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8.Performance Evaluation of Board and Management: Evaluation of the performance of the Board asa whole, individual director (including independent directors and Chairperson), various Committees ofthe Board and of the management.9.Role of promoter/controlling shareholder, redressal against Oppression and Mismanagement.10.Monitoring of group entities and subsidiaries.11.Accounting and Audit related issues.12.Related Party Transactions.13.Vigil Mechanism/Whistle blower.14.Corporate Governance and Shareholders’ Rights.15.Corporate Governance and other Stakeholders: Employees, Customers, Lenders, Vendors,Government and Regulators, Society, etc.16.Governance and Compliance Risk: Governance/Compliance failure and their impact on business,reputation and fund raising.17.Corporate Governance Forums.18.Parameters of Better Governed Companies: ICSI National Award for Excellence in CorporateGovernance.19.Dealing with Investor Associations, Proxy Services Firms and Institutional Investors.20.Family Enterprise and Corporate Governance.Case Laws, Case Studies & Practical Aspects.Part II: Risk Management (20 Marks)21.Risk Identification, Mitigation and Audit: Risk Identification, Risk Analysis, Risk Measurement, RiskMitigation, Risk Elimination, Risk Management Committee, Clarification and Investigation, Role ofInternal Audit, Risk Audit, Risk Related Disclosures.Case Studies & Practical Aspects.Part III: Compliances (20 Marks)22.Compliance Management: Essentials of successful compliance program, Significance ofCompliance, devising proper systems to ensure compliance, ensuring adequacy and effectivenessof compliance system, internal compliance reporting mechanisms, use of technology for compliancemanagement.23.Internal Control: Nature, Scope and Elements, Techniques of Internal Control System, Steps forInternal Control, Efficacy of internal controls and its review.24.Reporting: Integrated Reporting, Non-financial Reporting, Corporate Sustainability Reporting, BoardReporting, Annual Report, Other Reports under LODR, PIT, SAST Regulations.25.Website Management: Meeting through Video Conferencing.Case Studies & Practical Aspectsvii

Part IV: Ethics & Sustainability (10 Marks)26.Ethics & Business: Ethics, Business Ethics, Organization Structure and Ethics, Addressing EthicalDilemmas, Code of Ethics, Indian Ethos, Designing Code of Conduct, Policies, Fair practices andframeworks.27.Sustainability: Corporate Social Responsibility, Corporate Sustainability Reporting Framework, LegalFramework, Conventions, Treaties on Environmental and Social Aspects, Triple Bottom Line, Principleof Absolute Liability - Case Studies, Contemporary Developments, Indian Ethos.28.Models / Approaches to measure Business Sustainability: Altman Z-Score Model, Risk AdjustedReturn on Capital, Economic Value Added (EVA), Market Value Added (MVA), Sustainable Value AddedApproach.29.Indian and contemporary Laws relating to Anti-bribery: Prevention of corruption Act,1988, CentralVigilance Commission Act, 2003, Lokpal & Lokayukta Act, 2013, Foreign Corrupt Practices Act, 1977,Unlawful Activities (Prevention) Act, 1967 & Delhi Special Police Establishment Act, 1946; ICSI AntiBribery Code.Case Studies & Practical Aspectsviii

ARRANGEMENT OF STUDY LESSONSMODULE 1 – PAPER 1GOVERNANCE, RISK MANAGEMENT, COMPLIANCES AND ETHICSPART I: GOVERNANCELesson No.Lesson Title1Conceptual Framework of Corporate Governance2Legislative Framework of Corporate Governance in India3Board Effectiveness4Board Processes through Secretarial Standards5Corporate Policies and Disclosures6Board Committees7Accounting and Audit related issues, RPTs and Vigil Mechanism8Corporate Governance and Shareholders Rights9Corporate Governance and Other Stakeholders10Governance and Compliance Risk11Corporate Governance ForumsPART II: RISK MANAGEMENT12Risk ManagementPART III: COMPLIANCE13Compliance Management14Internal Control15ReportingPART IV: ETHICS & SUSTAINABILITY16Ethics and Business17CSR and Sustainability18Anti-Corruption and Anti-Bribery Laws in Indiaix

