Dissertation Report On

Corporate Governance Practices

Financial Performances

In Information Technology Industry in India

With Special Reference to

Dissertation report is submitted for the partial fulfilment of curriculum of MBA to the Fakir Mohan University, Balasore, Odisha.

Submitted By Under esteem guidance of

Rakesh Kumar Maharana Prof. D P Mishra

Roll No.-13201FM114020

Batch -2011-13

P G Dept. Of Business Management,

Fakir Mohan University, VyasaVihar, Balasore. Odisha.

Prof. D P Mishra

P.G. Department of Business Management

Fakir Mohan University

Balasore-756019, Odisha

Guide Certificate

This is to certify that, Mr. Rakesh Kumar Maharana ,MBA 4th Semester (2011-2013), Roll No. 13201FM114020has conducted the dissertation report entitled“ Corporate Governance Practices & Financial Performance Of Tata Consultancy Services “under my supervision for the partial fulfilment of the requirement for the degree of Master of Business Administration in Marketing Management. This is an original piece of research and it is not submitted anywhere else for any degree.

His continuous and diligent effort of preparing this project report in a scientific and well regulated manner is appreciable. He was found to be very regular, sincere, receptive and hard working.

I wish him every success in his life.

Date: Prof. D P Mishra

Place:

Preface

National Foundation for Corporate Governance (NFCG) was set up by the Ministry of Corporate Affairs, Government of India, in partnership with Confederation of Indian Industry (CII), Institute of Company Secretaries of India (ICSI) and Institute of Chartered Accountants of India (ICAI). In the year 2010, ICWAI and the National Stock Exchange also joined NFCG as its partners. NFCG ‘s mission is to promote better Corporate Governance practices in India by fostering a culture for promoting good governance, voluntary compliance and effective participation of different stakeholders and create a framework for best practices, structure, processes and ethics in business. In this way it intends to make a significant difference to the Indian Corporate Sector by raising the standards of Corporate Governance in India.

P.G. Dept. Of Business Management , Fakir Mohan University, Balasore, is a Govt. University Of Odisha and has pioneered the Post Graduate Degree in Business Management Program MBA , to carry out MBA Degree & Doing research and training inSpecialisedfields, on a regular basis.

The Research Study, ‘A Study on Corporate Governance Practices and Financial Performance Of Tata Consultancy Services in India” was initiated in 2011‐12 and completed in the current year 2012‐13.

The study is based on secondary research which involved a detailed scrutiny of corporate Governance Practices &FinancialPerformance OfTata Consultancy Services,A Leading IT Specified PSUin India. The information relating to Corporate Governance was obtained from the annual reports of the company for two time periods, financial years 2009‐10 and 2012‐13. Data on financial performance was obtained from the Capitaline database as well as the Annual Reports of the company. Those Factors were selected for the Study from various sources Which is defined by us &Due to inconsistencies in the availability of data eventually the analysis could be carried out for SomeFactors.

The uniqueness of this Study lies in the fact that this is the first time that the influence ofCorporate governance has been assessed on the financial performance of Tata Consultancy Services in India. The other distinctive feature of this Study is that for studying the corporate governance practices of the company we have considered not only the Mandatory and Non‐mandatory/Recommendatory requirements under SEBI clause 49 but also the measures taken by the companies voluntarily as suggested by the Ministry of Corporate Affairs in its Guidelines 2009. However we believe that good corporate governance practices need not be based only on compliance with Mandatory requirements or a few selected Non‐mandatory requirements. Good corporate governance practices should also be based on certain voluntary measures which go beyond mere compliance. For considering these ‘Beyond Compliance’ measures we have also examined the initiatives taken by the companies for creation of value for all its stakeholders including HRDevelopment, Quality Improvement for benefit of customers, Environment Protection,Health and Safety for its employees and for the welfare of the Society at large.

Abstract

This research paper attempts to analyze the level of corporate governance norms been adhered to by major IT companies of India as per guidelines of International Financial Corporation and as per the Corporate Governance norms of Securities and Exchange Board of India. It attempts to develop a conceptual understanding of correlation between various parameters of companies’ transparency, disclosures and provides comparative average scores of last three years of performance on a score card adopted. It is an empirical analysis of the corporate governance dimensions of high and low-performing companies with the phase of the research is based on the data gathered from the annual report disclosures of the companies. Sample are selected on the basis of Market capitalization assessment year 2011-12. Authors found varied level of differences in disclosures and transparency levels of Indian IT companies, as well as the analysis showcases the fact that different companies have different weight age on parameters analyzed as per Clause 49 of SEBI’s listing agreement.

To establish the influence of Corporate Governance parameters on the FinancialPerformance a combination of Multiple and Step‐wise Regression Analysis was undertaken.After assessing the influence of a series of corporate governance parameters on a selectedset of financial indicators, the Study has concluded that Corporate Governance has adefinite impact on financial performance of family managed firms. More importantly, it hasbeen observed that the initiatives taken by the companies for creating value for all itsstakeholders like Developmental and Promotional measures for its Employees, (i.e. HRinitiatives), Customers (Quality Improvement) and the Society (Environmental concerns)grouped as Beyond Compliance measures have come out as the single most decisive factorhaving a direct impact on Financial Performance. These value creation measures haverevealed a high and positive relationship with almost all financial performance variables in 2010.

Apart from these, governance practices relating to disclosures in the annual reports,aimed at sharing more information with the shareholders and investors which reflects ahigher degree of transparency in the balance sheets has also had a positive influence on thefinancial performance in terms of higher Market Capitalization and Tobin’s Q .It has been realized that Corporate Governance is vital for better management of any organization. Financial reportingand disclosure of any information are the key factors ofcorporate governance.

The study is expected to be of value to Investors, Stock Exchanges, Regulators, Researchersand even the Family Managed companies themselves as it brings out the long term benefitsof corporate governance and stakeholder value creation on company performance and

valuation.

P G Dept. Of Business Management,

Fakir Mohan University, VyasaVihar, Balasore.

Declaration

I hereby declare that the Dissertation project titled “ Corporate Governance Practices & Financial Performance Of Tata Consultancy Services“ is an original piece of research work carried out by me under the guidance and supervision of Senior Professor D. P. Mishra, P G Dept. Of Business Management, Fakir Mohan University, CA BhagabanPadhi, CA Majhar Majeed,Mr G.C.Maharana System Engineer at TCS Mumbi . Jyotirmaya Chandra, MBA, Utkal University, Bhubaneswar.

The information has been collected from genuine & authentic sources. The work has been submitted in partial fulfillment of the requirement of MASTER OF BUSINESS ADMINISTRATION (MBA) at P G Dept. Of Business Management, Fakir Mohan University.

Place: Balasore Signature:

Date: 30th Mar 2013 Rakesh Kumar Maharana

Acknowledgment

How can I express my sincere and informal thanks to my guide, reallythere is no word or there are no words than to say heartily “Thanks” to myguide Senior Professor D P Mishra, Dept. Of Business Management, Fakir Mohan University.

I have really no meaning of subject without her continuous, valuable and strong conceptual base guidance. No doubt it was my dream to reach to this level but there was only hope, she is the only person who has shown me real path and ladder to reach to the level of this kind and generated learning desire in me. Her ability to motivate me and make me understand about such difficult and current topic has triggered my desire of undertaking research. I am really thankful for her guidance.

I am extremely grateful to Professor D P Mishra, CAMajhar Majeed, CABhagban Padhyfor giving us an opportunity to carry out this pioneering study. I would alsolike to express our thanks to Jyotirmaya Chandra, MBA, Utkal University, Bhubaneswar.MrG. C. MaharanaSystem Engineer at TCS Mumbi, for his excellent coordination andsupport for analytical information.

I have received valuable guidance from By Senior Professor D P Mishra,FMU, Lacture Dr. Padmalita Routroy, FMU, Reader Dr. B B Mohaparto, FMU, and Lecture Dr. A B Jena, FMU, and Professor Bhagaban Das, HOD, FMU, of P.G. Dept. Of Management, FMU, Balaore, for conducting the study and we are grateful tothem for their direction.

I am also thankful to Lacture Ms. Padmalita Routroy, Professor D P Mishra Research Associates fortheir assistance in compilation of data,without the sincere encouragement and support from Faculties and all those at FMU itwould not have been possible to bring out this Report.

March 30, 2013 R. K. Maharana, MBA , FMU, BLS,

Balasore Jyotirmaya Chandra, MBA, UU, BBSR

Chapter	Topic	Page No.
I	Industry Profile	9
	Company Profile	10
	Introduction To Corporate Governance	12
	Major Issues in Corporate Governance	15
II	Objectives Of The Study	19
	Need & Scope Of The Study	20
	Review of Literature on Corporate Governance and its ImpactonFirm Financial Performance	21
	Research Methodology&Data Source	27
III	Corporate Governance Transparency And Disclosure, Data Analysis & Interpretation	32
IV	Findings	47
	Suggestions	50
	Annexure	51
	Bibliography	53

Executive Summary

National Foundation for Corporate Governance to promote bettercorporate governance practices in India, by fostering a culture of good governance,voluntary compliance and effective participation of different stakeholders and thus create aframework for best practices, structure, processes and ethics in business.

Corporate Governance as a system by which companies are directed and controlled. Boards of Directors are responsible for the governance of their companies. The role of shareholders’ in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. This definition stresses the leadership role of the board. Corporate Governance provides the structure for defining, implementing and monitoring the company’s goals and objectives and ensuring accountability to its shareholders and investors. Thus, the directors perform the stewardship role and are the guardians of the company’s assets and have been delegated the authority by the shareowners to act on their behalf. In developing economies including India, where ownership is concentrated and large shareholders dominate and influence management, the role of the board becomes all the more important to avoid conflict of interest and protect the interests of minority shareholders.

Before undertaking the present Study on ‘Corporate Governance Practices &Financial Performance OfTata Consultancy Services’ we carried out a review of research works done on the same subject. Several studies have been carried out in developed and eveloping markets to understand the relationship between corporate governance and firm performance. A study which combined all the corporate governance parameters into a combined index has concluded that better governed firms are relatively more profitable, more valuable and pay out more cash to their shareholders. Some of the key sub‐indices of corporate governance which have significantly influenced financial performance are Minority Shareholders’ Rights, Ownership Pattern, Disclosures of Transactions with Related Parties,

Executive and Director Compensation and Board procedures. Most of the studies in developing countries have concentrated on a few selected parameters of corporate governance relating to ownership such as board size, board independence (adequate number of independent directors on the board), promoters’ control on board, insider ownership and ownership concentration, CEO and board autonomy, to assess their impact on financial performance of firms and firm value. The association between corporate governance and financial performance is driven more by board structure sub‐index in Korea, where it is positively associated with higher profitability.

