Kumar Birla Shows The Way In Governance

Kumar Mangalam Birla has chosen to lead the way in adhering to the recommendations by the Sebi committee on corporate governance. All the main companies of his Aditya Birla group have made substantial disclosures on the boards of directors and financial and stock performances in 1999-2000 annual reports.

The Sebi committee was chaired by Kumar Birla himself, and this is the first known instance of any diversified business group making such disclosures.

The recommendations of the committee were formally adopted last financial year by the capital markets regulator.

The major Aditya Birla group companies include Grasim Industries, Hindalco, Indian Rayon and Indo Gulf Corporation.

 

The boards of most of these group companies are overwhelmingly dominated by non-executive directors as the Sebi committee recommended that at least half the board members should be non-executive directors.

What's more, each board of the Aditya Birla group has set up independent committees to look into shareholder issues. To expedite share transfer, the boards have delegated the responsibility to other company officials.

Also, the group companies have made disclosures on remunerations and other benefits given to directors and their attendance records. None of the directors of any company is a member of more than 10 committees or head more than five committees across the group.

The group is also reviewing compliance with the other recommendations of the committee which have not been met so far. The most significant among them is the setting up of independent audit and remuneration committees at the board level.

In some of the group companies like Indian Rayon, for example, there is not a single company executive on the board and, hence, it does not require a remuneration committee.

The group companies have also begun to disclose in detail the "managements' discussions and analysis reports" in addition to the directors' report.

Also under review is whether half-yearly declarations of financial performance, including summary of the significant events during the period, should be sent to each individual shareholder.

The group companies have also begun to provide performance details of all divisions, but they are only restricted to divisional turnover, gross realisations, and operating margins, and not their contribution to net profit.