LESSON WISE SUMMARYGOVERNANCE, RISK MANAGEMENT, COMPLIANCESAND ETHICSLesson 1: Conceptual Framework of Corporate GovernanceCorporate Governance is how a corporation is administered or controlled. It is a set of processes, customs,policies, laws and instructions affecting the way a corporation is directed, administered or controlled. Theparticipants in the process include employees, suppliers, partners, customers, government, and professionalorganization regulators, and the communities in which the organization has presence.Corporate Governance is integral to the existence of the company. Corporate Governance is needed to createa corporate culture of transparency, accountability and disclosure.Good corporate governance systems attract investment from global investors, which subsequently leadsto greater efficiencies in the financial sector. The relation between corporate governance practices and theincreasing international character of investment is very important. International flows of capital enable companiesto access financing from a much larger pool of investors. In order to reap the full benefits of the global capitalmarket and attract long-term capital, corporate governance arrangements must be credible, well understoodacross borders and should adhere to internationally accepted principles.Corporate governance is a critical factor in economic stability and organisational success. In the last decade,many emerging markets, international bodies, governments, financial institutions, public and private sectorbodies have reformed their corporate governance systems and are encouraging debate and spearheadinginitiatives towards good corporate governance. Better regulatory and self-regulatory corporate governanceframeworks and enforcement mechanisms are being implemented through tougher legislations and CorporateGovernance Codes.This Lesson gives an overview of the evolution of Corporate Governance worldwide and the existence anddevelopment of corporate governance in India since centuries.Lesson 2: Legislative Framework of Corporate Governance in IndiaThe Companies Act, 2013 which envisages radical changes in the sphere of Corporate Governance in Indiaalong with SEBI LODR Regulations, 2015 provide for various provisions for good governance of companies.The Companies Act, 2013 is applicable to all companies registered under the Act and listed companies have tofollow SEBI Regulations also. However the same is not the case with nationalized banks as these are governedby separate Acts. The sector specific companies i.e. banking/insurance/ public sector are required to follow theregulatory norms prescribed by their sectoral regulator.For example Insurance companies are subject to compliance with IRDA guidelines in addition to other applicablelegislations. The guidelines issued by the IRDA on the Corporate Governance norms applicable to the InsuranceCompany have been dealt with in the chapter.The lesson details the corporate governance developments in Companies, Banks and NBFCs. Also details theguidelines for the insurance companies. Stewardship Code for insurers in India has also been explained. It alsoprovides overview of the governance of Public Sector Enterprises under DPE Guidelines.x

