Governance,Business Ethics and Sustainability - The Institute of

410 Pages·2013·5.15 MB·English

PROFESSIONAL PROGRAMME
STUDY MATERIAL
GOVERNANCE
BUSINESS ETHICS
AND
SUSTAINABILITY

MODULE IV - PAPER 8

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PROFESSIONAL PROGRAMME
GOVERNANCE, BUSINESS ETHICS
AND SUSTAINABILITY
IMPORTANT NOTE
Corporate Governance has emerged as an important academic discipline
in its own right, bringing together contributions from accounting, finance, law
and management. Corporate governance now offers a comprehensive,
interdisciplinary approach to the management and control of companies.
Corporate professionals of today and tomorrow must imbibe in themselves the
evolving principles of good corporate governance across the globe on a
continual basis. Excellence can be bettered only through continuous study,
research and academic and professional interaction of the highest quality in
the theory and practice of good corporate governance. The corporate world
looks upon especially Company Secretaries to provide the impetus, guidance
and direction for achieving world-class corporate governance.
Company Secretaries are the primary source of advice on the conduct of
business for achieving this end. This can take into its fold everything from legal
advice on conflicts of interest, through accounting advice, to the development
of strategy and corporate compliance.
The paper on Governance, Business Ethics and Sustainability has been
introduced to provide knowledge on global development on governance,
business ethics and sustainability and best governance practices in the
corporate world.
This paper would help in understanding of national and international
governance norms, role of various governance forums at national and
international level, ethical business practices, corporate sustainability,
sustainability reporting etc.
The amendments made upto March 2011 have been incorporated in this
study material. Further students are advised to keep themselves abreast of
latest developments on governance and sustainability issues by regularly
reading economic dailies and visiting the websites of regulatory bodies,
national and international corporate governance forums. Students are also
advised to read regularly the ‘Student Company Secretary’/’Chartered
Secretary’ wherein all important regulatory amendments are reported regularly.
Although care has been taken in publishing this study material, yet the
possibility of errors, omissions and/or discrepancies cannot be ruled out. This
publication is released with an understanding that the Institute shall not be
responsible for any errors, omissions and/or discrepancies or any action taken
in that behalf. In the event of any doubt, students may write to the Directorate
of Academics and professional Development in the Institute for clarification.
Should there be any discrepancy, error or omission in the study material,
the Institute shall be obliged if the same is brought to its notice for issue of
corrigendum in the Student Company Secretary.
(iii)
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PROFESSIONAL PROGRAMME
SYLLABUS
FOR
GOVERNANCE, BUSINESS ETHICS AND SUSTAINABILITY
Level of knowledge: Expert Knowledge
Objective: To provide knowledge on global development and best practices in the
corporate world.
Detailed Contents:
PART A: CORPORATE GOVERNANCE (50 MARKS)
1. Evolution, concept, principles and development.
2. Management structure for corporate governance; Board structure; building
responsive boards - issue and challenges; effectiveness of Board, board
committees and their functioning in particular audit committee, legal compliance
committee and Stakeholders’ relationship committee; appraisal of Board
performance, transparency and disclosure; internal control system and risk
management.
3. An analysis of legislative framework of corporate governance in various
countries – such as UK, USA, India.
4. Corporate communication; art and craft of investors relations; shareholders
activism, investor protection and changing role of Institutional Investors.
5. Corporate Social Responsibility and good corporate citizenship.
6. Various corporate governance forums - Common Wealth Association for
Corporate Governance (CACG), Organization for Economic Cooperation
Development (OECD), International Corporate Governance Network (ICGN),
National Foundation for Corporate Governance (NFCG), etc.
PART B: BUSINESS ETHICS (30 MARKS)
7. Genesis, significance and scope; organization perspectives.
8. Ethical principles in business – codes and innovations.
9. Concept of the stakeholders’ organization.
10. Activity analysis, business dilemma versus decision, characteristics of ethical
dilemmas; the dilemma resolution process; business ethics as a strategic
management tool; stakeholders’ protection.
11. Challenges of business ethics and corporate leadership.
(v)
PART C: CORPORATE SUSTAINABILITY (20 MARKS)
12. Genesis, meaning, nature, objectives, significance and scope of corporate
sustainability.
13. Sustainability reporting - frameworks and guidance; trends and drivers; business
benefits of corporate sustainability reporting; leadership programmes and
stakeholder engagement; corporate sustainability management systems.
14. Legal framework; conventions and treaties on environmental, health and safety
and social security issues.
15. Principle of Absolute Liability - Case studies.
16. Contemporary developments.
(vi)
LIST OF RECOMMENDED BOOKS
GOVERNANCE, BUSINESS ETHICS AND SUSTAINABILITY
Recommended Readings and References:
1. ICSI & Taxmann Publication Corporate Governance
(Modules of Best Practices);

Taxmann, 59/32, New Rohtak Road,
New Delhi – 110 005
2. A C Fernando Corporate Governance: Principles,
Policies and Practices; Dorling

Kindersley India (Pvt.) Ltd.,
482, F I E Patparganj,
Delhi – 110 092
3. Inderjit Dube Corporate Governance;
LexisNexis Butterworths Wadhwa Nagpur,
C33 Inner Circle, Connaught Place,
New Delhi – 110 001
4. Sanjiv Agarwal Corporate Governance:
Concept & Dimensions;

Snow white Publications P Ltd.,
Jer Mahal, 532, Kalba Devi Road,
Mumbai
5. Edited by P V Sarma & S Corporate Governance : Contemporary
Rajani Issues and Challenges;
Vedams eBooks (P) Ltd.,

