ETHICS, GOVERNANCE AND SUSTAINABILITY

1 ISTUDY MATERIALPROFESSIONAL PROGRAMMEETHICS, GOVERNANCEANDSUSTAINABILITYMODULE IIPAPER 6 ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003tel 011-4534 1000, 4150 4444fax +91-11-2462 6727email THE INSTITUTE OF COMPANY SECRETARIES OF INDIATIMING OF HEADQUARTERSM onday to FridayOffice Timings to Dealing TimingsWithout financial transactions to financial transactions to , Typesetting by AArushi Graphics, Prashant Vihar, New Delhi, andPrinted at Tan Prints/PRN-2509/July 2014iiiiiPROFESSIONAL PROGRAMMEETHICS, GOVERNANCE AND SUSTAINABILITYC orporate GOVERNANCE has emerged as an important academic discipline in its own right, bringing togethercontributions from accounting, finance, law and management.

2 Corporate GOVERNANCE now offers a comprehensive,interdisciplinary approach to the management and control of companies. Corporate professionals of today andtomorrow must imbibe in themselves the evolving principles of good corporate GOVERNANCE across the globe ona continual basis. Excellence can be bettered only through continuous study, research and academic andprofessional interaction of the highest quality in the theory and practice of good corporate GOVERNANCE . Thecorporate world looks upon especially Company Secretaries to provide the impetus, guidance and direction forachieving world-class corporate Secretaries are the primary source of advice on the conduct of business.

3 This can take into its foldeverything from legal advice on conflicts of interest, through accounting advice, to the development of strategy/corporate compliance and advice on SUSTAINABILITY paper on Ethics, GOVERNANCE and SUSTAINABILITY has been introduced to provide knowledge on globaldevelopment on GOVERNANCE , ethics and SUSTAINABILITY aspects and best GOVERNANCE practices followed paper would help in understanding of national and international GOVERNANCE norms, ethical business practices,corporate SUSTAINABILITY , CSR and SUSTAINABILITY reporting, role of various GOVERNANCE forums study material is based on those sections of the Companies Act, 2013 and the rules made there underwhich have been notified by the Government of India and came into force April 01, 2014 (includingAmendments/Clarifications/Circ ulars issued there under upto June, 2014).

4 In respect of sections of the CompaniesAct, 2013 which have not been notified, applicable sections of Companies Act, 1956 have been dealt with in thestudy. Further students are advised to keep themselves abreast of latest developments on GOVERNANCE andsustainability issues by regularly reading economic dailies and visiting the websites of regulatory bodies, nationaland international corporate GOVERNANCE forums. Students are also advised to read regularly the Student CompanySecretary / Chartered Secretary wherein all important regulatory amendments are reported the event of any doubt, students may write to Directorate of Academics in the Institute for clarification due care has been taken in publishing this study material, yet the possibility oferrors, omissions and/or discrepancies cannot be ruled out.

5 This publication is released with an understandingthat the Institute shall not be responsible for any errors, omissions and/or discrepancies or any action taken inthat there be any discrepancy, error or omission in the study material, the Institute shall be obliged if thesame is brought to its notice for issue of corrigendum in the e-bulletin Student Company 2 PAPER 6: ETHICS, GOVERNANCE AND SUSTAINABILITY (100 Marks)Level of Knowledge:Advance KnowledgeObjective:To acquire knowledge of ethics, emerging trends in good GOVERNANCE practices and :Part A: Ethics and GOVERNANCE (70 Marks)1. Introduction Ethics, Business Ethics, Corporate GOVERNANCE , GOVERNANCE through Inner Consciousness andSustainability Failure of GOVERNANCE and its Consequences2.

6 Ethical Principles in Business Role of Board of Directors Organization Climate and Structure and Ethics Addressing Ethical Dilemmas Code of Ethics; Ethics Committee; Ethics Training; Integrity Pact Case Studies and Contemporary Developments3. Conceptual Framework of Corporate GOVERNANCE Introduction, Need and Scope Evolution of Corporate GOVERNANCE Developments in India Developments in Corporate GOVERNANCE A Global Perspective Elements of Good Corporate Governance4. Board Effectiveness - Issues and Challenges Board Composition; Diversity in Board Room; Types of Directors; Board s Role and Responsibilities Chairman, CEO, Separation of Roles Relationship between Directors and Executives Visionary Leadership Board Charter, Meetings and Processes Directors Training and Development Performance Evaluation of Board and Directorsv5.

7 Board Committees Introduction Various Board Committees, their Composition, Role and Responsibilities, Contribution to BoardGovernance Audit Committee Shareholders Grievance Committee Remuneration Committee Nomination Committee Corporate GOVERNANCE Committee Corporate Compliance Committee Other Committees6. Legislative Framework of Corporate GOVERNANCE in India Under Listing Agreement, SEBI Guidelines, Companies Act Corporate GOVERNANCE in PSUs Banks Insurance Companies7. Legislative Framework of Corporate GOVERNANCE An International Perspective Australia Singapore South Africa United Kingdom Contemporary Developments in the Global Arena8.

8 Risk Management and Internal Control Risk and its Classification Risk Management and Oversight Enterprise Risk Management Internal Control Roles and Responsibilities of Internal Control Disclosure about Risk, Risk Management and Internal Control9. Corporate GOVERNANCE and Shareholder Rights Rights of Shareholders Challenges in Exercising Shareholders Rightsvi Corporate GOVERNANCE issues with regard to Related Party Transactions Role of Investor Associations in Securing Shareholders Rights Role of Institutional Investors in Corporate Governance10. Corporate GOVERNANCE and Other Stakeholders Employees Customers Lenders Vendors Government Society11.

9 Corporate GOVERNANCE Forums The Institute of Company Secretaries of India National Foundation for Corporate GOVERNANCE Organisation for Economic Co-operation and Development Global Corporate GOVERNANCE Forum Institute of Directors Commonwealth Association of Corporate GOVERNANCE International Corporate GOVERNANCE Network The European Corporate GOVERNANCE Institute Conference Board The Asian Corporate GOVERNANCE Association Corporate Secretaries International AssociationPart B: SUSTAINABILITY (30 Marks)12. SUSTAINABILITY Meaning and Scope Corporate Social Responsibility and Corporate SUSTAINABILITY SUSTAINABILITY Terminologies and Meanings Why is SUSTAINABILITY an Imperative SUSTAINABILITY Case Studies Triple Bottom Line (TBL)13.

10 Corporate SUSTAINABILITY Reporting Frameworks Global Reporting Initiative Guidelinesvii National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business International Standards SUSTAINABILITY Indices Principles of Responsible Investment Challenges in Mainstreaming SUSTAINABILITY Reporting SUSTAINABILITY Reporting Case Studies14. Legal Framework, Conventions, Treaties on Environmental and Social Aspects15. Principle of Absolute Liability Case Studies16. Contemporary Developments Integrated ReportingviiiLIST OF RECOMMENDED BOOKSMODULE 2 : PAPER 6 : ETHICS, GOVERNANCE AND SUSTAINABILITYR ecommended Readings and Dube:Corporate GOVERNANCE ; LexisNexis Butterworths Wadhwa Agarwal:Corporate GOVERNANCE : Concept & Dimensions; Snow white PublicationsP.