Total No. of Questions : 5] SEAT No.

:
PA-3641 [Total No. of Pages : 2
[5946]-307
S.Y. M.B.A.
310-GE-UL-CORPORATE GOVERNANCE
(2019 Pattern) (Semester-III)
Time : 2½ Hours] [Max. Marks : 50
Instructions to the candidates:
1) All questions are compulsory.
2) Each questions is having internal options.

Q1) Attempt any five (2 marks each)

a) Define enterprise Risk management?

b) Define corporate governance.

c) Define SEBI.

d) Define external control.

e) Define share holders.

f) Define CSR.

g) Define Board charter.

h) Define Nominee committee.

a) Enterprise Risk Management (ERM) is a process for identifying,

assessing, and managing risks faced by an organization. ERM is an ongoing
process that helps organizations to identify and mitigate risks to their
operations, financial statements, and reputation.
b) Corporate Governance is the system of rules, practices, and processes by
which a company is directed and controlled. Corporate governance ensures
that the company is managed in the best interests of all its stakeholders,
including shareholders, employees, customers, and the community.
c) Securities and Exchange Board of India (SEBI) is the regulator of the
securities market in India. SEBI is responsible for ensuring the orderly
development and growth of the securities market and for protecting the
interests of investors.
d) External Control is the process by which organizations are held
accountable for their actions by external stakeholders, such as regulators,
customers, and investors. External control helps to ensure that organizations
are complying with laws and regulations and that they are acting in the best
interests of their stakeholders.
e) Shareholders are the owners of a company. They own shares of the
company's stock and are entitled to a share of the company's profits.
Shareholders have the right to vote on important decisions about the
company and to elect the board of directors.
f) Corporate Social Responsibility (CSR) is the responsibility of businesses
to contribute to the social and environmental well-being of the communities
in which they operate. CSR activities can include things like giving back to
the community, reducing environmental impact, and promoting ethical
business practices.
g) Board Charter is a document that sets out the roles, responsibilities, and
accountabilities of the board of directors of a company. The board charter is
an important tool for ensuring that the board is effective in governing the
company.
h) Nominee Committee is a committee of the board of directors that is
responsible for recommending candidates for election to the board. The
nominee committee typically considers the qualifications and experience of
candidates before making its recommendations to the board.

Q2) Define any two:

a) Types of directors.

There are different types of directors in a company, each with their own roles and
responsibilities. Here are some of the most common types of directors:

• Executive directors are typically employees of the company and are

responsible for the day-to-day management of the company. They are
typically appointed by the board of directors.

• Non-executive directors are not employees of the company and are

responsible for providing oversight and advice to the executive directors.
They are typically elected by the shareholders.

• Independent directors are non-executive directors who are not affiliated with
the company in any way. They are typically seen as having more
independence and are often given the role of chairing the audit committee.

• Nominee directors are directors who are appointed by a shareholder or

group of shareholders. They are typically used to ensure that the interests of
the shareholders are represented on the board.

• Women directors are directors who are female. They are often appointed to
the board to improve gender diversity and to bring a different perspective to
the boardroom.

• Diversity directors are directors who come from different backgrounds, such
 as different cultures, races, or religions. They are often appointed to the
board to improve diversity and to bring a different perspective to the
boardroom.

The specific roles and responsibilities of each type of director will vary depending
on the company and the specific circumstances. However, all directors have a
responsibility to act in the best interests of the company and its stakeholders.

Here are some of the key responsibilities of directors:

• Overseeing the management of the company

• Appointing and removing the executive directors

• Approving the company's financial statements

• Ensuring that the company complies with laws and regulations

• Protecting the interests of the shareholders

• Promoting good corporate governance

Directors have a fiduciary duty to the company and its stakeholders. This means
that they have a legal obligation to act in the best interests of the company and its
stakeholders. This includes a duty of care, a duty of loyalty, and a duty of
confidentiality.

The duty of care requires directors to take reasonable care when making decisions
on behalf of the company. This means that they should seek advice from experts
when necessary and should not make decisions that are obviously reckless or
negligent.

The duty of loyalty requires directors to act in the best interests of the company
and its stakeholders. This means that they should not put their own interests ahead
of the interests of the company and its stakeholders.

The duty of confidentiality requires directors to keep confidential information

about the company confidential. This includes information about the company's
finances, its operations, and its strategies.