Vardhman Charve Plaza IV, Building No. 9,
K P Block, Pitampura,
New Delhi – 110 034
6. John Carver Board Leadership; Jossey-Bass Books,
989 Market Street, San Francisco,
CA – 94103-1741
7. Christine Mallin The Role of Institutional Investors in
Corporate Governance
8. K R Sampath Law of Corporate Governance: Principles
and Perspective; Snow white Publications

P Ltd., Jer Mahal, 532, Kalba Devi Road,
Mumbai
9. Monograph on Position, duties ICSI Publication
& Liabilities of Directors
10. Guidance Note on Board’s ICSI Publication
Report
11. Guidance Note on Corporate ICSI Publication
Governance Certification
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12. O.C. Farell, John Paul Business Ethics Decision Making and
Fraedrich & Linda Ferrell Cases; Biztantra, An Impront of
Dreamtech Press, 19-A, Ansari Road

Daryaganj, New Delhi-110 092
13. Edited by Robert E Frederick A Companion to Business Ethics;
Blackwell Publishers Limited,
108, Cowley Road,
Oxford OX4 1JF, UK
14. Ashok K. Nadhani Business Ethics & Business
Communications;
Taxmann Publications Pvt. Ltd.,
59/32, New Rohtak Road,
New Delhi-110 005
15. Manual G Velasquez Business Ethics: Concepts and Cases

www.nfcgindia.org
www.oecd.org
www.iod.co.uk
www.gcgf.org
www.icgn.org
www.commonwealthfoundation.com
www.conference-board.org/
www.ecgi.org
www.acga-asia.org
www.coso.org
http://www.ibe.org.uk/
http://www.globalethics.org/
www.unglobalcompact.org
unfccc.int
www.globalreporting.org
www.sustainability.com
www.ethics.org
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BRIEF CONTENTS

Study Lesson No. Topic

PART A: CORPORATE GOVERNANCE
I. Evolution and Development of Concept of Corporate Governance
II. Issues and Challenges of an Effective Board
III. Committees of the Board
IV. Internal Control Systems and Risk Management
V. Legislative Framework of Corporate Governance in India
VI. Legislative Framework of Corporate Governance - An International
Perspective
VII. Corporate Social Responsibility
VIII. Investor Protection and Corporate Communication
IX. Corporate Governance Forums
PART B: BUSINESS ETHICS
X. Business Ethics – Genesis, Significance and Scope
XI. Ethical Principles in business
XII. Concept of Stakeholders Organization
PART C: SUSTAINABILITY
XIII. Corporate Sustainability
XIV. Sustainability Reporting
XV. Legal Framework; Conventions and Treaties on Environment,
Health, Safety and Social Security Issues
XVI. Principle of Absolute Liability
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PROFESSIONAL PROGRAMME
GOVERNANCE, BUSINESS ETHICS AND SUSTAINABILITY
DETAILED C O N T E N T S
PART A
STUDY I
EVOLUTION AND DEVELOPMENT OF CONCEPT OF
CORPORATE GOVERNANCE
Page
Learning Objectives … 1
Introduction ... 1
Definitions of Corporate Governance ... 2
Need for Corporate Governance ... 4
Evidence of Corporate Governance from Arthashastra … 5
Corporate Governance in U.S.A. … 6
Corporate Governance in UK … 7
Cadbury Report … 7
Other developments 8
Developments in India ... 10
CII’s Desirable Corporate Governance: A Code ... 11
Kumara Mangalam Birla Committee ... 16
Task Force on Corporate Excellence through Governance ... 19
Naresh Chandra Committee ... 20
N R Narayana Murthy Committte ... 28
Dr. J J Irani Expert Committee on Company Law ... 31
Corporate Governance Through Listing Agreement ... 33
Corporate Governance Voluntary Guidelines, 2009 ... 34
Elements of Good Corporate Governance ... 34
Lesson Round-Up … 37
SELF-TEST QUESTIONS ... 39
STUDY II
ISSUES AND CHALLENGES OF AN EFFECTIVE BOARD
Learning Objectives … 40
Introduction ... 40

This Study Paper is the property of the Institute of Company Secretaries of India. Permission
of the Council of the Institute is essential for reproduction of any portion of the Paper.
(x)
Page

Segment I … 41
Role of Directors … 41
Types of Board … 42
Types of Directors … 43
Executive Director ... 43
Non-executive Director ... 44
Shadow Director … 44
Independent Director ... 44
Statement of Independence … 48
Tenure of Independent Director … 48
Role of Independent Director … 48
Legal Position of Independent Director … 49
Lead Independent Director … 51
Role of Chairman ... 52
Chief Executive Officer … 54
Company Secretary … 54
Board Composition ... 57
Segment II … 58
Board Charter ... 58
Board Processes ... 59
Board Meetings ... 59
Segment III … 67
Responsibilities of Board … 67
Responsibility for Leadership … 69
Relationship between Directors and Executives ... 71
The Key Difference between Directors and Managers ... 71
Barriers to visionary leadership ... 73
Segment IV … 74
Training of Directors ... 74
Need, Objective and methodology … 74
Director Induction … 74
Directors Development programmes … 75
Performance review of Board and individual director ... 76
Conclusion ... 80
Lesson Round-Up … 80
SELF-TEST QUESTIONS ... 81
STUDY III
COMMITTEES OF THE BOARD
Learning Objectives … 82
Introduction ... 82