Industry Profile

IT Sector Industry are in adopting the best practices in the areas of Corporate Governance. Even in a fiercely competitive business environment, the Management and Employees of the Company are committed to uphold the core values of transparency, integrity, honesty and accountability which are fundamental to the Group. The Company retains focus on its resources, strengths and strategies for creation and safeguarding of shareholders’ wealth and at the same time protects the interests of all its shareholders.

The Corporate Governance philosophy is to ensure transparency, disclosures and reporting that complies fully with laws, regulations and guidelines, and to promote ethical conduct throughout the organization, with the primary objective of enhancing shareholders value, while being a responsible corporate citizen. The Company is committed to conforming to the highest standards of corporate governance in the country. It recognizes that the Board is accountable to all shareholders and that each member of the Board owes his/her first duty for protecting and furthering the interest of the Company.

Companies philosophy on Corporate Governance is founded upon a rich legacy of fair, ethical and transparent governance practices, many of which were in place even before they were mandated by adopting highest standards of professionalism, honesty, integrity and ethical behavior. Through the Governance mechanism in the Company, the Board along with its Committees endeavors to strike the right balance with its various stakeholders. The Corporate Governance philosophy has been further strengthened with the implementation, a few years ago, by the Company of the Tata Business Excellence Model, the Tata Code of Conduct applicable to the Company, its directors and employees. The Company is in full compliance with the requirements of Corporate Governance under Clause 49 of the Listing Agreement with the Indian Stock Exchanges. With the listing of the Company’s Depositary Programme on the New York Stock Exchange, the Company is also compliant with US regulations as applicable to Foreign Private Issuers (non-US listed companies) which cast upon the Board of Directors and the Audit Committee, onerous responsibilities to improve the Company’s operating efficiencies. Risk management and internal control functions have been geared up to meet the progressive governance standards.

Over the years, the Board has developed corporate governance guidelines to help fulfill corporate responsibility to various stakeholders. This ensures that the Board will have the necessary authority and practices in place, to review and evaluate our operations when required. Further, it allows the Board to make decisions that are independent of the

Management. Our corporate governance philosophy is based on the following principles:

• Satisfy the spirit of the law and not just the letter of the law. Corporate governance standards should go beyond the law.

• Be transparent and maintain a high degree of disclosure levels. When in doubt, disclose.

• Make a clear distinction between personal conveniences and corporate resources.

• Communicate externally, in a truthful manner, about how the Company is run internally.

• Comply with the laws in all the countries in which the Company operates.

• Have a simple and transparent corporate structure driven solely by business needs.

• Management is the trustee of the shareholders’ capital and not the owner.

- Report of the Kumar Mangalam Birla Committee on CorporateGovernance February 2000

- Draft Report of the Kumar Mangalam Committee on CorporateGovernance September 1999

- Desirable Corporate Governance in India - A Code April 1998

Company Profile

"TCS’ vision is to decouple business growth and ecological footprint from its operations to address the environment bottom-line. The green approach is embedded in our internal processes and services offerings...... From green buildings to green IT to a green supply chain, our mantra is to grow sustainably and help our customers achieve sustainable growth through our green solutions and service offerings" - N Chandrasekaran, CEO & MD, TCS

TCS’ Sustainability Initiatives – The Three Pillars

Error! Bookmark not defined.Being an organization of more than 250,000 employees, our infrastructure, facilities, and associates have a large impact on the society and environment. We aim to run our operations in a socially and environmentally sustainable manner. For instance, a large portion of the infrastructure for our operations in this decade is being built or yet to be built. We aim to build these as “greener infrastructure.”

Corporate Social Responsibilty The guiding principle of TCS’ CSR programmes is “Impact through Empowerment.” TCS has a diverse range of global CSR initiatives in the areas of education, health and environment: volunteering, funding and pro bono leveraging of our IT capabilities.

Solutions for our Customers With a dedicated eco-sustainability team working across industry verticals, we aim to provide next-generation sustainability services to our customers. We integrate sustainability into their business strategies and unlock environmental efficiencies in their entire value chain.

In 2010-11, TCS supported its local communities in various ways in the United States:Supported the victims of the 2010 Chilean earthquake Conducted IT educational programs for high school students in Cincinnati Raised support and awareness for diabetes prevention through a series of marathon sponsorships.

TCS achieves Platinum+ status in Business in the Community’s (BitC) Corporate Responsibility Index (CRI) as of April 1, 2012

Successfully deployed in India and abroad, TCS’ Computer-Based Functional Literacy (CBFL) solution is an innovative teaching method that uses theories of cognition and pedagogy, and multimedia to impart learning. CBFL has the potential to lift our country’s literacy rate in record time.

Computer-Based Functional Literacy Program is a corporate-wide initiative to address and overcome impediments of illiteracy through information technology. With computers and flash cards, we made use of animated graphics patterns for visualization and audio appreciation. This method ensures one learns within 40 to 45 hours of reading.

Tata Consultancy Services is an IT services, consulting and business solutions organization that delivers real results to global business, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT and ITenabled, infrastructure, engineering and assurance services. This is delivered TM through its unique Global Network Delivery Model , recognized as the benchmark of excellence in software development. A part of the Tata Group, India’s largest industrial conglomerate, TCS has a global footprint and is listed on the National Stock Exchange and Bombay Stock Exchange in India.

The Tata Group is committed to benefit the economicdevelopment of the countries in which it operates. NoTata company shall undertake any project or activity tothe detriment of the wider interests of the communitiesin which it operates.A Tata company’s management practices and businessconduct shall benefit the country, localities and communitiesin which it operates, to the extent possible and affordable,and shall be in accordance with the laws of the land.A Tata company, in the course of its business activities,shall respect the culture, customs and traditions of eachcountry and region in which it operates. It shall conformto trade procedures, including licensing, documentationand other necessary formalities, as applicable.

LocationsThe Tata Consultancy Services campus at Lucknow, Uttar Pradesh.

               India: TCS has development centres and/or regional offices in the following Indian cities: Ahmedabad, Bangalore, Baroda, Bhubaneswar, Chennai, Coimbatore, Delhi, Gandhinagar, Goa, Gurgaon, Guwahati, Hyderabad, Jamshedpur, Kochi, Kolkata, Lucknow, Mumbai, Nagpur, Noida, Pune and Trivandrum.

               TCS had a total of 265,583 employees as of 31 October 2012, of whom 220,835 were based in India and 17,748 in the rest of the world.

               Prof. Clayton M. Christensen, Dr. Ron Sommer and Mr. S. Ramadorai, Directors, retire by rotation and being eligible have offered themselves for re-appointment.

Corporate Governance of TCS Is Strong leadership and corporate governance have been TCS' hallmark. Meet our Board of Directors and browse through key governance-related documents.

Board of Directors

  Non-Executive Board Members

               Cyrus Mistry, Chairman , S Ramadorai, Vice Chairman, Prof. Clayton M Christensen, Director, Aman Mehta, DirectorDr. Ron Sommer, Director. Venkatraman Thyagarajan, Director , Dr. Vijay Kelkar, Director. Ishaat Hussain, Director. Phiroz A Vandrevala, DirectorOP Bhatt, Director

 Executive Board Member

               N Chandrasekaran, Chief Executive Officer and Managing Director

               Mrs. Laura M. Cha, a Director of the Company since November 2, 2006,  who retires by rotation at the forthcoming AGM, has conveyed her decision not to offer herself for re-appointment. She is also the Chairperson of the Shareholders/Investors Grievance Committee. The Directors place on record their appreciation of the valuable

 contribution made by her.

The Directors thank the Companys employees, customers, vendors, investors and academic institutions for their support to the Company.

The Directors also thank the Government of various countries, Government of India, State Governments in India and concerned Government Departments/Agencies for their co-operation.

The Directors appreciate and value the contributions made by every member of the TCS family globally.

On behalf of the Board of Directors,

Mumbai R. N. Tata

May 26, 2012 Chairman

Introduction to Corporate Governance

The governance of the corporation is now as important to the worldeconomy as the government of countries.

Corporate governance has been defined variously by a number of scholars. The variation in these definitions stems primarily due to differences in perspectives regarding the ambit of corporate governance.

Corporate governance deals with ways in which suppliers of finance to corporations assure themselves of getting a return on their investment. corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, of corporations and of society.

Within companies, corporate governance issues generally arise from the divergent roles ofAgency and Stewardship. The shareowners transfer their capital to the managers who playthe role of agents. Stewardship refers to the role of directors who act as the guardians ofthe company’s assets and have been delegated the authority by the shareowners to act ontheir behalf. To maintain an effective relationship between providers of funds to thecompany and the mangers of the company, a high level of trust must exist between both.The Board serves as the conduit between the two.

The foundation of Trust among shareholders, directors and managers can be built on thefour main pillars of corporate governance. These are Transparency, Accountability, Fairnessand Responsibility. These four pillars have provided the foundation for the six principles ofcorporate governance, instituted by OECD and expressed in its ‘Principles of CorporateGovernance (2004)’. These six principles are:

1. Ensuring the basis of an Effective Corporate Governance Framework‐ transparentand efficient markets, consistent with rule of law and clear division of responsibilitiesamong supervisory, regulatory and enforcement authorities

2. The Protection of Rights of Shareowners and key Ownership functions ‐ a frameworkthat protects and facilitates exercise of the rights of shareholders

3. Equitable treatment of shareowners – all shareholders including minority and foreignshareholders to be treated equitably and they have a right to effective redressal ofviolation of their rights.

4. Role of all Stakeholders in corporate governance ‐ active co‐operation betweencorporation and all stakeholders; shareholders, customers, suppliers, employees,investors and society in creating wealth, jobs and sustainability of financially soundenterprises.

5. Disclosures and Transparency – timely and accurate disclosures on all materialmatters relating to the corporation including financial performance, ownership andgovernance.

