Report on Corporate Governance
 

COMPANY'S PHILOSOPHY ON CORPORATE GOVERNANCE

TATA's principal purpose is to improve the quality of life of thecommunities it serves. The values and ideals, the way that it functions, helps it do that. As a Tata Company, the Company's 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 higheststandards of professionalism, honesty, integrity and ethical behavior. As a global organization, the Corporate Governance practices followed by the Company and its subsidiaries are compatible with international standards and best practices. Through the Governance mechanism in the Company, the Board along with its Committees undertakes its fiduciary responsibilities to all its stakeholders by ensuring transparency, fairplay and independence in its decision making.

The Corporate Governance philosophy is further strengthened withthe adherence to the Tata Business Excellence Model as a means to drive excellence, the Balanced Scorecard methodology for trackingprogress on long term strategic objectives and the Tata Code of Conduct which articulates the values, ethics and business principlesand serves as the ethical road map for the Company, its directors and employees supplemented with an appropriate mechanism to report any concern pertaining to non-adherence to the saidCode. The Company is in full compliance with the requirements of Corporate Governance under Clause 49 of the Listing Agreement with the Indian Stock Exchanges ("the Listing Agreement"). The Company's Depositary Programme is listed on the New York Stock Exchange and the Company also complies 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 processes focusareas continue to meet the progressive governance standards.

As a good corporate governance practice, the Company has voluntarily undertaken an Audit by M/s Parikh & Associates, Practising Company Secretaries, of the secretarial records anddocuments for the period under review in respect of compliance with the Companies Act, 1956 ("The Act"), Listing Agreement with the Indian Stock Exchanges and the applicable regulations and guidelines issued by Securities and Exchange Board of India.

BOARD OF DIRECTORS

The Board of Directors alongwith its Committees providesleadership and guidance to the Company's management and directs, supervises and controls the performance of the Company.The Board currently comprises of twelve Directors out of which nine Directors (75%) are Non Executive Directors. The Company has a Non Executive Chairman and the six Independent Directors comprise at least one half of the total strength of the Board. Allthe Independent Directors have confirmed that they meet the 'independence' criteria as mentioned under Clause 49 of the Listing Agreement.

None of the Directors on the Company's Board is a Member of more than ten Committees and Chairman of more than five Committees(Committees being, Audit Committee and Investors' Grievance Committee) across all the Indian Public limited companies in which he is a Director. All the Directors have made necessary disclosures regarding Committee positions held by them in other companies and do not hold the office of Director in more than fifteen public companies. None of the Directors of the Company are related to each other. All Non Executive Directors, excluding the 'Steel Director' (Tata Steel representative), are liable to retire by rotation. The appointment of the Managing Director and Executive Directors including the tenure and terms of remuneration are also approved by the members at the first meeting after their appointment.

The required information as enumerated in Annexure IA to Clause 49 of the Listing Agreement is made available to the Board of Directors for discussions and consideration at Board Meetings. The Board reviews the declaration made by the Managing Director regarding compliance with all applicable laws on a quarterly basis as also steps taken to remediate instances of non-compliance. The Managing Director and the Chief Financial Officer (CFO) have certified to the Board in accordance with Clause 49 V of the Listing Agreement pertaining to CEO and CFO certification for the Financial Year ended March 31, 2013.

During the year under review, nine Board Meetings were held on April 10, 2012, May 29, 2012, July 13, 2012, August 9, 2012, October 16, 2012, November 7, 2012, December 13, 2012, February 14, 2013 and March 28, 2013. The maximum time-gap between any two consecutive meetings did not exceed four months. The composition of the Board, attendance at Board Meetings held during the Financial Year under review and at the last Annual General Meeting, number of directorships (including Tata Motors), memberships/chairmanships of the Board and Committees of public companies and their shareholding as on March 31, 2013 in the Company are as follows:

