31.33 97.92 42 Aventis Pharma Ltd. Pharma 29 29 31 29.67 92.71 43 Divi's Laboratories Ltd. Pharma 32 32 29 31.00 96.88 44 Dr. Reddys Laboratories Ltd. Pharma 31 31 28 30.00 93.75 45 Glenmark Pharmaceuticals Ltd. Pharma 31 31 31 31.00 96.88 46 GlaxoSmithKline Pharma Ltd. Pharma 32 32 28 30.67 95.83 47 Ipca Laboratories Ltd. Pharma 32 32 29 31.00 96.88 48 Sun Pharma Industries Ltd. Pharma 31 31 28 30.00 93.75 49 Torrent Pharmaceuticals Ltd. Pharma 31 31 27 29.67 92.71 50 Ranbaxy Laboratories Ltd. Pharma 30 30 31 30.33 94.79

119

In the banking sector, there was a consistency of 93.23% of the prescribed

checklist. The highest was shown by SBI and IDBI and the lowest by Allahabad

Bank.

In the BSE30 group companies sector, there was a consistency of 96.25% of the

prescribed checklist. The highest was shown by Tata Steel Ltd. and the lowest by

Oil & Natural Gas Corporation Ltd as well as Larsen & Toubro Ltd.

In the FMCG sector, there was a consistency of 93.65% of the prescribed

checklist. The highest was shown Pidilite Industries Ltd. and the lowest by

Nestle India Ltd.

In the IT sector, there was a consistency of 95.52% of the prescribed checklist.

The highest was shown CMC Ltd. and the lowest by Mindtree Ltd.

In the pharmaceutical sector, there was a consistency of 95.21% of the prescribed

checklist. The highest was shown Cipla Ltd.and the lowest by Torrent

Pharmaceuticals Ltd. and Divi's Laboratories Ltd.

5.1.3 Means of Communication:

In Means of Communication parameter, the researcher has considered the

following seven means of Communication. If such means of communication to

the shareholders are used by the company then a score of 1 is assigned for each

mean used. Table 5.7 Means of Communication – Parameters

Means of Communication If not used as means of communication than 0 If used then 1

Quarterly Results 0 1 Presentation made to Institutional investors or the analysts 0 1 Publications in Newspaper 0 1 Official News Releases on website 0 1 Analysis on Website 0 1

Annual Report 0 1 Other Means to communicate with Shareholders 0 1 Total 7

120

Table 5.8 Means of Communication – Score Means of Communication ( 7 ) Sr.

No. Company Name Sector 06-07 07-08 08-09 AVG %

1 Allahabad Bank Ltd. Banking 4 4 3 3.67 52.38 2 Bank of Rajashthan Ltd. Banking 6 6 3 5.00 71.43 3 Bank of India Ltd. Banking 5 6 4 5.00 71.43 4 Bank of Baroda Ltd. Banking 4 4 4 4.00 57.14 5 Bank of Maharashtra Ltd. Banking 3 3 4 3.33 47.62 6 ICICI Bank Ltd. Banking 5 5 5 5.00 71.43 7 Axis Bank Ltd. Banking 4 4 6 4.67 66.67 8 State Bank of India Ltd. Banking 6 6 6 6.00 85.71 9 IDBI Bank Ltd. Banking 4 4 6 4.67 66.67


121

During the year 2008-09, out of the 50 selected companies; 27 companies were

making presentation to institutional investors or the analysts, 46 companies

provided information via Publications in Newspaper, 39 companies provided

information via Official News Releases on website, all 50 companies provided

information via Analysis on Website as well as information via Annual Report,

whereas only 8 companies used other means of communications for their

stakeholders; and all the companies declared Quarterly results.

In the banking sector, there was a consistency of 65.71% of the prescribed

checklist. The highest was shown by SBI and the lowest by Allahabad Bank

In the BSE30 group companies sector, there was a consistency of 80.48% of the

prescribed checklist. The highest was shown by Hindalco Industries Ltd. and

ACC Ltd. and the lowest by NTPC Ltd.

In the FMCG sector, there was a consistency of 61.90% of the prescribed

checklist. The highest was shown Britannia Industries Ltd. and the lowest by

Hindustan Unilever Ltd., Colgate-Palmolive (India) Ltd., Pidilite Industries Ltd

and Nirma Ltd.

In the IT sector, there was a consistency of 56.67% of the prescribed checklist.

The highest was shown TCS Ltd. and the lowest by Mindtree Ltd and First

Source Solution Ltd.

In the pharmaceutical sector, there was a consistency of 68.10% of the prescribed

checklist. The highest was shown Glenmark Pharmaceuticals Ltd. and the lowest

by Torrent Pharmaceuticals Ltd. and Dr. Reddys Laboratories Ltd.

5.1.4 Disclosures in Annual Report

In disclosures in Annual Report, the researcher considered two sub- parameters.

Debt Recovery Informations

Disclosures of Cases in a Court

If both the informations are disclosed by the company, then a maximum of 4

score is assigned to the company. If any one of the information is disclosed by

the company, then a score of 2 is assigned to the company.

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Table 5.9 Disclosures in Annual Report - Parameters

Parameter Sub – Parameters Highest Score Total Score to Debt Recovery Informations 2 Disclosures in Annual

Report Disclosures of Cases in a Court 2 4

Table 5.10 Disclosures in Annual Report – Score

Disclosures in AR ( 4 ) Sr. No. Company Name Sector

06-07 07-08 08-09 AVG % 1 Allahabad Bank Ltd. Banking 0 0 2 0.67 16.67 2 Bank of Rajashthan Ltd. Banking 2 2 2 2.00 50.00 3 Bank of India Ltd. Banking 2 2 4 2.67 66.67 4 Bank of Baroda Ltd. Banking 0 0 4 1.33 33.33 5 Bank of Maharashtra Ltd. Banking 0 0 2 0.67 16.67 6 ICICI Bank Ltd. Banking 2 2 2 2.00 50.00 7 Axis Bank Ltd. Banking 0 0 2 0.67 16.67 8 State Bank of India Ltd. Banking 2 2 2 2.00 50.00 9 IDBI Bank Ltd. Banking 4 4 2 3.33 83.33

10 HDFC Bank Ltd. Banking 2 2 2 2.00 50.00 11 ONGC Ltd. BSE 30 2 2 4 2.67 66.67 12 NTPC Ltd. BSE 30 2 2 4 2.67 66.67 13 Tata Steel Ltd. BSE 30 2 2 2 2.00 50.00 14 Larsen & Toubro Ltd. BSE 30 2 2 2 2.00 50.00 15 Reliance Infrastructure Ltd. BSE 30 0 0 4 1.33 33.33 16 Reliance Communication Ltd. BSE 30 2 2 2 2.00 50.00 17 Bharti Airtel Ltd. BSE 30 2 2 2 2.00 50.00 18 ACC Ltd. BSE 30 2 2 2 2.00 50.00 19 Hindalco Industries Ltd. BSE 30 2 2 2 2.00 50.00 20 Maruti Suzuki India Ltd. BSE 30 2 2 2 2.00 50.00 21 Colgate-Palmolive (India) Ltd. FMCG 2 2 2 2.00 50.00 22 Pidilite Industries Ltd. FMCG 4 4 2 3.33 83.33 23 Britannia Industries Ltd. FMCG 2 2 2 2.00 50.00 24 Nestle India Ltd. FMCG 2 2 2 2.00 50.00 25 ITC Ltd. FMCG 2 2 2 2.00 50.00 26 Hindustan Unilever Ltd. FMCG 2 2 2 2.00 50.00 27 Dabur (India) Ltd. FMCG 2 2 2 2.00 50.00 28 Marico Ltd. FMCG 2 2 2 2.00 50.00 29 Nirma Ltd. FMCG 2 2 2 2.00 50.00 30 Godrej Industries Ltd. FMCG 2 2 2 2.00 50.00 31 Infosys Technologies Ltd. IT 0 0 2 0.67 16.67 32 Tata Consultancy Services Ltd. IT 2 2 0 1.33 33.33 33 First Source Solution Ltd. IT 2 2 2 2.00 50.00 34 Polaris Software Lab Ltd. IT 2 2 2 2.00 50.00 35 Tech Mahindra Ltd. IT 2 2 4 2.67 66.67 36 Patni Computer Systems Ltd. IT 2 2 2 2.00 50.00 37 Wipro Ltd. IT 2 2 2 2.00 50.00 38 Mindtree Ltd. IT 0 0 2 0.67 16.67 40 MphasiS Ltd. IT 2 2 2 2.00 50.00 41 Cipla Ltd. Pharma 2 2 4 2.67 66.67 42 Aventis Pharma Ltd. Pharma 2 2 4 2.67 66.67 43 Divi's Laboratories Ltd. Pharma 2 2 4 2.67 66.67 44 Dr. Reddys Laboratories Ltd. Pharma 2 2 4 2.67 66.67 45 Glenmark Pharmaceuticals Ltd. Pharma 2 2 0 1.33 33.33

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Disclosures in AR ( 4 ) Sr. No. Company Name Sector

06-07 07-08 08-09 AVG % 46 GlaxoSmithKline Pharma Ltd. Pharma 2 2 0 1.33 33.33 47 Ipca Laboratories Ltd. Pharma 2 2 0 1.33 33.33 48 Sun Pharma Industries Ltd. Pharma 2 2 0 1.33 33.33 49 Torrent Pharmaceuticals Ltd. Pharma 2 2 0 1.33 33.33 50 Ranbaxy Laboratories Ltd. Pharma 2 2 2 2.00 50.00

It has been noted that all the 50 selected companies are not within the

compliance of Disclosures in Annual Report regarding Debt Recovery

information and disclosures of Cases in a Court.

In the banking sector, only IDBI Bank showed a good and positive variation.

In the BSE30 group companies sector, ONGC Ltd and NTPC Ltd showed a good

and positive variation.

In the FMCG sector, Pidilite Industries Ltd. showed a good and positive

variation. The remaining companies of this sector showed 50% compliance.

In the IT sector, Tech Mahindra Ltd. showed a good and positive variation.

In the pharmaceutical sector, companies like Cipla Ltd, Aventis Pharma Ltd.,

Divi’s Laboratories ltd and Dr. Reddy’s laboratories Ltd. were noted showing a

good and positive variation.

5.1.5 Information Updation & Financial Performance Disclosure

In information updation & financial performance disclosure parameter, the

researcher has considered two sub- parameters.

Data of the company uploaded and upgraded at the website of EDIFAR

(Electronic Data Information Filing and Retrieval System - SEBI)

Management Analysis & financial performance presented on its website.

If both the informations are disclosed by the company, a maximum score of 7 is

assigned to the company. If information updation is made by the company at

EDIFAR’s website then a score of 2 is assigned and if the management analysis

and financial performance are mentioned by the company on its website then an

additional score of 5 is assigned to the company.

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Table 5.11 Information Updation – Score Information Updation ( 7 ) Sr.



10 HDFC Bank Ltd. Banking 7 7 7 7.00 100.00 11 ONGC Ltd. BSE 30 5 5 5 5.00 71.43 12 NTPC Ltd. BSE 30 5 5 7 5.67 80.95 13 Tata Steel Ltd. BSE 30 5 5 5 5.00 71.43 14 Larsen & Toubro Ltd. BSE 30 7 7 5 6.33 90.48 15 Reliance Infrastructure Ltd. BSE 30 7 7 7 7.00 100.00 16 Reliance Communication Ltd. BSE 30 7 7 7 7.00 100.00 17 Bharti Airtel Ltd. BSE 30 7 7 5 6.33 90.48 18 ACC Ltd. BSE 30 7 7 7 7.00 100.00 19 Hindalco Industries Ltd. BSE 30 5 7 7 6.33 90.48 20 Maruti Suzuki India Ltd. BSE 30 7 7 7 7.00 100.00 21 Colgate-Palmolive (India) Ltd. FMCG 5 5 5 5.00 71.43 22 Pidilite Industries Ltd. FMCG 5 5 5 5.00 71.43 23 Britannia Industries Ltd. FMCG 7 7 7 7.00 100.00 24 Nestle India Ltd. FMCG 7 7 7 7.00 100.00 25 ITC Ltd. FMCG 7 7 7 7.00 100.00 26 Hindustan Unilever Ltd. FMCG 7 7 7 7.00 100.00 27 Dabur (India) Ltd. FMCG 7 7 7 7.00 100.00 28 Marico Ltd. FMCG 5 5 5 5.00 71.43 29 Nirma Ltd. FMCG 7 7 7 7.00 100.00 30 Godrej Industries Ltd. FMCG 7 7 7 7.00 100.00 31 Infosys Technologies Ltd. IT 5 5 5 5.00 71.43 32 Tata Consultancy Services Ltd. IT 5 5 5 5.00 71.43 33 First Source Solution Ltd. IT 7 7 5 6.33 90.48 34 Polaris Software Lab Ltd. IT 7 7 7 7.00 100.00 35 Tech Mahindra Ltd. IT 7 7 7 7.00 100.00 36 Patni Computer Systems Ltd. IT 5 5 7 5.67 80.95 37 Wipro Ltd. IT 5 5 7 5.67 80.95 38 Mindtree Ltd. IT 5 5 5 5.00 71.43 39 CMC Ltd. IT 5 5 5 5.00 71.43 40 MphasiS Ltd. IT 5 5 5 5.00 71.43 41 Cipla Ltd. Pharma 5 5 7 5.67 80.95 43 Divi's Laboratories Ltd. Pharma 5 5 7 5.67 80.95 44 Dr. Reddys Laboratories Ltd. Pharma 5 5 7 5.67 80.95 45 Glenmark Pharmaceuticals Ltd. Pharma 5 5 5 5.00 71.43 46 GlaxoSmithKline Pharma Ltd. Pharma 5 5 5 5.00 71.43 47 Ipca Laboratories Ltd. Pharma 5 5 5 5.00 71.43 48 Sun Pharma Industries Ltd. Pharma 7 7 5 6.33 90.48 49 Torrent Pharmaceuticals Ltd. Pharma 5 5 5 5.00 71.43 50 Ranbaxy Laboratories Ltd. Pharma 7 7 7 7.00 100.00

All the selected companies mentioned Management Analysis & financial

125

performance presented on their website for all the three financial years viz. 2006-

07, 2007-08, 2008-09. As regards to disclosure of data of the company being

uploaded and upgraded at the website of EDIFAR (Electronic Data Information

Filing and Retrieval System – SEBI), out of 50 selected companies, 19 companies

scored the maximum score of 2. Out of these 19 companies, 5 belonged to the

banking sector, 4 to BSE30 group companies, 7 to FMCG, 2 to IT and 1 to the

pharmaceutical sector.

5.1.6 Total Rating

Total score of transparency & disclosures is maximum 60. But the actual

weightage to Corporate Governance Index of the same parameter is 12, in

accordance primary data collected. Hence such scores are then apportioned.

Table 5.12 Transparency & Disclosures – Final Score

TOTAL (60)

Sr. No. Company Name Sector

06-07 07-08 08-09 AVG

Final Weighta

ge to CGI (out

of 12 Score)

(60/5 =12)

%

1 Allahabad Bank Ltd. Banking 41 41 50 44.00 8.80 73.33 2 Bank of Rajashthan Ltd. Banking 54 54 52 53.33 10.67 88.89 3 Bank of India Ltd. Banking 51 52 57 53.33 10.67 88.89 4 Bank of Baroda Ltd. Banking 51 51 55 52.33 10.47 87.22 5 Bank of Maharashtra Ltd. Banking 49 49 53 50.33 10.07 83.89 6 ICICI Bank Ltd. Banking 54 54 55 54.33 10.87 90.56 7 Axis Bank Ltd. Banking 51 51 56 52.67 10.53 87.78 8 State Bank of India Ltd. Banking 55 55 51 53.67 10.73 89.44 9 IDBI Bank Ltd. Banking 54 54 55 54.33 10.87 90.56

10 HDFC Bank Ltd. Banking 53 53 52 52.67 10.53 87.78 11 ONGC Ltd. BSE 30 53 47 58 52.67 10.53 87.78 12 NTPC Ltd. BSE 30 51 50 55 52.00 10.40 86.67 13 Tata Steel Ltd. BSE 30 55 55 51 53.67 10.73 89.44 14 Larsen & Toubro Ltd. BSE 30 53 53 53 53.00 10.60 88.33 15 Reliance Infrastructure Ltd. BSE 30 53 53 55 53.67 10.73 89.44 16 Reliance Communication Ltd. BSE 30 56 56 56 56.00 11.20 93.33 17 Bharti Airtel Ltd. BSE 30 55 55 55 55.00 11.00 91.67 18 ACC Ltd. BSE 30 56 56 56 56.00 11.20 93.33 19 Hindalco Industries Ltd. BSE 30 55 57 53 55.00 11.00 91.67 20 Maruti Suzuki India Ltd. BSE 30 54 56 57 55.67 11.13 92.78 21 Colgate-Palmolive (India) Ltd. FMCG 50 50 51 50.33 10.07 83.89 22 Pidilite Industries Ltd. FMCG 54 54 53 53.67 10.73 89.44 23 Britannia Industries Ltd. FMCG 54 54 54 54.00 10.80 90.00 24 Nestle India Ltd. FMCG 53 53 51 52.33 10.47 87.22 25 ITC Ltd. FMCG 54 54 53 53.67 10.73 89.44

126

TOTAL (60)

Sr. No. Company Name Sector

06-07 07-08 08-09 AVG

Final Weighta

ge to CGI (out

of 12 Score)

(60/5 =12)

%

26 Hindustan Unilever Ltd. FMCG 53 51 54 52.67 10.53 87.78 27 Dabur (India) Ltd. FMCG 53 55 55 54.33 10.87 90.56 28 Marico Ltd. FMCG 51 51 51 51.00 10.20 85.00 29 Nirma Ltd. FMCG 53 53 53 53.00 10.60 88.33 30 Godrej Industries Ltd. FMCG 53 52 55 53.33 10.67 88.89 31 Infosys Technologies Ltd. IT 50 50 51 50.33 10.07 83.89 32 Tata Consultancy Services Ltd. IT 54 54 49 52.33 10.47 87.22 33 First Source Solution Ltd. IT 52 52 52 52.00 10.40 86.67 34 Polaris Software Lab Ltd. IT 54 54 53 53.67 10.73 89.44 35 Tech Mahindra Ltd. IT 55 55 54 54.67 10.93 91.11 36 Patni Computer Systems Ltd. IT 52 52 52 52.00 10.40 86.67 37 Wipro Ltd. IT 53 52 53 52.67 10.53 87.78 38 Mindtree Ltd. IT 47 47 49 47.67 9.53 79.44 39 CMC Ltd. IT 54 54 54 54.00 10.80 90.00 40 MphasiS Ltd. IT 50 50 50 50.00 10.00 83.33 41 Cipla Ltd. Pharma 52 52 59 54.33 10.87 90.56 42 Aventis Pharma Ltd. Pharma 51 51 58 53.33 10.67 88.89 43 Divi's Laboratories Ltd. Pharma 53 53 56 54.00 10.80 90.00 44 Dr. Reddys Laboratories Ltd. Pharma 45 52 56 51.00 10.20 85.00 45 Glenmark Pharmaceuticals Ltd. Pharma 54 54 46 51.33 10.27 85.56 46 GlaxoSmithKline Pharma Ltd. Pharma 53 53 43 49.67 9.93 82.78 47 Ipca Laboratories Ltd. Pharma 54 54 44 50.67 10.13 84.44 48 Sun Pharma Industries Ltd. Pharma 54 54 49 52.33 10.47 87.22 49 Torrent Pharmaceuticals Ltd. Pharma 52 52 42 48.67 9.73 81.11 50 Ranbaxy Laboratories Ltd. Pharma 54 54 54 54.00 10.80 90.00

All the 50 selected companies were overall at par with each other with regards to

Transparency & Disclosures at 87.69%. The leading sector was the BSE30 group

companies at 90.44%, followed by FMCG sector with 88.06%. The banking sector

had 86.83% whereas the IT sector and pharmaceutical were neck to neck with

86.56%. Table 5.13 Summary Statistics of Transparency & Disclosure Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals Mean 10.42 10.85 10.57 10.39 10.39 Median 10.60 10.87 10.63 10.43 10.37 Mode 10.67 10.73 10.73 10.40 10.80 Standard Deviation 0.61 0.29 0.26 0.42 0.39 X- Value 9.81 10.56 10.31 9.97 9.99 Y- Value 11.03 11.14 10.83 10.81 10.78 Sample Variance 0.38 0.08 0.07 0.18 0.16 Range 2.07 0.80 0.80 1.40 1.13 Minimum 8.80 10.40 10.07 9.53 9.73 Maximum 10.87 11.20 10.87 10.93 10.87

127

The average Transparency & Disclosure parameter score of banking sector is

10.42 and the Standard Deviation is 0.61, hence Transparency & Disclosure

parameter is varying in 9.81 to 11.03 ranges around the average score for the

banking sector.

The average Transparency & Disclosure parameter score of BSE30 group

companies sector is 10.85 and the Standard Deviation is 0.29, hence

Transparency & Disclosure parameter is varying in 10.56 to 11.14 ranges around

the average score for the BSE30 group companies sector.

The average Transparency & Disclosure parameter score of FMCG sector is 10.57

and the Standard Deviation is 0.26, hence Transparency & Disclosure parameter

is varying in 10.31 to 10.83 ranges around the average score for the FMCG sector.

The average Transparency & Disclosure parameter score of IT sector is 10.39 and

the Standard Deviation is 0.42, hence Transparency & Disclosure parameter is

varying in 9.97 to 10.81 ranges around the average score for the IT sector.

The average Transparency & Disclosure parameter score of pharmaceutical

sector is 10.39 and the Standard Deviation is 0.39, hence Transparency &

Disclosure parameter is varying in 9.99 to 10.78 ranges around the average score

for the pharmaceutical sector.

