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Ethics & values in management

Presentation on

Audit committee & Insider Trading

SamskaraDebts in Hinduism

Group No. 10Group No. 10Shailaja Menon Shailaja Menon Roll No. 24 Roll No. 24Gautam Prabhukeluskar Roll No. 58Gautam Prabhukeluskar Roll No. 58 Komila Harry Komila Harry Roll No. 10 Roll No. 10 Anish Patel Anish Patel Roll No. 34 Roll No. 34 Aparna Kanchugar Roll No. 14Aparna Kanchugar Roll No. 14 Vinay Shriyan Vinay Shriyan Roll No. 61 Roll No. 61

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Audit CommitteeAudit Committee

What is an audit committee?What is an audit committee?

Need for an audit committeeNeed for an audit committee

Financial scandals in the U.SFinancial scandals in the U.S

Sarbanes-Oxley Act (SOA) 2002Sarbanes-Oxley Act (SOA) 2002

ENRON, WORLDCOM,XEROXENRON, WORLDCOM,XEROX

Special mention-Arjay Miller board member and a former president of the Special mention-Arjay Miller board member and a former president of the Ford Motor Company & Cadbury committeeFord Motor Company & Cadbury committee

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Blue Ribbon CommitteeBlue Ribbon Committee

On Improving the Effectiveness of Corporate Audit Committees (1999)On Improving the Effectiveness of Corporate Audit Committees (1999)

Members of Audit Committee to be independent directors onlyMembers of Audit Committee to be independent directors only Minimum of three directors- each to be financially literateMinimum of three directors- each to be financially literate Audit Committee to have formal written charter, approved by the board, Audit Committee to have formal written charter, approved by the board,

specifyingspecifying Responsibilities andResponsibilities and Structure, process, membershipStructure, process, membership

Charter to specify outside auditors’ responsibility towards board and Charter to specify outside auditors’ responsibility towards board and committeecommittee

Companies to attach with the Annual Report a letter from Audit Companies to attach with the Annual Report a letter from Audit Committee, as to whetherCommittee, as to whether Management reviewed the audited financial statements with the Management reviewed the audited financial statements with the

committeecommittee Outside auditors discussed with the committee, their judgements andOutside auditors discussed with the committee, their judgements and Committee believes that the company’s financial statements are fairly Committee believes that the company’s financial statements are fairly

presented in conformity with generally accepted accounting practices presented in conformity with generally accepted accounting practices (GAAP) (GAAP)

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Corporate Governance in India & Audit Corporate Governance in India & Audit CommitteeCommittee

SEBI Committee I (Kumar Mangalam Birla Committee) on Corporate SEBI Committee I (Kumar Mangalam Birla Committee) on Corporate GovernanceGovernance

In 1999 SEBI constituted a committee under the chairmanship of Shri In 1999 SEBI constituted a committee under the chairmanship of Shri Kumar Mangalam Birla, to promote and raise the standards of corporate Kumar Mangalam Birla, to promote and raise the standards of corporate governance. The Committee submitted its report in the year 2000 and governance. The Committee submitted its report in the year 2000 and based on these recommendations, Clause 49 was incorporated in the based on these recommendations, Clause 49 was incorporated in the Listing Agreement which companies are required to sign with the stock Listing Agreement which companies are required to sign with the stock exchanges while listing their shares.exchanges while listing their shares.

Audit committee to be mandatorily constitutedAudit committee to be mandatorily constituted

Minimum three members, all independent directorsMinimum three members, all independent directors

Chairman of the committee to be financially literateChairman of the committee to be financially literate

At least three meetings a year At least three meetings a year

Chairman of the committee to be present at AGM to answer shareholders’ Chairman of the committee to be present at AGM to answer shareholders’ queriesqueries

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SEBI Committee II(Narayana Murthy SEBI Committee II(Narayana Murthy Committee) RecommendationsCommittee) Recommendations