6. Responsibilities of the Board – framework to ensure strategic guidance to thecorporation by the Board, effective monitoring of the management of thecorporation and Accountability of the Board to the corporation and its shareholders

From a broader perspective of the economic, political and legal environment in which thecompanies operate, corporate governance is considered as the foundation of reforms whichstrengthens and modernizes a country’s economy in the global market. The more widelythe four principles of corporate governance are applied, the more equitably and effectivelywill resources be allocated. International guidelines have been published to advance thebenefits of corporate governance more widely in promoting economic growth, widening thecapital market, encouraging business integrity and thus help in alleviating poverty.

Corporate governance in its broadest sense is therefore the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to ensure accountability forthe stewardship of these resources. The aim is to align as nearly as possible the interests of individuals, corporations and society.

In the words of Anne Simpson, ‘Corporate governance is the meeting of the private interest and the public good: Shareholders rely upon effective governance for the investment returns which fund pensions and insurance and protect savings; for companies it underpins both enterprise and accountability; for the wider community transparency and accountability in governance is vital for ensuring prosperity and the contribution to the public purse upon which social welfare relies.

Importance of Corporate Governance

Good corporate governance in companies and also across the whole economy helps in providing a level of assurance necessary for the appropriate performance of a market (OECD, 2004). If the governance is weak, equity markets will be thin and thus there will be slower economic growth. On the other hand, in countries where corporate governance systems are strong (like stronger accounting standards), better investment and growth performance can be achieved (Gugler, et al., 2003).

•Corporate governance is catching up fast as a major instrument of corporate

reform in several countries

•Good governance emerged as a major incentive for corporate growth and in pursuing global business aspirations

•Good companies are going beyond the mandatory requirements in adopting best practices in governance

•Greater interaction and sharing of knowledge is gaining ground across countries in setting effective governance frameworks

•Disclosure and transparency are emerging as the key determinants of good governance

•As the financial markets grow and the developing countries corporations increasingly explore global financial markets for resources and business, harmonization of the corporate governance increases and intensified

The pace of developments in strengthening corporate governance in different countriesprovides an insight on the urgency with which strong governance norms are devised andimplemented all over the world

Objectives of Corporate Governance

• Fairness to all Stakeholders

• Greater transparency through better disclosures

• Greater Accountability of Executive Management to stakeholders.

• Enforcement & Verifiability of various Acts, Regulations,Recommendations, etc.

• Creating value for the shareholders

• Protecting interests of other stakeholders.

Essentials of Good Governance

• Quality and clarity of norms

• Enforcement systems and structure processes

• Dialogue and discussion and awareness

Factors affecting governance

• Integrity of the Management

• Ability of the board

• Adequacy of the process

• Commitment level of individual board members.

• Quality of corporate reporting

• Participation of stakeholders in the management.

Applicability

•All listed companies including PSUs and excluding Mutual funds.

•All companies that are incorporated under other statutes, so far the recommendations do not violate their respective statutes and guidelines or directives issued by the relevant regulatory authorities.

Implementation Schedule

•By all entities seeking listing for the first time, at the time of listing.

•having a paid up share capital of Rs 3 crores and above or net worth of Rs 25 crores or more at any time in the history of the company.

Board of Diectors

•Fifty percent of the Board of Directors should be non-executive & at least 1/3^rd should be independent, if the Chairman is Non-Executive. Else 50% should be independent

•No director should be a member in more than 10 committees or act as Chairman of more than 5 committees across all companies. Committees reckoned are Audit Committee and Shareholders/ Investors Grievances Committee

•Directors should be judicious mix of experts drawn from different field of specialization.

•Board should have adequate knowledge of the business of the enterprise.

Disclosures and Reports

• Non-Executive Directors’ pecuniary relationship or transactions with the company has to be disclosed in the Annual Report.

• Disclosures on the remuneration of the directors

• Management Discussion and Analysis report should form part of directors’ report or in addition thereto it should form part of the annual report to the shareholders.

Major Issues in Corporate Governance

Having a good corporate governance philosophy and a well documented corporategovernance framework is imperative for business enterprises, (both listed and unlisted), forinvestors including Banks, Financial Institutions and above all for the State.The major incentive for corporations to adopt internationally accepted governancestandards is that these standards assist them in achieving their aim of attracting investment,both domestic and international. For States, adoption of governance standards, enablesthem to strengthen their economies and encourage business probity.

The convergence of both these standards has its impact on the development of CapitalMarket with different categories of players.A well developed capital market is an indication of economic growth and many studies haveemphasized the linkage between capital market development and improved resourceallocation and economic growth. Other studies have evidenced that development of capitalmarket is related to protection of minority investors which is an essential element of goodcorporate governance. (La Porta et al., 1997, 1998 and Gleaser, Johnson and Shleifer,).

The effectiveness of corporate governance is dependent on myriad factors and cannotsimply be measured by profitability, growth or share performance. There are many variables that affect these measures. However it would be a fair assumption to make that goodgovernance helps to maintain market confidence and financial stability.

All countries have their own unique system of corporate governance, reflecting differenteconomic, cultural and legal environment. While rules and regulations are central to goodgovernance, an overly stringent regulatory system such as Sarbanes Oxley Act in the US maynot have the desired effect.Thus, Litvak, 2007 and Romano, 20094 in their studies have supported a more flexibleapproach to governance, which leaves room for firms to adjust their governance to firmspecific needs. This is reflected in the Comply or Explain rules of UK Combined Code ofCorporate Governance. (Financial Reporting Council, 2006).

According to Sir Adrian Cadbury, how widely the benefits of good governance aredistributed depends on the institutional and structural context within which firms carry outtheir activities. Corporations work within a governance framework which is set by laws ofthe country, regulations and the company’s own constitution set by those who own andfund the company and by the expectations of those it serves. The framework will differ fromcountry to country and its effectiveness depends on its coherence and on the degree ofreliance that can be placed on its constituent parts.

Regulatory Environment of corporate governance although the ultimate authority i.e SEBI, the capital markets regulator, is an independent body, the weakenforcement mechanism in the country is a key concern for members of theIndia Task Force. Significant government action is needed to improve theenforcement and surveillance functions of regulators in India. Implementation of corporate governance is mainly through the Clause 49 of the Listing Agreement that the companies make with the stock exchanges.

So far as Emerging Challengesof corporate governance is concerned, While corporates have been quite successful in placing effective processes that will ensurecompliance with the listing norms, several challenges exist in the governance landscape.Though the Chairman and CEO are separated in several companies, quite often it is foundthat a family member who is a non executive director is chairman and another familymember is the CEO.

Such arrangements meet the compliance requirements in letter butnot in spirit. Similarly, in some it was found that meetings of several committees areclubbed together to save on time. Though time is an important element that needs toconserved with great care, the focus of the discussion should not be lost in trying to savetime, which might lead to a situation where committees are called in a routine manner tofulfil the regulatory requirement. Significant improvements are required in respect to thereporting of subsidiary company operations as also related party transactions, a generalfeeling that is commonly shared by most of the practicing community on the corporategovernance. Evaluation of the performance of the Board and the sub committees inparticular the Audit Committee needs to be further strengthened and streamlined.

Looking Ahead the Corporate governance both in respect of policy and practice made quantum leap in India.On the policy side, India has one of the best frameworks for corporate governance. On thepractice side, there is great improvement in the standards of reporting, disclosure andcompliance of companies. Given more than one hundred thousand companies registered,of which about 5000 are listed; monitoring corporate governance in Indian companies is anintensely challenging task.Notwithstanding the size of numbers, improvements are evident in various aspects ofgovernance. This study which examined 42 companies on the governance aspects findsthat companies have complied with most of the norms of the listing agreement and somehave gone beyond in fulfilling a few more better standards.

Indian economy is experiencing unprecedented growth and receiving intense interest of the international investing community. Indian companies can derive great benefits from this extremely conducive environment by strengthening the company performance as also its governance standards. International investing is increasingly governed by quality governance as evidenced from a number of studies and it becomes imperative for Indian companies to sustain the pace of reforms in corporate governance. While Clause 49 deals with what is mandatory, good companies can go extra mile in devising effective ways of governance that could lead to efficient markets.

Corporate Strategy

Growth has been the key theme of TCS' journey so far. Learn more about TCS and the strategy it is pursuing for continued longer-term growth.

Corporate Overview

Tata Consultancy Services Limited (TCS) is an IT services, business solutions and outsourcing organization that delivers real results to global businesses, ensuring an unmatched level of certainty. TCS offers a consulting-led, integrated portfolio of IT and IT-enabled services delivered through its unique Global Network Delivery Model™ (GNDM™). section.

The Growth Opportunity

TCS operates in a large, growing global market for IT and IT-enabled services. Globally, organizations are spending more on IT as new technologies emerge, offering unique opportunities to gain a competitive advantage. Moreover, industries and geographies that lagged behind others in leveraging technology are now catching up. Further, the proportion of IT services budgets that is spent on external providers is going up as the shelf-life of technologies is reducing and corporations are looking for greater efficiency and variability in their costs. With a minuscule market share in this growing market, there is much headroom for TCS’longer-termgrowth.

Strategy for Longer-term Growth

TCS’ strategy for longer-term growth is to continually extend the core IT services business by expanding its geographic reach, industry coverage and service capabilities and deepening existing client relationships, building or acquiring emerging businesses and adopting or creating new business models and business solutions through continuous innovation.

Key elements of this strategy are summarized here:

Customer-centricity:We seek to build, nurture and deepen customer relationships so we are trusted strategic partners to our customers. Our industry-segmented, customer-centric organization is an important enabler that has ensured high levels of accountability, superior customer service and intimacy.

Full Services Capability:TCS has been investing in building a comprehensive, integrated portfolio of services to capture the entire value chain of IT, presenting a compelling value proposition for global enterprises making us a one-stop shop for many key clients, significantly deepening the relationship and boosting our share of the wallet.

Global Network Delivery Model™ (GNDM™):TCS' GNDM™ lets us seamlessly and uniformly deliver services to global customers from multiple locations across India, China, Europe, North America and Latin America. Teams separated by time zones collaborate on projects, leveraging all of TCS' assets while subscribing to one global service standard. It uses multiple levers of time zone, language, skills and local business knowledge to deliver high quality business solutions seamlessly across the globe, using a globally connected workforce, integrated delivery processes and multi-tiered infrastructure. This model developed by TCS is now recognized as the benchmark of excellence in software development. For large clients expanding beyond their home markets, the scale and depth of our GNDM™ capability makes us their preferred strategic partner.