From the above data it is clearly seen that the highest variation is for banking

sector on transparency and disclosure parameter and the least variation is for

FMCG sector.

Ho: Transparency & Disclosure Score is consistent among all five sectors.

H1: Transparency & Disclosure Score is not consistent among all five sectors.

Procedure: Above hypothesis is tested using one way analysis of variance.

128

Table 5.14 Anova Table - Transparency & Disclosure Score ANOVA

Source of Variation SS df MS F P-value F crit Between Groups 1.588088889 4 0.3970222 2.300474991 0.0732804 2.5787392 Within Groups 7.766222222 45 0.1725827 Total 9.354311111 49

Interpretation

Here, Ftabulated >Fcalculated and p-value = 0.07328, which is insignificant, therefore

the null hypothesis (Ho) cannot be rejected i.e. the Ho is accepted.

Conclusion

The researcher has concluded that since Ho is accepted, the Transparency &

Disclosure Parameter is consistent in all the select 5 sectors.

5.2 Corporate Governance (CG) & Auditor's

Certificate

A company shall obtain a certificate from its Auditors regarding compliance of

all requirements of corporate governance as stipulated by the Companies Act,

1956 and SEBI Regulations. Therefore this certificate is no less important than the

statutory audit report. In this research study, the researcher has considered two

sub-parameters to determine the authenticity of the Company’s procedures and

practices which are as follows: Table 5.15 Corporate Governance (CG) & Auditor’s Certificate – Parameters Sub – Parameters Score Certificate on Corporate Governance by the Practicing Company Secretary 5 Secretarial Audit other than SEBI audit 5

129

Table 5.16 Corporate Governance (CG) & Auditor’s Certificate – Score CG & Auditor’s Certificate (10) Sr.




Only 2 companies of the banking sector have obtained Corporate Governance

130

(CG) & Auditor's Certificate and that too during the FY 2008-09. They are Bank

of Rajasthan Ltd., which obtained Certificate on Corporate Governance by the

Practicing Company Secretary and Axis Bank Ltd which performed the

Secretarial Audit other than SEBI audit.

In the BSE30 group companies sector, 2 companies viz. Hindalco industries Ltd.

and Maruti Suzuki India Ltd. have not obtained Corporate Governance (CG) &

Auditor's Certificate. NTPC Ltd and Reliance infrastructure Ltd obtained an

average of 6.67 score for the prescribed three financial years in this parameter,

the highest among this sector.

In the FMCG sector, 3 companies viz. Colgate-Palmolive (India) Ltd., ITC Ltd.

and Godrej Industries Ltd. have not obtained Corporate Governance (CG) &

Auditor's Certificate. Whereas Pidilite Industries Ltd obtained an average of 5.00

score for the prescribed three financial years in this parameter, the highest

among this sector.

In the IT sector, 50% companies have not obtained Corporate Governance (CG)

& Auditor's Certificate. Only Wipro Ltd. obtained an average of 10.00 score for

the prescribed three financial years, the highest among this sector as well as

among all the sectors with regards to this parameter.

In the pharmaceutical sector, 70% companies have not obtained Corporate

Governance (CG) & Auditor's Certificate. Dr. Reddy’s laboratories Ltd. obtained

an average of 5.00 score for the prescribed three financial years in this parameter,

the highest among this sector.

131

Table 5.17 Summary Statistics of Corporate Governance (CG) and Auditor’s

Certificate Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals Mean 0.33 3.17 1.67 2.00 1.17 Median 0.00 3.33 1.67 0.83 0.00 Mode 0.00 5.00 1.67 0.00 0.00 Standard Deviation 0.70 2.77 1.57 3.22 1.93 X- Value -0.37 0.39 0.10 -1.22 -0.77 Y- Value 1.04 5.94 3.24 5.22 3.10 Sample Variance 0.49 7.69 2.47 10.37 3.73 Range 1.67 6.67 5.00 10.00 5.00 Minimum 0.00 0.00 0.00 0.00 0.00 Maximum 1.67 6.67 5.00 10.00 5.00

The average CG & Auditor’s Certificate score of banking sector is 0.33 and the

Standard Deviation is 0.70, hence CG & Auditor’s Certificate parameter is

varying in -0.37 to 1.04 ranges around the average score for the banking sector.

The average CG & Auditor’s Certificate parameter score of BSE30 group

companies sector is 3.17 and the Standard Deviation is 2.77, hence CG &

Auditor’s Certificate parameter is varying in 0.39 to 5.94 ranges around the

average score for the BSE30 group companies sector.

The average CG & Auditor’s Certificate parameter score of FMCG sector is 1.67

and the Standard Deviation is 1.57, hence CG & Auditor’s Certificate parameter

is varying in 0.10 to 3.24 ranges around the average score for the FMCG sector

The average CG & Auditor’s Certificate parameter score of IT sector is 2.00 and

the Standard Deviation is 3.22, hence CG & Auditor’s Certificate parameter is

varying in -1.22 to 5.22 ranges around the average score for the IT sector

The average CG & Auditor’s Certificate parameter score of pharmaceutical

sector is 1.17 and the Standard Deviation is 1.93, hence CG & Auditor’s

Certificate parameter is varying in -0.77 to 3.10 ranges around the average score

for the pharmaceutical sector.

From the above data it is clearly seen that the highest variation is for IT sector on

132

CG & Auditor’s Certificate parameter and the least variation is for Banking

sector.

Ho: Corporate Governance (CG) & Auditor's Certificate Score is consistent

among all five sectors

H1: Corporate Governance (CG) & Auditor's Certificate Score is not consistent



Table 5.18 Anova Table - Corporate Governance & Auditor's Certificate Score ANOVA


Interpretation:



Conclusion:

The researcher has concluded that since Ho is accepted, Corporate Governance

(CG) & Auditor's Certificate Parameter is consistent in all the select 5 sectors.

5.3 Structure and Strength of the Board

Companies reveal the existence and operations of the various board committees

in companies in their annual reports. The structure and strength of the Board of

Directors is decided on the basis of existence of the following committees in the

company.

Table 5.19 Structure & Strength of the Board - Parameters Sub-parameters Score Existence of Audit Committee 2.5 Existence of Shareholder’s Grievance Committee 2.5 Existence of Nomination Committee 2.5 Existence of Remuneration Committee 2.5

133

Table 5.20 Structure & Strength of the Board - Score Sector Structure and Strength of the Board (10) Sr.

No. Company Name 06-07 07-08 08-09 AVG % 1 Allahabad Bank Ltd. Banking 5 7.5 10 7.50 75.00 2 Bank of Rajashthan Ltd. Banking 7.5 7.5 7.5 7.50 75.00 3 Bank of India Ltd. Banking 5 5 7.5 5.83 58.33 4 Bank of Baroda Ltd. Banking 5 10 5 6.67 66.67 5 Bank of Maharashtra Ltd. Banking 5 5 5 5.00 50.00 6 ICICI Bank Ltd. Banking 7.5 7.5 7.5 7.50 75.00 7 Axis Bank Ltd. Banking 10 10 10 10.00 100.00 8 State Bank of India Ltd. Banking 5 5 7.5 5.83 58.33 9 IDBI Bank Ltd. Banking 5 5 5 5.00 50.00

10 HDFC Bank Ltd. Banking 7.5 7.5 8.5 7.83 78.33 11 ONGC Ltd. BSE 30 5 5 7.5 5.83 58.33 12 NTPC Ltd. BSE 30 5 5 5 5.00 50.00 13 Tata Steel Ltd. BSE 30 7.5 7.5 10 8.33 83.33 14 Larsen & Toubro Ltd. BSE 30 7.5 7.5 5 6.67 66.67 15 Reliance Infrastructure Ltd. BSE 30 5 10 7.5 7.50 75.00 16 Reliance Communication Ltd. BSE 30 5 10 7.5 7.50 75.00 17 Bharti Airtel Ltd. BSE 30 5 5 7.5 5.83 58.33 18 ACC Ltd. BSE 30 5 5 10 6.67 66.67 19 Hindalco Industries Ltd. BSE 30 5 5 5 5.00 50.00 20 Maruti Suzuki India Ltd. BSE 30 5 5 5 5.00 50.00 21 Colgate-Palmolive (India) Ltd. FMCG 5 5 5 5.00 50.00 22 Pidilite Industries Ltd. FMCG 5 5 5 5.00 50.00 23 Britannia Industries Ltd. FMCG 7.5 7.5 7.5 7.50 75.00 24 Nestle India Ltd. FMCG 5 5 5 5.00 50.00 25 ITC Ltd. FMCG 7.5 7.5 10 8.33 83.33 26 Hindustan Unilever Ltd. FMCG 7.5 7.5 10 8.33 83.33 27 Dabur (India) Ltd. FMCG 7.5 7.5 10 8.33 83.33 28 Marico Ltd. FMCG 7.5 7.5 10 8.33 83.33 29 Nirma Ltd. FMCG 7.5 7.5 7.5 7.50 75.00 30 Godrej Industries Ltd. FMCG 7.5 7.5 5 6.67 66.67 31 Infosys Technologies Ltd. IT 10 10 10 10.00 100.00 32 Tata Consultancy Services Ltd. IT 7.5 7.5 7.5 7.50 75.00 33 First Source Solution Ltd. IT 7.5 7.5 7.5 7.50 75.00 34 Polaris Software Lab Ltd. IT 7.5 7.5 7.5 7.50 75.00 35 Tech Mahindra Ltd. IT 7.5 7.5 7.5 7.50 75.00 36 Patni Computer Systems Ltd. IT 7.5 7.5 7.5 7.50 75.00 37 Wipro Ltd. IT 7.5 7.5 10 8.33 83.33 38 Mindtree Ltd. IT 7.5 7.5 7.5 7.50 75.00 39 CMC Ltd. IT 5 7.5 7.5 6.67 66.67 40 MphasiS Ltd. IT 7.5 7.5 7.5 7.50 75.00 41 Cipla Ltd. Pharma 5 5 5 5.00 50.00 42 Aventis Pharma Ltd. Pharma 5 5 5 5.00 50.00 43 Divi's Laboratories Ltd. Pharma 7.5 7.5 7.5 7.50 75.00 44 Dr. Reddys Laboratories Ltd. Pharma 7.5 7.5 7.5 7.50 75.00 45 Glenmark Pharmaceuticals Ltd. Pharma 7.5 7.5 7.5 7.50 75.00 46 GlaxoSmithKline Pharma Ltd. Pharma 5 5 5 5.00 50.00 47 Ipca Laboratories Ltd. Pharma 7.5 7.5 7.5 7.50 75.00 48 Sun Pharma Industries Ltd. Pharma 5 5 5 5.00 50.00 49 Torrent Pharmaceuticals Ltd. Pharma 5 5 5 5.00 50.00 50 Ranbaxy Laboratories Ltd. Pharma 7.5 7.5 7.5 7.50 75.00

134

Since the first two committees are mandatory, every company would have

scored a minimum of 5, and above this minimum score, the company would be

in compliance as to have the remaining two committees.

An average of 68.40% was scored by all 50 companies. The highest 100% was

scored by Axis Bank Ltd. and Infosys Technologies Ltd. The banking sector had

an average of 68.67% which is above the benchmark. BSE30 group of companies

scored a 63.33%, which is below the aggregate average. The FMCG sector had a

score of 70%, above the normal range. The IT sector led this parameter with

77.50%, way above the average score. The pharmaceutical sector managed to

scrape only 62.50% which was the least among all the sectors.

Table 5.21 Summary Statistics of Structure & Strength of the Board Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals Mean 6.87 6.33 7.00 7.75 6.25 Median 7.08 6.25 7.50 7.50 6.25 Mode 7.50 5.00 8.33 7.50 5.00 Standard Deviation 1.53 1.19 1.48 0.88 1.32 X- Value 5.34 5.14 5.52 6.87 4.93 Y- Value 8.40 7.52 8.48 8.63 7.57 Sample Variance 2.34 1.42 2.19 0.78 1.74 Range 5.00 3.33 3.33 3.33 2.50 Minimum 5.00 5.00 5.00 6.67 5.00 Maximum 10.00 8.33 8.33 10.00 7.50

The average Structure & Strength of the Board score of banking sector is 6.87 and

the Standard Deviation is 1.53, hence Structure & Strength of the Board


banking sector.

The average Structure & Strength of the Board parameter score of BSE30 group

companies sector is 6.33 and the Standard Deviation is 1.19, hence Structure &

Strength of the Board parameter is varying in 5.14 to 7.52 ranges around the


The average Structure & Strength of the Board parameter score of FMCG sector

is 7.00 and the Standard Deviation is 1.48, hence Structure & Strength of the

135

Board parameter is varying in 5.52 to 8.48 ranges around the average score for

the FMCG sector

The average Structure & Strength of the Board parameter score of IT sector is

7.75 and the Standard Deviation is 0.88, hence Structure & Strength of the Board

parameter is varying in 6.87 to 8.63 ranges around the average score for the IT

sector.

The average Structure & Strength of the Board parameter score of

pharmaceutical sector is 6.25 and the Standard Deviation is 1.32, hence Structure

& Strength of the Board parameter is varying in 4.93 to 7.57 ranges around the

average score for the pharmaceutical sector.

From the above data it is clearly seen that the highest variation is for Banking

sector on Structure & Strength of the Board parameter and least variation for IT

sector.

Ho: Structure & Strength of the Board Score is consistent among all five sectors

H1: Structure & Strength of the Board Score is not consistent among all five

sectors


Table 5.22 Anova Table – Structure & Strength of the Board Score ANOVA Source of Variation SS Df MS F P-value F crit

Between Groups 14.59222222 4 3.648056 2.153264592 0.089709 2.578739 Within Groups 76.23888889 45 1.694198 Total 90.83111111 49

Interpretation:



Conclusion:

The researcher has concluded that since Ho is accepted, the Structure & Strength

of the Board Parameter is consistent in all the select 5 sectors.

136

5.4 Board Independence & CEO Duality

The Corporate Governance demands that there should be a clear division of

responsibilities at the helm of the Company, which would ensure a balance of

power and authority such that no single individual has unfettered powers of

decision. The researcher has found a way to interpret and assign scores for such

independence and duality.

The researcher, in his assignment of score, has found that if the Chairman is an

Executive Director, then a 0 score is assigned to the company, else a score of 5 is

assigned. In a sub parameter, a maximum score of 5 for companies which have

appointed maximum percentage of independent directors in their board is

allotted. If the Chairman is an Executive Director, then according to clause 49,

minimum 50% independent directors are required on the board; else if the

Chairman is a Non Executive Director, then according to clause 49, minimum

33.33% independent directors are required on the board. If a company does not

fulfill the above mentioned minimum criteria, then a score of 0 is assigned.

Table 5.23 Board Independence & CEO Duality - Score

BI & CEO Duality (10) Sr. No.

Company Name Sector 06-07 07-08 08-09 AVG %

1 Allahabad Bank Ltd. Banking 8.75 8.13 8.75 8.54 85.42 2 Bank of Rajashthan Ltd. Banking 10.00 9.38 10.00 9.79 97.92 3 Bank of India Ltd. Banking 9.38 8.13 7.50 8.33 83.33 4 Bank of Baroda Ltd. Banking 8.13 8.75 3.75 6.88 68.75 5 Bank of Maharashtra Ltd. Banking 0.00 0.00 7.50 2.50 25.00 6 ICICI Bank Ltd. Banking 3.75 3.75 4.38 3.96 39.58 7 Axis Bank Ltd. Banking 3.75 3.75 3.75 3.75 37.50 8 State Bank of India Ltd. Banking 4.38 4.38 9.38 6.04 60.42 9 IDBI Bank Ltd. Banking 8.13 8.13 3.75 6.67 66.67

10 HDFC Bank Ltd. Banking 3.75 3.75 8.13 5.21 52.08 11 ONGC Ltd. BSE 30 0.00 0.00 0.00 0.00 0.00 12 NTPC Ltd. BSE 30 0.00 0.00 0.00 0.00 0.00 13 Tata Steel Ltd. BSE 30 7.50 8.75 8.75 8.33 83.33 14 Larsen & Toubro Ltd. BSE 30 8.13 8.13 5.00 7.08 70.83 15 Reliance Infrastructure Ltd. BSE 30 3.13 3.13 8.13 4.79 47.92

137

BI & CEO Duality (10) Sr. No. Company Name Sector 06-07 07-08 08-09 AVG %

16 Reliance Communication Ltd. BSE 30 4.38 5.00 10.00 6.46 64.58 17 Bharti Airtel Ltd. BSE 30 0.00 3.13 3.13 2.08 20.83 18 ACC Ltd. BSE 30 8.13 8.13 5.00 7.08 70.83 19 Hindalco Industries Ltd. BSE 30 3.75 3.75 8.75 5.42 54.17 20 Maruti Suzuki India Ltd. BSE 30 5.00 5.00 5.00 5.00 50.00 21 Colgate-Palmolive (India) Ltd. FMCG 7.50 7.50 8.13 7.71 77.08 22 Pidilite Industries Ltd. FMCG 5.00 5.00 8.13 6.04 60.42 23 Britannia Industries Ltd. FMCG 5.00 5.00 7.50 5.83 58.33 24 Nestle India Ltd. FMCG 0.00 0.00 3.13 1.04 10.42 25 ITC Ltd. FMCG 3.13 3.75 3.75 3.54 35.42 26 Hindustan Unilever Ltd. FMCG 8.13 8.13 8.13 8.13 81.25 27 Dabur (India) Ltd. FMCG 7.50 7.50 8.13 7.71 77.08 28 Marico Ltd. FMCG 4.38 4.38 10.00 6.25 62.50 29 Nirma Ltd. FMCG 8.75 8.75 8.75 8.75 87.50 30 Godrej Industries Ltd. FMCG 5.00 5.00 8.13 6.04 60.42 31 Infosys Technologies Ltd. IT 8.13 8.13 8.75 8.33 83.33 32 Tata Consultancy Services Ltd. IT 9.38 8.13 8.13 8.54 85.42 33 First Source Solution Ltd. IT 7.50 7.50 8.13 7.71 77.08 34 Polaris Software Lab Ltd. IT 3.13 3.13 3.13 3.13 31.25 35 Tech Mahindra Ltd. IT 5.00 5.00 5.00 5.00 50.00 36 Patni Computer Systems Ltd. IT 3.13 3.13 3.13 3.13 31.25 37 Wipro Ltd. IT 5.00 5.00 3.75 4.58 45.83 38 Mindtree Ltd. IT 3.13 3.13 3.13 3.13 31.25 39 CMC Ltd. IT 8.75 8.13 8.75 8.54 85.42 40 MphasiS Ltd. IT 7.50 5.00 7.50 6.67 66.67 41 Cipla Ltd. Pharma 3.75 3.75 4.38 3.96 39.58 42 Aventis Pharma Ltd. Pharma 5.00 5.00 8.13 6.04 60.42 43 Divi's Laboratories Ltd. Pharma 3.13 3.13 8.13 4.79 47.92 44 Dr. Reddys Laboratories Ltd. Pharma 4.38 4.38 9.38 6.04 60.42 45 Glenmark Pharmaceuticals Ltd. Pharma 7.50 7.50 7.50 7.50 75.00 46 GlaxoSmithKline Pharma Ltd. Pharma 7.50 7.50 7.50 7.50 75.00 47 Ipca Laboratories Ltd. Pharma 7.50 8.75 8.13 8.13 81.25 48 Sun Pharma Industries Ltd. Pharma 3.13 3.13 3.75 3.33 33.33 49 Torrent Pharmaceuticals Ltd. Pharma 8.75 8.75 8.75 8.75 87.50 50 Ranbaxy Laboratories Ltd. Pharma 8.13 8.13 3.75 6.67 66.67

In the banking sector, there was a consistency of 61.67% of the prescribed Board

Independence & CEO Duality. The highest was shown by Bank of Rajasthan Ltd.

and the lowest by Axis Bank. In the BSE30 group companies sector, there was a

consistency of 46.25% of the prescribed Board Independence & CEO Duality.

The highest was shown by Tata Steel Ltd. and the lowest by Oil & Natural Gas

Corporation Ltd as well as NTPC Ltd. Both NTPC and ONGC have 40%

independent directors and also have Executive directors; hence in view of the

above assignment of scores, both NTPC and ONGC score a zero in this

parameter. Only NTPC and ONGC are Public Sector Undertakings (PSUs),

while the other companies in the select BSE 30 group companies are not. Owing

to this demographic factor of PSUs, there may be a further scope of study of

138

corporate governance practices only in PSUs. In the FMCG sector, there was a

consistency of 61.04% of the prescribed Board Independence & CEO Duality.

The highest was shown Nirma Ltd. and the lowest by Nestle India Ltd. In the IT

sector, there was a consistency of 58.75% of the prescribed Board Independence

& CEO Duality. The highest was shown TCS Ltd and CMC Ltd. and the lowest

by Mindtree Ltd and Polaris Software Lab Ltd. In the pharmaceutical sector,

there was a consistency of 62.71% of the prescribed Board Independence & CEO

Duality. The highest was shown Torrent Pharmaceuticals Ltd. and the lowest by

Sun Pharma Industries Ltd.

Table 5.24 Summary Statistics of Board Independence & CEO Duality Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals Mean 6.17 4.63 6.10 5.88 6.27 Median 6.35 5.21 6.15 5.83 6.35 Mode NA 0.00 7.71 3.13 6.04 Standard Deviation 2.34 2.97 2.32 2.34 1.80 X- Value 3.83 1.66 3.78 3.53 4.47 Y- Value 8.51 7.59 8.43 8.22 8.07 Sample Variance 5.48 8.80 5.39 5.49 3.23 Range 7.29 8.33 7.71 5.42 5.42 Minimum 2.50 0.00 1.04 3.13 3.33 Maximum 9.79 8.33 8.75 8.54 8.75

The average Board Independence & CEO Duality score of banking sector is 6.17

and the Standard Deviation is 2.34, hence Structure & Strength of the Board


banking sector. The average Board Independence & CEO Duality parameter

score of BSE30group companies sector is 4.63 and the Standard Deviation is 2.97,

hence Board Independence & CEO Duality parameter is varying in 1.66 to 7.59

ranges around the average score for the BSE30 group companies sector. These

stellar companies NTPC, ONGC and others did not adhere sincerely to the

principles of Clause 49 (Number of Independent Directors) during the years of

this study (2007-2009); hence the researcher has awarded low scores accordingly.