Name of the Director Director
Identification
Number
Category No. of Board Meetings attended in the year Attendance at the last AGM Directorships(1) Committee positions(2) Shareholding(12)
Chairman Member Chairman Member Ordinary Shares 'A' Ordinary Shares
Ratan N Tata(3)(10) 00000001 Chairman Emeritus 7 Yes 1361730 109180
Cyrus P Mistry(4) 00010178 Non Executive, Chairman 7 Yes 10 1 1
Ravi Kant 00016184 Non Executive, Vice Chairman 9 Yes 2 2 1
N N Wadia 00015731 Non Executive, Independent 8 Yes 4 4
S M Palia(5)(10) 00031145 Non Executive, Independent 9 Yes 7 2 5 1500 12500
R A Mashelkar 00074119 Non Executive, Independent 8 Yes 7 4
S Bhargava 00035672 Non Executive, Independent 8 Yes 2 6 2 3
N Munjee 00010180 Non Executive, Independent 8 Yes 3 12 5 4
V K Jairath 00391684 Non Executive, Independent 9 Yes 1 2 250
Ralf Speth 03318908 Non Executive 7 Yes 1
Karl Slym(6) 01875188 Managing Director 5 NA 3 1
Ravindra Pisharody(11) 01875848 Executive Director (Commercial Vehicles) 7 Yes 5 50
Satish B Borwankar(11) 01793948 Executive Director (Quality) 7 Yes 7 1 710
R Sen(7)(10) 03043868 Non Executive, Independent 4 Yes
P M Telang(8)(10) 00012562 Managing Director – India Operation 2 NA 6600 11000
Details of Additional Director appointed after March 31, 2013 is as under:
Falguni Nayar(9) 00003633 Non Executive, Independent NA NA 1 2
  1. excludes alternate directorship and directorship in private companies, foreign companies, associations and section 25 companies
  2. includes only Audit and Investors' Grievance Committees
  3. ceased to be a Director and Chairman w.e.f. December 28, 2012. The Board of Directors designated him as "Chairman Emeritus."
  4. appointed as Non Executive Director w.e.f May 29, 2012 and appointed as Chairman w.e.f. December 28, 2012. He is also the 'Steel Director' w.e.f. March 28, 2013.
  5. stepped down as Director w.e.f. April 25, 2013, in accordance with the Company's retirement policy
  6. appointed as Managing Director w.e.f. September 13, 2012
  7. stepped down as Director w.e.f. October 16, 2012
  8. stepped down as Managing Director - India Operations w.e.f. June 21, 2012
  9. appointed as Non Executive, Independent Director w.e.f. May 29, 2013
  10. the memberships/chairmanships of the Board and Committees of public companies and shareholding are as of the date when they ceased to be the Directors
  11. appointed as Executive Directors w.e.f. June 21, 2012
  12. Shareholding as on March 31, 2013/date of cessation

THE COMMITTEES OF THE BOARD

The Board has constituted a set of Committees with specific termsof reference/scope to focus effectively on the issues and ensure expedient resolution of diverse matters. The Committees operate as empowered agents of the Board as per their Charter/terms of reference. Targets set by them as agreed with the management are reviewed periodically and mid-course corrections are also carried out. The Board of Directors and the Committees also take decisions by circular resolutions which are noted at the next meeting. The minutes of meetings of all Committees of the Board are placed before the Board for discussions/noting.

An Organisation Chart depicting the relationship between the Board of Directors, the Committees and the senior management as on March 31, 2013 is illustrated below:

AUDIT COMMITTEE

The Audit Committee functions according to its Charter that defines its composition, authority, responsibility and reporting functions in accordance with the Act, listing requirements and US regulations applicable to the Company and is reviewed from time to time. Whilst, the full Charter is available on the Company's website, given below is a gist of the responsibilities of the Audit Committee:

