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Key Comparatives between US and Indian Corporate Governance Practices

We are incorporated under the Indian Companies Act and our equity shares are listed on the BSE Limited (formerly known as Bombay Stock Exchange Limited) and the National Stock Exchange of India Limited, which are the major stock exchanges in India. Our corporate governance framework is in compliance with the Companies Act, the regulations and guidelines of the Securities and Exchange Board of India ("SEBI") and the requirements of the listing agreements entered into with the Indian stock exchanges ("Listing Agreement"). We also have American Depository Shares ("ADSs") listed on the New York Stock Exchange (the "NYSE").

Companies listed on the NYSE must comply with certain standards of corporate governance set forth in Section 303A of the NYSE's Listed Company Manual. Listed companies that are foreign private issuers, as the term is defined in Rule 3b-4 under the Securities Exchange Act of 1934 ("Exchange Act"), are permitted to follow home country practices in lieu of the provisions of this Section 303A, except that foreign private issuers are required to comply with the requirements of Sections 303A.06, 303A.11 and 303A.12(b) and (c) of the NYSE's Listed Company Manual. As per these requirements, a foreign private issuer must:

  • Establish an independent audit committee that has specified responsibilities and authority. [NYSE Listed Company Manual Section 303A.06];
  • Provide prompt written notice by its chief executive officer if any executive officer becomes aware of any non-compliance with any applicable corporate governance rules. [NYSE Listed Company Manual Section 303A.12(b)] ;
  • Provide to the NYSE annual written affirmations with respect to its corporate governance practices, and interim written affirmations in the event of a change to the board or a board committee. [NYSE Listed Company Manual Section 303A.12(c)] ; and

  • Include a statement of significant differences between its corporate governance practices and those followed by U.S. companies in the annual report of the foreign private issuer. [NYSE Listed Company Manual Section 303A.11]

In a few cases, the Indian corporate governance rules under Clause 49 of the Listing Agreement differ from those in the NYSE's Listed Company Manual as summarized below:

NYSE Corporate Governance Standards applicable to NYSE Listed Companies
Corporate Governance Rules as per Listing Agreements with Indian Stock Exchange(s)
Board of Directors (“Board”)
An 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]
The 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 non-executive directors.

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.
Executive Sessions
Non-management directors need to meet at regularly scheduled executive sessions without management. [NYSE Listed Company Manual Section 303A.03]

There is no requirement for such sessions at present. However, SEBI in its circular dated April 17, 2014 has announced certain amendments in the corporate governance rules as per the listing agreements with the Indian stock exchanges which will be effective later this year i.e. from October 1, 2014 ("revised corporate governance requirements"). The revised corporate governance requirements provide that the independent directors shall hold at least one meeting a year without the attendance of non-independent directors and members of management.


Nominating/Corporate Governance Committee
An NYSE listed company needs to have a nominating/corporate governance committee composed entirely of independent directors. [NYSE Listed Company Manual Section 303A.04]
At present an 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 independent directors. As per the revised corporate governance requirements, an Indian stock exchange listed company is required to constitute a nomination and remuneration committee with effect from October 1, 2014. The nomination and remuneration committee will comprise of at least three non-executive directors and at least half shall be independent directors.
The nominating/corporate governance committee needs to have a written charter that addresses certain specific committee purposes and responsibilities and provides for an annual performance evaluation of the committee. [NYSE Listed Company Manual Section 303A.04]
At present, if an Indian stock exchange listed company has a nomination committee, it is not required to have a charter for that committee. The performance evaluation of non-executive directors can be done by a peer group comprised of the entire board of directors, excluding the director being evaluated. However, the revised corporate governance requirements prescribe the role of the nomination and remuneration committee which includes formulation of criteria for evaluation of independent directors and the Board.
Compensation Committee
An 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]
Presently as 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. However, as per the revised corporate governance requirements a company shall be required to set up a combined nomination and remuneration committee with effect from October 1, 2014. The role of this committee includes recommending to the Board a policy relating to the remuneration of the directors, key managerial personnel and other employees.
The 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 Section 303A.05]
Effective October 1, 2014, an Indian stock exchange listed company shall have a nomination and remuneration committee. The role of this committee includes recommending to the Board a policy relating to the remuneration of the directors, key managerial personnel and other employees. 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.
Audit Committee
An 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 303A.07]

An 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.

Internal Audit Function
An 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]
Although 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.

In accordance with the revised corporate governance requirements Indian stock exchange listed companies shall comply with the requirement relating to "risk management". It includes establishing a procedure to inform the Board members about the risk assessment and minimization procedure, constituting a risk management committee of the Board and delegating powers to the Committee to monitor and review the risk management function. We have already constituted a Risk Policy and Monitoring Committee of the Board to review and monitor the risk management function prior to the revised corporate governance requirements coming into force. There is no requirement for such a committee under NYSE regulations for listed companies.
Shareholder Approval of Equity Compensation Plans
Shareholders 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]
There is a requirement of shareholders' approval for equity compensation and material revisions thereto under the Companies Act and the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 but not under Clause 49 of the Listing Agreement.
Corporate Governance Guidelines/Code of Ethics
An NYSE listed company needs to adopt and disclose corporate governance guidelines. [NYSE Listed Company Manual Section 303A.09]




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]

There 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.

Certifications as to Compliance
The 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]
The 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 basis.
Posting of Charters, Guidelines, etc. on Website
An 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]
There 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.