In this parameter, even if these two companies are not taken into consideration,

the mean would be 5.78, which would still be below other sectors. (Table

number 5.24). There may be a further study, either by taking a different span of

time, or by taking different stellar companies (PSUs and otherwise) and show

139

different results. The average Board Independence & CEO Duality parameter

score of FMCG sector is 6.10 and the Standard Deviation is 2.32, hence Board

Independence & CEO Duality parameter is varying in 3.78 to 8.43 ranges around

the average score for the FMCG sector. The average Board Independence & CEO

Duality parameter score of IT sector is 5.88 and the Standard Deviation is 2.34,

hence Board Independence & CEO Duality parameter is varying in 3.53 to 8.22

ranges around the average score for the IT sector. The average Board

Independence & CEO Duality parameter score of pharmaceutical sector is 6.27

and the Standard Deviation is 1.80, hence Board Independence & CEO Duality



From the above data it is clearly seen that the highest variation is for

BSE30group companies on Board Independence & CEO Duality parameter and

the least variation is for pharmaceutical sector.

Ho: Board Independence & CEO Duality Score is consistent among all five

sectors

H1: Board Independence & CEO Duality Score is not consistent among all five

sectors


Table 5.25 Anova Table - Board Independence & CEO Duality Score ANOVA

Source of Variation SS Df MS F P-value F crit Between Groups 18.34548611 4 4.586372 0.807792274 0.526771 2.578739 Within Groups 255.4947917 45 5.677662 Total 273.8402778 49

Interpretation:



140

Conclusion:

The researcher has concluded that since Ho is accepted, the Board Independence

& CEO Duality Parameter is consistent in all the select 5 sectors.

5.5 Appointment of Independent Directors in various

Board Committees

Good Corporate Governance practice requires that a majority of the non –

executive directors should be independent of management and free from

business or other relationship, which would otherwise materially interfere with

the exercise of their independent judgment. Besides, they should be the financial

experts as members of the audit committee. The four committees consist of audit

committee, shareholders’ grievance committee, remuneration committee and

nomination committee.

If there is no independent director in either of the four committees, then a 0 score

is assigned to the company, for that committee, else a maximum score of 2 is

assigned for that committee; taking the maximum available score as 8 for all four

committees. The researcher has assigned a maximum score of 2 for companies

which have appointed maximum percentage of independent directors in their

each board committee, and used this as a base for allocation for the rest of the

companies. Table 5.26 Appointment of Independent Directors in Board Committees -

Score Appt. of Ind. Directors - Board

Committee (8) Sr. No. Company Name Sector

06-07 07-08 08-09 AVG % 1 Allahabad Bank Ltd. Banking 2.60 3.73 6.53 4.29 53.61 2 Bank of Rajashthan Ltd. Banking 4.93 4.48 5.43 4.95 61.83 3 Bank of India Ltd. Banking 1.73 1.33 1.83 1.63 20.42 4 Bank of Baroda Ltd. Banking 2.43 6.17 4.50 4.37 54.56 5 Bank of Maharashtra Ltd. Banking 0.80 0.86 3.76 1.80 22.56 6 ICICI Bank Ltd. Banking 5.00 4.80 5.00 4.93 61.67 7 Axis Bank Ltd. Banking 5.00 5.03 2.83 4.29 53.61 8 State Bank of India Ltd. Banking 2.33 2.93 1.26 2.17 27.18 9 IDBI Bank Ltd. Banking 1.33 2.53 1.67 1.84 23.06

10 HDFC Bank Ltd. Banking 5.33 5.33 6.17 5.61 70.14 11 ONGC Ltd. BSE 30 2.75 0.50 5.33 2.86 35.76 12 NTPC Ltd. BSE 30 2.17 2.17 2.25 2.19 27.43

141

Appt. of Ind. Directors - Board Committee (8) Sr.


13 Tata Steel Ltd. BSE 30 2.83 3.93 3.83 3.53 44.17 14 Larsen & Toubro Ltd. BSE 30 6.00 3.86 2.00 3.95 49.40 15 Reliance Infrastructure Ltd. BSE 30 3.33 7.33 6.00 5.56 69.44 16 Reliance Communication Ltd. BSE 30 6.00 6.40 5.20 5.87 73.33 17 Bharti Airtel Ltd. BSE 30 2.83 2.58 2.48 2.63 32.89 18 ACC Ltd. BSE 30 2.17 2.17 2.17 2.17 27.08 19 Hindalco Industries Ltd. BSE 30 4.00 4.00 4.00 4.00 50.00 20 Maruti Suzuki India Ltd. BSE 30 1.90 2.00 2.00 1.97 24.58 21 Colgate-Palmolive (India) Ltd. FMCG 2.00 2.00 2.00 2.00 25.00 22 Pidilite Industries Ltd. FMCG 2.17 2.17 2.17 2.17 27.08 23 Britannia Industries Ltd. FMCG 2.67 3.67 4.00 3.44 43.06 24 Nestle India Ltd. FMCG 3.00 2.67 2.67 2.78 34.72 25 ITC Ltd. FMCG 6.31 4.83 5.60 5.58 69.77 26 Hindustan Unilever Ltd. FMCG 5.33 4.67 4.67 4.89 61.11 27 Dabur (India) Ltd. FMCG 4.00 4.00 4.00 4.00 50.00 28 Marico Ltd. FMCG 4.00 4.33 2.00 3.44 43.06 29 Nirma Ltd. FMCG 4.00 3.33 2.67 3.33 41.67 30 Godrej Industries Ltd. FMCG 3.50 3.50 6.00 4.33 54.17 31 Infosys Technologies Ltd. IT 6.87 8.00 2.00 5.62 70.28 32 Tata Consultancy Services Ltd. IT 4.33 4.33 4.67 4.44 55.56 33 First Source Solution Ltd. IT 2.00 3.47 3.67 3.04 38.06 34 Polaris Software Lab Ltd. IT 4.70 4.50 5.50 4.90 61.25 35 Tech Mahindra Ltd. IT 2.17 2.17 2.20 2.18 27.22 36 Patni Computer Systems Ltd. IT 4.00 3.50 6.00 4.50 56.25 37 Wipro Ltd. IT 5.00 5.00 5.00 5.00 62.50 38 Mindtree Ltd. IT 3.83 3.83 2.50 3.39 42.36 39 CMC Ltd. IT 3.00 4.00 2.83 3.28 40.97 40 MphasiS Ltd. IT 1.67 1.60 2.00 1.76 21.94 41 Cipla Ltd. Pharma 3.33 3.33 3.33 3.33 41.67 42 Aventis Pharma Ltd. Pharma 2.67 2.67 2.67 2.67 33.33 43 Divi's Laboratories Ltd. Pharma 4.67 4.67 4.67 4.67 58.33 44 Dr. Reddys Laboratories Ltd. Pharma 6.67 4.67 5.33 5.56 69.44 45 Glenmark Pharmaceuticals Ltd. Pharma 4.50 4.50 3.50 4.17 52.08 46 GlaxoSmithKline Pharma Ltd. Pharma 3.20 3.00 3.00 3.07 38.33 47 Ipca Laboratories Ltd. Pharma 4.67 4.67 4.67 4.67 58.33 48 Sun Pharma Industries Ltd. Pharma 3.00 3.00 3.00 3.00 37.50 49 Torrent Pharmaceuticals Ltd. Pharma 1.60 1.60 2.00 1.73 21.67 50 Ranbaxy Laboratories Ltd. Pharma 4.00 4.20 1.60 3.27 40.83

Very few companies were able to score more than 70%, the aggregate average of

the selected 50 companies was 45.21% Among the sectors, banking showed a

score of 44.86%, BSE30 group of companies managed 43.41%, FMCG scored

44.96%, IT scored 47.64% whereas pharmaceuticals was at 45.15%. The top

scorers were HDFC Bank Ltd., Reliance Communications Ltd., and Infosys

Technology Ltd. which scored more than 70%. So it can be noticed that the

142

FMCG sector and the pharmaceutical sector do not have companies which can

manage to be in the top slot of the prescribed parameter. Table 5.27 Summary Statistics of Appointment of Independent Directors in Board Committees - Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals Mean 3.59 3.47 3.60 3.81 3.61 Median 4.29 3.20 3.44 3.92 3.30 Mode 4.29 NA 3.44 NA 4.67 Standard Deviation 1.54 1.39 1.14 1.28 1.14 X- Value 2.05 2.09 2.46 2.53 2.48 Y- Value 5.13 4.86 4.74 5.09 4.75 Sample Variance 2.37 1.92 1.30 1.63 1.29 Range 3.98 3.90 3.58 3.87 3.82 Minimum 1.63 1.97 2.00 1.76 1.73 Maximum 5.61 5.87 5.58 5.62 5.56

The average Appointment of Independent Directors in various Board

Committees score of banking sector is 3.59 and the Standard Deviation is 1.54,

hence Appointment of Independent Directors in various Board Committees


banking sector.


Committees parameter score of BSE30group companies sector is 3.47 and the

Standard Deviation is 1.39, hence Appointment of Independent Directors in

various Board Committees parameter is varying in 2.09 to 4.86 ranges around

the average score for the BSE30 group companies sector.


Committees parameter score of FMCG sector is 3.60 and the Standard Deviation

is 1.14, hence Appointment of Independent Directors in various Board

Committees parameter is varying in 2.46 to 4.74 ranges around the average score

for the FMCG sector


Committees parameter score of IT sector is 3.81 and the Standard Deviation is

1.28, hence Appointment of Independent Directors in various Board Committees


143

sector.

The Appointment of Independent Directors in various Board Committees

parameter score of pharmaceutical sector is 3.61 and the Standard Deviation is

1.14, hence Appointment of Independent Directors in various Board Committees



From the above data it is clearly seen that the highest variation is for banking on

Appointment of Independent Directors in various Board Committees parameter

and the least variation is for FMCG and pharmaceutical sector.

Ho: Appointment of Independent Directors in various Board Committees

Score is consistent among all five sectors

H1: Appointment of Independent Directors in various Board Committees

Score is not consistent among all five sectors

Procedure: Above hypothesis is tested using one way analysis of variance. Table 5.28 Anova Table - Appointment of Independent Directors in Board Committees - Score ANOVA Source of Variation SS df MS F P-value F crit

Between Groups 0.596802827 4 0.1492007 0.087606309 0.9858633 2.5787392 Within Groups 76.63867924 45 1.7030818 Total 77.23548207 49

Interpretation:



Conclusion:

The researcher has concluded that since Ho is accepted, the Appointment of

Independent Directors in various Board Committees Parameter is consistent in

all the select 5 sectors.

144

5.6 Stakeholder Value Enhancement

Good Corporate Governance does not include only share holders, but also other

stake holders such as banks, deposit holders and various others. The researcher

has considered the following stakeholders for value enhancement and has

assigned scores accordingly. Table 5.29 Stakeholder Value Enhancement - Parameters

Stakeholder Value Enhancement If Yes, then assigned score 1

If No, then assigned score 0.

Banks are paid on time 1 0 Deposit holders or debentures holders where paid on time

1 0

Company is regular in payment of taxes 1 0 Supply Chain management Investor Relations officer is appointed

1 0

Stakeholder Transactions If Yes, then assigned score 0

If No, then assigned score 1

Company is default in payment of taxes 0 1 Current projects are running time/cost over runs 0 1 Table 5.30 Stakeholder Value Enhancement - Score

Stakeholder Value Enhancement (6) Sr. No. Company Name Sector

06-07 07-08 08-09 AVG %


10 HDFC Bank Ltd. Banking 5 5 3 4.33 72.22 11 ONGC Ltd. BSE 30 6 6 5 5.67 94.44 12 NTPC Ltd. BSE 30 5 5 5 5.00 83.33 13 Tata Steel Ltd. BSE 30 5 5 5 5.00 83.33 14 Larsen & Toubro Ltd. BSE 30 5 5 2 4.00 66.67 15 Reliance Infrastructure Ltd. BSE 30 5 5 5 5.00 83.33 16 Reliance Communication Ltd. BSE 30 5 5 4 4.67 77.78 17 Bharti Airtel Ltd. BSE 30 5 5 6 5.33 88.89 18 ACC Ltd. BSE 30 5 5 5 5.00 83.33 19 Hindalco Industries Ltd. BSE 30 5 5 4 4.67 77.78 20 Maruti Suzuki India Ltd. BSE 30 5 5 5 5.00 83.33 21 Colgate-Palmolive (India) Ltd. FMCG 5 5 4 4.67 77.78 22 Pidilite Industries Ltd. FMCG 5 5 6 5.33 88.89 23 Britannia Industries Ltd. FMCG 5 5 4 4.67 77.78

145

Stakeholder Value Enhancement (6) Sr. No. Company Name Sector

06-07 07-08 08-09 AVG %

24 Nestle India Ltd. FMCG 5 5 4 4.67 77.78 25 ITC Ltd. FMCG 5 5 6 5.33 88.89 26 Hindustan Unilever Ltd. FMCG 5 5 5 5.00 83.33 27 Dabur (India) Ltd. FMCG 6 5 4 5.00 83.33 28 Marico Ltd. FMCG 5 5 4 4.67 77.78 29 Nirma Ltd. FMCG 5 5 5 5.00 83.33 30 Godrej Industries Ltd. FMCG 5 5 5 5.00 83.33 31 Infosys Technologies Ltd. IT 5 5 6 5.33 88.89 32 Tata Consultancy Services Ltd. IT 5 5 6 5.33 88.89 33 First Source Solution Ltd. IT 5 5 5 5.00 83.33 34 Polaris Software Lab Ltd. IT 5 5 4 4.67 77.78 35 Tech Mahindra Ltd. IT 5 5 4 4.67 77.78 36 Patni Computer Systems Ltd. IT 5 5 4 4.67 77.78 37 Wipro Ltd. IT 5 5 4 4.67 77.78 38 Mindtree Ltd. IT 5 5 5 5.00 83.33 39 CMC Ltd. IT 5 5 5 5.00 83.33 40 MphasiS Ltd. IT 5 5 5 5.00 83.33 41 Cipla Ltd. Pharma 5 5 6 5.33 88.89 42 Aventis Pharma Ltd. Pharma 5 5 4 4.67 77.78 43 Divi's Laboratories Ltd. Pharma 5 5 4 4.67 77.78 44 Dr. Reddys Laboratories Ltd. Pharma 5 5 6 5.33 88.89 45 Glenmark Pharmaceuticals Ltd. Pharma 5 5 5 5.00 83.33 46 GlaxoSmithKline Pharma Ltd. Pharma 5 5 5 5.00 83.33 47 Ipca Laboratories Ltd. Pharma 5 5 5 5.00 83.33 48 Sun Pharma Industries Ltd. Pharma 5 5 5 5.00 83.33 49 Torrent Pharmaceuticals Ltd. Pharma 5 5 5 5.00 83.33 50 Ranbaxy Laboratories Ltd. Pharma 5 5 5 5.00 83.33

In the sub parameter of Banks being paid on time, all the sectors were in

compliance to the time limit.

In the sub parameter of Deposit holders or debentures holders were paid on

time, all the sectors were in compliance to the time limit.

In the sub parameter of the Company being regular in payment of taxes, in the

FY 2006-07 and 2007-08, all the 50 companies were in compliance. In the FY 2008-

09, 41 companies of the targeted 50 companies were in compliance. Of the

remaining 9 companies which are non-regular taxpaying companies, 06 belong

to the banking sector, 02 belong to the BSE30 group of companies, 01 belongs to

IT sector and none belong to the pharmaceutical sector and FMCG sectors.

146

In the sub parameter of the Supply Chain management information and where

Investor Relations officer is appointed, in the FY 2006-07 and FY 2007-08, only 3

companies appointed an Investor Relations officer. In the FY 2008-09, this rose to

a figure of 21.

In the sub parameter where the Company is default in payment of taxes, all

selected companies have been paying taxes for the select 3 FYs.

In the sub parameter where the Current projects are running time/cost over

runs, 12 companies are lagging behind their scheduled targets in the FY 2008-09.

The BSE30 group of companies sector is far behind with 6 companies which have

not completed their respective targets.

Table 5.31 Summary Statistics of Stakeholder Value Enhancement Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals Mean 4.80 4.93 4.93 4.93 5.00 Median 5.00 5.00 5.00 5.00 5.00 Mode 4.33 5.00 4.67 5.00 5.00 Standard Deviation 0.42 0.44 0.26 0.26 0.22 X- Value 4.38 4.49 4.67 4.67 4.78 Y- Value 5.22 5.37 5.20 5.20 5.22 Sample Variance 0.18 0.19 0.07 0.07 0.05 Range 1.00 1.67 0.67 0.67 0.67 Minimum 4.33 4.00 4.67 4.67 4.67 Maximum 5.33 5.67 5.33 5.33 5.33

The average Stakeholder Value Enhancement score of banking sector is 4.80 and

the Standard Deviation is 0.42, hence Stakeholder Value Enhancement parameter

is varying in 4.38 to 5.22 ranges around the average score for the banking sector.

The average Stakeholder Value Enhancement parameter score of BSE30group

companies sector is 4.93 and the Standard Deviation is 0.44, hence Stakeholder

Value Enhancement parameter is varying in 4.49 to 5.37 ranges around the


The average Stakeholder Value Enhancement parameter score of FMCG sector is

4.93 and the Standard Deviation is 0.26, hence Stakeholder Value Enhancement


147

FMCG sector

The average Stakeholder Value Enhancement parameter score of IT sector is 4.93

and the Standard Deviation is 0.26, hence Stakeholder Value Enhancement


sector.

The Stakeholder Value Enhancement parameter score of pharmaceutical sector is

5.00 and the Standard Deviation is 0.22, hence Stakeholder Value Enhancement



From the above data it is clearly seen that the highest variation is for

BSE30group companies on Stakeholder Value Enhancement parameter and the

least variation is for pharmaceutical sector.

Ho: Stakeholder Value Enhancement Score is consistent among all five sectors

H1: Stakeholder Value Enhancement Score is not consistent among all five

sectors


Table 5.32 Anova Table – Stakeholder Value Enhancement Score ANOVA Source of Variation SS df MS F P-value F crit Between Groups 0.213333333 4 0.0533333 0.477876106 0.751752 2.5787392 Within Groups 5.022222222 45 0.1116049 Total 5.235555556 49

Interpretation:



148

Conclusion:

The researcher has concluded that since Ho is accepted, the Stakeholder Value

Enhancement Parameter is consistent in all the select 5 sectors.

5.7 Effectiveness of BOD

It is one of the good corporate governance principles that the Independent

directors should be part of all statutory board committees to bring the best

results for the company. The Board will be effective only when the independent

directors play their role by attending the board committee meetings. They would

consider the conflicting interest of the stakeholders and would try to give their

best to the company. So, the effectiveness of Board of directors lies upon the

independent directors. The four committees consist of audit committee,

shareholders’ grievance committee, remuneration committee and nomination

committee.

