Airtel - BECG

8/8/2019 Airtel - BECG

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CORPORATE GOVERNANCERATING BHARTI AIRTEL

Divya Shubham

Aashish Kumar Chordia

Megha Chhaparia

Megha Parashar

Abhishek Goenka

D. Anvesh

Group No :13


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Mobile Services Broadband & Telephone Services Enterprise Services

GOVERNANCE METRICINTERNATIONAL


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About GMI

Formed in A ril, 2000

asy-to-use tool to monitor or orate governance

Ratings for 4,217 com anies

GMIRating Report

1. oard Accountability

2. Financial DisclosureandInternal Controls

3. areholderRights

4. xecutive Compensation5. Market for Control and Ownership ase

6. Corporate ehaviorand C RIssues


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Rating Methodology

Eachcriteria is ratedas 1 or 0

he final scoreofeach report is re-scaledona 10 point scale

Finally thecompany is ratedona 10 point scale

Score Interpretation

>9 Well aboveaverage

7.5 - 8.5 Aboveaverage

6 7 Average

3.5 5.5 Below average

< 3 Well below average


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FINANCIAL DISCLOSURE ANDINTERNAL CONTROLS

Rating 6.88 / 10


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Financial Disclosure & internal Control

Criteria Y/N Criteria Y/N

Audit committee wholly composed

of independent membersNo Chair of the audit committee is non-

executive and has expertise in

accounting or financial management

Yes

At least one member serves on the

boards of four or more public

companies

Yes At least one non-executive memberof the audit committee has

substantial industry knowledge

Yes

At least one non-executive member

has expertise in accounting or

financial management

Yes Non-executive members withsubstantial industry knowledge form

a majority of the

committee

No

Non-executive members of the

audit committee with expertise in

accounting or financial

management form a majority

Yes Chair of the audit committee is non-executive and has substantial

industry knowledge

Yes


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Currently under formal investigation

for accounting irregularitiesNo Makes comprehensive disclosures on

its enterprise risk management

policies (ERM) in its annual report

Yes

Has taken two or more unusual and

non-recurring charges within the

last three years

No The board has adopted a separatecommittee or subcommittee

responsible for oversight of risk

management

Yes

Someone other than senior

management has sole authority to

hire and fire the companys outside

auditor

Yes At least one non-executive memberof the risk committee or the board

has expertise in risk management

No

Audit committee has sole authority

to approve any non-audit services

from the company's outside auditor

Yes At least one non-executive memberof the risk committee has substantial

industry knowledge

Yes

Financial Disclosure & internal Control


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Rationale

Six members, all of whom are non-

executive directors and four of whom

are independent.

N.Kumar (Chairman) - Independent

director - 6 other BODs

The Audit Committee Chairman, N.Kumar is an independent director and

has sound financial knowledge as well

as many years of experience in general

management.

Majority of the audit committee members,

including the Chairman, have accounting

and financial management expertise N.

Kumar, Pulak Chandan Lal, Ajay Lal &

Tan Yong Choo

The Audit Committee Chairman, N.

Kumar is an independent director and

has sound financial knowledge as well

as many years of experience in general

management.

Rakesh Bharti Mittal has substantialindustry knowledge. Also is an

Electronics Engg Grad.

Only 2 members have extensive

knowledge of Telecom Industry.

N. Kumar (Chair) has extensive

industry knowledge


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Rationale

No

No investigation

Recommending to the Board, the

appointment, re-appointment and, if

required, the replacement or removal ofthe statutory auditor, internal auditors

and the determination of their audit

fees

Audit committee has sole authority to

approve any non-audit services fromthe company's outside auditor &

Approval of payment to statutory

auditors for any other services

rendered by them

In compliance with clause 49 of the listingagreement, the Company has established

an enterprise wide risk management

(ERM) framework to optimally identify

and manage risks as well as to address

operational, strategic and regulatory risks.

Independent Directors are responsibleto review and note the Companys risk

management framework and its

adequacy as well as regular update on

the effectiveness of implementation

N. Kumar is independent director and

hence is responsible for risk

management. He has extensive

industry knowledge

No


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REMUNERATION

Rating 6.15 / 10


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Remuneration


Discloses a policy requiring company

executives to retain some or all of

restricted shares for some time after

they have completed their

performance conditions

Yes

Claw back policy for any bonuses,

options and/or other compensation

based on accounts that end up being

restated at a later date (beyond

Sarbanes-Oxley Act requirements or

equivalent)

No

The retention period for some or all

restricted shares that have met all

performance conditions is 3 years or

longer Yes

The remuneration committee has

discretion to alter the criteria and/or

incentive targets for management

after being established or has power

to grant incentives or bonuses on a

discretionary basis.

