CORPORATE GOVERNANCE REPORT
1. THE COMPANY’S PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE
Corporate Governance continues to be a strong focus area for the Company.
Our philosophy on Corporate Governance in Eicher emanates from resolute commitment to protect stakeholder rights and interests, proactively manage risks and create long-term wealth and value. It permeates in all aspects of working - workplace management, marketplace responsibility, community engagement and business decisions.
The code of conduct and the governance are based on the corporate principles and strong emphasis laid on transparency, accountability, integrity and compliance.
The governance processes of the Company include creation of empowered sub-committees of the Board to oversee the functions of executive management. These sub-committees of the Board mainly comprises of Non-executive Directors and Independent Directors, which meet and deliberate regularly to discharge their obligations.
In India, Corporate Governance standards for listed companies are regulated by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. (Earlier, Clause 49 of the listing agreement of the Stock Exchanges.) The Company has adopted best practices mandated in SEBI (LODR) Regulations, 2015.
2. BOARD OF DIRECTORS
Your Company’s Board has an optimum combination of Executive, Non-executive and Independent Directors with one women Director, as per the requirements of Regulation 17 of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 (‘SEBI Listing Regulations’). The composition of the Board and the Independent Directors of the Company meet all the criteria mandated by SEBI Listing Regulations and the Companies Act, 2013.
2.2 Appointment of Directors
Directors are appointed or re-appointed with the approval of the shareholders and shall remain in office in accordance with the provisions of the law and terms and conditions of appointment. The Company has issued letter of appointment to all the Independent Directors and the terms and conditions of their appointment have been disclosed on the Company’s website www.eichermotors.com
Separate Meeting of Independent Directors:
As stipulated by the Code of Independent Directors under the Companies Act, 2013 and the SEBI Listing Regulations, a separate meeting of the Independent Directors of the Company was held on July 21, 2015 without the attendance of non-independent directors and members of management to:
(a) review the performance of non-independent directors and the Board as a whole;
(b) review the performance of the Chairperson of the Company, taking into account the views of executive directors and non-executive directors;
(c) assess the quality, quantity and timeliness of flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonably perform their duties
2.6 Induction and Familiarization Program for Directors
The Company has a program to familiarize Independent Directors with regard to their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, the business models of the Company etc. and the same is available on the weblink http://www.eicher. in/corporate-governance
2.7 Information supplied to the Board
The Board has complete access to all information of the Company. The following information is provided to the Board as a part of the agenda papers:-
A. Annual operating plans and budgets and any updates.
B. Capital budgets and any updates.
C. Annual and Quarterly results for the Company
D. Minutes of meetings of audit committee and other committees of the board of directors.
E. The information on recruitment and remuneration of senior officers just below the level of board of directors, including appointment or removal of Chief Financial Officer and the Company Secretary.
F. Show cause, demand, prosecution notices and penalty notices, which are materially important, if any.
G. Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems, if any.
H. Any material default in financial obligations to and by the Company, or substantial non-payment for goods sold by the Company, if any.
I. Any issue, which involves possible public or product liability claims of substantial nature, including any judgement or order which, may have passed strictures on the conduct of the Company or taken an adverse view regarding another enterprise that may have negative implications on the Company.
J. Details of joint venture or collaboration agreement.
K. Transactions that involve substantial payment towards goodwill, brand equity, or intellectual property.
L. Significant labour problems and their proposed solutions, wherever necessary. Any significant development in Human Resources/ Industrial Relations front like signing of wage agreement, implementation of Voluntary Retirement Scheme etc.
M. Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks of adverse exchange rate movement, if material.
O. Non-compliance of any regulatory, statutory or listing requirements and shareholders service such as non-payment of dividend, delay in share transfer etc., if any
While formulating and approving policies concerning appointment of directors and other senior officers, board diversity, remuneration and evaluation, the Board seeks to ensure business continuity with due weightage to succession planning.