Strategic Acquisitions: While primarily focusing on organic growth, TCS is also open to selective strategic acquisitions in order to penetrate select markets, strengthen verticals and enhance service offerings.

Non-linear Business Models:TCS has been building non-linear growth businesses that can enable revenue growth without commensurate headcount growth. Non-linearity in the existing businesses comes from productivity-enhancing tools, frameworks, solution accelerators and managed services engagements.

In addition, TCS is pursuing three strategic initiatives for non-linear growth:

Software Products (Asset Leveraged Solutions)
Platform-based BPO services (Process Clouds)
iON – an IT-as-a-service solution for small and medium business

Objectives Of The Study

To study the adherence of governance norms by major IT Companies of India by analyzing major difference between corporate governance practices within the sector. It leads to the understanding of the weightage given to particular parameters by different companies to the mandatory and non mandatory corporate governance norms.

The objective of our study on ‘Corporate Governance and Financial Performance of TATA Consultancy Services’ is to explore the relationship between corporate governance practices and financial performance of these TATA Consultancy Services. How TCS implements corporate governance practices to increase the revenue in competitive world, competing with the competitors’ strategy. Some other Secondary objectives are as follows.

v To understand the concept of Corporate governance

v To document the corporate governance practices in various groups of industry

v To examine the practice of the corporate governance for Board of Director

v To study the transparency and related disclosure

v To study shareholder's satisfaction and practice for their various claim

v To analyse the disclosure of financial information

Need & Scope Of The Study

The scope of the study is very wide. All units registered under thecompanies Act 1956 can be the census for the study. However, theresearcher has selected 5 groups. All these groups are selected from thepublished issue of the Business ‘Today-March 2012-13’ titled “India's top IT Sector Company”. All criteria related to corporate governance practice & Financial performance have been covered for the study.

This study is important for the two major aspects. Firstly, it can giveunderstanding of practical approach or implementation overview. Secondly,it also gives comparative overview of corporate governance provisions inIndian corporate sector. It is dynamic study in nature. So the significance ofthe study is very high. Further, some observations may be useful toacademicians, industry people an policy maker.“Transparency is the core aspect of corporate governance”Another important aspect in the transparency is commission paid tothe non-executive directors; because what amount of commission nonexecutivedirector draws makes impact on stakeholders trust. Auditcommittee and remuneration committee decides and fix up the sitting feesand above that the commission should not be paid. Sitting fees are decidedin advance and has to be agreed by all the directors. It should also be as perrules of organization. If commission is paid above the fees, the companyshould mention the reason.In addition to the commission to the non executive direction, oneimportant disclosure is disclosure as per clause 49 of the listing.

LIMITATIONS OF THE STUDY : -

1. It is secondary database study so the limitation of the secondary datareveals with this study.

2. Researcher has evaluated 63 parameters but it may be more than thatfor further research.

Review of Literature on Corporate Governanceand its Impact on Firm Financial Performance

Literature Review

Dilek Demirbas, Andrey Yukhanaev (2011) examined the role of the board of directors in Russia with specific attention to their independence, employee relations and ability of successful adaptation of the international standards. The authors used a survey questionnaire to provide an empirical example from a transition economy to the corporate governance literature by exploring the attitudes of the 55 board directors from 30 listed companies on the Russian Trading System (RTS) Stock Exchange. Authors concluded that the board of directors as an important instrument of efficient and good corporate governance practice. More surprisingly, they are also in favour of employee representatives on the board of directors and agree that board size and composition should be enhanced by employee representatives on the board.

Yiming Hu, Siqi Li, Thomas W. Lin, Shilei Xie (2011) attempted to examine whether Chinese banks exercise effective monitoring over borrowers in two lending decisions, including loan interest rates and loan renewals. The author used a sample of Chinese public industrial firms from 2000 to 2005, and performed multivariate regression analysis to investigate whether banks adjust their loan interest rates and consider loan renewal decisions in response to borrowers financial performance. The authors also examined these bank lending decisions before and after 2003, when the major banking reforms started to take place in China. A negative relation was found between the loan interest rate spread and the financial performance of borrowers. However, a negative relation was found between loan renewals and the financial performance of borrowers, consistent with firms in financial difficulties being in need of more funding and hence more likely to get its bank loans renewed. Additionally, it was found that the factors banks consider when making loan decisions vary before and after 2003.

Sungho Choi, Iftekhar Hasan, Maya Waisman (2009) investigated the impact of corporate governance on the risk and return of Korean banks during the 10 years that followed the financial crisis era. In particular, they investigated the ownership structure of banks, the extent of involvement of foreign institutions and investors in ownership and board membership of Korean banks, and the heterogeneity of board structure on bank performance. The authors found front research that foreign ownership, the extent of external board involvement, and the presence of foreign directors on the board are associated with significantly higher bank returns. Although foreign ownership and the number of outside board directors are associated with lower risk, the involvement of foreign board members is positively associated with risk

Racha Ghayad (2008) aimed to study the operation of Islamic banks and the elements which determine their performance. This paper supposes that corporate governance of Islamic banks imposes an important constraint on Islamic banks operations. The author found from the paper that the performance of an Islamic bank – as a company based on principles of Islam – is affected not only by the internal variables of quantitative nature (for example financial ratios) but also by the internal qualitative variables like the managerial variables. Moreover, the performance of an Islamic bank and a conventional bank should not be measured in the same way because of their divergence on the level of the objectives. The Shari’a member must have a qualification in finance and commerce to ensure better quality of supervision and consultation.

Anne Abraham, Hemant Deo, Helen Irvine (2008) aimed to focus on a number of unexpected disclosures by major Australian banks, to highlight the subjectivity of financial reports and their failure to present an accurate portrayal of the underlying realities, and proposed that corporate governance disclosures are required to provide reassurance that financial reports are trustworthy. The author found that disclosures about corporate governance practices play a strong legitimizing role, enhancing perceptions that financial reports correspond with organizational realities.

Morrison Handley-Schachler, Linda Juleff, Colin Paton (2007) attempted to overview the goals of corporate governance in the financial services sector from a theoretical perspective. The broad parameters of corporate governance are discussed, from a theoretical perspective. The main attention of this paper is banks and a key issue like the typical structure of their balance-sheets – high leverage, and a mismatch in their assets and liabilities, mean that it is imperative that they keep lenders' confidence, and imply a wider duty of care for bank directors. From survey the authors concluded that External regulators (FSA) and auditors have vital oversight functions, which should encourage sound governance practices.

Andy Mullineux (2006) considered the implications of the banks fiduciary duty to their depositors (as well as the shareholders) and the government's fiscal duty to taxpayers (in the presence of deposit insurance) for the corporate governance (CG) of banks. The author outlined recent contributions to the literature and assessed in the context of the asymmetric information literature relating to banking. . From survey the authors found that the good CG of banks requires regulation to balance the interests of depositors and taxpayers with those of the shareholders.

Firm Performance

Firm performance in the literature is based on the value of the firm. Studies show that corporate governance affects firm value as a result of reduced expropriation by insiders and improvement in the expected cash flows that can be distributed to investors (Black, Jang & Kim 2006; Claessens & Fan 2002; Gomper, Ishii & Metrick 2003; Klapper & Love 2004).

Four different approaches to firm value have been identified in the corporate finance literature (Qureshi 2007). They are: the financial management approach which focus on the estimation of cash flows and investment levels before identifying and evaluating the impact of financing sources on firm value; the capital structure approach which studies the impact of capital structure changes on the value of firm and how different factors impact directly or inversely, the debt and equity component of the firm capital structure; the resource based approach which explains the value of firm as an outcome of firm’s resources; and finally, the sustainable growth approach is a summary of the above three approaches to firm value, taking into account the firm’s operating performance, its investment and financing needs, the financing sources, and its financing and dividend policies for sustainable development of firm’s resources and maximization of firm value.

Tobin’s Q

Tobin’s Q is a market-based measure of profitability widely used in corporate governance studies as a proxy for firm performance (Agrawal & Knoeber 1996; Gomper, Ishii & Metrick 2003; Hermalin & Weisbach 1991). It is defined as the ratio of the market value of assets to the replacement value of assets (Bhagat & Jefferis 2002), which shows the financial strength of a company. Min and Prather (2001) states that according to the value additivity principle, the market value of a firm is the net present values (NPV) of the current project carried out by the current management plus the NPV of all future growth opportunities. To increase the market value of the firm, management, must accept projects with a positive NPV. Accepting projects with a positive NPV will cause the market value of the firm to exceed the book value of the firm, which will result in Tobin’s Q being greater than one. Tobin’s Q is both used in developed and developing financial markets.

Return on Assets

Return on assets (ROA) is also a measure of performance widely used in the governance literature for accounting-based measures (Finkelstein & D'Aveni 1994; Kiel & Nicholson 2003; Weir & Laing 2001). It is a measure which assesses the efficiency of assets employed (Bonn, Yoshikawa & Phan 2004) and shows investors the earnings the firm has generated from its investment in capital assets (Epps & Cereola 2008). Efficient use of a firm’s assets is best reflected by its rate of return on its assets. ROA is an indicator of short-term performance which is calculated as net income divided by total assets (Finkelstein & D'Aveni 1994). Since managers are responsible for the operation of the business and utilization of the firm’s assets, ROA is a measure that allows users to assess how well a firm’s corporate governance system is working in securing and motivating efficiency of the firm’s management (Epps & Cereola 2008).

Return on Equity

Another important measure of firm performance used in corporate governance research is eturn on equity (ROE), which is also an accounting-based measure (Baysinger & Butler 1985; Dehaene, De Vuyst & Ooghe 2001). The primary aim of an organization’s operation is to generate profits for the benefit of the investors.

Therefore, return on equity is a measure that shows investors the profit generated from the money invested by the shareholders (Epps & Cereola 2008). It is defined as the net income divided by common equity.

Impact of Accounting Information on Share Value

Changes in the share prices indicate that new information is incorporated into the share price through the activities of the investors in the market. An announcement of accounting earnings can impact share prices due to their potential information content. Price changes, in relation to information as it becomes available, have a more significant impact on smaller firms than larger firms. There tends to be more information available for larger firms. As the firm size increases, share prices incorporate information from numerous sources and there is relatively less unexpected information when earnings are announced ultimately (Deegan 2004).