Lesson 3: Board EffectivenessCompany being an artificial person it requires certain natural persons to represent the company at variousfronts. The position of directors in their relationship to the company is not only as the agents, but also trusteesof the company.The Board of Directors plays a pivotal role in ensuring good governance. The contribution of directors onthe Board is critical to the way a corporate conducts itself. A board’s responsibilities derive from law, custom,tradition and prevailing practices.In the present times transparency, disclosure, accountability, issues of sustainability, corporate citizenship,globalization are some of the concerns that the Boards have to deal with. In addition, the Boards have torespond to the explosive demands of the marketplace. This two dimensional role of the Board of Directors is thecornerstone in evolving a sound, efficient, vibrant and dynamic corporate sector for attaining of high standardsin integrity, transparency, conduct, accountability as well as social responsibility.Therefore in this Lesson Board’s role, powers and duties, types of directors required to be appointed under thelaws, board composition and role of independent director in ensuring board effectiveness have been discussed.The lesson also gives an insight on training of directors and performance evaluation of directors.Lesson 4: Board Processes through Secretarial StandardsIn general, board process refers mainly to the decision-making activities of the board which need to be performedso that the objectives of the board can be achieved. Decisions relating to the policy and operations of thecompany are arrived at meetings of the Board held periodically. Meetings of the Board enable discussions onmatters placed before them and facilitate decision making based on collective judgment of the Board.The fundamental principles with respect to Board Meetings are laid down in the Companies Act, 2013 and theSecretarial Standard -1 facilitates compliance with these principles by endeavouring to provide further claritywhere there is ambiguity and establishing benchmark standards to harmonise prevalent diverse practices. Forthe benefit of companies, SS-1 provides necessary flexibility in many cases viz. with respect to calling Meetingat shorter notice, transacting any other business not contained in the agenda and passing of Resolutions bycirculation.In this lesson, effective working of Boards through Secretarial Standard- 1 has been discussed.Lesson 5: Board CommitteesA board committee is a small working group identified by the board, consisting of board members, for thepurpose of supporting the board’s work. Committees are generally formed to perform some expertise work andimprove board effectiveness and efficiency.Companies Act, 2013 requires certain class of companies to form some committees mandatorily. Similarly SEBI(LODR) Regulations, 2015 makes it mandatory for the listed companies to formulate certain committees of theboard.In this lesson role and functioning various committees like audit committee, stakeholder relationship committee,corporate social responsibility committee is explained.For the prospective company secretaries this lesson shall be useful in performing the advisory role and incompliance management in practical areas of work.Lesson 6: Corporate Policies and DisclosuresA Company has to formulate specific policies in different areas of operations that help to bring uniformity inprocesses by clearly defining the business approach. Some of the policies are legally required, some arexi

organisational needs and some are voluntarily made as part of good governance. This lesson discusses aboutvarious disclosure and transparency requirements under Companies Act 2013 and SEBI Regulations.Various disclosures mandatorily required by the companies and listed entities are also elaborated in detail inthis chapter.Lesson 7: Accounting and Audit related issues, RPTs and Vigil MechanismCorporate Governance is concerned with holding the balance between economic and social goals and betweenindividual and communal goals. The corporate governance framework is there to encourage the efficient use ofresources and equally to require accountability for the stewardship of those resources. The aim is to align asnearly as possible the interests of individuals, corporations and society.Good accounting and auditing practices are highly effective as an instrument of corporate governance.Companies Act 2013 has provided for various mandatory and voluntary practices to improve financial reporting,internal audit and statutory audit of companies in India. Keeping this in view, this study lesson covers variousgood governance initiatives taken by the government of our country for accounting and audit related issues.It also covers in brief various legal provisions as well as background to related party transactions, meaning ofrelated parties, transactions covered under RPT and the procedure for approval etc.At the end, lesson provides brief about vigil mechanism, background of whistle blower concept and various lawspertaining to it.Lesson 8 : Corporate Governance and Shareholders RightsThe central element in corporate governance is the challenges arising out of separation of ownership and control.The shareholders are the true owners of a corporate and the governance function controls the operations of thecorporate. There is a strong likelihood that there is a mismatch between the expectations of the shareholdersand the actions of the management. Therefore there is a need to lay down clearly the rights of the shareholdersand that of the management.SEBI Act, 1992, the various SEBI Regulations and Guidelines and the Companies Act, 2013 enables theempowerment of shareholder rights. Companies Act, 2013 provides for some measures to protect the interestof minority shareholders.One of the objectives of the SEBI is to provide a degree of protection to the investors and to safeguard theirrights, steady flow of savings into market and to promote the development of and regulate the securities market.Investors should be safeguarded not only against frauds and cheating but also against the losses arising outof unfair practices.This lesson will enable the students to understand what the rights of the shareholders are and how it is importantfrom corporate governance perspective.Lesson 9: Corporate Governance and Other StakeholdersIn a business context, customers, investors, shareholders, employees, suppliers, government agencies,communities and many others who have a ‘stake’ or claim in some aspect of a company’s products, operations,markets, industry and outcomes are known as stakeholders.Stakeholders are characterized by their relationship to the company and their needs, interests and concerns,which will be foremost in their minds at the start of an engagement process. However, as the process unfoldsthey will soon take a particular role with related tasks and responsibilities.A major reason for increasing adoption of a Stakeholder Concept in setting business objectives is the recognitionthat businesses are affected by the “environment” in which they operate. Businesses come into regular contactxii

