Corporate Governance - 2004-05

The Company defines Corporate Governance as a set of guidelines which are followed by the Board of Directors and the Management of the Company to create value for the stakeholders.

Commitments and social responsibility in all dealings with customers, Government authorities, suppliers, employees and other stakeholders are the objectives of good Corporate Governance. The Company respects and strives hard to meet the objectives of good corporate governance..

Board of Directors

Committees of the Board of Directors

• Audit Committee
• Compensation Committee
• Executive Committee

Subsidiary Companies

Risk Management Policies

The Board of Directors of the Company includes an Executive Chairman, three Independent Directors, three Executive Directors and one Non-executive Director. A list of the members on our Board is given below.

• Dr. Anand Deshpande, Ph.D.- Chairman and Managing Director
• Mr. Sandeep Johri - - Non-executive Director (Independent)
• Mr. P. B. Kulkarni -- Non-executive Director (Independent)
• Prof. Krithi Ramamritham -- Non-executive Director (Independent)
• Shridhar Shukla, Ph.D. - - Non-executive Director
• Mr. S. P. Deshpande -- Executive Director
• Mr. Ashutosh Joshi -- Executive Director
• Mr. Ajit Tamhankar -- Executive Director

The Board meets in executive session at least four times in a year, at quarterly intervals, and more frequently if deemed necessary, to conduct its business. Those members of the Board, who are not able to physically participate in the Board meetings, participate in the meeting through tele-conferencing. The Chief Operating Officer and the Heads of Finance, HR and Administration Divisions, along with the Auditors of the Company attend the Board Meetings as invitees. Other Executives and/or Divisional Heads are invited to the Board Meetings, whenever required.

The Agenda and the supporting papers for discussion at the Board Meeting are prepared by the Company Secretary in consultation with the Chairman of the Company. Members of the Board are free to suggest inclusion of items on the agenda, in addition to their right to bring up matters for discussion at the meeting with the permission of the Chairman.

In order to achieve the objective of attaining highest level of accountability, transparency and fairness, the Board of Directors of the Company, during the year, appointed three committees under the Chairmanship of an Independent Director. These committees are:

Audit Committee

An Audit Committee was constituted by the Board at its meeting held on April 23, 2004. The Audit Committee of the Board is constituted to ensure better and more prudent financial and accounting practices, fiscal discipline and transparency in maintaining books of accounts and financial reporting. Mr. P. B. Kulkarn i, a Non-executive Director and Independent Director, is the Chairman of the committee. He is a senior banker and renowned expert in the area of foreign exchange and commercial banking. He was the Executive Director of the Reserve Bank of India and is a former Chairman and Managing Director of the Bank of Maharashtra, a reputed nationalized bank.

In addition to the Audit Committee members, the Head of Finance, the Head of Administration, statutory auditors and other executives attend the Audit Committee meetings whenever required. The Chairman of the Committee, Head of the Finance and Administration and Statutory Auditors attend the meetings as invitees. 

The Company Secretary is the Secretary of the Committee.

The Committee is constituted with powers and responsibilities including, but not limited to:

	Investigate any activity within terms of reference
	Seek information from any employee
	Obtain outside legal professional advice
	Secure attendance of outsiders with relevant expertise
	Ensure that the financial statement is correct, sufficient and credible
	Recommend appointment of an external auditor and fix audit fees and also approve for payment of other services
	Review financial statements with Management before submission to the Board
	Review adequacy of internal control systems and internal audit
	Hold discussion with internal auditors
	Hold discussion with external auditors about scope of audit
	Review financial and risk management policies
	Review substantial defaults in payment to the depositors, debenture holders, Shareholders and creditors
	Review management discussion and analysis report
	Review report on compliance of laws and risk management, reports issued by Statutory/internal auditors, related party transactions, appointment of internal auditors and remuneration
	Attend to any other responsibility as may be entrusted by the Board

Name of the Director	Position on the Board
Mr. P. B. Kulkarni	Independent Non-executive Director
Mr. S. P. Deshpande	Executive Director
Mr. Ashutosh Joshi	Executive Director

Compensation Committee

The Compensation Committee (CC) of the Board was constituted to decide on the issues relating to Employee Stock Option Schemes transfer, transmission and transposition of shares issued and, remuneration of Executive Directors..

Mr. P. B. Kulkarni, a Non-executive Director and Independent Director, is also the Chairman of the Committee. 