If the independent director of either of the four committees do not attend a

meeting, then a 0 score is assigned to the company, for that committee, else a

maximum score of 2 is assigned for that committee; taking the maximum

available score as 8 for all four committees. The researcher has assigned a

maximum score of 2 for companies whose independent director has attended

maximum meetings in their each board committee, and the researcher has used

this as a base for allocation for the rest of the companies. Table 5.33 Effectiveness of BOD - Score

Effectiveness of BOD Sr. No. Company Name Sector


10 HDFC Bank Ltd. Banking 5.37 5.50 7.71 6.19 77.41 11 ONGC Ltd. BSE 30 1.73 2.00 3.31 2.35 29.35 12 NTPC Ltd. BSE 30 3.47 3.33 1.38 2.73 34.09

149

Effectiveness of BOD Sr. No. Company Name Sector

06-07 07-08 08-09 AVG % 13 Tata Steel Ltd. BSE 30 2.78 3.05 4.63 3.48 43.55 14 Larsen & Toubro Ltd. BSE 30 5.92 3.71 1.71 3.78 47.25 15 Reliance Infrastructure Ltd. BSE 30 3.70 7.92 6.00 5.87 73.40 16 Reliance Communication Ltd. BSE 30 6.00 6.12 5.63 5.92 73.96 17 Bharti Airtel Ltd. BSE 30 4.00 3.20 2.48 3.23 40.31 18 ACC Ltd. BSE 30 4.00 4.00 3.73 3.91 48.89 19 Hindalco Industries Ltd. BSE 30 3.83 3.80 3.92 3.85 48.13 20 Maruti Suzuki India Ltd. BSE 30 3.33 3.67 3.33 3.44 43.06 21 Colgate-Palmolive (India) Ltd. FMCG 1.80 1.67 1.50 1.66 20.69 22 Pidilite Industries Ltd. FMCG 3.87 3.67 3.83 3.79 47.36 23 Britannia Industries Ltd. FMCG 1.50 1.75 1.97 1.74 21.74 24 Nestle India Ltd. FMCG 3.78 3.56 3.56 3.63 45.37 25 ITC Ltd. FMCG 6.49 5.34 3.42 5.09 63.59 26 Hindustan Unilever Ltd. FMCG 5.17 4.88 4.87 4.97 62.14 27 Dabur (India) Ltd. FMCG 4.58 5.52 5.92 5.34 66.74 28 Marico Ltd. FMCG 4.00 5.33 3.25 4.19 52.43 29 Nirma Ltd. FMCG 4.00 4.00 4.00 4.00 50.00 30 Godrej Industries Ltd. FMCG 4.00 3.93 4.50 4.14 51.77 31 Infosys Technologies Ltd. IT 7.53 7.05 4.00 6.19 77.40 32 Tata Consultancy Services Ltd. IT 5.92 5.50 4.81 5.41 67.62 33 First Source Solution Ltd. IT 1.70 4.68 5.11 3.83 47.87 34 Polaris Software Lab Ltd. IT 3.21 5.83 5.75 4.93 61.66 35 Tech Mahindra Ltd. IT 3.83 3.17 3.00 3.33 41.67 36 Patni Computer Systems Ltd. IT 3.11 3.28 3.94 3.44 43.06 37 Wipro Ltd. IT 5.89 6.00 6.00 5.96 74.54 38 Mindtree Ltd. IT 6.00 6.00 3.83 5.28 65.97 39 CMC Ltd. IT 3.92 5.08 3.58 4.19 52.43 40 MphasiS Ltd. IT 1.20 1.83 1.67 1.57 19.58 41 Cipla Ltd. Pharma 4.00 4.00 4.00 4.00 50.00 42 Aventis Pharma Ltd. Pharma 4.00 4.00 4.00 4.00 50.00 43 Divi's Laboratories Ltd. Pharma 6.00 5.87 5.87 5.91 73.89 44 Dr. Reddys Laboratories Ltd. Pharma 7.43 4.95 6.72 6.37 79.62 45 Glenmark Pharmaceuticals Ltd. Pharma 5.17 5.13 3.19 4.50 56.20 46 GlaxoSmithKline Pharma Ltd. Pharma 3.89 3.90 3.90 3.90 48.70 47 Ipca Laboratories Ltd. Pharma 6.00 5.89 5.67 5.85 73.15 48 Sun Pharma Industries Ltd. Pharma 3.50 4.00 3.07 3.52 44.03 49 Torrent Pharmaceuticals Ltd. Pharma 1.75 1.63 1.88 1.75 21.88 50 Ranbaxy Laboratories Ltd. Pharma 5.53 5.11 1.30 3.98 49.75

In the FY 2008-09, the attendances of independent director in committee wise

were as follows. The audit committee showed an 81.93% presence, the

shareholders grievance committee showed a 59.52% presence, the remuneration

committee showed a 47.09% presence and the nomination committee showed a

12.10% presence. Since the first two committees are mandatory, high presence is

observed, where as in some companies the latter two committees may not be

even formed, hence they show a less observation.

150

In the banking sector, there was an effectiveness of 53.52% due to attendance by

the independent directors in the prescribed four committees. The highest was

shown by HDFC Bank Ltd. and the lowest by IDBI Bank Ltd.

In the BSE30 group companies sector, there was an effectiveness of 48.77% due

to attendance by the independent directors in the prescribed four committees.

The highest was shown by Reliance Communication Ltd. and the lowest by

ONGC Ltd.

In the FMCG sector, there was an effectiveness of 48.18% due to attendance by

the independent directors in the prescribed four committees. The highest was

shown by Dabur (India) Ltd. and the lowest by Colgate-Palmolive (India) Ltd.

In the IT sector, there was an effectiveness of 55.18% due to attendance by the

independent directors in the prescribed four committees. The highest was shown

by Infosys Technologies Ltd and the lowest by MphasiS Ltd.

In the pharmaceutical sector, there was an effectiveness of 54.72% due to

attendance by the independent directors in the prescribed four committees. The

highest was shown by Dr. Reddys Laboratories Ltd. and the lowest by Torrent

Pharmaceuticals Ltd.

Table 5.34 Summary Statistics of Effectiveness of BOD Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals Mean 4.28 3.86 3.85 4.41 4.38 Median 4.79 3.63 4.07 4.56 4.00 Mode NA NA NA NA 4.00 Standard Deviation 1.50 1.18 1.27 1.42 1.37 X- Value 2.78 2.67 2.58 2.99 3.01 Y- Value 5.79 5.04 5.13 5.84 5.74 Sample Variance 2.26 1.40 1.62 2.02 1.87 Range 4.58 3.57 3.68 4.63 4.62 Minimum 1.61 2.35 1.66 1.57 1.75 Maximum 6.19 5.92 5.34 6.19 6.37

The average Effectiveness of BOD score of banking sector is 4.28 and the

Standard Deviation is 1.50, hence Effectiveness of BOD parameter is varying in

2.78 to 5.79 ranges around the average score for the banking sector.

The average Effectiveness of BOD parameter score of BSE30group companies

151

sector is 3.86 and the Standard Deviation is 1.18, hence Effectiveness of BOD


BSE30 group companies sector.

The average Effectiveness of BOD parameter score of FMCG sector is 3.85 and

the Standard Deviation is 1.27, hence Effectiveness of BOD parameter is varying

in 2.58 to 5.13 ranges around the average score for the FMCG sector

The average Effectiveness of BOD parameter score of IT sector is 4.41 and the

Standard Deviation is 1.42, hence Effectiveness of BOD parameter is varying in

2.99 to 5.84 ranges around the average score for the IT sector.

The Effectiveness of BOD parameter score of pharmaceutical sector is 4.38 and

the Standard Deviation is 1.37, hence Effectiveness of BOD parameter is varying

in 3.01 to 5.74 ranges around the average score for the pharmaceutical sector.


sector on Effectiveness of BOD parameter and the least variation is for BSE30

group companies sector.

Ho: Effectiveness of BOD Score is consistent among all five sectors

H1: Effectiveness of BOD Score is not consistent among all five sectors


Table 5.35 Anova Table – Effectiveness of BOD Score ANOVA Source of Variation SS df MS F P-value F crit Between Groups 3.126300196 4 0.781575 0.426432862 0.7887399 2.5787392 Within Groups 82.4769392 45 1.8328209 Total 85.60323939 49

Interpretation:

152



Conclusion:

The researcher has concluded that since Ho is accepted, the Effectiveness of BOD

Parameter is consistent in all the select 5 sectors.

5.8 Board Systems & Procedures

The Companies Act, Listing Agreement and SEBI guidelines specifically provide

the listed companies on how the Meetings should be conducted. The researcher

has considered procedure of meeting, teleconference meetings, attendance of

independent directors and compliance officer appointment & qualifications, as

well as written code of conduct for various levels of management. So, according

to the researcher, the Board systems and Procedures is an important aspect to be

considered.

Table 5.36 Board Systems & Procedures – Parameters Board Procedures If Yes, then

assigned score If No, then

assigned score Agenda and the Notes of the meetings being normally circulated before the meeting

1 0

Time gap between any two board meetings is more than four months

0 1

Tele-conferencing service available for the board meetings 0.5 0

If the independent directors of board of directors do not attend a board meeting,

then a 0 score is assigned to the company, else a maximum score of 3 is assigned

for that company. The researcher has assigned a maximum score of 3 for

companies whose independent director has attended maximum meetings in the

board meetings, and the researcher has used this as a base for allocation for the

rest of the companies.

For the appointment of compliance officer of the company, the researcher has

assigned the following scores: Company Secretary or any other official with CS

Qualification a score of 1; and for any other official without CS Qualification a

score of 0.

153

If there is any written code of conduct for the following level of management a

score of 0.5 for each is allotted: Directors, Senior Management and Employees;

taking the maximum score to 1.5.

Thus the total score for board systems and procedures becomes 8.

Table 5.37 Board Systems & Procedures - Score

Board Systems and Procedure Sr. No. Company Name Sector


10 HDFC Bank Ltd. Banking 6.50 6.20 6.74 6.48 81.01 11 ONGC Ltd. BSE 30 4.97 5.38 6.08 5.48 68.46 12 NTPC Ltd. BSE 30 5.93 5.23 5.24 5.47 68.32 13 Tata Steel Ltd. BSE 30 6.27 6.32 6.38 6.32 79.04 14 Larsen & Toubro Ltd. BSE 30 6.45 6.44 6.10 6.33 79.13 15 Reliance Infrastructure Ltd. BSE 30 6.70 6.32 7.00 6.67 83.41 16 Reliance Communication Ltd. BSE 30 6.22 6.25 6.81 6.43 80.35 17 Bharti Airtel Ltd. BSE 30 6.50 6.25 6.38 6.38 79.69 18 ACC Ltd. BSE 30 6.52 6.70 6.08 6.43 80.43 19 Hindalco Industries Ltd. BSE 30 6.44 6.50 7.00 6.65 83.07 20 Maruti Suzuki India Ltd. BSE 30 6.50 6.38 6.25 6.38 79.69 21 Colgate-Palmolive (India) Ltd. FMCG 7.39 8.00 6.84 7.41 92.63 22 Pidilite Industries Ltd. FMCG 6.33 6.81 5.59 6.25 78.08 23 Britannia Industries Ltd. FMCG 6.90 7.20 6.56 6.89 86.09 24 Nestle India Ltd. FMCG 5.86 6.00 6.00 5.95 74.40 25 ITC Ltd. FMCG 6.99 6.79 6.34 6.70 83.80 26 Hindustan Unilever Ltd. FMCG 5.97 6.33 6.83 6.37 79.67 27 Dabur (India) Ltd. FMCG 5.95 6.40 6.80 6.38 79.79 28 Marico Ltd. FMCG 6.50 5.73 6.36 6.20 77.44 29 Nirma Ltd. FMCG 6.33 6.80 7.00 6.71 83.89 30 Godrej Industries Ltd. FMCG 7.00 6.70 6.15 6.62 82.71 31 Infosys Technologies Ltd. IT 6.09 6.78 6.90 6.59 82.35 32 Tata Consultancy Services Ltd. IT 6.69 6.43 7.14 6.75 84.41 33 First Source Solution Ltd. IT 5.53 6.13 6.90 6.19 77.34 34 Polaris Software Lab Ltd. IT 6.14 6.76 7.26 6.72 84.01 35 Tech Mahindra Ltd. IT 5.88 6.63 5.21 5.90 73.81

154

Board Systems and Procedure Sr. No. Company Name Sector

06-07 07-08 08-09 AVG % 36 Patni Computer Systems Ltd. IT 7.35 7.20 7.70 7.42 92.71 37 Wipro Ltd. IT 6.90 7.10 8.00 7.33 91.67 38 Mindtree Ltd. IT 5.10 7.00 6.08 6.06 75.76 39 CMC Ltd. IT 6.10 5.50 5.38 5.66 70.73 40 MphasiS Ltd. IT 6.03 6.13 6.54 6.23 77.92 41 Cipla Ltd. Pharma 6.80 6.33 7.90 7.01 87.64 42 Aventis Pharma Ltd. Pharma 6.60 6.50 7.00 6.70 83.75 43 Divi's Laboratories Ltd. Pharma 6.57 6.80 6.30 6.56 81.96 44 Dr. Reddys Laboratories Ltd. Pharma 7.55 7.68 6.88 7.37 92.10 45 Glenmark Pharmaceuticals Ltd. Pharma 6.21 6.47 6.25 6.31 78.89 46 GlaxoSmithKline Pharma Ltd. Pharma 7.29 7.38 7.38 7.35 91.86 47 Ipca Laboratories Ltd. Pharma 6.79 6.49 6.70 6.66 83.21 48 Sun Pharma Industries Ltd. Pharma 6.50 6.63 6.25 6.46 80.73 49 Torrent Pharmaceuticals Ltd. Pharma 6.10 6.00 5.88 5.99 74.90 50 Ranbaxy Laboratories Ltd. Pharma 6.89 6.75 5.61 6.42 80.22

All the 50 selected companies have declared the Agenda and the Notes of the

board meetings which are normally circulated before the board meetings, for all

the select 3 FYs. Hence the researcher has allotted a score of 1 to all companies.

None of the select 50 companies have a time gap of four months or more

between any two board meetings. They are in compliance to rule of Companies

Act 1956. Hence the researcher has allotted a score of 1 to all companies.

There were only 4 companies offering Tele-conferencing service for the board

meetings in the FY 2006-07. This rose to a figure of 5 in the FY 2007-08 and to a

figure of 11 in the FY 2008-09. Hence the researcher has allotted a score of 0.5 to

such companies.

The maximum percentage of attendance of independent directors attracts a score

of 3, and the rest is apportioned.

In the banking sector, there was an attendance of independent directors in the

BOD meetings to the tune of 68.34%. The highest was shown by HDFC Bank

Ltd. and the lowest by Bank of Maharashtra Ltd.

In the BSE30 group companies sector, there was an attendance of independent

directors in the BOD meetings to the tune of 70.65%. The highest was shown by

155

Reliance Infrastructure Ltd. and the lowest by NTPC Ltd.

In the FMCG sector, there was an attendance of independent directors in the

BOD meetings to the tune of 77.16%.. The highest was shown by Nirma Ltd. and

the lowest by Nestle India Ltd.

In the IT sector, there was an attendance of independent directors in the BOD

meetings to the tune of 73.41%. The highest was shown by Patni Computer

Systems Ltd. and the lowest by MphasiS Ltd.

In the pharmaceutical sector, there was an attendance of independent directors

in the BOD meetings to the tune of 80.51%. The highest was shown by

GlaxoSmithKline Pharma Ltd. and the lowest by Ranbaxy Laboratories Ltd.

All 50 select companies have an appointed Compliance officer with C.S.

qualification, hence the researcher has assigned a 1 score.

All 50 select companies have a written code of conduct for the Directors and

Senior Management, so the researcher has assigned a score of 0.5 respectively for

each taking the sub score to 1.

In the FY 2006-07 and 2007-08, 15 companies had a written code of conduct for

the Employees; and in the FY 2008-09, 22 companies had a written code of

conduct for the Employees so the researcher has assigned a score of 0.5 to such

companies.

Taking into consideration the above four sub parameters, the total score reaches

a maximum of 8. In the banking sector, this total average score in percentage

was 74.17. In the BSE30 group companies sector, this total average score in

percentage was 78.16. In the FMCG sector, this total average score in percentage

was 81.85. In the IT sector, this total average score in percentage was 81.07. In the

pharmaceutical sector, this total average score in percentage was 83.53

156

Table 5.38 Summary Statistics of Board Systems & Procedures Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals Mean 5.93 6.25 6.55 6.49 6.68 Median 5.90 6.38 6.50 6.41 6.61 Mode NA 6.38 NA NA NA Standard Deviation 0.40 0.43 0.41 0.58 0.44 X- Value 5.54 5.82 6.13 5.90 6.24 Y- Value 6.33 6.68 6.96 7.07 7.13 Sample Variance 0.16 0.18 0.17 0.34 0.20 Range 1.31 1.21 1.46 1.76 1.38 Minimum 5.17 5.47 5.95 5.66 5.99 Maximum 6.48 6.67 7.41 7.42 7.37

The average Board Systems & Procedures score of banking sector is 5.93 and the

Standard Deviation is 0.40, hence Board Systems & Procedures parameter is

varying in 5.54 to 6.33 ranges around the average score for the banking sector.

The average Board Systems & Procedures parameter score of BSE30 group

companies sector is 6.25 and the Standard Deviation is 0.43, hence Board

Systems & Procedures parameter is varying in 5.82 to 6.68 ranges around the


The average Board Systems & Procedures parameter score of FMCG sector is

6.55 and the Standard Deviation is 0.41, hence Board Systems & Procedures


FMCG sector

The average Board Systems & Procedures parameter score of IT sector is 6.49

and the Standard Deviation is 0.58, hence Board Systems & Procedures


sector.

The Board Systems & Procedures parameter score of pharmaceutical sector is

6.68 and the Standard Deviation is 0.44, hence Board Systems & Procedures




157

Board Systems & Procedures parameter and the least variation is for banking

sector.

Ho: Board Systems & Procedures Score is consistent among all five sectors

H1: Board Systems & Procedures Score is not consistent among all five sectors


Table 5.39 Anova Table - Board Systems & Procedures Score ANOVA Source of Variation SS df MS F P-value F crit Between Groups 3.461379935 4 0.865345 4.114566975 0.0063226 2.5787392 Within Groups 9.464063777 45 0.2103125 Total 12.92544371 49

Interpretation:

Here, Ftabulated < Fcalculated and p-value = 0.0063226, which is significant, therefore

the null hypothesis (Ho) cannot be accepted i.e. the Ho is rejected.

Conclusion:

The researcher has concluded that since Ho is rejected, the Board Systems &

Procedures Parameter is not consistent in all the select 5 sectors.

5.9 Board Committees – Audit Committee

Audit Committee, being one of the mandatory board committees, is the main

pillar of corporate governance, the success or failure of which, largely depends

upon its effectiveness in the companies. There should be adequate disclosure of

audit committee charter and terms of reference in the annual report. There

should also be transparency in composition of audit committee, minimum

number of meetings, minimum number of independent directors and

appointment thereof etc.

If the proportion of independent directors in audit committee is below 66.67 %, a

score of 0 is assigned else a score of 1 is assigned. Similarly if the internal auditor

reports directly to the audit committee, a score of 1 is assigned else 0 is assigned.

158

If there is any financial expert in the audit committee, a score of 1 is assigned;

else a score of 1 is assigned. If the audit committee looks forward for

minimization of risk in the company affairs, a score of 1 is assigned; else a score

of 0 is assigned.

If the independent directors of audit committee do not attend an audit

committee meeting, then a 0 score is assigned to the company, for that audit

committee, else a maximum score of 4 is assigned to the company for that audit

committee. The researcher has assigned a maximum score of 4 for companies

whose independent director has attended maximum meetings in the audit

committee meetings, and the researcher has used this as a base for allocation for

the rest of the companies. Thus the total score for audit committee becomes 8.

Table 5.40 Board Committees – Audit Committee - Score

Board Committee- Audit Committee Sr. No. Company Name Sector


10 HDFC Bank Ltd. Banking 6.73 7.00 7.73 7.16 89.44 11 ONGC Ltd. BSE 30 4.80 6.00 5.96 5.59 69.82 12 NTPC Ltd. BSE 30 5.93 6.67 5.43 6.01 75.12 13 Tata Steel Ltd. BSE 30 5.56 5.09 7.26 5.97 74.61 14 Larsen & Toubro Ltd. BSE 30 7.83 6.67 7.43 7.31 91.37 15 Reliance Infrastructure Ltd. BSE 30 6.80 6.83 8.00 7.21 90.14 16 Reliance Communication Ltd. BSE 30 5.67 6.40 7.67 6.58 82.22 17 Bharti Airtel Ltd. BSE 30 8.00 7.00 7.20 7.40 92.50 18 ACC Ltd. BSE 30 8.00 8.00 7.47 7.82 97.78 19 Hindalco Industries Ltd. BSE 30 6.67 7.60 7.83 7.37 92.08 20 Maruti Suzuki India Ltd. BSE 30 6.67 7.33 5.67 6.56 81.94 21 Colgate-Palmolive (India) Ltd. FMCG 7.60 7.33 7.00 7.31 91.39 22 Pidilite Industries Ltd. FMCG 6.73 5.33 5.67 5.91 73.89 23 Britannia Industries Ltd. FMCG 7.00 7.50 6.60 7.03 87.92 24 Nestle India Ltd. FMCG 7.56 7.11 7.11 7.26 90.74

159

Board Committee- Audit Committee Sr. No. Company Name Sector

06-07 07-08 08-09 AVG % 25 ITC Ltd. FMCG 8.00 8.00 6.89 7.63 95.37 26 Hindustan Unilever Ltd. FMCG 7.33 7.00 6.74 7.03 87.82 27 Dabur (India) Ltd. FMCG 7.17 7.83 7.83 7.61 95.14 28 Marico Ltd. FMCG 8.00 8.00 3.50 6.50 81.25 29 Nirma Ltd. FMCG 8.00 8.00 8.00 8.00 100.00 30 Godrej Industries Ltd. FMCG 8.00 8.00 7.00 7.67 95.83 31 Infosys Technologies Ltd. IT 7.00 6.50 7.00 6.83 85.42 32 Tata Consultancy Services Ltd. IT 6.83 6.00 7.63 6.82 85.24 33 First Source Solution Ltd. IT 3.40 5.50 6.33 5.08 63.47 34 Polaris Software Lab Ltd. IT 5.43 7.00 7.00 6.48 80.95 35 Tech Mahindra Ltd. IT 6.67 6.67 7.00 6.78 84.72 36 Patni Computer Systems Ltd. IT 5.67 6.00 7.00 6.22 77.78 37 Wipro Ltd. IT 6.78 8.00 8.00 7.59 94.91 38 Mindtree Ltd. IT 7.00 7.00 7.67 7.22 90.28 39 CMC Ltd. IT 6.83 6.50 7.17 6.83 85.42 40 MphasiS Ltd. IT 5.40 7.67 7.33 6.80 85.00 41 Cipla Ltd. Pharma 7.00 7.00 8.00 7.33 91.67 42 Aventis Pharma Ltd. Pharma 8.00 8.00 8.00 8.00 100.00 43 Divi's Laboratories Ltd. Pharma 8.00 7.73 8.00 7.91 98.89 44 Dr. Reddys Laboratories Ltd. Pharma 6.40 5.67 7.33 6.47 80.83 45 Glenmark Pharmaceuticals Ltd. Pharma 6.00 5.60 5.60 5.73 71.67 46 GlaxoSmithKline Pharma Ltd. Pharma 6.78 6.80 6.80 6.79 84.91 47 Ipca Laboratories Ltd. Pharma 7.00 7.78 7.00 7.26 90.74 48 Sun Pharma Industries Ltd. Pharma 6.67 7.00 6.33 6.67 83.33 49 Torrent Pharmaceuticals Ltd. Pharma 6.50 6.25 6.75 6.50 81.25 50 Ranbaxy Laboratories Ltd. Pharma 7.50 5.80 6.60 6.63 82.92

The number of independent directors above 66.67% in audit committees of the

select 50 companies for the FY 2006-07 was 46, and the deficit of the 4 companies

were among the banking sector which had 3 and 1 belonged to the IT sector. For

the FY 2007-08 the number was 44, and the deficit of the 6 companies was among

the banking sector which had 3, 2 belonged to the BSE30 group of companies

and 1 belonged to FMCG sector. In the FY 2008-09, there was no improvement

on the whole. There were 46 companies who had independent directors above

66.67% in audit committees. The non-compliant companies belonged to the

banking sector which had 3, where as 1 belonged to the BSE30 group of

companies.