Yes

Discloses Remuneration guidelines

for the rest of senior management Yes


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Rationale

Remuneration Committee Consist of six

members out of which only four areindependent members

No

The options can be converted into equityshares either in full or in tranches at anytime up to 7 years from the grant date.

During the year, Manoj Kohli, the

CEOwas granted 91,400 stock

options under the ESOP Scheme2001 and ESOP Scheme

11,400 stock options were granted on July 1,

2009 at a discounted exercise price ofRs.

402.5 per option, which will vest over a

period of 3 years in equal proportion

No

Remuneration Committee submits

its proposal in front of AGM. And

shareholders approve their

recommendations'

No


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Rationale..

No80,000 stock options were granted on

August 1, 2009 at a discounted exercise

price of Rs. 5 per option with differential

vesting period spread over 4 years

The options can be converted into equity

shares either in full or in tranches at any time

up to 7 years from the grant date. The

unexercised vested options can be carried

forward throughout the exercise period. The

options which are not exercised will lapse after

the expiry of the exercise period

Amount Paid to Non Whole time

directors Rs1,59,97,000

According to clause 45(a) of

AOA the remuneration

committee has the power to

alter , any remuneration paid to

senior management of th

company.


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SHAREHOLDERS RIGHTS

Rating 5 / 10


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SHAREHOLDERS RIGHTS


All common or ordinary

equity shares have one share

one vote, with no restrictions

No Shareholders can convene

an EGM

Yes

Voting rights capped at a

certain percentage

No Confidential voting with no or

reasonable exceptions

Yes

Voting rights different for

domestic or non resident

investors

No Cumulative voting in the

election of directors

Yes

Voting rights different

depending on the duration of

ownership

No All vote results for the last

shareholder meeting

disclosed within 14 days ofthe meeting

Yes

Minimum holding period in

order to vote

No Shareowners can act in

concert through written

communication

Yes


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Rationale

The company posts the results of AGMs on its site.

The share owners can always write to the company to voice theirconcert. The postal ballot scheme was well received by SHs.

The results of post ballot is published in the newspaper within

48hrs of the declaration of result and be also places on thewebsite.

The SH voting rights are neither capped nor r dependent onduration


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MARKET FOR CONTROL ANDOWNERSHIP BASE

Rating / 10


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Single shareholder controls or

shareholder group acting together

control over50% of the

company's voting power

No Has adopted a shareholder rights plan No

Involved in a series of cross-

shareholdings with other

companies

Yes Shareholder rights plan has been ratified

by a shareholder voteNo

Has a staggered ("classified")

boardYes Shareholder rights plan includes a TIDE

provision or a three-year sunset provisionNo

Directors can be removed without

causeNo Shareholder right it to be redeemed by a

vote of the majority of shareholders other

than the potential acquirer

Yes

Fair price provision is in place or

the company is subject to fair

price protection under applicable

law

Yes The company has a unilateral right to

amend the by-laws/articles of

association/constitution without

shareholder approval

No


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Rationale

Single shareholder controls or shareholder group actingtogether control over50% of the company's voting power("Majority Owner")

Bodies Corporate 45.32

Foreign Bodies Corporate 20.57

Mutual Funds/ UTI 2.62

Foreign Institutional Investors 24.53


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CORPORATE BEHAVIOR ANDCSR ISSUES

Rating 7.5 / 10


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Company has been subject to a formal

regulatory investigation for a material

issue other than for accounting

irregularities within the last year

No

Has a policy addressing workplace

safety Yes

Company has pending criminal litigation

against it, has been found guilty withinthe last 3 years, or has pled the

equivalent of no contest in such

litigation in the past three years, or has

been under criminal in

No

Discloses its workplace safety

record in the annual report or inanother form accessible to

shareholders

NA

Company has been cited, settled, or

been found guilty of by either national orsupranational authorities for some

breach of law involving non-accounting

issues within the last year

No

Has been charged with three or

more serious workplace safetyviolations within the last two years

No

Corporate Behavior


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Corporate Behavior


Discloses its environmental

policies

Yes

Alleged by a responsible party that the

company used child

labor (under 14 or the minimum in

market, whichever is higher)

within the last three years

No

Discloses its environmentalperformance

Yes

Alleged by a responsible party that thecompany used sweat

shops as sub-contractors within the last

three yearsNA

Discloses its policy regarding

corporate level politicaldonations NA

Alleged by a responsible party that the

company used childlabor as a source for sub-contracted

work within the last three

years

No


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Rationale

At Bharti , people believe in the philosophy to refuse, reduce, reuse and recycle. The

company has taken many initiatives in this regard, both within the offices for the benefit of

our employees; and for outside world for the convenience of the people.