3. AUDIT COMMITTEE
In terms of provisions of Section 177 of the Companies Act, 2013 and Regulation 18 of SEBI Listing Regulations, Audit Committee of the Board of Directors presently consists of four Non-executive Directors who are Independent Directors and one Executive Director. The role of the Audit Committee is to provide directions to and oversee the internal audit and risk management functions, review of financial results and annual financial statements, interact with statutory auditors and such other matters as are required in terms of the Companies Act, 2013 and SEBI Listing Regulations.
Constitution of the Audit Committee complies with requirements of the Companies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 with all members being financially literate and most having accounting or related financial management expertise.
3.1 Major terms of reference
(i) Oversight of the Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.
(ii) Recommending the appointment and removal of external auditors, fixation of audit fee and also approval for payment for any other services. (iii) Reviewing with the management the quarterly, half yearly and annual financial statements and auditors’ report thereon before submission to the Board for approval.
(iv) Reviewing the Company’s financial and risk management policies.
(v) Review and monitor the Auditor’s independence and performance, and effectiveness of audit process.
(vi) Approval or any subsequent modification of transactions of the Company with related parties.
(vii) Scrutiny of inter-corporate loans and investments.
(viii) evaluation of internal financial controls and risk management systems;
(ix) reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems;
(x) reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit;
(xi) discussion with internal auditors of any significant findings and follow up there on;
(xii) reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board
(xiii) discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern;
(xiv) to review the functioning of the whistle blower mechanism;
(xv) Carrying out any other function as is mentioned in the terms of reference of the audit committee.
The Company has system and procedures in place to ensure that the audit committee mandatorily reviews:
(i) management discussion and analysis of financial condition and results of operations;
(ii) statement of significant related party transactions submitted by management;
(iii) internal audit reports relating to internal control weaknesses.
4. STAKEHOLDERS RELATIONSHIP COMMITTEE
In terms of provisions of Clause 49 of the erstwhile Listing Agreement, a Shareholders’ and Investors’ Grievance Committee of the Board of Directors was formed by the Board of Directors on July 23, 2001 and presently consists of two Non-executive and Independent Directors. The Committee has been re-nomenclated as Stakeholders Relationship Committee. The Committee is required to look into the redressal of Shareholders’ and Investors’ complaints like transfer of shares, Non-receipt of Annual Report, Non-receipt of declared dividend etc.
Meetings of the Stakeholders Relationship Committee of Board of Directors were held on February 13, 2015, May 8, 2015, July 21, 2015 and November 6, 2015.
The Managing Director and the Chief Financial Officer are the permanent invitees at the Stakeholders Relationship Committee meetings.
Mr Manhar Kapoor, the Company Secretary acts as the Secretary to the Shareholders Relationship Committee. He is the compliance officer of the Company.
5. NOMINATION AND REMUNERATION COMMITTEE
Pursuant to Section 178 of Companies Act, 2013, the Nomination and Remuneration Committee of the Board of Directors was formed by the Board of Directors on May 9, 2014 and presently consists of three Non-Executive Independent Directors.
5.1 Major terms of Reference
(i) Identifying persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down and recommending to the Board their appointment and removal
(ii) Carrying out evaluation of every director’s performance.
(iii) Laying down the evaluation criteria for performance evaluation of Independent Directors.
(iv) Formulating the criteria for determining qualifications, positive attributes and independence of a director.
Change in terms of reference of Nomination and Remuneration Committee and dissolution of Compensation Committee:
SEBI (Share Based Employee Benefits) Regulations, 2014, provided that the Compensation Committee shall be consisted of three or more non-executive Directors out of which not less than one-half shall be Independent Directors. The regulations also provided that the Company may designate such of its other committees as compensation committee if they fulfill the criteria as specified above.
The Compensation Committee of the Company was responsible for the administration and superintendence of Employee Stock Option Plan – 2006 (ESOP – 2006) of the Company and related activities. The Board of Directors of the Company in their meeting held on May 8, 2015 designated Nomination and Remuneration Committee for administration of ESOP related activities of the Company by changing terms of reference of Nomination and Remuneration Committee and dissolved the Compensation Committee. Before dissolution, two meetings of the compensation committee were held on January 12, 2015 and March 20, 2015.