Directors who breach their fiduciary duties can be held personally liable for any
losses that the company suffers. This is why it is important for directors to take
their responsibilities seriously and to act in the best interests of the company and
its stakeholders at all times.

b) Four pillars of corporate governance.

here are the four pillars of corporate governance:

1. Accountability: This refers to the responsibility of directors and managers to
 act in the best interests of the company and its stakeholders. This includes a
duty to disclose information to shareholders and other stakeholders, and to
be accountable for their decisions.
2. Transparency: This refers to the openness and clarity of the company's
decision-making process. This includes providing information about the
company's finances, operations, and strategies to shareholders and other
stakeholders.
3. Fairness: This refers to the equitable treatment of all stakeholders, including
shareholders, employees, customers, and suppliers. This includes ensuring
that all stakeholders have a fair opportunity to participate in the company's
decision-making process.
4. Responsibility: This refers to the company's commitment to acting ethically
and in a sustainable manner. This includes complying with laws and
regulations, and taking steps to minimize its environmental impact.
These four pillars are essential for ensuring that companies are managed in a
responsible and ethical manner. By upholding these pillars, companies can build
trust with their stakeholders and create a sustainable business model.
Here are some specific examples of how these four pillars can be implemented in a
company:
• Accountability: The board of directors can be held accountable by
shareholders through the annual general meeting (AGM). At the AGM,
shareholders can vote on the board's performance and remove directors who
are not performing well.
• Transparency: The company can be transparent by publishing its financial
statements and other important information on its website. The company can
also hold regular press conferences and investor meetings to keep
stakeholders informed about its activities.
• Fairness: The company can ensure fairness by having a code of conduct for
employees and by establishing an independent complaints procedure. The
company can also create a diversity and inclusion policy to ensure that all
stakeholders are treated fairly.
• Responsibility: The company can be responsible by complying with
environmental laws and regulations. The company can also set targets for
reducing its environmental impact.
By implementing these four pillars, companies can demonstrate their commitment
to good corporate governance and build trust with their stakeholders.

c) Types of auditors.

There are two main types of auditors: internal auditors and external auditors.

• Internal auditors are employed by the company they audit and are
responsible for ensuring that the company's internal controls are effective.
They also help to identify and mitigate risks to the company's operations and
financial statements.

• External auditors are independent of the company they audit and are
responsible for providing an opinion on the fairness and accuracy of the
 company's financial statements. They also help to ensure that the company
is complying with laws and regulations.

In addition to these two main types of auditors, there are also other types of
auditors, such as:

• Regulatory auditors: These auditors are appointed by a regulator to audit a

company's compliance with specific laws or regulations.

• Forensic auditors: These auditors are appointed to investigate allegations of

fraud or other wrongdoing.

• IT auditors: These auditors are responsible for auditing the company's

information technology systems.

• Compliance auditors: These auditors are responsible for auditing the

company's compliance with all applicable laws and regulations.

The specific type of auditor that is appointed will vary depending on the specific
needs of the company and the nature of the audit.

Here are some of the key differences between internal and external auditors:

• Internal auditors:

o Are employed by the company they audit.

o Are typically less experienced than external auditors.

o Are not required to be independent.

o Focus on the company's internal controls.

• External auditors:

o Are independent of the company they audit.

o Are typically more experienced than internal auditors.

o Are required to be independent.

o Focus on the fairness and accuracy of the company's financial

statements.

Both internal and external auditors play an important role in ensuring the integrity
of a company's financial statements and operations. By working together, they can
help to protect the interests of the company's stakeholders.
 d) Statutory duties of directors.

here are the statutory duties of directors under the Companies Act 2013 of India:

• Duty to act in good faith and in the best interests of the company: This
means that directors must act in a way that they believe is in the best
interests of the company, even if it is not in their own personal interests.
• Duty to exercise reasonable care, skill, and diligence: This means that
directors must take reasonable care when making decisions on behalf of the
company. They should seek advice from experts when necessary and should
not make decisions that are obviously reckless or negligent.
• Duty to avoid conflicts of interest: This means that directors must not put
their own interests ahead of the interests of the company. They must
disclose any conflicts of interest to the board and should not vote on
decisions that could benefit them personally.
• Duty to disclose information: This means that directors must disclose all
material information to the shareholders of the company. This includes
information about the company's finances, its operations, and its strategies.
• Duty to keep proper records: This means that directors must keep proper
records of the company's activities. These records should be sufficient to
allow the shareholders to monitor the company's performance.
• Duty to cooperate with regulators: This means that directors must cooperate
with regulators who are investigating the company. They must provide
information and documents that are requested by the regulators and must not
obstruct the investigation.

These are just some of the statutory duties of directors. Directors may also have
other duties under other laws or regulations. It is important for directors to be
aware of their duties and to act in accordance with them.

Here are some of the consequences of a breach of statutory duties by directors:

• Personal liability: Directors who breach their statutory duties may be held
personally liable for any losses that the company suffers. This means that
they may have to pay compensation to the company or its shareholders.
• Injunctions: Directors who breach their statutory duties may be restrained
from acting as directors in the future. This means that they may be
prevented from being involved in the management of any company.
• Imprisonment: In some cases, directors who breach their statutory duties
may be imprisoned. This is a rare occurrence, but it is possible in cases of
serious misconduct.
It is important for directors to be aware of the consequences of a breach of
statutory duties. By acting in accordance with their duties, they can help to protect
themselves and the company from liability.