Across the globe.Corporate governance in India is evident from the various legal and regulatory frameworks and Committees set relating to corporate functioning comprising of the following:

Companies Act, 1956,

Monopolies and Restrictive Trade Practices Act, 1969

(replaced by new Competition Law),

Foreign Exchange Management Act, 2000,

Securities and Exchange Board of India Act, 1992,

Securities Contract Regulation Act, 1956,

The Depositories Act, 1996,

Arbitration and Conciliation Act, 1996,

SEBI Code on Corporate Governance,

CII Code of desirable corporate governance (1998),

UTI code of governance (1999),

Kumar Mangalam Birla Committee on Corporate Governance (2000),

Naresh Chandra Committee (2002),

N.R. Narayanamurthy Committee (SEBI 2003).

Directors are the major instrument of the corporate governance in the modern corporates. Many companies, excepting a few public sector have complied with the requirement in regard to proportion of the representation of the independent directors in the boards. Though big corporates find good quality independent directors with relative ease, the same is emerging as a major challenge for the mid and small cap companies who appear to be facing sizeable problem in finding right number of directors with right qualities and qualifications. At present, nominee directors are treated as independent directors, but SEBI is proposing not to consider nominee directors as independent directors, in which case, the challenge becomes much tougher for a host of companies. In view of the representation of independent directors becoming a prominent aspect of the corporate governance, it is important that companies take this aspect with greater focus and seriousness.

Good Governance Impact Financial Performance

Several studies focusing on developed and emerging markets have concluded that well governed companies have registered better performance in financial terms. Adoption of best practices in Governance has led to:

a) Improved access to external financing resulting in greater efficiencies due to greater knowledge of investors with regard to the company’s strategies

b) Lower cost of capital

c) Improved operational performance through more efficient management and better asset allocation

d) Better financial performance and company valuation as seen in:

i) Improved Economic Value Added (EVA) ‐

A Credit Lyonnais South Asia ( CLSA) 20015 study of 100 largest emerging markets, has shown that best corporate governance practices in emerging markets had 8 percentage points higher EVA than the average of all firms in the country.

ii) Improved Profitability –

An ABN/AMRO Study of Brazil based firms6 with CG Ratings showed that their P/E ratios were 20 percent higher, RoEs at 45 percent higher and Net margins 76 percent higher than those with below average CG practices. A Study by L Brown and M Caylor of Georgia State University7 in 2004 has shown that well governed companies outperformed poorly governed ones by 18.7 percent in terms of RoI and 23.8 percent for RoE.

iii) Higher Returns on Assets –

Research by Sung Je Byun of Columbia University in 20068 concluded that firms with superior corporate governance practices had higher RoE and better RoA and RoC. (Return on Capital). For top rated companies the RoE was 14.35 percent while for the bottom level companies it was 9.20 percent . RoA of top rated companies was also higher at 4.81 percent compared to 3.46 percent for the bottom based companies. Return on Capital (RoC) was also better at 10.26 percent compared to 6.69 percent .

iv) Higher Firm Valuation and Share Performance –

The Study had identified higher valuation premiums in terms of Price/Cash Flow, Price/Earnings, Earnings Value/EBITDA and Price/Book Value More recent research by P Gompers, J Ishii and A Metrick11 on 1500 large US companies in the 1990s has indicated that superior corporate governance practices retain a significant impact on a company’s market value and higher returns to shareholders. US based firms with better governance had faster sales growth and were more profitable than their peers.

v) Reduced Share Price Volatility ‐

The study by Brown and Caylor12 referred above also concluded that well governed companies had a share price volatility which was 5.6 percent below average.

vi) Reduced risk of corporate crises and scandals ‐

Companies with good corporate governance practices are known to incorporate effective risk management systems and are hence better equipped to cope with crises.

A Study by J Derwall and H Vervijmeren, ‘Corporate Governance and the Cost of Equity Capital: Evidence from GMI’s Governance Ratings’ in 2007 for US companies and H Ashbaugh Skaife and Ryan la fond 200613, concluded that firms with better governance present lower agency risks resulting in shareowners’ and lenders’ willingness to provide capital at a lower cost to the company.

Research Methodology & Data Source

It is an empirical study,All Data are collected from secondary sources such as newspaper journal magazines, internet websites etc, analysis is made on the basis of effect of the practices of corporate governance to financial performance to what extent.For this studyresearcher has used secondary data as a source of information for thusresearch e.g. the Annual reports and websites and other publications.

Parameters based Score card method has been adopted for comparative analysis, on the basis of Clause 49 under listing agreement norms set by SEBI and Kumar Mangalam Birla Committee Recommendations. Annual reports of 4 major companies have been analyzed and selection of the companies are based on its market capitalization as on financial year ending 2012 to ascertain its level of governance mechanism. Scorecard method has been adopted to analyze the level and percentage of norms adherence by different Company.

The Capitaline Database of Annual Reports of listed companies was used for the purpose of collecting data on corporate governance as well as financial performance for the two reference periods – 2005‐06 and 2009‐10. During the scrutiny of Annual Reports we came across several data gaps, especially for the earlier year. Some of the companies were not even present in the earlier year. Hence the final data entry could be done.

Regression Analysis: A combination of multiple and step‐wise regression has been used for our analysis. As observed in other similar studies, control variables like size of the companies, have not been used to study the impact of a set of independent variables on the dependent variable, i.e., the different financial variables. This was due to the small size of the sample in various asset classes.

The study depended onresults emerging from the step‐wise regression analysis, though the output ofmultiple regression analysis helped for determining the initial interaction among thevariables. In this way, the independent variables which have very high influence onthe dependent variable were considered.

In the second step the variable which hasthe next highest influence is considered. This process continued till a stage isreached when the independent variables have no significant influence on thedependent variable, going by acceptable levels of p‐values and t‐values. This helpedavoiding multicollinearity problems among the independent variables.

Q4 FY13 Performance Highlights

Revenue:

INR Revenue of `164,301 Mn, growth of 2.2% QoQ and 23.9% YoY

USD Revenue of $3,040 Mn, growth of 3.1% QoQ and 14.8% YoY

Constant currency revenue growth of 4.0%, volume growth of 4.4% QoQ

 Profit:

Operating Income at ` 43,584 Mn, Operating Margin of 26.5%

Net Income at ` 35,969 Mn, Net Margin of 21.9%

 Demand:

52 new clients added during the quarter; Active clients: 1,065

11 large deals signed across verticals

 People:

Gross addition of 20,098 associates, closing headcount: 2,76,196

Utilization at 82.0% (ex-trainees) and 72.2% (including trainees)

Employee retention continues to be best in industry; LTM Attrition (IT Services)at 9.4%

Diversity

Ø 32.4% of our workforce are women

Ø 60.8% of our associates have more than 3 years of work experience

Ø Associates from 118 nationalities

Composition of International Workforce (Consolidated)

Corporate_Governance_Report_Quarter_ended_Mar_31_2013

Corporate Governance Transparency & Disclosure, Data Analysis & Interpretation

Identification of Parameters: The study is based on desk research and econometricanalysis of data pertaining to corporate governance and Financial Performance. TheStudy commenced with identification of a set of parameters of corporategovernance practices as laid down in SEBI Clause 49 of the Listing Agreement ofStock Exchanges with the companies. Some of these were selected to representindependent variables. Another set of parameters indicating the financialperformance of the companies was selected which was considered to be thedependent variables.The parameters of corporate governance were classified as,

i) Mandatory

ii) Non‐mandatory parameters,

iii) Parameters based on Voluntary Guidelines announced by the Ministry of Corporate

Affairs in 2009 and

iv) Parameters which went Beyond Compliance and covered the company’s practicesaimed at creating value for its other stakeholders like employees, customers,suppliers and Society at large. These included HR development and training, qualityimprovement programs, health and safety related initiatives and environmentprotection measures.

All the four sets of governance parameters were streamlined and only those which can havea possible direct or indirect influence on financial performance were selected. Each of theseparameters was further sub‐divided into sub‐parameters indicating the manner in which thecompanies complied with the corporate governance norms. In this manner the final listconstituted 82 sub‐parameters of corporate governance.In the same way 13 different variables of financial performance were identified to asdependent variables to understand the impact of corporate governance parameters onthem. These included,

i) Profit after Tax, PAT,

ii) Price to Book Value Ratio, P/B Ratio

iii) Average Annualized Earnings per share, EPS,

iv) Total Sales

v) Book Value

vi) Total Assets

vii) Total Debt

viii) Return on Capital Employed – ROCE

ix) Return on Net worth – RONW

x) Interest Coverage Ratio

xi) Debt Equity Ratio

xii) Market Capitalization and

xiii) Tobin’s Q.

Exchange BSE | NSE

Date 10 May 2013

Price 1,499.90

%Change 0.07%

Volume 23189

OpeningPrice1,500.00

DayHigh 1,509.90

DayLow 1,496.00

52-WeekHigh1,598.00

52-WeekLow 1,175.50

Capital Structure As on March 31, 2013

Authorised Capital

2,250,000,000 Equity Shares of ` 1 each

1,000,000,000 Redeemable Preference Shares of ` 1 each

Issued, subscribed and Paid-up Capital

1,957,220,996 Equity Shares of ` 1 each fully paid-up

1,000,000,000 Redeemable Preference Shares of ` 1 each

2,250,000,000

1,000,000,000

Total 3,250,000,000

1,957,220,996

1,000,000,000

Total 2,957,220,996

Theoretical Perspective of Corporate Governance

Corporate governance is of growing importance, particularly with regards to the monitoring role of the board of directors. As a result, the theoretical perspectives that are relevant to this study are based on the governance structures and reporting practices that affect the value of the firms. This section reviews the theoretical perspectives of a board’s accountability that is relevant for this study. It draws on agency theory, stewardship theory, stakeholder theory, social contract theory.

Agency Theory

Much of the research into corporate governance derives from agency theory. Since the early work of Berle and Means (1932), corporate governance has focused upon the separation of ownership and control which results in principal-agent problems arising from the dispersed ownership in the modern corporation. They viewed corporate governance as a mechanism where a board of directors is an essential monitoring device to minimize the problems brought about by the principal-agent relationship. In this context, agents are the managers, principals are the owners and the board of directors act as the monitoring mechanism (Mallin 2004).

The agency role of the directors refers to the governance function of the board of directors in serving the shareholders by ratifying the decisions made by the managers and monitoring the implementation of those decisions.