Bharti Airtel is in the process of finalizing its Environment/ Health & Safety Policy (EHS)

and will apply forISO 14001 compliance within the next 3 years for each of its facilities.

All Bharti Airtel offices have fire alarm systems. Periodic fire drills are carried out in

Bharti Airtel offices as a practice. All Airtel offices are provided with First Aid boxes and

have identified people as First Aid specialists.

For more details, please visit www.airtel.in


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BOARD ACCOUNTABILITY

Rating 8 / 10


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Board Accountability

A boardofdirectorsendorsetheorganization'sstrategy

developdirectional policy

appoint, superviseand remunerateseniorexecutives

andensureaccountability of theorganization to itsowners

Board Compositionason 28thApril 2010

Type of directors Number

Whole ime Director 2

Independent Director 6

Independent Nonexecutive

Directors

8

TOTAL 16


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Combined Chairman and CEO Yes Non-executive Chair No

Directors subject to annual election by

all shareholdersYes Discloses corporate governance

policies or guidelinesYes

All directors attended at least 75% of

the board meetings and committee

meetings in the last fiscal year

Yes The company discloses an over-boarding policy limiting the number of

directorships held by executive

directors

Yes

Board policy is for the non-executive

directors to meet in executive session

before or after every board meeting,

time permitting

Yes Executive Chairman, Chief ExecutiveOfficer or Managing Director (as

applicable) serves on the boards of

three or more public companies

Yes

Designated lead/ senior non-executive

directorYes Non-executive chair is independent No

All executive directors own shares

after excluding options heldNo All non-executive directors own shares

after excluding options heldYes



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Within the last three years, company

has failed to adopt the specific

recommendations (or a comparable

alternative) of a shareholder proposal

approved by a majority vote

Yes Uses, or has adopted, some form ofmajority voting in the election of

directors

No

The company discloses an over-boarding policy limiting the number of

directorships held by non-executive

directors

Yes Non-executive directors have a formalsession without the executive members

at least once a year

Yes

At least one director serves on the

boards of four or more public

companies

No Related-party transactions involvingofficers or directors in the past three

years

Yes

Discloses a code of ethics for senior

executives or the employee code of

ethics also covers senior executives

Yes



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Rationale

Boardofdirectors: ( unil Bharti Mittal -ChairmanandManaging Director)

Bharti Airtel hasaauditor rotationpolicy approvedby theBoard for tatutory aswell asInternal Auditors.

he Company has laiddowna roadmap tocomply withprovisionsof arbanes-Oxley ( OX) Act. a U federal law enacted.

Ason July 30, 2002, also knownas the 'Public Company Accounting ReformandInvestor Protection Act' and 'Corporateand Auditing Accountability andResponsibility Act.

Practiceofan informal meeting of independent directorsprior to thecommencement ofevery board meeting without thepresenceofany non-independent/executivedirector to raiseanddiscuss important issues that theywould like tobeaddressedat theboard meeting.

CompanysBoard isanoptimum mix ofexecutive, nonexecutiveandindependent directors, which is incompliance with the listing agreements, FDIguidelines, otherstatutory provisionsand termsof theshareholders agreement.


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Rationale

On April 28, 2010 i.e. thedateof this report, theBoardcomprisedofsixteen

members, twoof whom including Chairmanare whole-timedirectors, six arenon-executiveandeight are independent non-executivedirectors.

Asper the Companys governancepolicy, theselectionofanew board memberis the responsibility of theentireBoardandall theappointmentsare made withits unanimousconsent. heappointmentsofsuchdirectorsarealsoapprovedbytheshareholdersat theannual general meeting.

he independent directorsalso meet internal andstatutory auditorsperiodicallywithout thepresenceof management toensure their independenceandproperdischargeofdutiesby them.

All independent directors meet separately prior to the commencement ofeveryboard meeting, on theirown, (without thepresenceofany non-

independent/executivedirectorsor representativesof management)inceBashir Currimjee would retire w.e.f. theconclusionof theboard meeting

dated April 28, 2010, Mr. N. Kumarhas beendesignatedas lead independentdirector inhisplace w.e.f. April 28, 2010.

Source: Company Annual report 2009-2010


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OVERALL RATING


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Field Rating

Board Accountability 8

Financial Disclosure and Internal

Controls

6.88

ShareholderRights

Executive Compensation 6.15

Market for Control and Ownership

Base

Corporate Behavior and CSRIssues 7.5

TOTAL

Airtel - BECG

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