During the 3 select FYs, all the select 50 companies had the internal auditor

reporting directly to the audit committee, so the researcher has assigned a score

of 1 to each.

160

The number of companies having financial expert in the audit committee during

the FY 2006-07 was 22, for the FY 2007-08 it was 26 and it improved to 48 during

the FY 2008-09. A score of 1 was assigned in that accordance.

Since all the companies’ audit committees look forward for minimization of risk

in the company affairs, a score of 1 is assigned to all of them.

In the banking sector, during the FY 2008-09, there was an average attendance of

75.16% by the independent directors of audit committee.

In the BSE30 group companies sector during the FY 2008-09, there was an

average attendance of 79.78% by the independent directors of audit committee.

In the FMCG sector, during the FY 2008-09, there was an average attendance of


In the IT sector, during the FY 2008-09, there was an average attendance of


In the pharmaceutical sector, during the FY 2008-09, there was an average

attendance of 88.54% by the independent directors of audit committee. This is

the highest among all the sectors.

Out of the total score of 8, the FMCG sector was leading with an average of 7.19,

followed by the pharmaceutical sector with 6.93. The BSE30 group companies

sector had an average score of 6.78, the IT sector had 6.67 and the banking sector

had an average score of 6.48 out of a maximum score of 8.

Table 5.41 Summary Statistics of Board Committees – Audit Committee Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals Mean 6.48 6.78 7.19 6.67 6.93 Median 6.87 6.89 7.29 6.81 6.73 Mode NA NA NA NA NA Standard Deviation 0.95 0.75 0.62 0.67 0.70 X- Value 5.53 6.03 6.58 6.00 6.23 Y- Value 7.43 7.53 7.81 7.33 7.63 Sample Variance 0.90 0.56 0.38 0.45 0.49 Range 2.67 2.24 2.09 2.51 2.27 Minimum 4.63 5.59 5.91 5.08 5.73 Maximum 7.30 7.82 8.00 7.59 8.00

161

The average Board Committees – Audit Committee score of banking sector is

6.48 and the Standard Deviation is 0.95, hence Board Committees – Audit

Committee parameter is varying in 5.53 to 7.43 ranges around the average score

for the banking sector.

The average Board Committees – Audit Committee parameter score of

BSE30group companies sector is 6.78 and the Standard Deviation is 0.75, hence

Board Committees – Audit Committee parameter is varying in 6.03 to 7.53

ranges around the average score for the BSE30 group companies sector.

The average Board Committees – Audit Committee parameter score of FMCG

sector is 7.19 and the Standard Deviation is 0.62, hence Board Committees –

Audit Committee parameter is varying in 6.58 to 7.81 ranges around the average

score for the FMCG sector

The average Board Committees – Audit Committee parameter score of IT sector

is 6.67 and the Standard Deviation is 0.67, hence Board Committees – Audit

Committee parameter is varying in 6.00 to 7.33 ranges around the average score

for the IT sector.

The Board Committees – Audit Committee parameter score of pharmaceutical

sector is 6.93 and the Standard Deviation is 0.70, hence Board Committees –

Audit Committee parameter is varying in 6.23 to 7.63 ranges around the average

score for the pharmaceutical sector.


sector on Board Committees – Audit Committee parameter and the least

variation is for FMCG sector.

Ho: Board Committees – Audit Committee Score is consistent among all five

sectors

H1: Board Committees – Audit Committee Score is not consistent among all

five sectors

162


Table 5.42 Anova Table – Board Committees – Audit Committee Score ANOVA Source of Variation SS df MS F P-value F crit Between Groups 2.931555735 4 0.7328889 1.316561768 0.278321 2.5787392 Within Groups 25.05009854 45 0.5566689 Total 27.98165427 49

Interpretation:



Conclusion:

The researcher has concluded that since Ho is accepted, the Board Committees –

Audit Committee Parameter is consistent in all the select 5 sectors.

5.10 Board Committees – Shareholder Grievance

Committee:

Shareholders / investors are the owners of corporates. Therefore their

grievances have to be addressed seriously and sorted out urgently. On this

perspective, corporate governance demands that every company must set up

Shareholders / Investors grievance committee as one of the mandatory board

committees.

The researcher has assigned a maximum score of 5 to the companies, which after

receiving complaints have no pending cases left at the end of the year; and a

proportionate score to the companies having pending cases. Table 5.43 Board Committees – Shareholder Grievance Committee - Score

Shareholder Grievance Committee Sr. No. Company Name Sector

06-07 07-08 08-09 AVG % 1 Allahabad Bank Ltd. Banking 5.00 5.00 5.00 5.00 100.00 2 Bank of Rajashthan Ltd. Banking 4.56 5.00 5.00 4.85 97.09 3 Bank of India Ltd. Banking 0.00 0.00 0.00 0.00 0.00 4 Bank of Baroda Ltd. Banking 4.76 4.86 4.99 4.87 97.40 5 Bank of Maharashtra Ltd. Banking 5.00 5.00 5.00 5.00 100.00 6 ICICI Bank Ltd. Banking 4.92 4.95 5.00 4.96 99.13

163

Shareholder Grievance Committee Sr. No. Company Name Sector

06-07 07-08 08-09 AVG % 7 Axis Bank Ltd. Banking 4.93 4.85 4.89 4.89 97.84 8 State Bank of India Ltd. Banking 4.98 4.97 5.00 4.98 99.65 9 IDBI Bank Ltd. Banking 4.98 5.00 5.00 4.99 99.88

10 HDFC Bank Ltd. Banking 5.00 5.00 5.00 5.00 100.00 11 ONGC Ltd. BSE 30 5.00 0.00 5.00 3.33 66.64 12 NTPC Ltd. BSE 30 4.99 4.99 5.00 4.99 99.88 13 Tata Steel Ltd. BSE 30 4.98 4.58 4.99 4.85 97.01 14 Larsen & Toubro Ltd. BSE 30 4.87 5.00 3.10 4.32 86.47 15 Reliance Infrastructure Ltd. BSE 30 5.00 5.00 5.00 5.00 100.00 16 Reliance Communication Ltd. BSE 30 5.00 5.00 5.00 5.00 100.00 17 Bharti Airtel Ltd. BSE 30 4.83 5.00 5.00 4.94 98.89 18 ACC Ltd. BSE 30 5.00 5.00 5.00 5.00 100.00 19 Hindalco Industries Ltd. BSE 30 5.00 5.00 5.00 5.00 100.00 20 Maruti Suzuki India Ltd. BSE 30 5.00 5.00 5.00 5.00 100.00 21 Colgate-Palmolive (India) Ltd. FMCG 5.00 5.00 5.00 5.00 100.00 22 Pidilite Industries Ltd. FMCG 5.00 5.00 5.00 5.00 100.00 23 Britannia Industries Ltd. FMCG 5.00 5.00 5.00 5.00 100.00 24 Nestle India Ltd. FMCG 5.00 5.00 5.00 5.00 100.00 25 ITC Ltd. FMCG 5.00 5.00 5.00 5.00 100.00 26 Hindustan Unilever Ltd. FMCG 4.96 4.95 5.00 4.97 99.38 27 Dabur (India) Ltd. FMCG 4.96 5.00 5.00 4.99 99.75 28 Marico Ltd. FMCG 5.00 5.00 5.00 5.00 100.00 29 Nirma Ltd. FMCG 5.00 5.00 0.00 3.33 66.67 30 Godrej Industries Ltd. FMCG 5.00 5.00 5.00 5.00 100.00 31 Infosys Technologies Ltd. IT 5.00 5.00 5.00 5.00 100.00 32 Tata Consultancy Services Ltd. IT 4.97 5.00 5.00 4.99 99.83 33 First Source Solution Ltd. IT 4.66 5.00 5.00 4.89 97.74 34 Polaris Software Lab Ltd. IT 5.00 5.00 5.00 5.00 100.00 35 Tech Mahindra Ltd. IT 5.00 5.00 4.99 5.00 99.94 36 Patni Computer Systems Ltd. IT 5.00 5.00 5.00 5.00 100.00 37 Wipro Ltd. IT 5.00 5.00 4.99 5.00 99.96 38 Mindtree Ltd. IT 4.61 4.99 5.00 4.87 97.35 39 CMC Ltd. IT 5.00 5.00 5.00 5.00 100.00 40 MphasiS Ltd. IT 5.00 0.00 0.00 1.67 33.33 41 Cipla Ltd. Pharma 5.00 5.00 5.00 5.00 100.00 42 Aventis Pharma Ltd. Pharma 5.00 5.00 5.00 5.00 100.00 43 Divi's Laboratories Ltd. Pharma 5.00 5.00 5.00 5.00 100.00 44 Dr. Reddys Laboratories Ltd. Pharma 5.00 5.00 4.88 4.96 99.17 45 Glenmark Pharmaceuticals Ltd. Pharma 5.00 5.00 5.00 5.00 100.00 46 GlaxoSmithKline Pharma Ltd. Pharma 5.00 5.00 5.00 5.00 100.00 47 Ipca Laboratories Ltd. Pharma 5.00 5.00 5.00 5.00 100.00 48 Sun Pharma Industries Ltd. Pharma 5.00 5.00 5.00 5.00 100.00 49 Torrent Pharmaceuticals Ltd. Pharma 5.00 5.00 5.00 5.00 100.00 50 Ranbaxy Laboratories Ltd. Pharma 5.00 5.00 5.00 5.00 100.00

Since no company would like to keep pending any shareholders complaints

against them, all the 50 select companies strived to keep this figure as low as

possible. During the 3 select FYs, the banking sector had a compliance of 89.10%.

164

The BSE30 group companies sector had a compliance of 94.89%. The FMCG

sector had compliance 96.58% %. The IT sector had compliance 92.82%. The

pharmaceutical sector had compliance 99.92%.

Table 5.44 Summary Statistics of Board Committees – Shareholder Grievance

Committee Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals

Mean 4.45 4.74 4.83 4.64 5.00 Median 4.97 5.00 5.00 5.00 5.00 Mode 5.00 5.00 5.00 5.00 5.00 Standard Deviation 1.57 0.54 0.53 1.05 0.01 X- Value 2.89 4.21 4.30 3.59 4.98 Y- Value 6.02 5.28 5.35 5.69 5.01 Sample Variance 2.45 0.29 0.28 1.09 0.00 Range 5.00 1.67 1.67 3.33 0.04 Minimum 0.00 3.33 3.33 1.67 4.96 Maximum 5.00 5.00 5.00 5.00 5.00

The average Board Committee – Shareholder Grievance Committee score of

banking sector is 4.45 and the Standard Deviation is 1.57, hence Board

Committee – Shareholder Grievance Committee parameter is varying in 2.89 to

6.02 ranges around the average score for the banking sector.

The average Board Committee – Shareholder Grievance Committee parameter

score of BSE30 group companies sector is 4.74 and the Standard Deviation is

0.54, hence Board Committee – Shareholder Grievance Committee parameter is

varying in 4.21 to 5.28 ranges around the average score for the BSE30 group

companies sector.


score of FMCG sector is 4.83 and the Standard Deviation is 0.53, hence Board


5.35 ranges around the average score for the FMCG sector


score of IT sector is 4.64 and the Standard Deviation is 1.05, hence Board


5.69 ranges around the average score for the IT sector.

165

The Board Committee – Shareholder Grievance Committee parameter score of

pharmaceutical sector is 5.00 and the Standard Deviation is 0.01, hence Board


5.01 ranges around the average score for the pharmaceutical sector.


sector on Board Committee – Shareholder Grievance Committee parameter and

the least variation is for pharmaceutical sector.

Ho: Board Committee – Shareholder Grievance Committee is consistent


H1: Board Committee – Shareholder Grievance Committee Score is not

consistent among all five sectors


Table 5.45 Anova Table – Board Committees – Shareholder Grievance

Committee Score ANOVA Source of Variation SS Df MS F P-value F crit Between Groups 1.642270912 4 0.4105677 0.498886509 0.7366184 2.5787392 Within Groups 37.03356865 45 0.8229682 Total 38.67583956 49

Interpretation:



Conclusion:

The researcher has concluded that since Ho is accepted, the Board Committee –

Shareholder Grievance Committee Parameter is consistent in all the select 5

sectors.

166

5.11 Remuneration to BOD & Its Policy

As per the requirement of the Listing Agreement and Companies Act, 1956, total

Managerial Remuneration payable shall not exceed 11% of the Company’s book

profits during particular period of time. Besides that, Remuneration policy for

the board members might have impact on their performance. It may also lead to

Insider Trading practices, if ignored. So the Remuneration Policy has been

considered crucial for the corporate governance study on practices and

procedures.

The researcher has used the following sub parameters for evaluating

remuneration policy. If all elements of Salary, Benefits, Bonus, Pension (i.e.

variable and not performance linked) are mentioned in annual report, a score of

2 is assigned. If details of fixed component and performance linked incentive

along with performance criteria are mentioned in annual report, a score of 1 is

assigned. If Service contracts, notice period, severance fees are mentioned in

annual report, a score of 1 is assigned. If stock option details e.g. whether issued

at discount, period over which accrued and over which exercisable, are

mentioned in annual report, a score of 1 is assigned. Table 5.46 Remuneration to BOD & Its Policy - Score

Remuneration policy Sr. No. Company Name Sector

06-07 07-08 08-09 AVG % 1 Allahabad Bank Ltd. Banking 2 2 2 2.00 40.00 2 Bank of Rajashthan Ltd. Banking 2 2 2 2.00 40.00 3 Bank of India Ltd. Banking 2 2 2 2.00 40.00 4 Bank of Baroda Ltd. Banking 2 2 1 1.67 33.33 5 Bank of Maharashtra Ltd. Banking 3 3 1 2.33 46.67 6 ICICI Bank Ltd. Banking 4 4 4 4.00 80.00 7 Axis Bank Ltd. Banking 2 2 4 2.67 53.33 8 State Bank of India Ltd. Banking 2 2 3 2.33 46.67 9 IDBI Bank Ltd. Banking 4 4 3 3.67 73.33

10 HDFC Bank Ltd. Banking 3 3 3 3.00 60.00 11 ONGC Ltd. BSE 30 2 2 5 3.00 60.00 12 NTPC Ltd. BSE 30 3 3 3 3.00 60.00 13 Tata Steel Ltd. BSE 30 3 3 5 3.67 73.33 14 Larsen & Toubro Ltd. BSE 30 4 2 5 3.67 73.33 15 Reliance Infrastructure Ltd. BSE 30 2 2 2 2.00 40.00 16 Reliance Communication Ltd. BSE 30 2 2 2 2.00 40.00 17 Bharti Airtel Ltd. BSE 30 4 4 5 4.33 86.67 18 ACC Ltd. BSE 30 4 3 3 3.33 66.67 19 Hindalco Industries Ltd. BSE 30 2 2 5 3.00 60.00 20 Maruti Suzuki India Ltd. BSE 30 3 3 3 3.00 60.00

167

Remuneration policy Sr. No. Company Name Sector

06-07 07-08 08-09 AVG % 21 Colgate-Palmolive (India) Ltd. FMCG 2 3 2 2.33 46.67 22 Pidilite Industries Ltd. FMCG 2 2 2 2.00 40.00 23 Britannia Industries Ltd. FMCG 3 3 3 3.00 60.00 24 Nestle India Ltd. FMCG 2 2 3 2.33 46.67 25 ITC Ltd. FMCG 5 4 3 4.00 80.00 26 Hindustan Unilever Ltd. FMCG 4 4 3 3.67 73.33 27 Dabur (India) Ltd. FMCG 3 4 3 3.33 66.67 28 Marico Ltd. FMCG 3 4 3 3.33 66.67 29 Nirma Ltd. FMCG 2 2 2 2.00 40.00 30 Godrej Industries Ltd. FMCG 3 3 3 3.00 60.00 31 Infosys Technologies Ltd. IT 2 2 2 2.00 40.00 32 Tata Consultancy Services Ltd. IT 2 2 2 2.00 40.00 33 First Source Solution Ltd. IT 2 2 2 2.00 40.00 34 Polaris Software Lab Ltd. IT 3 3 4 3.33 66.67 35 Tech Mahindra Ltd. IT 3 4 2 3.00 60.00 36 Patni Computer Systems Ltd. IT 3 3 3 3.00 60.00 37 Wipro Ltd. IT 2 3 3 2.67 53.33 38 Mindtree Ltd. IT 2 2 4 2.67 53.33 39 CMC Ltd. IT 2 2 5 3.00 60.00 40 MphasiS Ltd. IT 3 3 2 2.67 53.33 41 Cipla Ltd. Pharma 2 2 3 2.33 46.67 42 Aventis Pharma Ltd. Pharma 3 3 3 3.00 60.00 43 Divi's Laboratories Ltd. Pharma 3 3 3 3.00 60.00 44 Dr. Reddys Laboratories Ltd. Pharma 2 2 3 2.33 46.67 45 Glenmark Pharmaceuticals Ltd. Pharma 2 2 2 2.00 40.00 46 GlaxoSmithKline Pharma Ltd. Pharma 3 3 2 2.67 53.33 47 Ipca Laboratories Ltd. Pharma 2 2 3 2.33 46.67 48 Sun Pharma Industries Ltd. Pharma 2 2 3 2.33 46.67 49 Torrent Pharmaceuticals Ltd. Pharma 2 2 2 2.00 40.00 50 Ranbaxy Laboratories Ltd. Pharma 4 4 3 3.67 73.33

For all the 3 FYs, all elements of Salary, Benefits, Bonus, Pension (i.e. variable

and not performance linked) of Directors are mentioned in annual report of all

the select 50 companies. So a score of 2 is assign to every company.

In the FY 2006-07, the details of fixed component and performance linked

incentive along with performance criteria of Directors are mentioned in annual

report of 13 companies, for the FY 2007-08, it was 12 companies and for the FY

2008-09, it was 20 companies out of the select 50 companies. So a score was of 1

was given to such compliant companies.

In the FY 2006-07, the details of Service contracts, notice period, severance fees of

Directors are mentioned in annual report of 4 companies, for the FY 2007-08, it

was 5 companies and for the FY 2008-09, it was 9 companies out of the select 50

168

companies. So a score was of 1 was given to such compliant companies.

In the FY 2006-07, the details stock options e.g. whether issued at discount,

period over which accrued and over which exercisable are mentioned in annual

report of 16 companies, for the FY 2007-08, it was 17 companies and for the FY

2008-09, it was 23 companies out of the select 50 companies. So a score was of 1

was given to such compliant companies.

The banking sector scored an average of 51.33%. The BSE30 group companies

sector scored an average of 62.00%. The FMCG sector scored an average of

58.00%. The IT sector scored an average of 52.67%. The pharmaceutical sector

scored an average of 51.33%.

Table 5.47 Summary Statistics of Remuneration to BOD & Its Policy Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals

Mean 2.57 3.10 2.90 2.63 2.57 Median 2.33 3.00 3.00 2.67 2.33 Mode 2.00 3.00 2.33 2.00 2.33 Standard Deviation 0.77 0.72 0.70 0.48 0.52 X- Value 1.80 2.38 2.20 2.15 2.04 Y- Value 3.34 3.82 3.60 3.12 3.09 Sample Variance 0.59 0.52 0.50 0.23 0.27 Range 2.33 2.33 2.00 1.33 1.67 Minimum 1.67 2.00 2.00 2.00 2.00 Maximum 4.00 4.33 4.00 3.33 3.67

The average Remuneration to BOD & Its Policy score of banking sector is 2.57

and the Standard Deviation is 0.77, hence Remuneration to BOD & Its Policy


banking sector.

The average Remuneration to BOD & Its Policy parameter score of BSE30 group

companies sector is 3.10 and the Standard Deviation is 0.72, hence Remuneration

to BOD & Its Policy parameter is varying in 2.38 to 3.82 ranges around the


The average Remuneration to BOD & Its Policy parameter score of FMCG sector

is 2.90 and the Standard Deviation is 0.70, hence Remuneration to BOD & Its

169

Policy parameter is varying in 2.20 to 3.60 ranges around the average score for

the FMCG sector

The average Remuneration to BOD & Its Policy parameter score of IT sector is

2.63 and the Standard Deviation is 0.48, hence Remuneration to BOD & Its Policy


sector.

The Remuneration to BOD & Its Policy parameter score of pharmaceutical sector

is 2.57 and the Standard Deviation is 0.52, hence Remuneration to BOD & Its

Policy parameter is varying in 2.04 to 3.09 ranges around the average score for

the pharmaceutical sector.


sector on Remuneration to BOD & Its Policy parameter and the least variation is

for IT sector.

Ho: Remuneration to BOD & Its Policy Score is consistent among all five

sectors

H1: Remuneration to BOD & Its Policy Score is not consistent among all five

sectors


Table 5.48 Anova Table - Remuneration to BOD & Its Policy Score ANOVA Source of Variation SS df MS F P-value F crit Between Groups 2.257777778 4 0.5644444 1.334500876 0.2718349 2.5787392 Within Groups 19.03333333 45 0.422963 Total 21.29111111 49

Interpretation:


170


Conclusion:

The researcher has concluded that since Ho is accepted, the Remuneration to

BOD & Its Policy Parameter is consistent in all the select 5 sectors.

