Corporate Governance Standards applicable to NYSE Listed
Governance Rules as per Listing Agreements with Indian
of Directors (“Board”)
NYSE listed company needs to have a majority of independent
directors. [NYSE Listed Company Manual Section 303A.01]
A director must meet certain criteria in order to qualify
as “independent”. An NYSE listed company
must disclose the identity of its independent directors
and the basis upon which it is determined they are independent.
[NYSE Listed Company Manual Section 303A.02]
board of an Indian stock exchange listed company needs
to have an optimum combination of executive and non-executive
directors, with not less than 50% of the directors being
If the chairman of the board of directors is a non-executive
director of the company, at least one-third of the directors
must be independent. If the chairman is an executive
director, at least half of the directors must be independent.
However, if the non-executive chairman is a promoter
of the company or is related to any promoter or person
occupying management positions at the Board level or
one level below the Board, at least half of the directors
on the Board of the company must be independent.
The definition of the term “independent director”
is different and is set out in Clause 49(I)(A)(iii)
of the Listing Agreement.
directors need to meet at regularly scheduled executive
sessions without management. [NYSE Listed Company Manual
is no requirement for such sessions.
NYSE listed company needs to have a nominating/corporate
governance committee composed entirely of independent
directors. [NYSE Listed Company Manual Section 303A.04]
Indian stock exchange listed company may, but is not
required to, have a nomination committee, and if it
does, the committee need not be comprised entirely of
nominating/corporate governance committee needs to have
written charter that addresses certain specific committee
and responsibilities and provides for an annual performance
evaluation of the committee. [NYSE Listed Company Manual
an Indian stock exchange listed company has a nomination
committee, it is not required to have a charter for
The performance evaluation of non-executive directors
done by a peer group comprised of the entire board of
excluding the director being evaluated.
NYSE listed company needs to have a compensation committee
composed entirely of independent directors. Compensation
committee members must satisfy certain additional independence
requirements set forth in Section 303A.02 of the NYSE
Listed Company Manual by the deadline specified therein.
[NYSE Listed Company Manual Section 303A.05]
per a non-mandatory Indian requirement, Indian stock
exchange listed companies are encouraged to establish
a compensation/remuneration committee to determine on
behalf of the board and the shareholders the company’s
policy on specific remuneration packages for executive
directors, including compensation and pension rights.
To avoid conflicts of interest, it is a non-mandatory
requirement that any compensation committee may consist
of at least three non-executive directors. It is also
a non-mandatory requirement that the chairman of any
compensation committee may be an independent director.
compensation committee needs to have a written charter
that addresses certain specific purposes and responsibilities
of the committee and provides for an annual performance
evaluation of the committee. [NYSE Listed Company Manual
compensation committee may, but is not required to,
have a charter. The annual corporate governance report
of an Indian stock exchange listed company generally
provides details of remuneration, including brief details
of the remuneration policy of the company and any compensation
committee’s agreed terms of reference.
NYSE listed company needs to have an audit committee
with at least three members. All the members of the
audit committee must satisfy the independence requirements
of Rule 10A-3 under the Exchange Act and the requirements
of NYSE Corporate Governance Standard 303A.02. [NYSE
Listed Company Manual Sections 303A.06 and 303A.07]
The audit committee needs to have a written charter
that addresses certain specific purposes of the committee,
provides for an annual performance evaluation of the
committee and sets forth certain specific minimum duties
and responsibilities. [NYSE Listed Company Manual Section
Indian stock exchange listed company must have a qualified
and independent audit committee comprised of at least
three members with certain specified powers and roles.
At least 2/3 of the members must be independent and
all members must be financially literate and at least
one member must have accounting or related financial
management expertise. The chairman of the committee
must be an independent director.
The audit committee is not required to
have a written charter. However, in the Listing Agreement,
Clause 49C sets out the powers of the audit committee,
Clause 49D sets forth the required roles of the audit
committee and Clause 49E sets out the information which
should mandatorily be reviewed by the audit committee.
NYSE listed company needs to have an internal audit
function to provide management and the audit committee
with ongoing assessments of the company’s risk
management processes and system of internal control.
A company may choose to outsource this function to a
third party service provider other than its independent
auditor. [NYSE Listed Company Manual Section 303A.07]
an internal audit function is not required, one of the
roles of the audit committee is “reviewing the
adequacy of internal audit function, if any, including
the structure of the internal audit department, staffing
and seniority of the official heading the department,
reporting structure coverage and frequency of internal
audit”. All internal audit reports relating to
internal control weaknesses of the company must be reviewed
by the audit committee. Also, the appointment, removal
and terms of remuneration of the chief internal auditor
are subject to review by the audit committee. Therefore,
an Indian stock exchange listed company is required
to conduct an internal audit and to have a department
to conduct the internal audit.
Approval of Equity Compensation Plans
must be given the opportunity to vote on all equity-compensation
plans and material revisions thereto, with limited exemptions.
[NYSE Listed Company Manual Section 303A.08]
is a requirement of shareholders’ approval for
equity compensation and material revisions thereto under
the Companies Act, 1956 and the SEBI (Employee Stock
Option Scheme and Employee Stock Purchase Scheme) Guidelines,
1999 but not under Clause 49 of the Listing Agreement.
Governance Guidelines/Code of Ethics
NYSE listed company needs to adopt and disclose corporate
governance guidelines. [NYSE Listed Company Manual Section
An NYSE listed company needs to adopt and disclose a
code of business conduct and ethics for directors, officers
and employees, and promptly disclose any waivers of
the code for directors or executive officers. [NYSE
Listed Company Manual Section 303A.10]
is no such mandatory requirement to adopt corporate
governance guidelines. An Indian stock exchange listed
company has to comply with all the requirements prescribed
under Clause 49 of the Listing Agreement.
An Indian stock exchange listed company
needs to adopt a code of conduct / ethics applicable
to all members of the board of directors and senior
management one level below the board. The company’s
annual report must contain a declaration signed by the
CEO stating that all board members and senior management
personnel have complied with the code of conduct. The
company’s annual report and quarterly compliance
report on corporate governance must disclose any non-compliance
with the code by the board members and senior management.
as to Compliance
CEO of each NYSE listed company has to certify on an
annual basis that he or she is not aware of any violation
by the company of the NYSE corporate governance listing
standards. This certification, as well as the CEO/CFO
certification required under Section 302 of the Sarbanes-Oxley
Act of 2002, must be disclosed in the company’s
annual report to shareholders. [NYSE Listed Company
Manual Section 303A.12]
CEO and the CFO are required to provide an annual certification
on the true and fair view of the company’s financial
statements and compliance with existing accounting standards,
applicable laws and regulations.
In addition, Indian stock exchange listed companies
are required to submit a quarterly compliance report.
Indian stock exchange listed companies are also required
to submit a certificate from either the auditors or
practicing company secretaries regarding compliance
with conditions of corporate governance on an annual
of Charters, Guidelines, etc. on Website
NYSE listed company is required to post the charters
of its audit, compensation, and nominating/corporate
governance committees, its corporate governance guidelines,
and its code of business conduct and ethics on the company’s
website, and to state in its proxy statement or annual
report that these documents are so posted. The listed
company’s website address must be included in
such postings. [NYSE Listed Company Manual Sections
303A.04, 303A.05, 303A.07, 303A.09 and 303A.10]
is no such similar requirement for an Indian listed
company. However, the Board of an Indian listed company
must have a code of conduct for all Board members and
senior management of the company. The code of conduct
must be posted on the website of the company.