5.2 The additional terms of reference, role, responsibilities and powers of Nomination and Remuneration Committee are as under:
(i) To undertake and perform all such functions, powers for administration and superintendence of ESOS – 2006, inter alia as contained under SEBI (Share Based Employee Benefit) Regulations, 2014 including any amendments thereof.
(ii) The Nomination and Remuneration Committee shall meet at least once a year.
(iii) To review and approve any other matter relating to the aforesaid Employee Stock Option Scheme – 2006 (ESOS) which may be considered necessary and incidental thereto.
5.4 Remuneration Policy
The Remuneration Policy of the Company is designed to attract, motivate and retain manpower. This Policy applies to directors and senior management including its Key Managerial Personnel (KMP) and other employees of the Company. The compensation strategy revolves around getting the "most suited talent in the market".
The remuneration of the Managing Director, Executive Director and KMPs of the Company is recommended by the Nomination and Remuneration Committee based on established criteria. The Company generally pays remuneration by way of salary, perquisites and allowances (fixed component), incentive remuneration and/or commission (variable components).
Remuneration by way of commission to the Non-Executive Directors is decided by the Board of Directors in line with the approv al granted by shareholders.
5.5 Evaluation Criteria
The Company has adopted an Evaluation policy to evaluate performance of each director, the Board as a whole and its committees. Evaluation is also carried out by the Nomination and Remuneration Committee in accordance with Section 178 of the Companies Act 2013 and Code for Independent Directors’ as outlined under Schedule IV of the Companies Act, 2013. Such evaluation factors various criteria including contribution, domain expertise, strategic vision, industry knowledge, participation in discussions etc.
During the financial period, formal annual evaluation of the Board, its committees, the Chairman and individual Directors was carried out pursuant to the Board Performance Evaluation Policy on July 21, 2015.
6. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
Pursuant to Section 135 of Companies Act, 2013, the Corporate Social Responsibility Committee of the Board of Directors was formed by the Board of Directors on 9th May, 2014 and presently consists of three Directors.
6.1 Major terms of Reference
(i) Formulating and recommending to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the Company as specified in Schedule VII of the Companies Act, 2013.
(ii) Recommending the amount of expenditure to be incurred on the activities referred to in CSR Policy.
(iii) Monitoring the CSR Policy of the Company from time to time.
7. RISK MANAGEMENT COMMITTEE
In terms of Clause 49 of the erstwhile Listing Agreement, a Risk Management Committee of the Board of Directors was constituted by the Board of Directors on May 9, 2014 and reconstituted on November 12, 2014 and presently consists of two Directors and the Chief Financial Officer.
7.1 Major Terms of Reference
(i) To assist the Board in formulating the Risk Management Plan and practices;
(ii) To monitor and review risk management plan and practices of the Company as approved by the Board
8. SHARES COMMITTEE
The Shares Committee of the Company consists of three members i.e. Mr Siddhartha Lal - Managing Director, Mr Lalit Malik - Chief Financial Officer and Mr Manhar Kapoor –Company Secretary to look after and approve transfer of equity shares including dematerialisation, issue of duplicate certificates, transmission of securities, etc.
During the fifteen months ended March 31, 2016, 27 meetings of the Committee were held whereby 12182 shares were transferred by the Committee and 1445 requests for dematerialisation, 115 requests for duplicate certificates and 36 requests for transmission of securities were approved.
9. REMUNERATION OF DIRECTORS
9.1 Remuneration to Managing Director
The Non-executive and Independent Directors are paid sitting fees @ Rs. 20,000/- for attending each meeting of the Board of Directors, Audit Committee and Compensation Committee.
The Non-executive and Independent Directors are paid sitting fees @ Rs. 10,000/- for attending each meeting of Nomination and Remuneration Committee, Stakeholders’ Relationship Committee (formerly Shareholders’ and Investors’ Grievance Committee) and the Corporate Social Responsibility Committee.