5.12 Corporate Social Responsibility

One of the major principles of corporate governance is the creation of

stakeholders’ values. Therefore, a good corporate citizen is expected to take

active initiatives and various measures relating to environment, health, safety,

human resource development, social responsibility, industrial relations etc.

The researcher found out that since corporate social responsibility is subjective

in nature, it would be wrong to judge companies only by certain parameters.

After studying Karmayog’s CSR (www.karmayog.org/csr2009/csr2009_29264.

htm ) rating the researcher has used the following parameters.

1. Companies are rated from score 0 to 10 (Score 10 being the highest).

2. CSR Rating is assigned based on the CSR initiatives of the company for

the time period of the study, including a comparison with previous CSR

initiatives.

3. Rating is based on “Sufficient (innovative) and Necessary (basic needs)

Criteria” for different levels.

Table 5.49 Corporate Social Responsibility – Score Corporate Social Responsibility Sr.


1 Allahabad Bank Ltd. Banking 0.00 0.00 4.00 1.33 13.33 2 Bank of Rajashthan Ltd. Banking 0.00 0.00 4.00 1.33 13.33 3 Bank of India Ltd. Banking 0.00 0.00 4.00 1.33 13.33 4 Bank of Baroda Ltd. Banking 0.00 0.00 4.00 1.33 13.33 5 Bank of Maharashtra Ltd. Banking 0.00 4.00 4.00 2.67 26.67 6 ICICI Bank Ltd. Banking 6.00 6.00 6.00 6.00 60.00 7 Axis Bank Ltd. Banking 0.00 0.00 6.00 2.00 20.00

171

Corporate Social Responsibility Sr. No. Company Name Sector

06-07 07-08 08-09 AVG % 8 State Bank of India Ltd. Banking 0.00 4.00 6.00 3.33 33.33 9 IDBI Bank Ltd. Banking 0.00 2.00 4.00 2.00 20.00

10 HDFC Bank Ltd. Banking 6.00 4.00 4.00 4.67 46.67 11 ONGC Ltd. BSE 30 4.00 4.00 4.00 4.00 40.00 12 NTPC Ltd. BSE 30 2.00 0.00 2.00 1.33 13.33 13 Tata Steel Ltd. BSE 30 8.00 8.00 8.00 8.00 80.00 14 Larsen & Toubro Ltd. BSE 30 6.00 6.00 8.00 6.67 66.67 15 Reliance Infrastructure Ltd. BSE 30 0.00 4.00 2.00 2.00 20.00 16 Reliance Communication Ltd. BSE 30 0.00 2.00 2.00 1.33 13.33 17 Bharti Airtel Ltd. BSE 30 6.00 6.00 6.00 6.00 60.00 18 ACC Ltd. BSE 30 0.00 8.00 6.00 4.67 46.67 19 Hindalco Industries Ltd. BSE 30 4.00 4.00 6.00 4.67 46.67 20 Maruti Suzuki India Ltd. BSE 30 4.00 4.00 6.00 4.67 46.67 21 Colgate-Palmolive (India) Ltd. FMCG 4.00 4.00 4.00 4.00 40.00 22 Pidilite Industries Ltd. FMCG 0.00 4.00 4.00 2.67 26.67 23 Britannia Industries Ltd. FMCG 4.00 4.00 2.00 3.33 33.33 24 Nestle India Ltd. FMCG 4.00 4.00 4.00 4.00 40.00 25 ITC Ltd. FMCG 0.00 0.00 0.00 0.00 0.00 26 Hindustan Unilever Ltd. FMCG 6.00 6.00 4.00 5.33 53.33 27 Dabur (India) Ltd. FMCG 6.00 6.00 4.00 5.33 53.33 28 Marico Ltd. FMCG 0.00 2.00 6.00 2.67 26.67 29 Nirma Ltd. FMCG 4.00 2.00 2.00 2.67 26.67 30 Godrej Industries Ltd. FMCG 2.00 2.00 4.00 2.67 26.67 31 Infosys Technologies Ltd. IT 8.00 8.00 8.00 8.00 80.00 32 Tata Consultancy Services Ltd. IT 4.00 8.00 8.00 6.67 66.67 33 First Source Solution Ltd. IT 0.00 0.00 0.00 0.00 0.00 34 Polaris Software Lab Ltd. IT 4.00 4.00 4.00 4.00 40.00 35 Tech Mahindra Ltd. IT 0.00 4.00 6.00 3.33 33.33 36 Patni Computer Systems Ltd. IT 0.00 0.00 4.00 1.33 13.33 37 Wipro Ltd. IT 6.00 6.00 8.00 6.67 66.67 38 Mindtree Ltd. IT 0.00 4.00 6.00 3.33 33.33 39 CMC Ltd. IT 4.00 4.00 4.00 4.00 40.00 40 MphasiS Ltd. IT 4.00 4.00 6.00 4.67 46.67 41 Cipla Ltd. Pharma 4.00 4.00 4.00 4.00 40.00 42 Aventis Pharma Ltd. Pharma 2.00 2.00 0.00 1.33 13.33 43 Divi's Laboratories Ltd. Pharma 4.00 4.00 4.00 4.00 40.00 44 Dr. Reddys Laboratories Ltd. Pharma 6.00 6.00 6.00 6.00 60.00 45 Glenmark Pharmaceuticals Ltd. Pharma 0.00 0.00 2.00 0.67 6.67 46 GlaxoSmithKline Pharma Ltd. Pharma 4.00 4.00 4.00 4.00 40.00 47 Ipca Laboratories Ltd. Pharma 0.00 2.00 2.00 1.33 13.33 48 Sun Pharma Industries Ltd. Pharma 2.00 4.00 2.00 2.67 26.67 49 Torrent Pharmaceuticals Ltd. Pharma 4.00 2.00 2.00 2.67 26.67 50 Ranbaxy Laboratories Ltd. Pharma 4.00 4.00 4.00 4.00 40.00

This was the most difficult parameter to judge the various companies. The

banking sector secured an average score of 2.60. The BSE30 group companies

sector secured an average score of 4.33. The FMCG sector secured an average

score of 3.27. The IT sector secured an average score of 4.20. The pharmaceutical

172

sector secured an average score of 3.07. If a careful note is to be done, it is

alarming that none of the sectors have secured more than 50%, which indicates

that the corporate social responsibility has not reached its hyped level. Though

among the select 50 companies, the top 8 scorers are ICICI Bank Ltd., Tata Steel

Ltd., Larsen & Toubro Ltd., Bharti Airtel Ltd., Infosys Technologies Ltd., Tata

Consultancy Services Ltd., Wipro Ltd. and Dr. Reddys Laboratories Ltd.

Table 5.50 Summary Statistics of Corporate Social Responsibility Score Banking BSE 30 Group Companies FMCG IT Pharmaceuticals Mean 2.60 4.33 3.27 4.20 3.07 Median 2.00 4.67 3.00 4.00 3.33 Mode 1.33 4.67 2.67 6.67 4.00 Standard Deviation 1.62 2.25 1.55 2.46 1.64 X- Value 0.98 2.08 1.71 1.74 1.43 Y- Value 4.22 6.58 4.82 6.66 4.71 Sample Variance 2.61 5.06 2.41 6.03 2.69 Range 4.67 6.67 5.33 8.00 5.33 Minimum 1.33 1.33 0.00 0.00 0.67 Maximum 6.00 8.00 5.33 8.00 6.00

The average Corporate Social Responsibility score of banking sector is 2.60 and

the Standard Deviation is 1.62, hence Corporate Social Responsibility parameter

is varying in 0.98 to 4.22 ranges around the average score for the banking sector.

The average Corporate Social Responsibility parameter score of BSE30 group

companies sector is 4.33 and the Standard Deviation is 2.25, hence Corporate

Social Responsibility parameter is varying in 2.08 to 6.58 ranges around the


The average Corporate Social Responsibility parameter score of FMCG sector is

3.27 and the Standard Deviation is 1.55, hence Corporate Social Responsibility


FMCG sector

The average Corporate Social Responsibility parameter score of IT sector is 4.20

and the Standard Deviation is 2.46, hence Corporate Social Responsibility


sector.

173

The Corporate Social Responsibility parameter score of pharmaceutical sector is

3.07 and the Standard Deviation is 1.64, hence Corporate Social Responsibility




Corporate Social Responsibility parameter and the least variation is for FMCG

sector.

Ho: Corporate Social Responsibility Score is consistent among all five sectors

H1: Corporate Social Responsibility Score is not consistent among all five

sectors


Table 5.51 Anova Table - Corporate Social Responsibility Score ANOVA Source of Variation SS df MS F P-value F crit Between Groups 22.36444444 4 5.5911111 1.486607143 0.2221631 2.5787392 Within Groups 169.2444444 45 3.7609877 Total 191.6088889 49

Interpretation:



Conclusion:

The researcher has concluded that since Ho is accepted, the Corporate Social

Responsibility Parameter is consistent in all the select 5 sectors.

174

5.13 Final Rating

Table 5.52 Corporate Governance Index Rating for the FY 2006-07 Sr. No. Company Name Sector T&D

(12) BI

(10) S&S (10)

CG & AC (10)

Apt. ID (08)

Stk VE (06)

E of BOD (08)

B S& P (08)

BC – AC (08)

BC – SGC (05)

Rem BOD (05)

CSR (10)

CGI (100)

1 Allahabad Bank Ltd. Banking 8.20 8.75 5.00 0.00 2.60 5.00 4.00 5.64 8.00 5.00 2.00 0.00 54.19 2 Bank of Rajashthan Ltd. Banking 10.80 10.00 7.50 0.00 4.93 5.00 5.89 6.43 7.78 4.56 2.00 0.00 64.89 3 Bank of India Ltd. Banking 10.20 9.38 5.00 0.00 1.73 6.00 3.00 6.01 6.50 0.00 2.00 0.00 49.82 4 Bank of Baroda Ltd. Banking 10.20 8.13 5.00 0.00 2.43 5.00 1.93 5.85 3.25 4.76 2.00 0.00 48.54 5 Bank of Maharashtra Ltd. Banking 9.80 0.00 5.00 0.00 0.80 5.00 0.94 5.27 3.88 5.00 3.00 0.00 38.68 6 ICICI Bank Ltd. Banking 10.80 3.75 7.50 0.00 5.00 5.00 4.81 5.17 6.78 4.92 4.00 6.00 63.72 7 Axis Bank Ltd. Banking 10.20 3.75 10.00 0.00 5.00 5.00 6.67 6.38 7.00 4.93 2.00 0.00 60.92 8 State Bank of India Ltd. Banking 11.00 4.38 5.00 0.00 2.33 5.00 2.75 5.27 6.00 4.98 2.00 0.00 48.70 9 IDBI Bank Ltd. Banking 10.80 8.13 5.00 0.00 1.33 5.00 1.63 6.83 7.25 4.98 4.00 0.00 54.95

10 HDFC Bank Ltd. Banking 10.60 3.75 7.50 0.00 5.33 5.00 5.37 6.50 6.73 5.00 3.00 6.00 64.78 11 ONGC Ltd. BSE 30 10.60 0.00 5.00 0.00 2.75 6.00 1.73 4.97 4.80 5.00 2.00 4.00 46.84 12 NTPC Ltd. BSE 30 10.20 0.00 5.00 5.00 2.17 5.00 3.47 5.93 5.93 4.99 3.00 2.00 52.69 13 Tata Steel Ltd. BSE 30 11.00 7.50 7.50 5.00 2.83 5.00 2.78 6.27 5.56 4.98 3.00 8.00 69.42 14 Larsen & Toubro Ltd. BSE 30 10.60 8.13 7.50 0.00 6.00 5.00 5.92 6.45 7.83 4.87 4.00 6.00 72.30 15 Reliance Infrastructure Ltd. BSE 30 10.60 3.13 5.00 10.00 3.33 5.00 3.70 6.70 6.80 5.00 2.00 0.00 61.26 16 Reliance Communication Ltd. BSE 30 11.20 4.38 5.00 10.00 6.00 5.00 6.00 6.22 5.67 5.00 2.00 0.00 66.46 17 Bharti Airtel Ltd. BSE 30 11.00 0.00 5.00 0.00 2.83 5.00 4.00 6.50 8.00 4.83 4.00 6.00 57.17 18 ACC Ltd. BSE 30 11.20 8.13 5.00 0.00 2.17 5.00 4.00 6.52 8.00 5.00 4.00 0.00 59.01 19 Hindalco Industries Ltd. BSE 30 11.00 3.75 5.00 0.00 4.00 5.00 3.83 6.44 6.67 5.00 2.00 4.00 56.69 20 Maruti Suzuki India Ltd. BSE 30 10.80 5.00 5.00 0.00 1.90 5.00 3.33 6.50 6.67 5.00 3.00 4.00 56.20 21 Colgate-Palmolive (India) Ltd. FMCG 10.00 7.50 5.00 0.00 2.00 5.00 1.80 7.39 7.60 5.00 2.00 4.00 57.29 22 Pidilite Industries Ltd. FMCG 10.80 5.00 5.00 5.00 2.17 5.00 3.87 6.33 6.73 5.00 2.00 0.00 56.90 23 Britannia Industries Ltd. FMCG 10.80 5.00 7.50 0.00 2.67 5.00 1.50 6.90 7.00 5.00 3.00 4.00 58.37 24 Nestle India Ltd. FMCG 10.60 0.00 5.00 0.00 3.00 5.00 3.78 5.86 7.56 5.00 2.00 4.00 51.79

175

Sr. No. Company Name Sector T&D

(12) BI

(10) S&S (10)

CG & AC (10)

Apt. ID (08)

Stk VE (06)

E of BOD (08)

B S& P (08)

BC – AC (08)

BC – SGC (05)

Rem BOD (05)

CSR (10)

CGI (100)

25 ITC Ltd. FMCG 10.80 3.13 7.50 0.00 6.31 5.00 6.49 6.99 8.00 5.00 5.00 0.00 64.21 26 Hindustan Unilever Ltd. FMCG 10.60 8.13 7.50 0.00 5.33 5.00 5.17 5.97 7.33 4.96 4.00 6.00 69.99 27 Dabur (India) Ltd. FMCG 10.60 7.50 7.50 0.00 4.00 6.00 4.58 5.95 7.17 4.96 3.00 6.00 67.26 28 Marico Ltd. FMCG 10.20 4.38 7.50 0.00 4.00 5.00 4.00 6.50 8.00 5.00 3.00 0.00 57.58 29 Nirma Ltd. FMCG 10.60 8.75 7.50 5.00 4.00 5.00 4.00 6.33 8.00 5.00 2.00 4.00 70.18 30 Godrej Industries Ltd. FMCG 10.60 5.00 7.50 0.00 3.50 5.00 4.00 7.00 8.00 5.00 3.00 2.00 60.60 31 Infosys Technologies Ltd. IT 10.00 8.13 10.00 0.00 6.87 5.00 7.53 6.09 7.00 5.00 2.00 8.00 75.61 32 Tata Consultancy Services Ltd. IT 10.80 9.38 7.50 0.00 4.33 5.00 5.92 6.69 6.83 4.97 2.00 4.00 67.42 33 First Source Solution Ltd. IT 10.40 7.50 7.50 0.00 2.00 5.00 1.70 5.53 3.40 4.66 2.00 0.00 49.69 34 Polaris Software Lab Ltd. IT 10.80 3.13 7.50 0.00 4.70 5.00 3.21 6.14 5.43 5.00 3.00 4.00 57.91 35 Tech Mahindra Ltd. IT 11.00 5.00 7.50 0.00 2.17 5.00 3.83 5.88 6.67 5.00 3.00 0.00 55.04 36 Patni Computer Systems Ltd. IT 10.40 3.13 7.50 0.00 4.00 5.00 3.11 7.35 5.67 5.00 3.00 0.00 54.15 37 Wipro Ltd. IT 10.60 5.00 7.50 10.00 5.00 5.00 5.89 6.90 6.78 5.00 2.00 6.00 75.67 38 Mindtree Ltd. IT 9.40 3.13 7.50 0.00 3.83 5.00 6.00 5.10 7.00 4.61 2.00 0.00 53.57 39 CMC Ltd. IT 10.80 8.75 5.00 5.00 3.00 5.00 3.92 6.10 6.83 5.00 2.00 4.00 65.40 40 MphasiS Ltd. IT 10.00 7.50 7.50 0.00 1.67 5.00 1.20 6.03 5.40 5.00 3.00 4.00 56.30 41 Cipla Ltd. Pharma 10.40 3.75 5.00 0.00 3.33 5.00 4.00 6.80 7.00 5.00 2.00 4.00 56.28 42 Aventis Pharma Ltd. Pharma 10.20 5.00 5.00 0.00 2.67 5.00 4.00 6.60 8.00 5.00 3.00 2.00 56.47 43 Divi's Laboratories Ltd. Pharma 10.60 3.13 7.50 0.00 4.67 5.00 6.00 6.57 8.00 5.00 3.00 4.00 63.46 44 Dr. Reddys Laboratories Ltd. Pharma 9.00 4.38 7.50 5.00 6.67 5.00 7.43 7.55 6.40 5.00 2.00 6.00 71.93 45 Glenmark Pharmaceuticals Ltd. Pharma 10.80 7.50 7.50 0.00 4.50 5.00 5.17 6.21 6.00 5.00 2.00 0.00 59.68 46 GlaxoSmithKline Pharma Ltd. Pharma 10.60 7.50 5.00 0.00 3.20 5.00 3.89 7.29 6.78 5.00 3.00 4.00 61.25 47 Ipca Laboratories Ltd. Pharma 10.80 7.50 7.50 0.00 4.67 5.00 6.00 6.79 7.00 5.00 2.00 0.00 62.25 48 Sun Pharma Industries Ltd. Pharma 10.80 3.13 5.00 0.00 3.00 5.00 3.50 6.50 6.67 5.00 2.00 2.00 52.59 49 Torrent Pharmaceuticals Ltd. Pharma 10.40 8.75 5.00 0.00 1.60 5.00 1.75 6.10 6.50 5.00 2.00 4.00 56.10 50 Ranbaxy Laboratories Ltd. Pharma 10.80 8.13 7.50 0.00 4.00 5.00 5.53 6.89 7.50 5.00 4.00 4.00 68.34

176

During the FY 2006-07, an analysis of the score of 100, the banking sector secured

an average of 54.92. The highest was Bank of Rajasthan Ltd with a score of 64.89,

and the lowest was Bank of Maharashtra with a score of 38.68.

During the FY 2006-07, an analysis of the score of 100, the BSE30 group

companies sector secured an average of 59.80. The highest was L&T Ltd. with a

score of 72.30, and the lowest was ONGC Ltd with a score of 46.84.

During the FY 2006-07, an analysis of the score of 100, the FMCG sector secured

an average of 61.42. The highest was Nirma Ltd with a score of 70.18, and the

lowest was Nestle India Ltd with a score of 51.79.

During the FY 2006-07, an analysis of the score of 100, the IT sector secured an

average of 61.08. The highest was Wipro Ltd with a score of 75.67, and the

lowest was First Source Solutions Ltd. with a score of 49.69.

During the FY 2006-07, an analysis of the score of 100, the pharmaceutical sector

secured an average of 60.84. The highest was Dr Reddy’s laboratories Ltd with a

score of 71.93, and the lowest was Sun Pharmaceutical Ltd. with a score of 52.59.