SEBI-Improvisation of existing practices of corporate governance.SEBI-Improvisation of existing practices of corporate governance. The Committee included representatives from the stock exchanges, chambers, The Committee included representatives from the stock exchanges, chambers,

commerce and industry, investor associations and professionals commerce and industry, investor associations and professionals Enhanced role of the Audit CommitteeEnhanced role of the Audit Committee Audit Committee to put in place procedures to inform Board Members about the Audit Committee to put in place procedures to inform Board Members about the

risk assessment and minimization procedures. Management to place a report, risk assessment and minimization procedures. Management to place a report, certified by Compliance Officer, before the Board, on business risks faced by the certified by Compliance Officer, before the Board, on business risks faced by the company, measure to address and minimize the risk-taking capacity of the company, measure to address and minimize the risk-taking capacity of the company.company.

Justification for all deviations from accepted accounting standards. Companies Justification for all deviations from accepted accounting standards. Companies should encourage a regime of unqualified financial statements.should encourage a regime of unqualified financial statements.

Companies raising money through IPO should disclose use of the same on Companies raising money through IPO should disclose use of the same on quarterly basis.quarterly basis.

Audit Committees are required to mandatorily review :Audit Committees are required to mandatorily review : Financial statements and draft audit reports including quarterly, half-yearly Financial statements and draft audit reports including quarterly, half-yearly

reports.reports. Management discussion and analysis of financial condition, operational Management discussion and analysis of financial condition, operational

performanceperformance Reports relating to compliance with laws.Reports relating to compliance with laws. Letters of internal weaknesses issued by statutory / internal auditors Letters of internal weaknesses issued by statutory / internal auditors Records of related party transactionsRecords of related party transactions

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Audit Committee: Statutory Provisions Audit Committee: Statutory Provisions in Indiain India

Section 292 A of the Companies Act, 1956 (inserted w.e.f. 13.12.2000) Section 292 A of the Companies Act, 1956 (inserted w.e.f. 13.12.2000) contains a provision relating to establishment of audit committee by every contains a provision relating to establishment of audit committee by every public company having paid up capital of Rs. 5 crore or more.public company having paid up capital of Rs. 5 crore or more.

Clause 59 of the uniform listing agreement prescribed by SEBI is Clause 59 of the uniform listing agreement prescribed by SEBI is applicable to all listed companies. applicable to all listed companies.

As per section 29 A of Companies Act, 1956-periodic discussions aboutAs per section 29 A of Companies Act, 1956-periodic discussions about internal control systems,internal control systems, scope of audit,scope of audit, observations of auditors andobservations of auditors and review of the half yearly and annual financial statements before review of the half yearly and annual financial statements before

submission to the board and also ensure compliance of internal control submission to the board and also ensure compliance of internal control systems.systems.

It shall have authority to investigate into any matter in relation to such It shall have authority to investigate into any matter in relation to such matters and shall have full access to information contained in records of matters and shall have full access to information contained in records of the company.the company.

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Audit Committee: Statutory Audit Committee: Statutory Provisions in IndiaProvisions in India

As per clause 49 of the listing agreement, audit committee is empowered to As per clause 49 of the listing agreement, audit committee is empowered to investigate any activity within terms of reference.investigate any activity within terms of reference.

seek information of any employee and recommend appointment and seek information of any employee and recommend appointment and removal of external auditor,removal of external auditor,

fixation of audit fees, fixation of audit fees, approval for payment of other services,approval for payment of other services, review with the management the annual financial statements before review with the management the annual financial statements before

submission to boardsubmission to board review adequacy of internal control system,review adequacy of internal control system, oversight of company’s financial reporting process and oversight of company’s financial reporting process and disclosure of its financial information to ensure that financial statements disclosure of its financial information to ensure that financial statements

are correct, sufficient and credible, are correct, sufficient and credible, reviewing adequacy of internal audit function, reviewing company’s reviewing adequacy of internal audit function, reviewing company’s

financial and risk management policies, etc. financial and risk management policies, etc.

