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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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Mobil
r
i
roadband
l
one
er
i es nter
rise
er
i es
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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Mobile ervices roadband
elephone ervices nterprise ervices
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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Mobile Services Broadband & Telephone Services Enterprise Services
FINANCIAL DISCLOSURE ANDINTERNAL CONTROLS
Rating 6.88 / 10
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Mobile Services Broadband & Telephone Services Enterprise Services
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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Mobile Services Broadband & Telephone Services Enterprise Services
Criteria Y/N Criteria Y/N
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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Mobile Services Broadband & Telephone Services Enterprise Services
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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Mobile Services Broadband & Telephone Services Enterprise Services
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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Mobile Services Broadband & Telephone Services Enterprise Services
REMUNERATION
Rating 6.15 / 10
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Mobile Services Broadband & Telephone Services Enterprise Services
Remuneration
Criteria Y/N Criteria Y/N
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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Mobile Services Broadband & Telephone Services Enterprise Services
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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Mobile Services Broadband & Telephone Services Enterprise Services
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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Mobile Services Broadband & Telephone Services Enterprise Services
SHAREHOLDERS RIGHTS
Rating 5 / 10
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Mobile Services Broadband & Telephone Services Enterprise Services
SHAREHOLDERS RIGHTS
Criteria Y/N Criteria Y/N
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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Mobile Services Broadband & Telephone Services Enterprise Services
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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Mobile Services Broadband & Telephone Services Enterprise Services
MARKET FOR CONTROL ANDOWNERSHIP BASE
Rating / 10
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Mobile Services Broadband & Telephone Services Enterprise Services
Criteria Y/N Criteria Y/N
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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Mobile Services Broadband & Telephone Services Enterprise Services
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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Mobile Services Broadband & Telephone Services Enterprise Services
CORPORATE BEHAVIOR ANDCSR ISSUES
Rating 7.5 / 10
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Mobile Services Broadband & Telephone Services Enterprise Services
Criteria Y/N Criteria Y/N
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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Mobile Services Broadband & Telephone Services Enterprise Services
Corporate Behavior
Criteria Y/N Criteria Y/N
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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Mobile Services Broadband & Telephone Services Enterprise Services
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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Mobile Services Broadband & Telephone Services Enterprise Services
BOARD ACCOUNTABILITY
Rating 8 / 10
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Mobile ervices Broadband
elephone ervices Enterprise ervices
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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Mobile Services Broadband & Telephone Services Enterprise Services
Criteria Y/N Criteria Y/N
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
Board Accountability
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Mobile Services Broadband & Telephone Services Enterprise Services
Criteria Y/N Criteria Y/N
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
Board Accountability
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Mobile ervices Broadband
! elephone ervices Enterprise ervices
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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Mobile" ervices Broadband#
$ elephone" ervices Enterprise " ervices
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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Mobile Services Broadband & Telephone Services Enterprise Services
OVERALL RATING
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Mobile Services Broadband & Telephone Services Enterprise Services
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
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