The members of the Company in their 33rdAnnual General Meeting held on March 20, 2015 had approved payment of remuneration by way of commission to the Non-Executive Directors of the Company not exceeding 1% of the net profits of the Company, calculated in accordance with the provisions of the Companies Act 2013, for a period of five years with effect from the financial year ended December 31, 2014.
Independent Directors are not entitled to any stock options.
Further, there has been no other material pecuniary relationship or business transactions by the Company with any Non-executive and Independent Directors of the Company.
10. SUBSIDIARY COMPANIES
Subsidiary companies of the Company are managed by their respective Board having the rights and obligations to manage such companies in the best interest of their stakeholders. The Company monitors performance of significant unlisted subsidiary company, inter alia, by the following means:
(i) Financial statements, in particular the investments made by the subsidiary company are reviewed by the Audit Committee of the Company.
(ii) All minutes of Board meetings of subsidiary company are placed before the Company’s Board on regular basis.
(iii) All significant transactions and arrangements entered into by the subsidiary company are reviewed on regular basis.
(iii) Mr Prateek Jalan, a non-executive independent director of the Company is a director on the board of unlisted material subsidiary, incorporated in India.
11. OTHER DISCLOSURES
11.1 Related Party Transactions
In terms of the Accounting Standard-18 "Related Party Disclosures", as prescribed under section 133 of the Companies Act, 2013 read with rule 7 of the Companies (Accounts) Rules, 2014, the Company has identified the related parties covered therein and details of transactions with such related parties have been disclosed in Note No. 39 to the Accounts forming part of this Annual Report.
Transactions with related parties entered into by the Company are in the ordinary course of business and on arm’s length basis and do not have potential conflicts with the Company. Further, these transactions are also placed in the Audit Committee Meeting(s) for its prior approval or omnibus approval. There is no materially significant related party transaction during the fifteen months ended March 31 2016.
11.2 Compliances by the Company
The Company has complied with the requirements of the Stock Exchanges, SEBI and other statutory authorities on all matters related to capital markets during the last three years. No penalties have been imposed on the Company by the Stock Exchanges or SEBI or any other statutory authorities relating to the above.
11.3 Code of Conduct for Directors and Senior Management
The Board of Directors of the Company has adopted a Code of Conduct for Directors and Senior Management and the same is available on Company’s website at www.eichermotors.com.
11.4 Prevention of Insider Trading Code:
As per SEBI (Prohibition of Insider Trading) Regulation, 2015, the Company has adopted a Code of Conduct for Prevention of Insider Trading. All the Directors, employees and third parties such as auditors, consultants etc. who could have access to the unpublished price sensitive information of the Company are governed by this code. The trading window for dealing in securities of the Company is closed as per the provisions of the code.
11.5 CEO / CFO Certification
The CEO and the CFO of the Company have certified to the Board with regard to the compliance in terms of Regulation 17(8) of SEBI Listing Regulations and that the certificate forms part of the Annual Report.
11.6 Status of compliance of Non-Mandatory requirements under regulation 27(1) of SEBI Listing Regulations
The Company complies with the following non-mandatory requirements:
1. A non-executive Chairman is entitled to maintain a Chairman’s office at the Company’s expense and also allowed reimbursement of expenses incurred in performance of his duties.
2. The Auditors have expressed no qualification in their report.
3. The Company has appointed separate persons to the post of the Chairman and the Managing Director/CEO.
4. The Internal auditor periodically reports to the Audit Committee.
11.7 Accounting treatment in preparation of the financial statements
The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. The financial statements have been prepared on accrual basis under the historical cost convention.
11.8 Whistle Blower Policy
The Board of Directors of the Company has adopted a Whistle Blower Policy to establish a vigil mechanism and the same is available on Company’s website at www.eichermotors.com. No person has been denied access to the Audit Committee.