1 P.T.O.
[5946]-307
 Q3) a) Discuss the major recommendations of the K.M. Birla committee on cor-
porate governance? (Mandatory & non mandatory)
here are the major recommendations of the K.M. Birla committee on corporate
governance:

• Mandatory recommendations:
o Composition of the board of directors: The board of directors should
have a minimum of three directors and a maximum of twelve
directors. At least half of the directors should be independent
directors. The chairman of the board should be an independent
director.
o Audit committee: The board of directors should establish an audit
committee that is composed of at least three independent directors.
The audit committee should be responsible for overseeing the
company's financial reporting and internal controls.
o Nomination and remuneration committee: The board of directors
should establish a nomination and remuneration committee that is
composed of at least three independent directors. The nomination and
remuneration committee should be responsible for recommending
candidates for the board of directors and for setting the remuneration
of the directors and senior executives.
o Disclosure: The company should disclose all material information to
the shareholders in a timely manner. This includes information about
the company's finances, its operations, and its risks.
o Whistleblowing: The company should establish a whistleblowing
policy that allows employees to report suspected wrongdoing without
fear of retaliation.
• Non-mandatory recommendations:
o Board size: The board of directors should have a board size that is
appropriate for the size and complexity of the company.
o CEO duality: The chairman of the board and the CEO should not be
the same person.
o Independent directors: The independent directors should meet
regularly without the presence of the executive directors.
o Risk management: The company should have a formal risk
management framework in place.
o Sustainability: The company should disclose its sustainability
practices to the shareholders.
The K.M. Birla committee also made recommendations on the role of the stock
exchanges and the regulators in promoting good corporate governance. The
committee recommended that the stock exchanges should require listed companies
to comply with the mandatory recommendations of the committee. The committee
also recommended that the regulators should take steps to enforce the
recommendations of the committee.

The recommendations of the K.M. Birla committee have been widely accepted and
adopted by companies in India. The committee's recommendations have helped to
improve the corporate governance practices of companies in India and have made
the Indian corporate sector more transparent and accountable.

b) Define corporate governance need & scope of corporate governance?

here are the definitions of corporate governance need and scope:

• Corporate governance need refers to the need for companies to have good
corporate governance practices. This need arises from the fact that
companies are complex organizations that manage significant resources and
are subject to a variety of risks. Good corporate governance practices help to
ensure that companies are managed in a responsible and ethical manner and
that the interests of all stakeholders are protected.
• Corporate governance scope refers to the range of activities that are covered
by corporate governance. This scope includes the following:
o The composition and structure of the board of directors

o The appointment and removal of directors

o The role of the board of directors in overseeing the management of
the company
o The company's financial reporting and internal controls
o The company's risk management framework
o The company's disclosure practices
o The company's relationship with its stakeholders

Good corporate governance is important for a number of reasons. It helps to:

• Protect the interests of shareholders and other stakeholders

• Promote transparency and accountability
• Reduce the risk of fraud and corruption
 • Improve the efficiency and effectiveness of the company
• Attract investment and boost the company's reputation

The scope of corporate governance can vary depending on the size and complexity
of the company, the industry in which it operates, and the regulatory environment
in which it operates. However, the key principles of good corporate governance are
always the same.

Here are some of the key principles of good corporate governance:

• Board oversight: The board of directors should be responsible for

overseeing the management of the company and ensuring that it is managed
in a responsible and ethical manner.
• Accountability: The board of directors should be accountable to the
shareholders for the company's performance.
• Transparency: The company should be transparent in its dealings with its
stakeholders. This includes disclosing all material information to the
shareholders in a timely manner.
• Fairness: The company should treat all stakeholders fairly. This includes
ensuring that all stakeholders have a fair opportunity to participate in the
company's decision-making process.
• Integrity: The company should act with integrity in all its dealings. This
includes complying with all applicable laws and regulations.

By following these principles, companies can ensure that they have good corporate
governance practices in place and that they are managed in a responsible and
ethical manner.

Q4) a) Explain the power and liabilities of the directors?

b) Discuss the different boards committee? explain their role and functions.

a) Explain the power and liabilities of the directors?