  1. Reviewing the quarterly financial statements before submission to the Board, focusing primarily on:
    • Compliance with accounting standards and changes in accounting policies and practices;
    • Major accounting entries involving estimates based on exercise of judgment by management;
    • Audit qualifications and significant adjustments arising out of audit;
    • Analysis of the effects of alternative GAAP methods on the financial statements;
    • Compliance with listing and other legal requirements concerning financial statements;
    • Review Reports on the Management Discussion and Analysis of financial condition, Results of Operations and the Directors' Responsibility Statement;
    • Overseeing the Company's financial reporting process and the disclosure of its financial information, including earnings press release, to ensure that the financial statements are correct, sufficient and credible; and
    • Disclosures made under the CEO and CFO certification and related party transactions to the Board and Shareholders.
  2. Reviewing with the management, external auditor and internal auditor, adequacy of internal control systems and recommending improvements to the management.
  3. Reviewing, with the management, the statement of uses/ application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for purposes other than those stated in the offerdocument/ prospectus/ notice and the report submitted by the monitoring agency monitoring the utilisation of the said proceeds and making appropriate recommendations to the Board to take up steps in this matter.
  4. Recommending the appointment/removal of the statutory auditor, cost auditor, fixing audit fees and approving non audit/consulting services provided by the statutory auditors' firms to the Company and its subsidiaries; Auditors' (including Cost Auditors) qualifications and independence as also performance evaluation of the statutory auditors.
  5. Reviewing the adequacy of internal audit function, coverage and frequency of internal audit, appointment, removal, performance and terms of remuneration of the chief internal auditor. Approving the appointment of CFO after assessing the qualification, experience and background etc of the candidate.
  6. Discussing with the internal auditor and senior management significant internal audit findings and follow-up thereon.
  7. Reviewing the findings of any internal investigation by the internal auditor into matters involving suspected fraud or irregularity or a failure of internal control systems of a material nature and report the matter to the Board.
  8. Discussing with the external auditor before the audit commences, the nature and scope of audit, as well as conduct post-audit discussions to ascertain any areas of concern.
  9. Reviewing the Company's financial and risk management policies.
  10. Reviewing the functioning of the Whistle-Blower Policy and the legal compliance mechanism.
  11. Reviewing the financial statements and investments made by subsidiary companies and subsidiary oversight relating to areas such as adequacy of the internal audit structure and function of the subsidiaries, their status of audit plan and its execution, key internal audit observations, risk management and the control environment.
  12. Look into the reasons for any substantial defaults in payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividend) and creditors, if any.

During the year, the Committee reviewed key audit findings covering operational, financial and compliance areas. Management personnel of the subsidiaries presented their internal control system, risk mitigation plan to the Committee. The Committee, through self-assessment, annually evaluates its performance, reviews the status on compliance of its obligations under the Charter and confirms that it fulfills its duties and responsibilities. The Chairman of the Audit Committee briefs the Board on significant discussions at Audit Committee meetings.

During the year under review, the Committee comprised of fourIndependent Directors, all of whom are financially literate and have relevant finance and/or audit exposure. Mr S M Palia, who was the Financial Expert, stepped down as Director w.e.f. April 25, 2013. Mr Munjee has been appointed as the Financial Expert in his place. The quorum of the Committee is two members or one-third of its members, whichever is higher. The Chairman of the Audit Committee also attended the last Annual General Meeting of the Company. During the year under review, nine Audit Committee meetings were held on April 18, 2012, May 26, 2012, July 17, 2012, August 7, 2012, September 7, 2012, November 5, 2012, December 1, 2012, January 16/17, 2013 and February 13, 2013.

The composition of the Audit Committee and attendance at its meetings is as follows:

Composition Meetings attended
N Munjee (Chairman) 9
S M Palia* 7
R A Mashelkar 8
V K Jairath 9
Falguni Nayar** NA

The Committee meetings are held at the Company's Corporate Headquarters or at its plant locations and are attended by Managing Director, Executive Directors, Chief Financial Officer, Chief Internal Auditor, Statutory Auditors and Cost Auditors. The Audit Committee meetings considering financial statements is preceded by an ½ hour meeting of the Audit Committee members alongwith the Auditors only. The Business and Operation Heads are invited to the meetings, as and when required. The Company Secretary acts as the Secretary of the Audit Committee. The Chief Internal Auditor reports to the Audit Committee to ensure independence of the Internal Audit function.

The Committee relies on the expertise and knowledge of the management, the internal auditors and the independent Statutory Auditor in carrying out its oversight responsibilities. It also uses external expertise, if required. The management is responsible for the preparation, presentation and integrity of the Company's financial statements including consolidated statements, accounting and financial reporting principles. Themanagement is also responsible for internal control over financial reporting and all procedures are designed to ensure compliance with accounting standards, applicable laws and regulations as well as for objectively reviewing and evaluating the adequacy, effectiveness and quality of the Company's system of internal control.

Deloitte Haskins & Sells, Mumbai (Registration Number 117366W), the Company's Statutory Auditors are responsible for performing an independent audit of the Financial Statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in India.

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