The agency model assumes that individuals have access to complete information and investors possess significant knowledge of whether or not governance activities confirm to their preferences and the board has knowledge of investors preferences.

Stewardship Theory

In contrast to agency theory, stewardship theory presents a different model of management, where managers are considered good stewards who will act in the bestinterest of the owners (Donaldson & Davis 1991).

Stewardship theory sees a strong relationship between managers and the success of the firm, and therefore the stewards protect and maximise shareholder wealth through firm performance. A steward who improves performance successfully, satisfies most stakeholder groups in an organization, when these groups have interests that are well served by increasing organisational wealth (Davis, Schoorman & Donaldson 1997). When the position of the CEO and Chairman is held by a single person, the fate of the organization and the power to determine strategy is the responsibility of a single person. Thus the focus of stewardship theory is on structures that facilitate and empower rather than monitor and control (Davis, Schoorman & Donaldson 1997). Therefore stewardship theory takes a more relaxed view of the separation of the role of chairman and CEO, and supports appointment of single person for the position of chairman and CEO and a majority of specialist executive directors rather than non-executive directors (Clarke 2004).

Stakeholder Theory

Research into corporate governance also discusses the stakeholder theory in relation to firms’ responsibility to the wider community. A stakeholder is any group of individuals who can affect or is affected by the activities of the firm, in achieving the objectives of the firm (Freeman 1984). A similar view has been put forward by the World Business Council for Sustainable Development (1999), which also identifies stakeholders as the representatives from labor organisations, academia, church, indigenous peoples, human rights groups, government and non-governmental organizations and shareholders, employees, customers/consumers, suppliers, communities and legislators. According to Ansoff (1965), a firm’s objective could be achieved through balancing the conflicting interests of these various stakeholders. Therefore, a fundamental aspect of stakeholder theory is to identify the stakeholders an organization is responsible for. Any stakeholder is relevant if their investment is, in some form, subject to risk from the activities of the organization (Clarkson 1995).

Social Contract Theory

Among the other theories reviewed in corporate governance literature social contract theory, sees society as a series of social contracts between members of society and society itself (Gray, Owen & Adams 1996). There is a school of thought which sees social responsibility as a contractual obligation the firm owes to society (Donaldson 1983). Integrated social contract theory was developed by Donaldson and Dunfee (1999) as a way for managers to make ethical decision making, which refers to macrosocial and microsocial contracts. The former refers to the communities and the expectation from the business to provide support to the local community, and the latter refers to a specific form of involvement.

Corporate Governance Reports are important part of the Annual Reports. Many companies in addition to giving the compliance on various parameters also some times discuss the philosophy and objectives of the corporate governance thus setting the background for the spirit and letter of governance that is reported.

Tata Sons represents the main ‘promoter’ company of the group and is the group headquarters. Two-thirds of the equity of Tata Sons is held by various philanthropic trusts endowed by members of the Tata Family. Currently the full group structure consists of 80 listed and unlisted companies. Moreover, several changes have recently been undertaken in the group structure which is not incorporated in the figure. Unfortunately information pertaining to equity linkages to incorporate these changes and depict the structure of the full group is unavailable.

Tata Group Website: http://www.tata.com/tata_sons/index.htm

Business groups

Business groups in India depict caste and provincial origins. Most of these traditional groups come from the trading communities (e.g. banias) and their initial activities can be traced back to certain parts of the country, although, in more recent times some of the larger groups have assumed a pan-Indian operational character.

Groups increased the number of companies under their fold when assets belonging to the erstwhile British companies were acquired. Traditionally, the management of most of these groups was via the managing agency system. Under this system, each of the participating firms signs a management contract with a managing agency owned by the group. The managing agencies in turn run these firms. Several of the largest business groups in India like the Tatas and the Birlas were initially run by managing agencies owned by them.

Company list

1. TISCO 2. Tata Chemicals

3. Indian Hotels 4. Tata Industries

5. Tata Electrical Company 6. Forbes, Forbes and Campbell

7. Voltas 8. TELCO

9. TOMCO 10. Investment Corporation of India

11. Tata Tea 12. Tata Metals and Strips

13. Tata Services 14. Titan Watches

15. ACC 16. Tata Industrial Finance

17. Tata Honeywell 18. Tata Finance

19. Tata Consultancy 20. Tata Housing company

21. Tata IBM 22. Tata Telecom

23. Tata Elxsi 24. High Tech Drilling

25. Gokak 26. Varuna Investments

Relationship between Corporate Governance and Financial Performance in India

A large majority of the firms listed on Indian Stock Exchanges are those in which ownership is concentrated within the promoting families. Promoters exert considerable influence over management and consequently over all major decisions. Minority shareholders who are usually not well aware of the company’s operational aspects have to be content with financial returns on their equity holdings.

As long as the company is doing well financially, promoters or the controlling family groups do not have sufficient motivation to invest in IT related infrastructure or highly skilled manpower to put in place superior corporate governance practices like setting up a separate Risk Management Dept., or installing stateof‐ the–art IT systems for internal controls or constituting separate board level committees for nomination and remuneration of directors and senior management personnel. Disclosures to minority shareholders through annual reports or through postings on the company websites are minimum.

Concern for the welfare of other stakeholders in the company like suppliers, consumers, employees and even Society at large is limited. In short compliance to corporate governance norms is there but only in letter and not in spirit. Whether this situation would be sustainable in the long run is debatable. This issue of corporate governance and its impact on the performance of the firm has not been researched well in the Indian context though abroad innumerable studies have been carried out on this subject.

The Satyam episode and the resultant financial mismanagement which went against the interests of the investors and minority shareholders had triggered a serious debate on the lacuna in the shareholders’ awareness of good governance practices and the deficiencies in the monitoring mechanisms of regulatory agencies with respect to compliance of the governance norms and provisions.

Our focus on corporate governance and its relationship with the company’s financial performance attempts to examine this oft debated issue of family ownership and control and its impact on the overall financial performance of the company and in particular the returns to the minority shareholders .

Effective implementation of corporate governance practices in a long term sustainable manner is expected to benefit all stakeholders including the controlling shareholders and would result in higher firm valuations in the long run.

Six parameters have been chosen for comparison of various corporate governance practices in Tata Consultancy Servicesin India namely, Company’s philosophy on Corporate Governance, Formation of Board of Directors, Composition of Board of Directors, Particulars of Director’s, Organizational Committees, and Additional Information supplied in CG report or in the Annual report.

• A leading European telecom handset manufacturer has awarded TCS a large transformational outsourcing deal to drive innovation, operational efficiency and building of new business capabilities.

• A North American retailer has selected TCS as a strategic partner for their application development & maintenance and infrastructure support.

• A leading European Post & Parcels company has selected TCS as a strategic partner in its multi-million dollar enterprise IT transformation program that is aimed to bring in accelerated new technology adoption while increasing operational efficiency.

• TCS has been engaged by a large global bank to provide application development and maintenance services across multiple domains for their international business.

• TCS has been selected to provide operations support services to one of USA's leading mortgage servicers and lenders.

• TCS BaNCS Core Banking was selected by a well known North American Bank including its subsidiaries.

• A Europe based global semiconductor company awarded TCS a multi-year, multi-million SAP application maintenance & support and infrastructure services contract.

• A market leader in diagnostic insights and innovation has awarded TCS a multi million dollar contract in its strategic initiative to improve efficiency and effectiveness of its global IT operations.

• TCS was selected by an European world-wide provider of molecular sample and assay technologies as a strategic partner for their full IT outsourcing program.

• TCS has entered into an agreement with one of the states in North America to customize, implement and support unemployment Insurance that will allow the state to modernize and streamline its processes and business.

• A British multinational insurance company has selected TCS to provide application development , maintenance and assurance services across multiple lines of business.

Naresh Chandra Committee Report on CorporateGovernance

The department of company affairs also constituted a high level committee under the chairmanship of Naresh Chandra, a former cabinet secretary to recommend measures for improvements in corporate audit and governance.

The committee submitted its report on various aspects concerning corporate governance such as role, remuneration, and training etc. Of independent directors, audit committee, the auditors and then relationship with the company and how their roles can be regulated as improved. The committee stingily believes that “a good accounting system is a strong indication of the management commitment to governance.

Good accounting means that it should ensure optimum disclosure and transparency, should be reliable and credible and should have comparability.According to the committee, the statutory auditor in a company is the“lead actor” in disclosure front and this has been amply recognized sections209 to 223 of the companies act. The chief aspects concerning the auditorsfunctioning as per the act are:

_ Auditors are fiduciaries of the shareholders not of the management asthey are appointed as the shareholders appoint them.

_ Auditor’s independence is guaranteed as rules for removing onreplacing an auditor as more stringent than for reappointment.

_ The statutory auditor of a company can, at all times, have the right ofaccess to all books of accounts and vouchers of a company and hisrepeat can be quite exhaustive to specify whether,

_The auditor could obtain from management all information and explanations that were necessary for the purpose of audit.

_ Proper books of accounts have been kept by the company

_ Brained offices have been audited by him

_ Company’s accounts conform to accounting standards set by the institute of chartered Accountants of India.

Some Mandatory functions are,

_ The adequacy of internal control commensurate to the size of the company and its business.

_ The adequacy of records maintained on fixed assets and inventories

and whether any fixed assets were re-valued during the year.

_ Loans and advances that were given by the company, and whether the parties concerned were regular in repaying the principal and interest.

_ Loans and advances taken by the company and whether these were at terms in judicial to the interest of the company and also whether these were being property repaid according to conducted schedules.

_ Transactions including loans and advances, with related parties as defined by section 301 of the companies act.

The evolution of the corporate governance guidelines is given in the chart below.

Recent Evolution of the Corporate Governance

Cadbury Report, United Kingdom 1995 Greenbury Report, United Kingdom, 1995

Hampel Report, United Kingdom, 1998 CII Voluntary Code of Corporate overnance,1998Kumara Mangalam Birla Committee, India, 1999 Sabanes-Oxley Act, 2002

Higgs Report, 2003 On non-executive directors. Smith Report, 2003 On Audit Committees.