The powers and liabilities of directors vary depending on the country and the
company's articles of association. However, there are some general principles
that apply to most companies.
• Powers: Directors have the power to manage the company on behalf of
the shareholders. This includes the power to make decisions about the
company's business, its finances, and its employees.
• Liabilities: Directors are liable to the company and its shareholders for
any losses that they cause through their negligence or misconduct. This
is known as the duty of care. Directors are also liable for any breaches
 of the company's constitution or the law.
Here are some of the specific powers and liabilities of directors:
• Power to appoint and remove officers: Directors have the power to
appoint and remove the company's officers, such as the CEO and CFO.
• Power to make decisions about the company's business: Directors have
the power to make decisions about the company's business, such as
what products or services to offer, where to open new offices, and how
to invest the company's money.
• Power to approve the company's financial statements: Directors have
the power to approve the company's financial statements, which are a
record of the company's financial performance.
• Power to raise capital: Directors have the power to raise capital for the
company, such as by issuing shares or bonds.
• Power to enter into contracts: Directors have the power to enter into
contracts on behalf of the company.
• Liability for negligence: Directors are liable to the company and its
shareholders for any losses that they cause through their negligence.
This means that they must take reasonable care when making decisions
on behalf of the company.
• Liability for breaches of the company's constitution or the law:
Directors are liable to the company and its shareholders for any
breaches of the company's constitution or the law. This means that they
must comply with all applicable laws and regulations.
b) Discuss the different boards committee? explain their role and functions.
The board of directors of a company may establish committees to help it in
its work. These committees are usually composed of directors and may be
made up of executive directors, non-executive directors, or a combination of
both.
The most common committees are:
• Audit committee: The audit committee is responsible for overseeing
the company's financial reporting and internal controls. It typically
meets regularly with the company's auditors to discuss the company's
financial statements and to ensure that the controls are effective.
• Nomination and remuneration committee: The nomination and
remuneration committee is responsible for recommending candidates
for the board of directors and for setting the remuneration of the
directors and senior executives.
• Risk committee: The risk committee is responsible for overseeing the
company's risk management framework. It typically meets regularly
with the company's management to discuss the company's risks and to
ensure that the risks are being managed effectively.
• Compliance committee: The compliance committee is responsible for
ensuring that the company complies with all applicable laws and
regulations. It typically meets regularly with the company's
 management to discuss the company's compliance obligations and to
ensure that the company is complying with these obligations.
• Other committees: There may be other committees established by the
board of directors, such as a corporate social responsibility committee
or a sustainability committee. These committees are typically
established to focus on specific areas of the company's operations.
The role and functions of the different committees vary depending on the
company and the specific committee. However, the committees typically
play an important role in helping the board of directors to fulfill its
responsibilities.

Q5) a) Highlighted the major failure of corporate governance in Kingfisher

Airlines?
b) Explain in detail the issues and challenges of ICICI bank in corporate
governance.

here are the major failures of corporate governance in Kingfisher Airlines and
ICICI Bank:

a) Kingfisher Airlines

Kingfisher Airlines was an Indian airline that was founded in 2005. The airline
was founded by Vijay Mallya, who was also the chairman and managing director
of the company. Kingfisher Airlines was once one of the leading airlines in India,
but it filed for bankruptcy in 2012.

There were a number of corporate governance failures that contributed to the

downfall of Kingfisher Airlines. These failures included:

• Lack of transparency: The company did not disclose its financial

information to the public in a timely manner. This made it difficult for
investors to assess the company's financial health.
• Conflicts of interest: Vijay Mallya was the chairman and managing director
of the company, and he also owned a majority stake in the company. This
created a conflict of interest, as Mallya had the power to make decisions that
benefited himself at the expense of the company.
• Poor financial management: The company was poorly managed, and it
accumulated a large amount of debt. This debt eventually became
unsustainable, and the company filed for bankruptcy.
b) ICICI Bank
ICICI Bank is an Indian multinational banking and financial services company.
The bank was founded in 1994, and it is one of the largest banks in India.

There have been a number of corporate governance issues and challenges at ICICI
Bank. These issues include:

• The Videocon loan case: In 2018, it was revealed that ICICI Bank had lent
₹3,250 crore (US$430 million) to Videocon Group, a conglomerate owned
by the Ruia family. The loan was approved by Chanda Kochhar, who was
the CEO of ICICI Bank at the time. The loan was later classified as a non-
performing asset (NPA).
• The Chanda Kochhar controversy: The Videocon loan case led to a
controversy surrounding Chanda Kochhar. It was alleged that Kochhar had
approved the loan to Videocon Group in exchange for favors from the Ruia
family. Kochhar was forced to resign as CEO of ICICI Bank in 2018.
• The Nirav Modi fraud case: In 2018, it was revealed that Nirav Modi, a
jeweler, had defrauded Punjab National Bank of ₹14,000 crore (US$1.8
billion). Nirav Modi had used fraudulent letters of credit issued by PNB to
obtain loans from other banks, including ICICI Bank. ICICI Bank was one
of the banks that lost money in the fraud.

These are just some of the corporate governance issues and challenges that have
been faced by ICICI Bank. The bank has taken steps to address these issues, but it
is important for the bank to continue to improve its corporate governance
practices.

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