with customers, suppliers, government agencies, families of employees, special interest groups. Decisionsmade by a business are likely to affect one or more of these “stakeholder groups”.Stakeholders can only be well informed and knowledgeable if companies are transparent and report on issuesthat impact stakeholders. Both parties have an obligation to communicate sincerely and attempt to understand,not just be understood.In this lesson relationship between company and various stakeholders has been discussed and explained howbetter stakeholder engagement ensures good governance.Lesson 10: Governance and Compliance RiskHistorically, boards have been perceived to focus primarily on value creation for shareholders. But with renewedattention to statutory compliance, regulators now also want boards to focus on value management and valueprotection by doing a formal review of compliance obligations. As a result, corporations are looking to replaceinformal compliance frameworks with well structured, documented and demonstrable compliance structuresthat help management monitor and report compliance risk and exposure as well as compliance status to theBoard.Regulatory compliance is an organization’s adherence to laws, regulations, guidelines and specificationsrelevant to its business. Violations of regulatory compliance regulations often result in legal punishment, includingpenalties/ fines. As the number of rules has increased since the turn of the century, regulatory compliance hasbecome more prominent in a variety of organizations. The trend has even led to the creation of corporate, chiefand regulatory compliance officer positions to hire employees whose sole focus is to make sure the organizationconforms to stringent, complex legal mandates.This lesson describes the importance compliance and consequences of non compliance. Besides, it alsohighlights the importance of corporate compliance management and compliance risks.Lesson 11: Corporate Governance ForumsThe world has become a borderless global village. The spirit to implement internationally accepted norms ofcorporate governance standards found expression in private sector, public sector and the government thinking.The framework for corporate governance is not only an important component affecting the long-term prosperityof companies, but it is critical in terms of National Governance, Human Governance, Societal Governance,Economic Governance and Political Governance since the activities of the corporate have an impact on everyaspect of the society as such.The need to find an institutional framework for corporate governance and to advocate its cause has resulted inthe setting up and constitution of various corporate governance forums and institutions the world over. In thisstudy lesson we will be discussing with some of the prominent Forums and Institutions of Corporate Governance.Lesson 12: Risk ManagementRisk and reward go hand by hand. We have often heard the statement that without risk there is no gain. Riskis inherent in the business. Different types of risk exist in the business according to the nature of the businessand they are to be controlled and managed.Risk Management is a continuous process of identifying, evaluating and assessing the inherent and potentialrisk, adopting the methods for its systematic reduction in order to sustainable business development.Companies Act, 2013 provides that a statement indicating development and implementation of a riskmanagement policy for the company including identification therein of elements of risk, if any, which in theopinion of the Board may threaten the existence of the company.SEBI (LODR) Regulations, 2015 also provides that company shall lay down procedures to inform Boardxiii

members about the risk assessment and minimization procedures. The Board shall be responsible for framing,implementing and monitoring the risk management plan for the company.The company secretaries are governance professionals whose role is to enforce a compliance frameworkto safeguard the integrity of the organization and to promote high standards of ethical behavior. He has asignificant role in assisting the board of the organization to achieve its vision and strategy. The activities of thegovernance professional encompass legal and regulatory duties and obligations and additional responsibilitiesassigned by the employer.This lesson shall enable the students to understand risk management framework, the definition and types ofrisks; risk management process; advantages of risk management; steps in risk management; legal provisionson risk management; who is responsible for risk management etc.Lesson 13: Compliance ManagementA compliance management system is the method by which corporate manage the entire compliance p

business ethics has been given due importance in business, commerce and industry. Promotion of culture of ethics is an imperative, and it is increasingly being realized that it is the bedrock of good governance which ulti