177

Table 5.53 Corporate Governance Index Rating for the FY 2007-08


(12) BI

(10) S&S (10)

CG &

AC (10)

Apt. ID (08)

Stk VE (06)

E of BOD (08)

B S& P (08)

BC – AC (08)

BC – SGC (05)

Rem BOD (05)

CSR (10)

CGI (100)


10 HDFC Bank Ltd. Banking 10.60 3.75 7.50 0.00 5.33 5.00 5.50 6.20 7.00 5.00 3.00 4.00 62.88 11 ONGC Ltd. BSE 30 9.40 0.00 5.00 5.00 0.50 6.00 2.00 5.38 6.00 0.00 2.00 4.00 45.28 12 NTPC Ltd. BSE 30 10.00 0.00 5.00 5.00 2.17 5.00 3.33 5.23 6.67 4.99 3.00 0.00 50.39 13 Tata Steel Ltd. BSE 30 11.00 8.75 7.50 5.00 3.93 5.00 3.05 6.32 5.09 4.58 3.00 8.00 71.22 14 Larsen & Toubro Ltd. BSE 30 10.60 8.13 7.50 0.00 3.86 5.00 3.71 6.44 6.67 5.00 2.00 6.00 64.89 15 Reliance Infrastructure Ltd. BSE 30 10.60 3.13 10.00 5.00 7.33 5.00 7.92 6.32 6.83 5.00 2.00 4.00 73.13 16 Reliance Communication Ltd. BSE 30 11.20 5.00 10.00 5.00 6.40 5.00 6.12 6.25 6.40 5.00 2.00 2.00 70.37 17 Bharti Airtel Ltd. BSE 30 11.00 3.13 5.00 0.00 2.58 5.00 3.20 6.25 7.00 5.00 4.00 6.00 58.16 18 ACC Ltd. BSE 30 11.20 8.13 5.00 0.00 2.17 5.00 4.00 6.70 8.00 5.00 3.00 8.00 66.19 19 Hindalco Industries Ltd. BSE 30 11.40 3.75 5.00 0.00 4.00 5.00 3.80 6.50 7.60 5.00 2.00 4.00 58.05 20 Maruti Suzuki India Ltd. BSE 30 11.20 5.00 5.00 0.00 2.00 5.00 3.67 6.38 7.33 5.00 3.00 4.00 57.58 21 Colgate-Palmolive (India) Ltd. FMCG 10.00 7.50 5.00 0.00 2.00 5.00 1.67 8.00 7.33 5.00 3.00 4.00 58.50 22 Pidilite Industries Ltd. FMCG 10.80 5.00 5.00 5.00 2.17 5.00 3.67 6.81 5.33 5.00 2.00 4.00 59.78 23 Britannia Industries Ltd. FMCG 10.80 5.00 7.50 0.00 3.67 5.00 1.75 7.20 7.50 5.00 3.00 4.00 60.42 24 Nestle India Ltd. FMCG 10.60 0.00 5.00 0.00 2.67 5.00 3.56 6.00 7.11 5.00 2.00 4.00 50.93 25 ITC Ltd. FMCG 10.80 3.75 7.50 0.00 4.83 5.00 5.34 6.79 8.00 5.00 4.00 0.00 61.01 26 Hindustan Unilever Ltd. FMCG 10.20 8.13 7.50 0.00 4.67 5.00 4.88 6.33 7.00 4.95 4.00 6.00 68.64

178


(12) BI

(10) S&S (10)

CG &

AC (10)

Apt. ID (08)

Stk VE (06)

E of BOD (08)

B S& P (08)

BC – AC (08)

BC – SGC (05)

Rem BOD (05)

CSR (10)

CGI (100)

27 Dabur (India) Ltd. FMCG 11.00 7.50 7.50 0.00 4.00 5.00 5.52 6.40 7.83 5.00 4.00 6.00 69.75 28 Marico Ltd. FMCG 10.20 4.38 7.50 0.00 4.33 5.00 5.33 5.73 8.00 5.00 4.00 2.00 61.47 29 Nirma Ltd. FMCG 10.60 8.75 7.50 0.00 3.33 5.00 4.00 6.80 8.00 5.00 2.00 2.00 62.98 30 Godrej Industries Ltd. FMCG 10.40 5.00 7.50 0.00 3.50 5.00 3.93 6.70 8.00 5.00 3.00 2.00 60.03 31 Infosys Technologies Ltd. IT 10.00 8.13 10.00 0.00 8.00 5.00 7.05 6.78 6.50 5.00 2.00 8.00 76.45 32 Tata Consultancy Services Ltd. IT 10.80 8.13 7.50 0.00 4.33 5.00 5.50 6.43 6.00 5.00 2.00 8.00 68.69 33 First Source Solution Ltd. IT 10.40 7.50 7.50 0.00 3.47 5.00 4.68 6.13 5.50 5.00 2.00 0.00 57.17 34 Polaris Software Lab Ltd. IT 10.80 3.13 7.50 0.00 4.50 5.00 5.83 6.76 7.00 5.00 3.00 4.00 62.52 35 Tech Mahindra Ltd. IT 11.00 5.00 7.50 0.00 2.17 5.00 3.17 6.63 6.67 5.00 4.00 4.00 60.13 36 Patni Computer Systems Ltd. IT 10.40 3.13 7.50 0.00 3.50 5.00 3.28 7.20 6.00 5.00 3.00 0.00 54.00 37 Wipro Ltd. IT 10.40 5.00 7.50 10.00 5.00 5.00 6.00 7.10 8.00 5.00 3.00 6.00 78.00 38 Mindtree Ltd. IT 9.40 3.13 7.50 0.00 3.83 5.00 6.00 7.00 7.00 4.99 2.00 4.00 59.85 39 CMC Ltd. IT 10.80 8.13 7.50 5.00 4.00 5.00 5.08 5.50 6.50 5.00 2.00 4.00 68.51 40 MphasiS Ltd. IT 10.00 5.00 7.50 0.00 1.60 5.00 1.83 6.13 7.67 0.00 3.00 4.00 51.73 41 Cipla Ltd. Pharma 10.40 3.75 5.00 0.00 3.33 5.00 4.00 6.33 7.00 5.00 2.00 4.00 55.82 42 Aventis Pharma Ltd. Pharma 10.20 5.00 5.00 0.00 2.67 5.00 4.00 6.50 8.00 5.00 3.00 2.00 56.37 43 Divi's Laboratories Ltd. Pharma 10.60 3.13 7.50 0.00 4.67 5.00 5.87 6.80 7.73 5.00 3.00 4.00 63.29 44 Dr. Reddys Laboratories Ltd. Pharma 10.40 4.38 7.50 5.00 4.67 5.00 4.95 7.68 5.67 5.00 2.00 6.00 68.24 45 Glenmark Pharmaceuticals Ltd. Pharma 10.80 7.50 7.50 0.00 4.50 5.00 5.13 6.47 5.60 5.00 2.00 0.00 59.50 46 GlaxoSmithKline Pharma Ltd. Pharma 10.60 7.50 5.00 0.00 3.00 5.00 3.90 7.38 6.80 5.00 3.00 4.00 61.18 47 Ipca Laboratories Ltd. Pharma 10.80 8.75 7.50 0.00 4.67 5.00 5.89 6.49 7.78 5.00 2.00 2.00 65.87 48 Sun Pharma Industries Ltd. Pharma 10.80 3.13 5.00 0.00 3.00 5.00 4.00 6.63 7.00 5.00 2.00 4.00 55.55 49 Torrent Pharmaceuticals Ltd. Pharma 10.40 8.75 5.00 0.00 1.60 5.00 1.63 6.00 6.25 5.00 2.00 2.00 53.63 50 Ranbaxy Laboratories Ltd. Pharma 10.80 8.13 7.50 0.00 4.20 5.00 5.11 6.75 5.80 5.00 4.00 4.00 66.29

179


an average of 57.99. The highest was Bank of Baroda Ltd with a score of 66.55,

and the lowest was Bank of Maharashtra with a score of 43.77.


companies sector secured an average of 61.53. The highest was Reliance

Infrastructure Ltd. with a score of 73.13, and the lowest was ONGC Ltd with a

score of 45.28.


an average of 61.35. The highest was Dabur India Ltd with a score of 69.75, and

the lowest was Nestle India Ltd with a score of 50.93



lowest was MphasiS Ltd. with a score of 51.73.



score of 68.24, and the lowest was Torrent Pharmaceutical Ltd. with a score of

53.63.

180

Table 5.54 Corporate Governance Index Rating for the FY 2008-09


(12) BI

(10) S&S (10)

CG &

AC (10)

Apt. ID (08)

Stk VE (06)

E of BOD (08)

B S& P (08)

BC – AC (08)

BC – SGC (05)

Rem BOD (05)

CSR (10)

CGI (100)



181


(12) BI

(10) S&S (10)

CG &

AC (10)

Apt. ID (08)

Stk VE (06)

E of BOD (08)

B S& P (08)

BC – AC (08)

BC – SGC (05)

Rem BOD (05)

CSR (10)

CGI (100)


182


an average of 62.57. The highest was Axis Bank Ltd with a score of 71.80, and the

lowest was Bank of India with a score of 48.67.


companies sector secured an average of 66.02. The highest was Tata Steel Ltd.

with a score of 79.04, and the lowest was NTPC Ltd with a score of 55.29.


an average of 64.61. The highest was Dabur India Ltd with a score of 74.68, and

the lowest was Colgate Palmolive India Ltd with a score of 55.67



lowest was MphasiS Ltd. with a score of 55.54.



score of 79.21, and the lowest was Sun Pharmaceutical Ltd. with a score of 52.20

183

Table 5.55 Average Corporate Governance Index Rating for the three FYs 2006-07, 2007-08 & 2008-09


(12) BI

(10) S&S (10)

CG & AC (10)

Apt. ID (08)

Stk VE (06)

E of BOD (08)

B S& P

(08)

BC –

AC (08)

BC – SGC (05)

Rem BOD (05)

CSR (10)

CGI (100)



184


(12) BI

(10) S&S (10)

CG & AC (10)

Apt. ID (08)

Stk VE (06)

E of BOD (08)

B S& P

(08)

BC –

AC (08)

BC – SGC (05)

Rem BOD (05)

CSR (10)

CGI (100)


185

On an average for the select 3 FYs, an analysis of the score of 100, the banking

sector secured an average of 58.49. The highest was HDFC Bank Ltd with a score

of 66.02, and the lowest was Bank of Maharashtra Ltd with a score of 48.03.

On an average for the select 3 FYs, an analysis of the score of 100, the BSE30

group companies sector secured an average of 62.45. The highest was Tata Steel

Ltd. with a score of 73.23, and the lowest was NTPC Ltd with a score of 52.79.

On an average for the select 3 FYs, an analysis of the score of 100, the FMCG

sector secured an average of 62.46. The highest was Hindustan Unilever Ltd

with a score of 70.89, and the lowest was Nestle India Ltd with a score of 53.79.

On an average for the select 3 FYs, an analysis of the score of 100, the IT sector

secured an average of 63.80. The highest was Wipro Ltd with a score of 78.34,

and the lowest was MphasiS Ltd. with a score of 54.52.

On an average for the select 3 FYs, an analysis of the score of 100, the

pharmaceutical sector secured an average of 61.30. The highest was Dr Reddy’s

laboratories Ltd with a score of 73.13, and the lowest was Sun Pharmaceutical

Ltd. with a score of 53.45.

5.14 Final Ranking:

On the basis of the above various parameters and ratings, the researcher has

concluded about the rankings of the select 50 companies, in the following

manner. Table 5.56 Final Ranking: Corporate Governance Index - 2006-07

2006-07 Ranks Company Name Sector Score

1 Wipro Ltd. IT 75.67 2 Infosys Technologies Ltd. IT 75.61 3 Larsen & Toubro Ltd. BSE 30 72.30 4 Dr. Reddys Laboratories Ltd. Pharmaceuticals 71.93 5 Nirma Ltd. FMCG 70.18 6 Hindustan Unilever Ltd. FMCG 69.99 7 Tata Steel Ltd. BSE 30 69.42

186


8 Ranbaxy Laboratories Ltd. Pharmaceuticals 68.34 9 Tata Consultancy Services Ltd. IT 67.42

10 Dabur (India) Ltd. FMCG 67.26 11 Reliance Communication Ltd. BSE 30 66.46 12 CMC Ltd. IT 65.40 13 Bank of Rajashthan Ltd. Banking 64.89 14 HDFC Bank Ltd. Banking 64.78 15 ITC Ltd. FMCG 64.21 16 ICICI Bank Ltd. Banking 63.72 17 Divi's Laboratories Ltd. Pharmaceuticals 63.46 18 Ipca Laboratories Ltd. Pharmaceuticals 62.25 19 Reliance Infrastructure Ltd. BSE 30 61.26 20 GlaxoSmithKline Pharma Ltd. Pharmaceuticals 61.25 21 Axis Bank Ltd. Banking 60.92 22 Godrej Industries Ltd. FMCG 60.60 23 Glenmark Pharmaceuticals Ltd. Pharmaceuticals 59.68 24 ACC Ltd. BSE 30 59.01 25 Britannia Industries Ltd. FMCG 58.37 26 Polaris Software Lab Ltd. IT 57.91 27 Marico Ltd. FMCG 57.58 28 Colgate-Palmolive (India) Ltd. FMCG 57.29 29 Bharti Airtel Ltd. BSE 30 57.17 30 Pidilite Industries Ltd. FMCG 56.90 31 Hindalco Industries Ltd. BSE 30 56.69 32 Aventis Pharma Ltd. Pharmaceuticals 56.47 33 MphasiS Ltd. IT 56.30 34 Cipla Ltd. Pharmaceuticals 56.28 35 Maruti Suzuki India Ltd. BSE 30 56.20 36 Torrent Pharmaceuticals Ltd. Pharmaceuticals 56.10 37 Tech Mahindra Ltd. IT 55.04 38 IDBI Bank Ltd. Banking 54.95 39 Allahabad Bank Ltd. Banking 54.19 40 Patni Computer Systems Ltd. IT 54.15 41 Mindtree Ltd. IT 53.57 42 NTPC Ltd. BSE 30 52.69 43 Sun Pharma Industries Ltd. Pharmaceuticals 52.59 44 Nestle India Ltd. FMCG 51.79 45 Bank of India Ltd. Banking 49.82 46 First Source Solution Ltd. IT 49.69 47 State Bank of India Ltd. Banking 48.70 48 Bank of Baroda Ltd. Banking 48.54 49 ONGC Ltd. BSE 30 46.84 50 Bank of Maharashtra Ltd. Banking 38.68

Table 5.57 Final Ranking: Corporate Governance Index - 2007-08


1 Wipro Ltd. IT 78.00 2 Infosys Technologies Ltd. IT 76.45 3 Reliance Infrastructure Ltd. BSE 30 73.13 4 Tata Steel Ltd. BSE 30 71.22 5 Reliance Communication Ltd. BSE 30 70.37

187


6 Dabur (India) Ltd. FMCG 69.75 7 Tata Consultancy Services Ltd. IT 68.69 8 Hindustan Unilever Ltd. FMCG 68.64 9 CMC Ltd. IT 68.51

10 Dr. Reddys Laboratories Ltd. Pharmaceuticals 68.24 11 Bank of Baroda Ltd. Banking 66.55 12 Ranbaxy Laboratories Ltd. Pharmaceuticals 66.29 13 ACC Ltd. BSE 30 66.19 14 Ipca Laboratories Ltd. Pharmaceuticals 65.87 15 ICICI Bank Ltd. Banking 65.76 16 Larsen & Toubro Ltd. BSE 30 64.89 17 Divi's Laboratories Ltd. Pharmaceuticals 63.29 18 Nirma Ltd. FMCG 62.98 19 HDFC Bank Ltd. Banking 62.88 20 Polaris Software Lab Ltd. IT 62.52 21 Bank of Rajashthan Ltd. Banking 61.71 22 Marico Ltd. FMCG 61.47 23 GlaxoSmithKline Pharma Ltd. Pharmaceuticals 61.18 24 ITC Ltd. FMCG 61.01 25 Axis Bank Ltd. Banking 60.79 26 Britannia Industries Ltd. FMCG 60.42 27 Tech Mahindra Ltd. IT 60.13 28 Godrej Industries Ltd. FMCG 60.03 29 Mindtree Ltd. IT 59.85 30 Pidilite Industries Ltd. FMCG 59.78 31 Glenmark Pharmaceuticals Ltd. Pharmaceuticals 59.50 32 IDBI Bank Ltd. Banking 59.02 33 Colgate-Palmolive (India) Ltd. FMCG 58.50 34 Bharti Airtel Ltd. BSE 30 58.16 35 Hindalco Industries Ltd. BSE 30 58.05 36 Maruti Suzuki India Ltd. BSE 30 57.58 37 First Source Solution Ltd. IT 57.17 38 Allahabad Bank Ltd. Banking 57.06 39 Aventis Pharma Ltd. Pharmaceuticals 56.37 40 Cipla Ltd. Pharmaceuticals 55.82 41 Sun Pharma Industries Ltd. Pharmaceuticals 55.55 42 Patni Computer Systems Ltd. IT 54.00 43 Torrent Pharmaceuticals Ltd. Pharmaceuticals 53.63 44 State Bank of India Ltd. Banking 53.22 45 MphasiS Ltd. IT 51.73 46 Nestle India Ltd. FMCG 50.93 47 NTPC Ltd. BSE 30 50.39 48 Bank of India Ltd. Banking 49.11 49 ONGC Ltd. BSE 30 45.28 50 Bank of Maharashtra Ltd. Banking 43.77

188

Table 5.58 Final Ranking: Corporate Governance Index - 2008-09 2008-09

Ranks Company Name Sector Score 1 Wipro Ltd. IT 81.34 2 Dr. Reddys Laboratories Ltd. Pharmaceuticals 79.21 3 Tata Steel Ltd. BSE 30 79.04 4 Tata Consultancy Services Ltd. IT 75.67 5 Dabur (India) Ltd. FMCG 74.68 6 Hindustan Unilever Ltd. FMCG 74.03 7 Marico Ltd. FMCG 73.31 8 Reliance Infrastructure Ltd. BSE 30 72.63 9 Cipla Ltd. Pharmaceuticals 72.41

10 Axis Bank Ltd. Banking 71.80 11 HDFC Bank Ltd. Banking 70.38 12 CMC Ltd. IT 70.01 13 Infosys Technologies Ltd. IT 69.85 14 ACC Ltd. BSE 30 69.65 15 Bank of Rajashthan Ltd. Banking 69.14 16 ONGC Ltd. BSE 30 68.79 17 Polaris Software Lab Ltd. IT 68.74 18 ICICI Bank Ltd. Banking 67.93 19 Divi's Laboratories Ltd. Pharmaceuticals 67.66 20 Allahabad Bank Ltd. Banking 67.22 21 Bharti Airtel Ltd. BSE 30 67.15 22 Hindalco Industries Ltd. BSE 30 67.10 23 Reliance Communication Ltd. BSE 30 67.01 24 Glenmark Pharmaceuticals Ltd. Pharmaceuticals 66.74 25 First Source Solution Ltd. IT 65.04 26 Godrej Industries Ltd. FMCG 64.78 27 Britannia Industries Ltd. FMCG 63.93 28 Ipca Laboratories Ltd. Pharmaceuticals 63.46 29 Pidilite Industries Ltd. FMCG 62.98 30 Patni Computer Systems Ltd. IT 61.67 31 Bank of Maharashtra Ltd. Banking 61.62 32 State Bank of India Ltd. Banking 61.34 33 ITC Ltd. FMCG 60.60 34 Mindtree Ltd. IT 60.51 35 Nestle India Ltd. FMCG 58.66 36 Aventis Pharma Ltd. Pharmaceuticals 58.39 37 GlaxoSmithKline Pharma Ltd. Pharmaceuticals 58.18 38 Tech Mahindra Ltd. IT 57.71 39 Maruti Suzuki India Ltd. BSE 30 57.65 40 Nirma Ltd. FMCG 57.52 41 Larsen & Toubro Ltd. BSE 30 55.95 42 Colgate-Palmolive (India) Ltd. FMCG 55.67 43 Bank of Baroda Ltd. Banking 55.66 44 MphasiS Ltd. IT 55.54 45 NTPC Ltd. BSE 30 55.29 46 Ranbaxy Laboratories Ltd. Pharmaceuticals 54.16 47 Torrent Pharmaceuticals Ltd. Pharmaceuticals 52.65 48 Sun Pharma Industries Ltd. Pharmaceuticals 52.20 49 IDBI Bank Ltd. Banking 51.94 50 Bank of India Ltd. Banking 48.67

189

Table 5.59 Final Ranking: Corporate Governance Index (Average 2006-07, 2007-08 & 2008-09)

AVG (2006-07, 2007-08 & 2008-09) Ranks Company Name Sector Score

1 Wipro Ltd. IT 78.34 2 Infosys Technologies Ltd. IT 73.97 3 Tata Steel Ltd. BSE 30 73.23 4 Dr. Reddys Laboratories Ltd. Pharmaceuticals 73.13 5 Hindustan Unilever Ltd. FMCG 70.89 6 Tata Consultancy Services Ltd. IT 70.59 7 Dabur (India) Ltd. FMCG 70.56 8 Reliance Infrastructure Ltd. BSE 30 69.00 9 CMC Ltd. IT 67.97

10 Reliance Communication Ltd. BSE 30 67.95 11 HDFC Bank Ltd. Banking 66.02 12 ICICI Bank Ltd. Banking 65.80 13 Bank of Rajashthan Ltd. Banking 65.25 14 ACC Ltd. BSE 30 64.95 15 Divi's Laboratories Ltd. Pharmaceuticals 64.80 16 Axis Bank Ltd. Banking 64.51 17 Larsen & Toubro Ltd. BSE 30 64.38 18 Marico Ltd. FMCG 64.12 19 Ipca Laboratories Ltd. Pharmaceuticals 63.86 20 Nirma Ltd. FMCG 63.56 21 Polaris Software Lab Ltd. IT 63.05 22 Ranbaxy Laboratories Ltd. Pharmaceuticals 62.93 23 Glenmark Pharmaceuticals Ltd. Pharmaceuticals 61.97 24 ITC Ltd. FMCG 61.94 25 Godrej Industries Ltd. FMCG 61.80 26 Cipla Ltd. Pharmaceuticals 61.50 27 Britannia Industries Ltd. FMCG 60.90 28 Bharti Airtel Ltd. BSE 30 60.83 29 Hindalco Industries Ltd. BSE 30 60.61 30 GlaxoSmithKline Pharma Ltd. Pharmaceuticals 60.20 31 Pidilite Industries Ltd. FMCG 59.89 32 Allahabad Bank Ltd. Banking 59.49 33 Mindtree Ltd. IT 57.98 34 Tech Mahindra Ltd. IT 57.62 35 First Source Solution Ltd. IT 57.30 36 Colgate-Palmolive (India) Ltd. FMCG 57.15 37 Maruti Suzuki India Ltd. BSE 30 57.14 38 Aventis Pharma Ltd. Pharmaceuticals 57.08 39 Bank of Baroda Ltd. Banking 56.92 40 Patni Computer Systems Ltd. IT 56.61 41 IDBI Bank Ltd. Banking 55.30 42 MphasiS Ltd. IT 54.52 43 State Bank of India Ltd. Banking 54.42 44 Torrent Pharmaceuticals Ltd. Pharmaceuticals 54.13 45 Nestle India Ltd. FMCG 53.79 46 ONGC Ltd. BSE 30 53.64 47 Sun Pharma Industries Ltd. Pharmaceuticals 53.45 48 NTPC Ltd. BSE 30 52.79 49 Bank of India Ltd. Banking 49.20 50 Bank of Maharashtra Ltd. Banking 48.03

190

5.15 Banking Sector Analysis: 5.15.1 Banking Sector – Score Table 5.60 Banking Sector – Composite Score

Parameters Allahabad Bank Ltd.

Bank of Rajashthan

Ltd.

Bank of India Ltd.

Bank of Baroda Ltd.

Bank of Maharashtra

Ltd.

ICICI Bank Ltd.

Axis Bank Ltd.

State Bank of India

Ltd.

IDBI Bank Ltd.

HDFC Bank Ltd.