12. MEANS OF COMMUNICATION
(i) The consolidated quarterly and annual results are published in the Business Standard (English) - All Editions and Business Standard (Hindi), Delhi edition. The Standalone and Consolidated quarterly and annual results of the Company are available on the Company’s website at www. eichermotors.com
(ii) The Standalone and Consolidated quarterly and annual results are filed with the Stock Exchanges in terms of Regulation 33(3) of SEBI Listing Regulations.
(iii) The following are displayed on the Website of the Company i.e. www. eichermotors.com:
Business of the Company;
Terms and conditions of appointment of Independent Directors;
Composition of various committees of the Board
Whistle Blower Policy
Annual Report of the Company;
Policy on dealing with related party transactions;
Policy for determining material subsidiaries;
Details of familiarization programs for Independent Directors;
Standalone and Consolidated Quarterly and Annual Financial Results of Company;
Schedule of analyst or institutional investor meet and presentations made to them;
Code of Conduct for the Directors and Senior Management;
Investors/analysts conference call information and transcripts; and Contact information - for solving any investor’s queries.
Other information as required under regulation 46 of SEBI Listing Regulations.
(iv) Management Discussion and Analysis Report forms part of the Annual Report.
13. GENERAL SHAREHOLDER INFORMATION
Day, date, time and venue of the Annual General Meeting: Saturday, June 18, 2016 at 10:00 A.M at Shri Ram Centre 4, Safdar Hashmi Marg, New Delhi-110001
13.6 Cut-Off Date : June 11, 2016 13.7 Interim Dividend payment date : Interim dividend declared by the Board on March 12, 2016 was paid on or before March 31, 2016
13.8 Listing on Stock Exchanges
The equity shares of the Company are listed on the following Stock Exchanges
BSE Limited Phiroze Jeejeebhoy Towers, Dalal Street Mumbai - 400 001
National Stock Exchange of India Ltd. Exchange Plaza, 5th Floor, Plot No. C/1, G Block Bandra Kurla Complex, Bandra (E) Mumbai - 400 051
The Company confirms that the annual listing fees to both the stock exchanges for the financial year 2016-17 have been paid.
13.10 Registrar and Share Transfer Agent / Address for correspondence:
Share transfer and other communication regarding change of address, dividends, share certificates, investor complaints, etc. may be addressed to
M/s Link Intime India Pvt. Ltd. Registrar and Share Transfer Agent 44, 2nd Floor, Community Centre Naraina Industrial Area, Phase-I, New Delhi 110028 Phone No: 011-41410592 Fax No: 011-41410591 E-Mail: email@example.com
Members may write for any queries / information to Mr Manhar Kapoor, General Counsel and Company Secretary at Eicher Motors Limited, 3rd Floor- Select Citywalk, A-3 District Centre, Saket, New Delhi–110017, or at # 96, Sector 32, Gurgaon- 122001, Haryana, or any query can be sent by email to firstname.lastname@example.org.
13.12 Share transfer system
Shares of the Company were transferred through M/s. MCS Limited till September 4, 2015 Thereafter shares of the Company are transferred through M/s. Link Intime India Pvt. Ltd., the Registrar and Share Transfer Agents of the Company and the Shares Committee of the Company approves the said share transfers.
Total number of shares transferred within the stipulated period during the fifteen months ended March 31, 2016 was 16,976 shares.
13.13 Dematerialisation of shares and liquidity
As per SEBI’s circular dated February 21, 2000, the Company’s equity shares are under the Compulsory Demat Category and can now only be traded in the dematerialized form w.e.f. March 22, 2000.
Members are requested to avail the facility of the depository system by opening of Demat account with any of the Depository Participant (DP). Members who hold shares in dematerialized form, should send all their communications concerning dematerialisation / rematerialisation of share certificates, transfers/transmissions, dividends, change of address, change in mandate, nominations, etc. to the concerned DPs with whom they have opened Demat Account.
As on March 31, 2016, 2,64,75,585 shares constituting 97.48% of the total paid up equity share capital of the Company have been dematerialized with NSDL and CDSL.
