|
|
 |
|
Corporate Governance Report |
 |
|
Corporate governance is the relationship between all stakeholders in a company – shareholders, directors and the management. It is the mechanism through which individuals are motivated to align their behaviour with the overall corporate good. It aims to protect shareholders' rights, the interests of stakeholders, define the roles and responsibilities of the board of directors, promote ethical behaviour and ensure transparency.
One of the new initiatives we have taken in this regard is the setting up of a Governance Committee by the board of directors to deal exclusively with governance matters. Its primary role is to draft and review new policies such as the Whistle Blower Policy and codes of conduct for directors and senior management.
The Mastek board spends a lot of time discussing corporate governance matters, including business ethics and best practices. A corporate governance report is issued every quarter. It comprises internal reports and certifications on topics such as Business Risk Management, Financial Planning and Budgeting, Financial Risk Mitigation and Management, Shareholder Relationships, Customer Relationships, Employee Relationships, Other Stakeholder Relationships, and Asset and IPR protection. The board discusses the report at length at its meetings. Customer and employee survey analysis reports are also placed before the board.
It's important to note that Mastek's independent directors have no qualms about voicing their opinions on matters affecting the company. The board of directors, on its part, actively encourages such independence.
Mastek has always been proactive when it comes to ensuring better corporate governance. We benchmark ourselves with international codes of corporate governance.
Naresh Chandra Committee Report on Corporate Audit & Governance
The Department of Company Affairs (DCA) under the Ministry of Finance and Company Affairs appointed this high-level committee on August 21, 2002 to examine various corporate governance issues. The report comprises five chapters. Chapter 1 is an introductory section. Chapters 2, 3 and 4 deal with the auditor-company relationship, auditing roles of auditors and independent directors, and remuneration and training, which are relevant to Mastek. Chapter 5 is on regulatory changes.
The company complies with the relevant recommendations.
Codes of Best Practice Recommended by the Cadbury Committee for Effective Corporate Governance
The Cadbury Committee published its Code of Best Practice in December 1992. The recommendations -- which largely reflected perceived best practices at the time -- included separating the roles of the CEO and chairman, having a minimum of three non-executive directors on the board and the formation of audit committees. The code also advocated a more active role for institutional investors to promote good practices in corporate governance.
The company substantially complies with the Cadbury Committee recommendations.
OECD Principles of Corporate Governance
The OECD -- Organisation for Economic Co-operation and Development -- principles of corporate governance were endorsed by OECD ministers in 1999 and have since become an international benchmark for policymakers, investors, corporations and other stakeholders worldwide. The principles were thoroughly reviewed in 2004 to take account of recent developments and the experiences of OECD member and non-member countries. The principles are a living instrument, offering non-binding standards and good practices as well as guidance on implementation, which can be adapted to the specific circumstances of individual countries and regions.
The company complies with the relevant OECD principles.
Euroshareholders Corporate Governance Guidelines, 2000
The European Shareholders Group (`Euroshareholders') is the confederation of European shareholders' associations. It was founded in 1990 and is based in Brussels. At present, eight national shareholders associations are members of Euroshareholders. The organisation's principal task is to represent the interests of individual shareholders in the European Union.
Its main objectives are:
- To support the harmonisation at the EU level of issues such as minority shareholder protection, transparency of the capital markets and cross-border proxy voting
- To enhance shareholder value in European companies
- To support corporate governance issues at the European level
Euroshareholders guidelines are based upon the same principles as that of the 1999 OECD guidelines, but are more specific and detailed.
The company complies with the guidelines except one that says: “Companies should clearly state (in writing) their financial objectives as well as their strategy, and should include these in the Annual Report.”
Combined Code of Corporate Governance
The Combined Code has been derived from the Ron Hampel Committee's final report and the Cadbury and Greenbury reports. It is appended to the listing rules of the London Stock Exchange.
Among other things, the Combined Code stipulates:
- Boards should maintain a sound system of internal control to safeguard shareholders' investment and the company's assets
- Directors should conduct a review of the effectiveness of the group's system of internal control at least annually, and report to shareholders that they have done so
- The review should cover all controls, including financial, operational and compliance controls and risk management
The company substantially fulfils the requirements under the code. One requirement -- that the chairman should be a working director and the evaluation of the board of directors – is yet to be introduced, although initiatives are in progress to do so.
Regulatory Compliance
During the past three financial years, there hasn't been a single case of non-compliance with income tax, sales tax, central excise, customs duty, company law and other regulations against Mastek.
We have been proactive in reporting important information to shareholders and were doing it even before corporate governance regulations were introduced.
We were among the first companies in India to start issuing profit warning guidances to investors — these are issued every quarterly. We also conduct analysts' meets every six months and publish the question-answer exchange with the management on our website.
Since 1998-99, Mastek has adopted the global practice of consolidating the accounts of its subsidiaries.
Recently, we conducted a satisfaction survey with analysts from leading domestic and foreign brokerage houses. The survey assessed the company on eight key parameters: access to management, satisfaction with management meetings, frequency of analysts' meets, clarity of reports, consistency of information, adequacy of information, transparency of information and the informative nature of our web site.
We periodically take steps to ensure that contactors follow labor laws. We take special care to ensure that they don't use child labour.
Mastek's board of directors has constituted an Audit Committee and a Share-Transfer-cum-Investor-Grievance Committee to protect the interests of investors.
The Audit Committee comprises three independent directors from finance and accounting backgrounds. Its job is to ensure the correctness and credibility of the company's financial statements.
The committee holds discussions with the management and the auditors, and tests the decisions made by the management in preparing the company's financial disclosures. These include the quality of the accounting principles applied and the management's judgments that have a bearing on the company's financial statements. It reviews the independence of internal and statutory auditors, and ensures that internal checks for the proper maintenance of accounts and their conformity with prevailing laws and regulations are in place.
The Share-Transfer-cum-Investor-Grievance Committee is headed by an independent director as its chairman. It reviews investor complaints and checks their status every six months.*
|
|
|