Transparency & Disclosures 8.80 10.67 10.67 10.47 10.07 10.87 10.53 10.73 10.87 10.53 CG & Auditor's Certificate 8.54 9.79 8.33 6.88 2.50 3.96 3.75 6.04 6.67 5.21 Structure & Strength 7.50 7.50 5.83 6.67 5.00 7.50 10.00 5.83 5.00 7.83 Board Independence & Chairperson – Executive Director Duality 0.00 1.67 0.00 0.00 0.00 0.00 1.67 0.00 0.00 0.00 Appointment of Independent Director - Board Committee 4.29 4.95 1.63 4.37 1.80 4.93 4.29 2.17 1.84 5.61 Stakeholder Value Enhancement 4.33 5.00 5.00 4.33 5.00 5.33 5.33 4.33 5.00 4.33 Effectiveness of Board of Directors 4.53 5.24 2.92 5.28 3.15 5.05 5.81 3.05 1.61 6.19 Board Systems and Procedure 5.98 5.67 5.82 5.69 5.88 5.91 6.29 5.17 6.44 6.48 Board Committees - Audit Committee 7.18 6.59 5.67 5.37 4.63 7.30 7.28 6.43 7.22 7.16 Board Committees - Shareholder Grievance Committee 5.00 4.85 0.00 4.87 5.00 4.96 4.89 4.98 4.99 5.00 Remuneration to Board of Directors & its Policy 2.00 2.00 2.00 1.67 2.33 4.00 2.67 2.33 3.67 3.00 Corporate Social Responsibility 1.33 1.33 1.33 1.33 2.67 6.00 2.00 3.33 2.00 4.67 Corporate Governance Index 59.49 65.25 49.20 56.92 48.03 65.80 64.51 54.42 55.30 66.02

191

Ho: All select banks are consistent on Corporate Governance Index

Parameters.

H1: All select banks are not consistent on Corporate Governance Index

Parameters.

Procedure: Above hypothesis is tested using one way analysis of variance

Table 5.61 Anova Table – Banking Sector Composite Score ANOVA Source of Variation SS df MS F P-value F crit Between Groups 34.83033699 9 3.870037443 0.483084952 0.883308228 1.966053725 Within Groups 881.2199939 110 8.011090854 Total 916.0503309 119

Interpretation:

Here, Ftabulated >Fcalculated and p-value = 0.883308228, which is insignificant,

therefore the null hypothesis (Ho) cannot be rejected i.e. the Ho is accepted.

Conclusion:

The researcher has concluded that since Ho is accepted, All select Banks are

consistent on Corporate Governance Index Parameters.

5.15.2 Comparison of CG Index with Net Profit Ratio & Debt Equity Ratio

Table 5.62 Comparison of CG Index with Net Profit Ratio & Debt Equity Ratio

– Banking Sector Sr. No. Company Name C G Index (100) Net Profit

Ratio (%) Debt/ Equity Ratio

(in times) 1 Allahabad Bank Ltd. 59.49 12.37 1.05 2 Bank of Rajashthan Ltd. 65.25 10.05 1.30 3 Bank of India Ltd. 49.20 13.36 2.03 4 Bank of Baroda Ltd. 56.92 10.55 1.44 5 Bank of Maharashtra Ltd. 48.03 8.51 2.07 6 ICICI Bank Ltd. 65.80 37.87 2.73 7 Axis Bank Ltd. 64.51 14.70 2.24 8 State Bank of India Ltd. 54.42 11.26 2.92 9 IDBI Bank Ltd. 55.30 7.58 5.73

10 HDFC Bank Ltd. 66.02 16.97 4.60

192

Table 5.63 Correlation Statistics between CG Index and Net Profit Ratio – Banking Sector

Correlation Statistics (Between CG Index & Net Profit Ratio)

R 0.5096 R2 0.2597 Standard Error 5.855851 Observations 10

It is quite evident that the correlation between the CG Index and Net Profit ratio

is not established in a clear manner. For example, ICICI bank has a CG score of

65.80, which is not the highest, but its Net Profit Ratio is 37.87% which is the

highest among the select banks.

Here Correlation coefficient between CG index and NP Ratio is 0.5096, which is

positive, and implies that there is moderate relationship between CG index and

Net Profit Ratio. So, the researcher can infer that increase in Net Profit Ratio

does not give significant increase in CG Index. Hence, companies achieving

good Net Profit Ratio not necessarily follow good corporate governance

practices.

Further R2 value is 0.2597, so it is obvious to infer that only 25.97% of variation in

the dependent variable (CG Index) is predictable by independent variable (Net

Profit Ratio). Table 5.64 Correlation Statistics between CG Index and Debt-Equity Ratio – Banking Sector

Correlation Statistics (Between CG Index & Debt-Equity Ratio)


Similarly, the correlation between the CG Index and the Debt Equity ratio does

not fulfill its expectations. There is no relation between the CG Index being high

and the Debt Equity ratio being low. It may or may exist in a random fashion. So

the Capital structure of a company and CG Index do not coincide in all the cases.

193

Here Correlation coefficient between CG index and Debt-Equity Ratio is 0.0532,

which is positive, which implies that there is no strong relationship between CG

index and Debt-Equity Ratio. So, the researcher can infer that decrease in Debt-

Equity Ratio does not give significant increase in CG Index. Hence, companies

achieving Low Debt-Equity Ratio not necessarily follow good corporate

governance practices.

Further R2 value is 0.0028, which is very small. So it is obvious to infer that only

0.28% of variation in the dependent variable (CG Index) is predictable by

independent variable (Debt-Equity Ratio).

194

5.16 BSE 30 Group Companies Analysis: 5.16.1 BSE 30 Group Companies - Score Table 5.65 BSE 30 Group Companies – Composite Score

Parameters ONGC Ltd.

NTPC Ltd.

Tata Steel Ltd.

L & T Ltd.

Reliance Infrastructure

Ltd.

Reliance Communication

Ltd.

Bharti Airtel Ltd.

ACC Ltd.

Hindalco Industries

Ltd.

Maruti Suzuki India Ltd.

Transparency & Disclosures 10.53 10.40 10.73 10.60 10.73 11.20 11.00 11.20 11.00 11.13 CG & Auditor's Certificate 0.00 0.00 8.33 7.08 4.79 6.46 2.08 7.08 5.42 5.00

Structure & Strength 5.83 5.00 8.33 6.67 7.50 7.50 5.83 6.67 5.00 5.00 Board Independence & Chairperson –

Executive Director Duality 5.00 6.67 5.00 0.00 6.67 5.00 1.67 1.67 0.00 0.00

Appointment of Independent Director - Board Committee 2.86 2.19 3.53 3.95 5.56 5.87 2.63 2.17 4.00 1.97

Stakeholder Value Enhancement 5.67 5.00 5.00 4.00 5.00 4.67 5.33 5.00 4.67 5.00 Effectiveness of Board of Directors (BOD) 2.35 2.73 3.48 3.78 5.87 5.92 3.23 3.91 3.85 3.44

Board Systems and Procedure 5.48 5.47 6.32 6.33 6.67 6.43 6.38 6.43 6.65 6.38 Board Committees - Audit Committee 5.59 6.01 5.97 7.31 7.21 6.58 7.40 7.82 7.37 6.56

Board Committees - Shareholder Grievance Committee 3.33 4.99 4.85 4.32 5.00 5.00 4.94 5.00 5.00 5.00

Remuneration to Board of Directors (BOD) & its Policy 3.00 3.00 3.67 3.67 2.00 2.00 4.33 3.33 3.00 3.00

Corporate Social Responsibility (CSR) 4.00 1.33 8.00 6.67 2.00 1.33 6.00 4.67 4.67 4.67 Corporate Governance Index (CGI) 53.64 52.79 73.23 64.38 69.00 67.95 60.83 64.95 60.61 57.14

195

Ho: All select BSE 30 Group Companies are consistent on Corporate

Governance Index Parameters.

H1: All select BSE 30 Group Companies are not consistent on Corporate


Procedure: Above hypothesis is tested using one way analysis of variance

Table 5.66 Anova Table – BSE 30 Group Companies Composite Score ANOVA

Source of Variation SS Df MS F P-value F crit Between Groups 33.70376756 9 3.7449 0.560584348 0.82656343 1.9661 Within Groups 734.8313203 110 6.6803 Total 768.5350879 119

Interpretation:

Here, Ftabulated > Fcalculated and p-value = 0.82656343, which is insignificant,


Conclusion:

The researcher has concluded that since Ho is accepted, All select BSE 30 Group

Companies are consistent on Corporate Governance Index Parameters.

5.16.2 Comparison of CG Index with Net Profit Ratio & Debt Equity Ratio:


– BSE 30 Group Companies Sr. No. Company Name CG Index

(100)

Net Profit

Ratio (%)

Debt/ Equity Ratio (in

times) 1 ONGC Ltd. 53.64 25.24 0.00 2 NTPC Ltd. 52.79 18.71 0.54 3 Tata Steel Ltd. 73.23 22.70 0.74 4 Larsen & Toubro Ltd. 64.38 8.78 0.42 5 Reliance Infrastructure Ltd. 69.00 12.35 0.56 6 Reliance Communication Ltd. 67.95 24.94 0.71 7 Bharti Airtel Ltd. 60.83 23.14 0.35 8 ACC Ltd. 64.95 18.51 0.09 9 Hindalco Industries Ltd. 60.61 13.62 0.47

10 Maruti Suzuki India Ltd. 57.14 8.38 0.09

196

Table 5.68 Correlation Statistics between CG Index and Net Profit Ratio – BSE 30 Group Companies




is not established in a clear manner. For example, ONGC has a CG score of 53.64,

which is not the highest, but its Net Profit Ratio is 25.24% which is the highest

among the select BSE 30 Group Companies.


positive, which implies that there is no relationship between CG index and Net

Profit Ratio. So, the researcher can infer that increase in Net Profit Ratio does not

give significant increase in CG Index. Hence, companies achieving good Net

Profit Ratio not necessarily follow good corporate governance practices.



Profit Ratio). Table 5.69 Correlation Statistics between CG Index and Debt-Equity Ratio –

BSE 30 Group Companies Correlation Statistics

(Between CG Index & Debt-Equity Ratio) R 0.5969 R2 0.3563 Standard Error 0.223400034 Observations 10


not fulfill its expectations. There is moderate relation between the CG Index

being high and the Debt Equity ratio being low.


which is positive, which implies that there is moderate relationship between CG

197


Equity Ratio gives significant change in CG Index. Hence, companies achieving

high Debt-Equity Ratio follow good corporate governance practices.

Further R2 value is 0.3563, which is moderate. So it is obvious to infer that



198

5.17 FMCG Sector Analysis: 5.17.1 FMCG Sector – Score Table 5.70 FMCG Sector – Composite Score

Parameters Colgate-

Palmolive (India) Ltd

Pidilite Industries

Ltd

Britannia Industries

Ltd

Nestle India Ltd

ITC Ltd

Hindustan Unilever

Ltd

Dabur (India)

Ltd

Marico Ltd

Nirma Ltd

Godrej Industries

Ltd Transparency & Disclosures 10.07 10.73 10.80 10.47 10.73 10.53 10.87 10.20 10.60 10.67 CG & Auditor's Certificate 7.71 6.04 5.83 1.04 3.54 8.13 7.71 6.25 8.75 6.04 Structure & Strength 5.00 5.00 7.50 5.00 8.33 8.33 8.33 8.33 7.50 6.67 Board Independence & Chairperson – Executive Director Duality 0.00 5.00 1.67 1.67 0.00 1.67 1.67 3.33 1.67 0.00


Stakeholder Value Enhancement 4.67 5.33 4.67 4.67 5.33 5.00 5.00 4.67 5.00 5.00 Effectiveness of Board of Directors (BOD) 1.66 3.79 1.74 3.63 5.09 4.97 5.34 4.19 4.00 4.14

Board Systems and Procedure 7.41 6.25 6.89 5.95 6.70 6.37 6.38 6.20 6.71 6.62 Board Committees - Audit Committee 7.31 5.91 7.03 7.26 7.63 7.03 7.61 6.50 8.00 7.67 Board Committees - Shareholder Grievance Committee 5.00 5.00 5.00 5.00 5.00 4.97 4.99 5.00 3.33 5.00



199

Ho: All select FMCG Companies are consistent on Corporate Governance

Index Parameters.

H1: All select FMCG Companies are not consistent on Corporate Governance

Index Parameters.


Table 5.71 Anova Table – FMCG Sector Composite Score ANOVA


Interpretation:



Conclusion:

The researcher has concluded that since Ho is accepted, All select FMCG

Companies are consistent on Corporate Governance Index Parameters.

5.17.2 Comparison of CG Index with Net Profit Ratio & Debt Equity Ratio:


– FMCG Sector

Sr. No. Company Name CG Index

(100)

Net Profit

Ratio (%)


times) 1 Colgate-Palmolive (India) Ltd. 57.15 14.24 0.02 2 Pidilite Industries Ltd. 59.89 10.15 0.61 3 Britannia Industries Ltd. 60.90 5.95 0.06 4 Nestle India Ltd. 53.79 11.90 0.01 5 ITC Ltd. 61.94 21.18 0.02 6 Hindustan Unilever Ltd. 70.89 13.51 0.10 7 Dabur (India) Ltd. 70.56 15.24 0.08 8 Marico Ltd. 64.12 9.02 0.85 9 Nirma Ltd. 63.56 5.80 0.91

10 Godrej Industries Ltd. 61.80 8.30 0.71

200

Table 5.73 Correlation Statistics between CG Index and Net Profit Ratio – FMCG Sector




is not established in a clear manner. For example, ITC Ltd. has a CG score of

61.94, which is not the highest, but its Net Profit Ratio is 21.18% which is the

highest among the select FMCG Companies.


positive, which implies that there is no strong relationship between CG index

and Net Profit Ratio. So, the researcher can infer that increase in Net Profit Ratio



practices.



Profit Ratio). Table 5.74 Correlation Statistics between CG Index and Debt-Equity Ratio – FMCG Sector







201










202

5.18 IT Sector Analysis:

5.18.1 IT Sector - Score Table 5.75 IT Sector – Composite Score

Parameters Infosys

Technologies Ltd.

TCS Ltd.

First Source

Solution Ltd.

Polaris Software Lab Ltd.

Tech Mahindra

Ltd.

Patni Computer Systems

Ltd.

Wipro Ltd.

Mind tree Ltd.

CMC Ltd.

Mphasis Ltd.

Transparency & Disclosures 10.07 10.47 10.40 10.73 10.93 10.40 10.53 9.53 10.80 10.00 CG & Auditor's Certificate 8.33 8.54 7.71 3.13 5.00 3.13 4.58 3.13 8.54 6.67 Structure & Strength 10.00 7.50 7.50 7.50 7.50 7.50 8.33 7.50 6.67 7.50 Board Independence & Chairperson – Executive Director Duality 0.00 1.67 1.67 1.67 0.00 0.00 10.00 0.00 5.00 0.00


Stakeholder Value Enhancement 5.33 5.33 5.00 4.67 4.67 4.67 4.67 5.00 5.00 5.00 Effectiveness of Board of Directors (BOD) 6.19 5.41 3.83 4.93 3.33 3.44 5.96 5.28 4.19 1.57 Board Systems and Procedure 6.59 6.75 6.19 6.72 5.90 7.42 7.33 6.06 5.66 6.23 Board Committees - Audit Committee 6.83 6.82 5.08 6.48 6.78 6.22 7.59 7.22 6.83 6.80 Board Committees - Shareholder Grievance Committee 5.00 4.99 4.89 5.00 5.00 5.00 5.00 4.87 5.00 1.67



203

Ho: All select IT Companies are consistent on Corporate Governance Index

Parameters.

H1: All select IT Companies are not consistent on Corporate Governance

Index Parameters.


Table 5.76 Anova Table – IT Sector Composite Score ANOVA Source of Variation SS df MS F P-value F crit Between Groups 52.57685261 9 5.841872512 0.815363338 0.603129585 1.966053725 Within Groups 788.1222346 110 7.164747587 Total 840.6990872 119

Interpretation:



Conclusion:

The researcher has concluded that since Ho is accepted, All select IT Companies

are consistent on Corporate Governance Index Parameters.



– IT Sector Sr. No. Company Name CG Index

(100)

Net Profit

Ratio (%)


times) 1 Infosys Technologies Ltd. 73.97 28.67 0.09 2 Tata Consultancy Services Ltd. 70.59 23.31 0.00 3 First Source Solution Ltd. 57.30 10.28 2.04 4 Polaris Software Lab Ltd. 63.05 7.86 0.00 5 Tech Mahindra Ltd. 57.62 11.34 0.00 6 Patni Computer Systems Ltd. 56.61 27.85 0.33 7 Wipro Ltd. 78.34 17.25 0.25 8 Mindtree Ltd. 57.98 21.02 0.50 9 CMC Ltd. 67.97 9.31 0.42

10 MphasiS Ltd. 54.52 13.80 0.67

204

Table 5.78 Correlation Statistics between CG Index and Net Profit Ratio – IT Sector




is not established in a clear manner. For example, Infosys Technologies Ltd. has

a CG score of 73.97, which is not the highest, but its Net Profit Ratio is 28.67%

which is the highest among the select IT Companies.






practices.



Profit Ratio).

Table 5.79 Correlation Statistics between CG Index and Debt-Equity Ratio –

IT Sector Correlation Statistics

(Between CG Index & Debt-Equity Ratio) R 0.4005 R2 0.1604 Standard Error 0.59385698 Observations 10


not fulfill its expectations. There is moderate relation between the CG Index

being high and the Debt Equity ratio being low.

205


which is positive, which implies that there is moderate relationship between CG



achieving High Debt-Equity Ratio not necessarily follow good corporate


Further R2 value is 0.1604, which is very small. So it is obvious to infer that



206

5.19 Pharmaceuticals Sector Analysis:

5.19.1 Pharmaceuticals Sector – Score

Table 5.80 Pharmaceuticals Sector – Composite Score

Parameters Cipla Ltd.

Aventis Pharma

Ltd.

Divi's

Laboratories Ltd.

Dr. Reddys

Laboratories Ltd.

Glenmark

Pharma Ltd.

GlaxoSmith Kline

Pharma Ltd.

Ipca Laboratories

Ltd.

Sun Pharma

Ltd.

Torrent Pharma

Ltd.

Ranbaxy

Lab

Transparency & Disclosures 10.87 10.67 10.80 10.20 10.27 9.93 10.13 10.47 9.73 10.80 CG & Auditor's Certificate 3.96 6.04 4.79 6.04 7.50 7.50 8.13 3.33 8.75 6.67 Structure & Strength 5.00 5.00 7.50 7.50 7.50 5.00 7.50 5.00 5.00 7.50 Board Independence & Chairperson – Executive Director Duality 3.33 0.00 0.00 5.00 3.33 0.00 0.00 0.00 0.00 0.00 Appointment of Independent Director - Board Committee 3.33 2.67 4.67 5.56 4.17 3.07 4.67 3.00 1.73 3.27 Stakeholder Value Enhancement 5.33 4.67 4.67 5.33 5.00 5.00 5.00 5.00 5.00 5.00 Effectiveness of Board of Directors 4.00 4.00 5.91 6.37 4.50 3.90 5.85 3.52 1.75 3.98 Board Systems and Procedure 7.01 6.70 6.56 7.37 6.31 7.35 6.66 6.46 5.99 6.42 Board Committees - Audit Committee 7.33 8.00 7.91 6.47 5.73 6.79 7.26 6.67 6.50 6.63 Board Committees - Shareholder Grievance Committee 5.00 5.00 5.00 4.96 5.00 5.00 5.00 5.00 5.00 5.00 Remuneration to Board of Directors & its Policy 2.33 3.00 3.00 2.33 2.00 2.67 2.33 2.33 2.00 3.67 Corporate Social Responsibility 4.00 1.33 4.00 6.00 0.67 4.00 1.33 2.67 2.67 4.00 Corporate Governance Index 61.50 57.08 64.80 73.13 61.97 60.20 63.86 53.45 54.13 62.93

207

Ho: All select Pharmaceuticals Companies are consistent on Corporate


H1: All select Pharmaceuticals Companies are not consistent on Corporate



Table 5.81 Anova Table – Pharmaceuticals Sector Composite Score ANOVA Source of Variation SS df MS F P-value F crit Between Groups 24.50340506 9 2.722600563 0.389177654 0.938108555 1.966053725 Within Groups 769.5356055 110 6.995778232 Total 794.0390105 119

Interpretation:



Conclusion:

The researcher has concluded that since Ho is accepted, All select

Pharmaceuticals Companies are consistent on Corporate Governance Index

Parameters.



– Pharmaceuticals Sector

Sr. No. Company Name CG Index

(100)

Net Profit

Ratio (%)


times) 1 Cipla Ltd. 61.50 16.26 0.13 2 Aventis Pharma Ltd. 57.08 15.31 0.14 3 Divi's Laboratories Ltd. 64.80 31.58 0.14 4 Dr. Reddys Laboratories Ltd. 73.13 20.69 0.10 5 Glenmark Pharmaceuticals Ltd. 61.97 21.20 0.91 6 GlaxoSmithKline Pharma Ltd. 60.20 32.31 0.00 7 Ipca Laboratories Ltd. 63.86 11.23 0.59 8 Sun Pharma Industries Ltd. 53.45 29.47 0.16 9 Torrent Pharmaceuticals Ltd. 54.13 14.67 0.61

10 Ranbaxy Laboratories Ltd. 62.93 15.43 1.26

208

Table 5.83 Correlation Statistics between CG Index and Net Profit Ratio – Pharmaceuticals Sector




is not established in a clear manner. For example, Divi’s Laboratories Ltd. has a

CG score of 64.80, which is not the highest, but its Net Profit Ratio is 31.58%

which is the highest among the select Pharmaceuticals Companies.






practices.



Profit Ratio). Table 5.84 Correlation Statistics between CG Index and Debt-Equity Ratio – Pharmaceuticals Sector







209










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