Persistent Systems: Investors: Financial 2005-06: Corporate Governance

The Company has voluntarily followed, to a large extent, the corporate governance code as described in clause 49 of the Listing Agreement and in terms of the Securities and Exchange Board of India circular number SEBI/CFD/DIL/CG/1 /2004/12110 October 29, 2004, amended from time to time, although the Company is not a listed public limited company.

The Company defines Corporate Governance as a set of guidelines that are followed by the Board of Directors and the Management of the Company to create value for the stakeholders who include namely, shareholders, customers, employees, suppliers and society at large.

The Company firmly believes in conducting its affairs with the highest level of integrity, fairness, accountability and transparency. The initiative taken by the Company in voluntary adoption of various corporate governance measures is a reflection of the same.

Commitments and social responsibility in all dealings with stakeholders, regulatory authorities and suppliers are the objectives of good corporate governance. The Company respects and strives hard to meet the objectives of good corporate governance.

The Company Secretary, in consultation with the Chairman of the Company, prepares the agenda and supporting papers for discussion at each Board meeting. 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.

Information and data that are important to the Board’s understanding of the business in general and related matters are tabled for discussion at the meeting. Agenda is distributed in writing to the members of the Board sufficiently in advance.

The Board meets in executive session at least four times 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 / video conferencing. The Chief Operating Officer, the Heads of Finance, Human Resource and Administration Divisions and the Statutory Auditors of the Company attend the Board meetings, wherever required. In compliance with Clause 49 of the Listing Agreement, the gap between two Board Meetings has not exceeded four months.

Notice of Board Meetings

The notice for the regular quarterly Board meetings is sent to the Directors 60 days prior to the meeting. For urgent/extraordinary meetings of the Board, the notice is sent at least twenty-four (24) hours prior to such meetings (intimation by telephone is accepted for notice of extraordinary meetings). All notices for all meetings of the Board thereof are in writing (including E-mail), and sent to each of the Directors.

Agenda for the Board Meetings

The agenda and the relevant documents for the Board Meetings are sent to all the Directors at least three (3) Business Days prior to such a meeting. For urgent / extra ordinary meetings of the Board, the agenda is sent at least twenty four (24) hours prior to such meeting.

Chairman of the Board Meetings

The Chairman and Managing Director of the Company is the Chairman for all Board Meetings. In his absence, the Director as elected by the Directors present at such meeting chairs that Meeting.

In order to achieve the objective of attaining the highest level of accountability, transparency and fairness, the Board of Directors of the Company has appointed three committees with the primary objectives as under:
		Audit Committee An Audit Committee was constituted by the Board at its meeting held on April 23, 2004, to ensure prudent financial and accounting practices, fiscal discipline and transparency in financial reporting. The quarterly audited accounts are reviewed by the Audit Committee and recommended to the Board for its approval with its recommendations.
		Compensation Committee The Compensation Committee was constituted by the Board at its meeting held on April 23, 2004, to decide on the issues relating to Employee Stock Option Schemes, transfer, transmission and transposition of shares and remuneration of Executive Directors.
		Executive Committee The Executive Committee was constituted by the Board at its meeting held on January 29, 2005, to review the implementation of decisions taken by the Board of Directors.

Audit Committee

The Audit Committee is constituted with responsibilities including, but not limited to, the following:
		To ensure that the financial statements are correct, sufficient and credible
		To review financial statements with the Management before submission to the Board
		To review adequacy of internal control systems and internal audits
		To recommend appointment of an external auditor and fixation of audit fees along with approval for payment of other services
		To hold discussions with internal auditors
		To hold discussions with external auditors about the scope of audit
		To review financial and risk management policies
		To review substantial defaults in payments to the depositors, debenture holders, shareholders and creditors
		To review Management Discussion and Analysis report
		To review reports on compliance of laws and risk management, Reports issued by Statutory / Internal Auditors, Related party transactions, Appointment of Internal Auditors and remuneration
		To attend to any other responsibility as may be entrusted by the Board

The Audit Committee is empowered to do the following:
		To investigate any activity within its terms of reference
		To seek information from any employee
		To obtain advice from outside legal professionals
		To secure attendance of outsiders with relevant expertise

Compensation Committee

The Compensation Committee is constituted with responsibilities including but not limited to the following:
		To decide the quantum of equity shares/ options to be granted under Employee Stock Option Schemes (ESOS) and preferential offer 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
		To determine at such intervals, as the CC considers appropriate, the persons to whom shares / options may be granted
		To decide the conditions under which shares / options vested in employees may lapse in case of termination of employment for any reason
		To 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
		To specify the grant, vest and exercise of shares/ option in case of employees who are on long leave
		To construe and interpret the plan and to 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
		To recommend to the Board the remuneration to be paid to the Executive Directors
		To approve transfer of shares in the name of an employee at the time of exercising of options by such employee under ESOS
		To attend to any other responsibility as may be entrusted by the Board

The Compensation Committee is empowered to do the following:
		To invite any employee or such document as it may deem fit for exercising of its functions
		To approve allotment / transfer / transmission / transposition / consolidation / split / name deletion / issue of duplicate share certificate of Equity Shares of the Company

Executive Committee

The Executive Committee is constituted with responsibilities including but not limited to the following:
		To review and follow up the action taken on the Board’s Decisions
		To review the operations of the Company in general
		To review the systems followed by the Company
		To examine proposals for investment in real estate
		Subject to ratification by the Board, to review, propose and monitor annual budget including additional budget, if any
		To review capital expenditure against the budget
		To authorise opening and closing of bank accounts
		To authorise additions / deletions to the signatories pertaining to banking transactions
		To approve investment of surplus funds for an amount not exceeding Rs. 25 Crores as per the policy approved by the Board
		To approve transactions relating to foreign exchange exposure including, but not limited to, forwards cover and derivate products
		To approve donations as per the policy approved by the Board
		To delegate authority to the Company officials to represent the Company at various courts, government authorities, and so on
		To attend to any other responsibility as may be entrusted by the Board to investigate any activity within terms of reference

The Executive Committee is empowered to do the following:
		To seek information from any employee as considered necessary
		To obtain outside professional legal advice as considered necessary
		To secure attendance of outsiders with relevant expertise

Board Meetings
The Board meets at least once in every calendar quarter and at least four (4) such meetings are held every year. The Board meetings of the company are usually held on the third Friday after the end of each calendar quarter, unless decided otherwise in specific cases.

Committee Meetings

Audit Committee
The Audit Committee meets at least once in every calendar quarter and at least four (4) such meetings are held every year. The Audit Committee meetings of the company are usually held on the third Wednesday after the end of each calendar quarter, unless decided otherwise in specific cases.

Compensation Committee
The Compensation Committee meets in the first quarter of the financial year to recommend the remuneration to be paid to the Managing Director and Executive Director/s of the Company. Apart from this the Compensation Committee meets as and when there is any business to be transacted which has been delegated to it.

Executive Committee
The Executive Committee meeting is normally held once every month. The Executive Committee meetings of the Company are usually held on the third Tuesday of each month, unless decided otherwise in specific cases.

Annual General Meeting
The Company holds the Annual General Meeting of the Company usually in the month of June every year.