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Insider TradingInsider Trading

Insider trading occurs when someone makes an investment decision Insider trading occurs when someone makes an investment decision based on information that is not available to the general public. In some based on information that is not available to the general public. In some cases, the information allows them to profit, in others, avoid a loss.cases, the information allows them to profit, in others, avoid a loss.

Some Provisions of SEBI (Prohibition of Insider Trading) (Amendment) Some Provisions of SEBI (Prohibition of Insider Trading) (Amendment) Regulation 2008Regulation 2008

Any person who is a director or officer of a listed company shall disclose Any person who is a director or officer of a listed company shall disclose to the company in Form B the number of shares or voting rights held and to the company in Form B the number of shares or voting rights held and positions taken in derivatives by such person and his dependents (as positions taken in derivatives by such person and his dependents (as defined by the company), within two working days of becoming a director defined by the company), within two working days of becoming a director or officer of the company.or officer of the company.

Any person who is a director or officer of a listed company, shall disclose Any person who is a director or officer of a listed company, shall disclose to the company and the stock exchange where the securities are listed in to the company and the stock exchange where the securities are listed in Form D, the total number of shares or voting rights held and change in Form D, the total number of shares or voting rights held and change in shareholding or voting rights, if there has been a change in such holdings shareholding or voting rights, if there has been a change in such holdings of such person and his dependents (as defined by the company) from the of such person and his dependents (as defined by the company) from the last disclosure made under sub-regulation (2) or under this sub-last disclosure made under sub-regulation (2) or under this sub-regulation, and the change exceeds Rs. 5 lakh in value or 25,000 shares or regulation, and the change exceeds Rs. 5 lakh in value or 25,000 shares or 1% of total shareholding or voting rights, whichever is lower – within 2 1% of total shareholding or voting rights, whichever is lower – within 2 working days.working days.

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Highlights of Cases on insider trading Highlights of Cases on insider trading in Indiain India

The Case of insider trading (HLL-BBLIL Merger)The Case of insider trading (HLL-BBLIL Merger)

The controversy involving HLL's purchase of 8 lakh shares of BBLIL The controversy involving HLL's purchase of 8 lakh shares of BBLIL before the public announcement of merger.before the public announcement of merger. SEBI suspected of insider trading.SEBI suspected of insider trading. At the end of a 15 month process in March 1998 SEBI charged HLL of At the end of a 15 month process in March 1998 SEBI charged HLL of

insider trading. insider trading. On July 14 1998, the Appellate Authority in the Finance Ministry set aside On July 14 1998, the Appellate Authority in the Finance Ministry set aside

SEBI's March 1998 ruling.SEBI's March 1998 ruling.

IInfosys is not only an IT bellwether, it's also an ethical bellwethernfosys is not only an IT bellwether, it's also an ethical bellwether..

Mr Kris Gopalakrishnan, CEO, Infosys share inheritance case.Mr Kris Gopalakrishnan, CEO, Infosys share inheritance case.

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Sanskara Or SamskaaraSanskara Or Samskaara

Sanskara is the sanskrit word for “making perfect” or “refining”Sanskara is the sanskrit word for “making perfect” or “refining”

It is the ceremony of refinementIt is the ceremony of refinement

It raises an individual from mere physical existence to a higher spiritual It raises an individual from mere physical existence to a higher spiritual existence.existence.

Sanskaras bind an individual into his or her social group Sanskaras bind an individual into his or her social group

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The sixteen sankarasThe sixteen sankaras

GarbhadhanGarbhadhan

Prayer for a childPrayer for a childParental duty to continue the raceParental duty to continue the raceRestricted to family membersRestricted to family membersPerformed by the husbandPerformed by the husband

PunsavanaPunsavana

Performed in the 4Performed in the 4thth month of pregnancy. month of pregnancy.To invoke good & divine qualities in a childTo invoke good & divine qualities in a childShasthras – ritual for a male child Shasthras – ritual for a male child

SimintonnayanaSimintonnayana

Rituals during the 7Rituals during the 7thth month monthPrayers for a healthy child &Prayers for a healthy child &The mental and physical well being of the expectant motherThe mental and physical well being of the expectant mother