The Committee is constituted with powers and responsibilities including but not limited to the following:

	Decide the quantum of Equity Shares/Options (hereinafter called Shares) to be granted under ESPP, ESOP-III and preferential offers to the Executive Directors (in terms of the resolution passed by the Board of Directors at its meeting held on April 23, 2004), as the case may be, per employee and the total number in aggregate
	Determine at such intervals, as the CC considers appropriate, the persons to whom Shares/Options may be granted
	Decide the conditions under which Shares/Options vested in employees may lapse in case of termination of employment for any reason
	Lay down the procedure for making a fair and reasonable adjustment to the number of Shares/Options and to the exercise price in case of rights issues, bonus issues and other corporate actions
	Specify the grant, vest and exercise of Shares/Option in the case of employees who are on long leave
	Construe and interpret the plan and establish, amend and revoke rules and regulations for its administration. The CC may correct any defect, omission or inconsistency in the plan or any option and/or vary/amend the terms to adjust to the situation that may arise
	Invite any employee or representative of Intel 64 Fund, LLC or such document as it may deem fit
	Transfer the shares in the name of an employee at the time of exercise of options by such employee under ESOP-II
	Recommend to the Board the remuneration to be paid to the Executive Directors
	Attend to any other responsibility as may be entrusted by the Board
	Approve allotment/transfer/transmission/transposition/consolidation/split/name deletion/issue of duplicate share certificate of Equity Shares of the Company

Composition of the Audit Committee of the Board and Members of the Committee

Name of the Director	Position on the Board
Mr. P. B. Kulkarni	Independent Non-executive Director
Mr. S. P. Deshpande	Executive Director
Mr. Ashutosh Joshi	Executive Director

Executive Committee

The Compensation Committee (CC) of the Board was constituted to decide on the issues relating to Employee Stock Option Schemes transfer, transmission and transposition of shares issued and, remuneration of Executive Director.

The Executive Committee of the Board of Directors was set up on January 29, 2005 to review the implementation of decisions taken by the Board of Directors. Mr. P. B. Kulkarni, a Non-executive Director and Independent Director, is the Chairman of the Committee.

The Committee is constituted with following responsibilities:

	Review and follow up the action taken on the Board’s decisions
	Review the operations of the Company in general
	Review the systems followed by the Company
	Examine proposals for investment in real estate
	Attend to any other responsibility as may be entrusted by the Board to investigate any activity within terms of reference

The Committee is empowered to:

	Seek information from any employee as considered necessary
	Obtain outside legal professional advice as considered necessary
	Secure attendance of outsiders with relevant expertise

Composition of the Executive Committee of the Board and Members of the Committee

The Audit Committee and the Board of Directors review the consolidated financial statements of the Company and its subsidiary companies and look into the related party transactions entered into by the Company including those with the Subsidiary Companies.

Details of the percentage holding in the subsidiary Companies are given in the table below:

The Company has evolved a comprehensive risk management policy to identify, assess and manage risks in the following areas:

	Company assets and property
	Employees
	Foreign Currency Risks

Policy for managing risk relating to assets and property

As an offshore product development company offering complete life cycle services, the Company has made significant investments in establishing world-class offshore development centers at Pune and Nagpur.

The policy deals with nature of risk involved in relation to assets and property, objectives of risk management and measures to manage risk.

The risk management policy relating to assets aims at ensuring proper security and maintenance of assets and adequate coverage of insurance to facilitate speedy replacement of assets with minimal disruption to operations.

The policy identifies the role and responsibilities of the departments to ensure adequate physical security and maintenance of its assets.

Policy for managing risk relating to employees

As a knowledge-based organization focused on software product development services, the employees constitute the most important asset of the Company. The risk management policy relating to employees is therefore necessary to cover all risks related to employees and their acts/omissions. The policy deals with the nature of risk involved in relation to employees, objectives of risk management and measures to manage risk.

In particular, the objectives of the employee related risk management policy aims at reducing attrition rate, providing adequate security to employees in relation to life, disability, accident and sickness, providing adequate legal safeguards to protect confidential information and protecting the Company from any contractual liability due to misconduct/errors/omissions of employees.

The Divisional Head of Administrative Services in consultation with the Chairman of the Committee prepared the personnel manual.

Policy for hedging managing of foreign currency risk

As a 100% Export Oriented Unit (EOU), significant portions of financial transactions and assets of the Company are denominated in foreign currency. The Company derives its income predominantly from export of software products and services and imports a large part of its computer infrastructure requirements. The Company, at times, resorts to long-term and short-term borrowings in foreign currency to finance expansion plans and growth. The foreign currency denominated assets comprises mainly receivables.

The objective of foreign currency risk management is to protect cash flows and profit margins from volatility on account of fluctuations in exchange rates. The policy for foreign currency risk management ensures that the treasury department continuously tracks movement of foreign currencies, avails of services of experts and hedges the risk through appropriate mechanisms such as forwarding contracts/options.