13.16 Transfer of Unclaimed / Unpaid Dividend:
The Company shall be transferring the unclaimed / unpaid dividends as mentioned hereunder to the Investor Education and Protection Fund, established by the Central Government, in terms of the provisions of Sections 205A and 205C of the Companies Act, 1956.
13.17 Investors’ services
The Company has attended to most of the investors’ grievance/ correspondence within a period of 10 days from the date of receipt of complaint for the fifteen months ended March 31, 2016.
13.18 Unclaimed shares suspense account
The Company has opened Unclaimed Suspense Account, i.e. "Eicher Motors Limited - Unclaimed Suspense Account" with Kotak Securities Limited and the unclaimed shares lying with the Company have been dematerialized and credited to Eicher Motors Limited - Unclaimed Suspense Account.
Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the details with respect to the unclaimed shares of the Company for the fifteen months ended March 31, 2016 are as under:
13.19 Nomination facility
Your Company is pleased to offer the facility of nomination to members. Pursuant to Section 72 of the Companies Act, 2013, the Members, who hold shares in the physical form and wish to avail nomination facility, are requested to send the duly completed form to the Registrar and Share transfer Agent of the Company. The Members, who hold shares in the electronic form and wish to avail nomination facility, are requested to send separate request to their respective DP(s) only.
13.20 Consolidation of folios and avoidance of multiple mailing
In order to enable the Company to reduce costs and duplicity of efforts for investor servicing, members who may have more than one folio in their individual name or jointly with other persons mentioned in the same order, are requested to consolidate all similar holdings under one folio. This would help in monitoring the folios more effectively. Members may write to the Registrar and Share Transfer Agent at the address given at Para 13.25, indicating the folio numbers to be consolidated.
13.21 National Electronic Clearing Services (NECS) Mandate
Members holding shares in dematerialized form are requested to intimate all changes pertaining to their bank details, National Electronic Clearing Service (NECS), Electronic Clearing Service (ECS), mandates, nominations, power of attorney, change of address, change of name, e-mail address, contact numbers, etc., to their Depository Participant (DP). Changes intimated to the DP will then be automatically reflected in the Company’s records which will help the Company and the Company’s Registrars and Transfer Agents to provide efficient and better services. Members holding shares in physical form are requested to intimate such changes to Company’s Registrars and Transfer Agents
13.22 Registered Office
3rd Floor- Select Citywalk A-3 District Centre, Saket New Delhi- 110 017 Tel. No. (011)- 29563722 Website: www.eichermotors.com
13.23 Corporate Office
#96, Sector 32, Gurgaon- 122 001, Haryana. Tel. No. (0124)- 4415600 Website: www.eichermotors.com
13.24 Plant locations
(i) Thiruvottiyur High Road, Thiruvottiyur, Chennai - 600 019, (Tamil Nadu)
(ii) A-19/1, SIPCOT Industrial Growth Centre, Oragadam, Kanchipuram - 602 105 (Tamil Nadu)
13.25 Address for Correspondence with Registrar
M/s Link Intime India Pvt. Ltd. Registrar and Share Transfer Agent 44, 2nd Floor, Community Centre Naraina Industrial Area, Phase-I New Delhi 110028 Phone No: 011-41410592 Fax No: 011-41410591 E-Mail: email@example.com
The Board of Director in its meeting held on July 21, 2015 had appointed M/s Link Intime India Pvt. Ltd. as Company’s registrar and shares transfer agent in place of MCS Limited.
13.26 Web Links in terms of Regulation 46 of SEBI Listing Regulations Policy for determining Material Subsidiaries: http://www.eicher.in/uploads/1454671647_policy-for-determining-material-subsidiaries.pdf Policy on Related Party Transactions: http://www.eicher.in/uploads/1427720283_PMDRPT.pdf
Familiarization program for Independent Directors:
http://www.eicher.in/corporate-governance Other Code and Policies:
This is to certify that the information given above is true and correct
For Eicher Motors Limited
Siddhartha Lal Managing Director DIN 00037645
S. Sandilya Chairman DIN 00037542
Place : Gurgaon
Date : May 05, 2016