JatakarmaJatakarma

To welcome the new born in to the familyTo welcome the new born in to the familyBrahmins chant Mantras for a healthy, long life of the child. Brahmins chant Mantras for a healthy, long life of the child. The father feeds honey to the baby and pierces the baby's earThe father feeds honey to the baby and pierces the baby's earThe piercing is said to have an enhancing effect on the child’s memoryThe piercing is said to have an enhancing effect on the child’s memory

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The sixteenThe sixteen sankarassankarasNamakarnaNamakarna

Performed on the 10Performed on the 10thth,11,11thth or 12 or 12thth day after birth day after birthThe baby gets its name after completion of this sanskaraThe baby gets its name after completion of this sanskara

NishkramanaNishkramana

The child is taken out of the home for the 1The child is taken out of the home for the 1stst time. time.To show obedience to the PanchmahabhutTo show obedience to the PanchmahabhutEnhances the age and physical and mental development of the child. Enhances the age and physical and mental development of the child.

AnnaprashanaAnnaprashana

Sanskara-on a 6 month old childSanskara-on a 6 month old childFor the 1For the 1stst time when the child consumes solid food time when the child consumes solid foodMantras recited and oblations are offered to the various deities. Mantras recited and oblations are offered to the various deities.

ChudkarmaChudkarma

This Sanskara is shaving the head of child.This Sanskara is shaving the head of child.This is done in first of third year of the childThis is done in first of third year of the childThe body of the child is protected and harmonized by this ceremony. The body of the child is protected and harmonized by this ceremony.

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The sixteen sankarasThe sixteen sankarasKarnvedhKarnvedh

Performed in the firth or the seventh year or at the end of the first year with Chudkaram Sanskara. Performed in the firth or the seventh year or at the end of the first year with Chudkaram Sanskara.

Upanayana (bringing near)Upanayana (bringing near)

Imp. Sanskara – when the child is 6-9 Imp. Sanskara – when the child is 6-9 yrs old, yrs old, The child is brought near the guruThe child is brought near the guruMarks the beginning of 2Marks the beginning of 2ndnd phase of life- phase of life- Youth,Youth, Said to be the 2Said to be the 2ndnd birth i.e the spiritual birth i.e the spiritual birth of the childbirth of the child

VedarambhaVedarambha

Sanskara is done along with Sanskara is done along with UpanayanaUpanayanaIncludes the scared -Thread Includes the scared -Thread ceremonyceremony Entitles the child to study the Entitles the child to study the Vedas andVedas and participate in Vedic Functionsparticipate in Vedic FunctionsThe child is sent to Gurukul. The child is sent to Gurukul.

SamavartanaSamavartana

Performed at the end of child’s study in Gurukul and beginning of GrahasthashramPerformed at the end of child’s study in Gurukul and beginning of GrahasthashramAs a part of the ritual he takes permission from the guru before entering the ashram,As a part of the ritual he takes permission from the guru before entering the ashram,at the end of this sanskara the guru gives him imp.guidelines or tips for the ashram.at the end of this sanskara the guru gives him imp.guidelines or tips for the ashram.

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The sixteen sankarasThe sixteen sankarasVivahaVivaha

This Sanskara is entry into the second Ashram. This Sanskara is entry into the second Ashram. The life as individual family begins. The life as individual family begins. Pays spiritual debts by sacrifice , by procreating children Pays spiritual debts by sacrifice , by procreating children and study. and study.

VanaprasthaVanaprastha

Man withdraws himself from all worldly activities.Man withdraws himself from all worldly activities.Retires into the forest and Retires into the forest and prepares himself for taking sanyasprepares himself for taking sanyas.

SanyasaSanyasa

Renounces the world and leads a life of studyRenounces the world and leads a life of study& meditation by living on alms& meditation by living on alms.