Narayana Murthy Committee, 2002 Naresh ChandraCommittee,2003

Clause 49 of the Listing Agreement, 2005

N Chandrasekaran Chief Executive Officer (Managing Director)

Natarajan Chandrasekaran (“Chandra”) is the Chief Executive Officer (CEO) and Managing Director of Tata Consultancy Services, a leading global IT solutions and consulting firm with consolidated revenues of US $11.6 billion for year ended March 31, 2013. During his tenure as the chief executive since October 2009, the company has grown at a compounded annual rate of 21 per cent.

Responsible for formulating the company’s global strategy across its footprint of 44 countries, Chandra has led TCS to great success with the market capitalization of the company touching USD 50 billion during 2012. TCS was consistently ranked throughout 2012 as the most valuable company in India. With over 276,000 consultants, TCS has become the largest private sector employers in India with the highest retention rate in a globally competitive industry.

Chandra personifies TCS’ commitment to customer satisfaction and high quality. Through his experience in a variety of operating roles, he has built a reputation in the IT industry for his exceptional ability to build and grow new business offerings and nurture long-term relationships. He has also been at the helm of several key strategic transitions at TCS including architecting, as Chief Operating Officer, the new organization structure unveiled in 2008, which created multiple agile business units within TCS that were focused on industries and markets.

Chandra represents TCS on several global and local forums. He is the chairman of the National Association of Software & Service Companies (NASSCOM) for 2012-2013. He joined TCS in 1987 after completing his Masters in Computer Applications from Regional Engineering College, Trichy, Tamil Nadu in 1986 and a Bachelor of Science in Applied Science from the Coimbatore Institute of Technology, Tamil Nadu. The SRM University has conferred the Degree of Doctor of Literature (2010) on Chandra for his pioneering and outstanding contributions to the industry.

Chandra has received several awards and recognition in the business community in 2012. He was judged as the “Business Leader of the Year” by NDTV. He won the “Best CEO of the Year” award at the Forbes India Leadership Awards 2012 and was awarded the Outstanding Business leader of the year at the CNBC’s India Business Leadership Awards. He was also awarded “Asia Business Leader Award of the year” by CNBC Asia Business Leaders Awards 2012. Chandra was also named the “Pathfinder CEO” of 2012 by National HRD Network (NHRDN)

He was also awarded the Medal of the City of Amsterdam - Frans Banninck Coqc medal in recognition of his endeavor to promote trade and economic relations between Amsterdam and India.

Beyond the office, Chandra is an avid photographer and a passionate long-distance runner and has completed marathons in Mumbai, New York, Prague, Stockholm, Vienna, Chicago and Berlin.

Born in 1963, Chandra lives in Mumbai, with his wife Lalitha and son Pranav.

Guidelines of Committee to Auditors: -

(i) For the public to have confidence in the quality of audit, it is essential that auditors showed always be and be seen to be independent of the company, which includes integrity, professional ethics and objectivity.

(ii) Before taking any work auditor must consider that there should not be any threat to his independence. And if it present he should adopt risk aversion virtue.

Corporate governance and Ethics: -

Ethics is normative science that deals with conduct of human beings living in society, so as to judge what is right and what is wrong on in the terms of good or bad. Ethics builds certain norms and standards against which comparison can be made and conclusions can be derived. Thus ethics deals with abstract and subjective issues.

Business stands in society and society is guided by norms of it. Ethics in business is related to conduct of business. Society cannot remain silent in relation to “BUSINESS ETHICS.” Business conduct is generally or mostly guided by

_ Mission and objectives of Organization.

_ Collective aspirations and judgment of manager about means and ends of business.

_ Expectations of shareholders. Out these factors expectations of shareholders play an

important role. This can be described as base far corporate governance.

We can not achieve good governance if public governance is deficient, if political leadership and institutions are distrusted if the law is outdated and legal administration takes years or even decades to deliver justice.

Each and every stakeholder expects transparency from the management, because stakeholders cannot get total idea inside management practices, by just referring to the Balance sheet of the firm. They must be aware about essential aspects like how much remuneration is drawn by directors, what criteria are used by company for directors appointment and reappointment, and if company has internal share trading with the promoters, directors or any relative of firm, whether it is recorded or not.

This is because sometimes directors drawn more salary and commission for the work which they have not attempted, for this purpose Corporate governance norms explain that every company must disclose about the pay scale and criteria for scale so that investors will not doubt in the financial position of company.

Each of the stakeholders is directly or indirectly related with the company and it significantly affects to the decision of management.

That is why the disclosures related to the stakeholders are important to be disclosed in front of stakeholder when the size and scope of any corporate expands, it affects pare to the value of stake holders, so while expanding and managing large corporate world, whether corporate executives are balancing the value of stakeholders or not are evaluated by the researcher in this part.

Apart from the stakeholder’s satisfaction financial information are also included. Financial disclosures are the important disclosures, as every company has to be transparent in financial disclosure so that it can well inform the investors about where their funds are moving.

Variances in Corporate Governance Practices

The factors affecting the efficiencies of capital markets are many, the more important being good liquidity and low transaction costs. In TCS, The availability of high quality information also aids efficiency and maintains investor confidence and overall market attractiveness. Given these factors and the regulatory and legislative measures that support efficient markets there are some distinct variations in the manner in which capital markets function in the developed and developing economies.

Most developed markets are associated with dispersed share ownership and fragmented ownership structures. Here the key concerns are monitoring management and ensuring that managers act in the interest of the shareholders. Institutional shareholders like Insurance companies and pension funds are relied upon to safeguard shareholders’ interests.

In developing and emerging markets, ownership is concentrated and large shareholders

(promoters or founding family members) dominate and influence management at times to the detriment of minority shareholders’ interests. Institutional directors are not very experienced or influential and disclosure and transparency norms are still being evolved.

Implementation and enforcement of laws is weak. Conflict of interests arise out of cross holdings of shares (companies own shares in one another). The regulatory framework for companies in such markets and the ensuing monitoring mechanisms, have to be drawn up keeping in mind the characteristics of the constituent firms.

Depending on the maturity of the markets and legal, ethical and financial environment, each country has to devise its own regulatory framework for corporate governance. But yet the real standards of corporate governance can only be determined by the measures the companies themselves adopt either voluntarily or otherwise to improve the way they are directed and controlled. These measures are guided by the size of the firms, their structure and ownership and their priorities. For smaller sized firms, which, are family owned or controlled corporate governance at times can become a handicap.

Yet, as companies expand and diversify and embark upon organic or inorganic growth there is a corresponding need for long term investments from outside. These funds of course come at a cost loosening of control, greater accountability and investor protection – which are the fundamental principles of good governance.

THE ESSENSE OF CORPORATE GOVERNANCE

Constituents of governance gain scope and significance

Corporate governance has been defined by scholars and market practioners as per the perspective with which they were analyzing the subject. The practioner’s point of view that was powerfully conveyed was that of N.R. Narayana Murthy, Chairman, Committee onCorporate Governance,

Securities and Exchange Board of India, 2003 and he himself a highly successful and globally acclaimed entrepreneur who built Infosys on the premise and foundations of a strong corporate governance “The term “corporate governance”, is susceptible both to broad and narrow definitions. In fact, many of the codes do not even attempt to articulate what is encompassed by the term. The important point is that corporate governance is a concept, rather than an individual instrument. It includes debate on the appropriate management and control structures of a company. Further, it includes the rules relating to the power relations between owners, the Board of Directors, management and, last but not least, the stakeholders such as employees, suppliers, customers and the public at large:”.

Organization of Economic Cooperation and Development (OECD) which spearheaded the design and development of corporate governance principles and guidelines defined it as”

Corporate governance involves a set of relationships between a company’s management, its board, its shareholders, and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set and the means of attaining those objectives and monitoring performance are determined”During the year, the Company received various awards and recognitions, some of which are given below:

India

- Outstanding Company of the Year 2012 - CNBC TV18

- Ranked #1 Employer in India – Data Quest

- Best Company to Work For - Business Today

- Ranked #1 in Data Quest Top 20 IT companies

- ICAI Award for Excellence in Financial Reporting

- IT Company of the Year - NDTV Business Leadership Awards

- Indian IT Company of the Year- Bloomberg-UTV CXO Awards 2011 Global

- 5th in Bloomberg Business weeks Tech 100

- 7th in News weeks Global Green Rankings

- Indias Best Managed Company - Finance Asia

- Forbes Asias Fab 50 companies

- Gold SABRE, USA for Executive Leadership Communications

- Best Architecture Trophy 2011 for TCS campus at Siruseri, Chennai at International Property Awards

In the IT industry there are 4 companies, while looking to the Corporate Governance, the first score point was statement of Company’s philosophy on Corporate Governance and thus the point was assigned a weightage of 2 on a scale of 100. All 4 companies get the expected score of 2. All companies have sufficient disclosure of the statement of Company's philosophy on code of governance. However, Infosys have better described Company's philosophy on code of governance. In the Corporate Governance score, the second score point was about the Structure and Strength of the board. The point was assigned a weightage of 2 on a scale of 100. All 4 companies get the expected score of 2. All companies have sufficiently disclosed the composition of the Board of Directors. Chairman & CEO Duality , The appointment of Chairman of the board carries of critical importance. The third point describes about the duality of Chairman and CEO. The point assigned a weightage of total 5 points, which are assigned on the following basis. TCS and Wipro among this companies has assigned a score of 5. Whereas Infosys scored 3 points and Tech Mahindra scored of 4. Disclosure of Tenure and Age limit of directors, In the Corporate Governance score, the fourth point was about Disclosure of Tenure and Age limit of directors. The point was assigned a weightage of 2 on a scale of 100. The disclosures about the tenure and age limit of directors are sufficiently available in the annual report of the Infosys and Tech Mahindra whereas it is not sufficiently available in TCS and Wipro.

Findings

        During the financial year 2011-12, the volatility in the macroeconomic environment continued to cast its shadow and most of the markets where TCS operates in, were impacted. Even in this environment, the Company recorded industry leading financial performance. The major contributing  factors for such all round performance across geographies and industry verticals were the Companys customer-centric approach and its ability to innovate customer specific solutions, focus on pricing, disciplined execution of complex projects and the rigor in following strong internal processes.

                In the financial year 2011-12, the Company continued its strong growt  momentum across major markets.  Revenue growth in the year remained high in North America (29.62%), UK (29.16%), Europe (41.62%), Asia Pacific (50.67%) and Middle East & Africa (43.38%). Other geographies also witnessed double digit growth rates.

               In the financial year 2011-12, most of the industry verticals registered healthy growth rates. Revenue growth in BFSI (27.44%),Retail & Consumer Packaged Goods (45.05%) and Manufacturing (38.11%) were significant contributors. Revenue growth in other industry verticals was also significantly high at 37.27% - the major contributors were Life Sciences and Healthcare (33.10%), Hi-Tech (57.32%), Travel, Transport & Hospitality (42.85%).

               The Company became the first Indian IT Company to cross the US  billion milestone in terms of annual revenue.

               On consolidated basis, revenue for the year 2011-12 at Rs 48,893.83

 crores was higher by 31.00% (Rs 37,324.51 crores in 2010-11), operating profit at Rs 13,517.37 crores was higher by 29.44% (Rs 10,443.10 crores in 2010-11) and the net profit for the year at Rs 10,413.49 crores was higher by 14.84% (Rs 9,068.04 crores in 2010-11).

               On unconsolidated basis, revenue for the year 2011-12 at Rs 38,858.54 crores was higher by 32.73 % (Rs 29,275.41 crores in 2010-11), operating profit at Rs 10,697.55 crores was higher by 30.05% (Rs 8,225.71 crores in 2010-11) and the net profit for the year at Rs 10,975.98 crores was higher by 44.99%    (Rs 7,569.99 crores in 2010-11).

The Company has been making good progress in the strategic initiatives to drive its non-linear growth. Software products (Asset Leveraged Solutions) have added significant new customers during the year.

               Platform based BPO or process cloud have been offered in the areas of life insurance and pensions, analytics, finance and accounts, HR outsourcing and procurement. iON, the Companys cloud based platform for small and medium businesses launched in early 2011 has gained momentum in 2012.

               Standard and Poors ratings services has assigned BBB positive corporate credit rating with outlook as Negative to the Company. The Company has also been rated by Dun & Bradstreet at 5A1(Condition-Strong). The rating is assigned on the basis of tangible net worth and composite appraisal of the Company.

            In the Education and Skill Building area, the primary programmes are

 Computer-based Functional Literacy (CBFL) programme, \Advanced Computer Training - Two batches were completed during the year 2011-12.

               Skill Development - A special programme to develop skills of NGOs to help them manage their operations and finances better along with Yale University and one of the Companys large customers in the financial industry.

               TCS Research Scholar Scheme supporting students who wish to pursue PhD in India. Academic Collaboration by conducting faculty development programmes, workshops for students and establishing joint research labs in the Institutes.

               Corporate Governance Report and Management Discussion and AnalysisStatement Corporate Governance Report and Management Discussion and Analysis statements are very satisfactory from the Report.

Directors Responsibility Statement

               Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956 (Act), and based on the representations received from the  operating management, the Directors hereby confirm that:

 (i) in the preparation of the Annual Accounts for the year 2011-12, the applicable Accounting Standards have been followed and there are no material departures;

(ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the financial year;

 (iii) they have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Act. They confirm that there are adequate systems and controls for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

               There has been no material change in the nature of the business of the subsidiaries. A statement containing brief financial details of the subsidiaries which is included in the Annual Report.

Suggestions

To be Sustained commitment to high levels of quality, best-in-class service management and robust information security practices which would help TCS to attain a number of milestones during the year.

So far TCS continues to maintain the enterprise-wide highest maturity Level 5for CMMI®-DEV (Development) and CMMI®-SVC (Services) models. In theyear 2011-12, TCS had set a new benchmark as the first publicly statedrecipient to achieve a Multiple Simultaneous Appraisal against twoconstellations of the CMMI® model; and is also the first organisationin the world to be appraised at Level 5 of the CMMI®-SVC model, whichunderscores the maturity of the firms fast growing business processoutsourcing (BPO) and infrastructure services business.

As TCS is enterprise-wide certified against ISO 9001:2008 (QualityManagement), ISO 27001:2005 (Security Management) and ISO 20000:2005(Service Management). TCS also continues to maintain domain specificquality certifications AS 9100 (for Aerospace Industry), ISO 13485 (forMedical Devices) and TL 9000 (for Telecom Industry).

As TCS is enterprise-wide certified against ISO 14001:2004 (EnvironmentalManagement) and OHSAS 18001:2007 (Occupational Health and SafetyManagement). These certifications demonstrate TCS strong commitment tothe environment and the occupational health and safety of itsassociates and business partners; and helps convey this to all itsstakeholders, including customers.

 In the area of Knowledge Management, TCS received the prestigious MostAdmired Knowledge Enterprise (MAKE) award for the 7th time in India andAsia. TCS also received the global Independent Operating Unit (IOU)MaKE award for the 2nd timecan be well achived.

               The Companys initiatives in the community aim to create impact throughempowerment so that the people in the community can make a betterliving and lead a better quality of life. The Company has chosen fourareas to focus its energies on namely Education and Skill Development,Health, Environment and Affirmative Action.

 Programmes undertaken under these four broad areas are aimed ateconomically backward and other marginalized groups (like women,children and aged) as well as those who are physically or sociallydisadvantaged.

 The Companys community initiatives are need to be delivered using four differentapproaches:

(i) Leveraging the Companys core competencies in technology

(ii) Creating conditions for employee participation throughvolunteering

(iii) Building synergistic partnerships with clients and other partnerslike NGOs

(iv)Financial sponsorships

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Annexure

Parameters for Compliance with SEBI Clause 49 of Listing Agreement

Selected for Impact on Firm Performance(Mandatory and Non‐mandatory)

Mandatory Compliance Parameters

1. Board Composition

a) Total No. of Directors

b) Chairman Executive/Non‐Executive

c) Proportion of Promoter/Promoter Group’s Directors on the Board

d) Proportion of Independent Directors on Board

e) Average annual attendance of Directors at Board meetings

2. Shareholding Pattern

a) Share of Promoters/Promoter Group in total equity

b) Share of public holding in total equity

c) Share of foreign investors in total equity

d) Share of banks/mutual funds/Insurance Cos. in total equity

e) Share of FIIs/NRIs/OCBs in total equity

f) Share of other corporate bodies, trusts, etc. in total equity

3. Board Level Committees

a) Company has Audit & Shareholders’ Grievances Committee (mandatory)

b) Number of Independent Directors on the Committees

c) Additional Board level Committees

4. Role and Powers of Audit Committee and Review of information

a) Fulfillment of all functions under role, powers and review as mandated

b) Partial Fulfillment of functions‐ role, power and review

Nonmandatory Compliance Parameters

1. Remuneration Committee

a) Decides policy and criteria on remuneration for EDs

b) Remuneration policy for EDs and any deviations disclosed in AR

c) Terms of reference, role, authority, and performance disclosed in AR

d) Composition of Rem. Comm.

2. Shareholders’ Rights

a) Half‐yearly results sent to residence/on website

3. Whistle Blower Policy

Parameters Beyond Compliance

1. Resolution of disputes (if avail in AR)

2. Management Oversight (With IT procedures)

3. Incentives through ESOPs‐ Directors, Senior Management, Other Executives

4. HR Initiatives – Periodic Training for Employees, Other Stakeholders

5. Performance Improvement Programs

6. Women’s Security and Empowerment

7. Quality Improvement Programs and Certifications in AR

8. Environment protection/Safety and Health in AR

9. Innovation and technology absorption(in AR)

10. Energy conservation (in AR)

11. R&D for public and customer benefits (in AR)

12. Corporate social responsibility (in AR)

SEBI sets up Kumar Mangalam Birla Committee

In 1999, SEBI set up a committee under the Chairmanship of Kumaramangalam Birla, to suggest suitable recommendations for the Listing Agreement of Companies with their Stock

Exchanges to improve the existing standards of Corporate Governance in the listed companies. The committee paid much attention to role and composition of the Board of directors, disclosure laws and share transfers. Recognizing that accountability, transparency and equal treatment of all stakeholders are the key elements of corporate governance the Committee evolved a Code of Governance in the context of the prevailing conditions in the capital market. The Code was accepted in 2000 by SEBI and incorporated into a new Clause 49, which was inserted into the Listing Agreement of Companies with their Stock Exchanges.In terms of corporate laws and financial regulations, India has emerged far better than other East Asian countries. The Companies Act 1956 has been the foundation of Corporate Governance and Accounting Systems in India. Since liberalization wide‐ranging changes were brought about in the laws and regulations relating to the financial markets. The single most important development has been the establishment of Securities and Exchange Board of India (SEBI) in 1992. SEBI has played a crucial role in establishing the basic minimum compliance norms for corporate governance by listed companies.

    The Directors thank the Companys employees, customers, vendors, investors and academic institutions for their support to the Company.

                The Directors also thank the Government of various countries, Government of India, State Governments in India and concerned Government Departments/Agencies for their co-operation.

               The Directors appreciate and value the contributions made by everymember of the TCS family globally.

                                                                               On behalf of the Board of Directors,

                Mumbai                                                                                               R. N. Tata

                May 26, 2012

                                                            Chairman

Bibliography

All Detail data related to this topic corporate governance are collected from the following sources for this analysis Anne Abraham,

Hemant Deo, Helen Irvine (2008) "What lies beneath? Financial reporting and corporate governance in Australian banks", Asian Review of Accounting, Vol. 16 Iss: 1, pp.4 - 20

Racha Ghayad, (2008) "Corporate governance and the global performance of Islamic banks", Humanomics, Vol. 24 Iss: 3, pp.207 – 216

SEBI (1999)’ “Draft Report of the Kumar Manglam Birla Committee on Corporate Governance”, http://www.SEBI.org

TCS, Corporate_Governace_Report_for_September_30_2011

Joshi, V. (2004) Corporate Governance: The Indian Scenario.Foundation Books.

Web Links References:

http://www.sebi.gov.in/ Securities and Exchange Board of India

http://www.bseindia.com/ Bombay Stock Exchange Limited

http://www.nfcgindia.org/library_int.htm National Foundation for Corporate Governance

http://www.ita.doc.gov/goodgovernance/International Trade Administration

http://www.oecd.org/Organisationfor Economic Cooperation and Development

http://www.corpgov.net/Corporate governance network

http://www.tcs.com/investors/Pages/default.aspx Annual Report of TCShttp://www.moneycontrol.com/stocks/company_info

http://www.SEBI.org

Rakesh Kumar Maharana

Odisha Updates

About Me

Sunday, 15 November 2015

Corporate Governance Practices & Financial PerformancesIn IT Industry in India With Special Reference to TCS