Antyeshti (death)Antyeshti (death)

A small piece of gold, tulsi leaf and drops of Ganga water are put in the mouth of the person on theA small piece of gold, tulsi leaf and drops of Ganga water are put in the mouth of the person on thedeath bed. death bed. The body is laid on the ground with the head towards the north. The eldest son generally performsThe body is laid on the ground with the head towards the north. The eldest son generally performs the last rites before which he takes a purificatory bath, amidst the chanting of mantras. the last rites before which he takes a purificatory bath, amidst the chanting of mantras. The dead body is washed, perfumed and wrapped in a new white cloth and decked with flowers.The dead body is washed, perfumed and wrapped in a new white cloth and decked with flowers. For ten days following death, food is not prepared at home and relatives andFor ten days following death, food is not prepared at home and relatives and friends take the responsibility of getting food for the family.friends take the responsibility of getting food for the family.

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Debts in HinduismDebts in Hinduism

    To ensure a stable social framework, Hinduism introduces the To ensure a stable social framework, Hinduism introduces the concept of debts.concept of debts.

According to the Taittiriya Sanhita (6.3.10.5), a child is born with According to the Taittiriya Sanhita (6.3.10.5), a child is born with three debts to repay in his (or her) lifetime. three debts to repay in his (or her) lifetime. 

""Deva RinDeva Rin (rin=debt)“: (rin=debt)“: Human beings get easy access to the objects created by God, hence Human beings get easy access to the objects created by God, hence

they become indebted to the deities. This is called the deva rin. This they become indebted to the deities. This is called the deva rin. This debt must be repaid by performing various religious acts and worships debt must be repaid by performing various religious acts and worships (puja). (puja). 

""Rishi RinRishi Rin““ Human beings acquire the knowledge generated by the ancient sages Human beings acquire the knowledge generated by the ancient sages

and intellectuals. Thus humanity is indebted to them. This is called and intellectuals. Thus humanity is indebted to them. This is called rishi rin. By studying and acquiring knowledge (and if possible adding rishi rin. By studying and acquiring knowledge (and if possible adding matter to the existing knowledge), this debt can be repaid.matter to the existing knowledge), this debt can be repaid.

""Pitri RinPitri Rin“ “ A person is indebted to his/her ancestors as they have propagated A person is indebted to his/her ancestors as they have propagated

their lineage and are the cause for his/her birth. This is called pitri rin. their lineage and are the cause for his/her birth. This is called pitri rin. To repay this debt, Hinduism advocated (righteous) procreation as well To repay this debt, Hinduism advocated (righteous) procreation as well as performing rituals in rememberance of the ancestors.as performing rituals in rememberance of the ancestors.

  

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Debts in HinduismDebts in Hinduism

Another ancient Hindu scripture, Shatpath Brahman (1.7.2.1-6), added Another ancient Hindu scripture, Shatpath Brahman (1.7.2.1-6), added two more debts:-two more debts:-

    “ “Nri Rin”Nri Rin”or Manushya-rinor Manushya-rin A person is indebted to humanity at large which can be repaid by treating A person is indebted to humanity at large which can be repaid by treating

others with respect and helping them others with respect and helping them

“ “Bhuta Rin”Bhuta Rin” a person is indebted to plants, animals and nature. These a person is indebted to plants, animals and nature. These debts are repaid by performing the five great sacrificial fires debts are repaid by performing the five great sacrificial fires (panchamahayadnya) in the stage of the householder.(panchamahayadnya) in the stage of the householder.

Thus, we can conclude that the concept of "service" has its roots in the Thus, we can conclude that the concept of "service" has its roots in the ancient Hindu tradition of the five-fold debt system. The concept of the ancient Hindu tradition of the five-fold debt system. The concept of the four ends and five debts generates awareness of one's duties and four ends and five debts generates awareness of one's duties and responsibilities, provides moral and ethical direction to life, encourages responsibilities, provides moral and ethical direction to life, encourages family values, and helps one to organize life for individual family values, and helps one to organize life for individual accomplishments.accomplishments.

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Thank youThank you