Q4. How are principles of corporate social responsibility being followed by Amway?

Corporate Social Responsibility (CSR) is a concept whereby organizations consider the interests

of society by taking responsibility for the impact of their activities on customers, employees,

shareholders, communities and the environment in all aspects of their operations. This obligation

is seen to extend beyond the statutory obligation to comply with legislation and sees

organizations voluntarily taking further steps to improve the quality of life for employees and

their families as well as for the local community and society at large.

AMWAYS   DELIVERS   CORPORATE  SOCIAL  RESPONSIBILITY.

IBOs play a key part in helping Amway to deliver its Global Cause Programme.In order to give many of

the world’s children a chance to live a better life, Amway launched the global One by One campaign

for children in 2003. The One by One programme:

• helps Amway to bring its vision to life

• declares what the company stands for

• builds trust and respect in Amway brands

• establishes Corporate Social Responsibility at a high level.

Amway encourages staff and IBOs to support its One by One campaign for children. Since 2001,

Amway Europe has been an official partner of UNICEF and has been able to contribute over €2 million

(about £1.4 million). The focus is on supporting the worldwide ‘Immunisation Plus’ programme. This

involves, for example, providing measles vaccines to children across the globe. The ‘Plus’ is about

using the vehicle of immunisation to deliver other life-saving services for children. It is about making

health systems stronger and promoting activities that help communities and families to improve child-

care practices. For example the ‘Plus’ could include providing vitamin A supplements in countries

where there is vitamin A deficiency. Since 2001, Amway and its IBOs across Europe have been

supporting UNICEF’s child survival programme

##################################################3

Q5.What do you understand by strategy? How does Amway develop and implement its strategy?

"Strategy is the direction and scope of an organisation over the long-term: which achieves advantage

for the organisation through its configuration of resources within a challenging environment, to meet

the needs of markets and to fulfil stakeholder expectations".

In other words, strategy is about:

* Where is the business trying to get to in the long-term (direction)

* Which markets should a business compete in and what kind of activities are involved in such

markets? (markets; scope)

* How can the business perform better than the competition in those markets? (advantage)?

* What resources (skills, assets, finance, relationships, technical competence, facilities) are required in

order to be able to compete? (resources)?

* What external, environmental factors affect the businesses' ability to compete? (environment)?

* What are the values and expectations of those who have power in and around the business?

(stakeholders)

Strategy at Different Levels of a Business

Strategies exist at several levels in any organisation - ranging from the overall business (or group of

businesses) through to individuals working in it.

Corporate Strategy - is concerned with the overall purpose and scope of the business to meet

stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the

business and acts to guide strategic decision-making throughout the business. Corporate strategy is

often stated explicitly in a "mission statement".

Business Unit Strategy - is concerned more with how a business competes successfully in a particular

market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining

advantage over competitors, exploiting or creating new opportunities etc.

Operational Strategy - is concerned with how each part of the business is organised to deliver the

corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues

of resources, processes, people etc.

How Strategy is Managed - Strategic Management

In its broadest sense, strategic management is about taking "strategic decisions" - decisions that

answer the questions above.

THE  COMPANY  USES   THE  RATIONAL  APPROACH.

in   Decision Making

1. Define the problem

This is often where people struggle. They react to what they think the problem is. Instead, seek to

understand more about why you think there's a problem.

Defining the problem: (with input from yourself and others)

Ask yourself and others, the following questions:

a. What can you see that causes you to think there's a problem?

b. Where is it happening?

c. How is it happening?

d. When is it happening?

e. With whom is it happening? (HINT: Don't jump to "Who is causing the problem?" When we're

stressed, blaming is often one of our first reactions. To be an effective manager, you need to address

issues more than people.)

f. Why is it happening?

g. Write down a five-sentence description of the problem in terms of "The following should be

happening, but isn't ..." or "The following is happening and should be: ..." As much as possible, be

specific in your description, including what is happening, where, how, with whom and why. (It may be

helpful at this point to use a variety of research methods.

---------------------------------------------------

Defining complex problems:

a. If the problem still seems overwhelming, break it down by repeating steps a-f until you have

descriptions of several related problems.

Verifying your understanding of the problems:

a. It helps a great deal to verify your problem analysis for conferring with a peer or someone else.

Prioritize the problems:

a. If you discover that you are looking at several related problems, then prioritize which ones you

should address first.

b. Note the difference between "important" and "urgent" problems. Often, what we consider to be

important problems to consider are really just urgent problems. Important problems deserve more

attention. For example, if you're continually answering "urgent" phone calls, then you've probably got

a more "important" problem and that's to design a system that screens and prioritizes your phone

calls.

Understand your role in the problem:

a. Your role in the problem can greatly influence how you perceive the role of others. For example, if

you're very stressed out, it'll probably look like others are, too, or, you may resort too quickly to

blaming and reprimanding others. Or, you are feel very guilty about your role in the problem, you may

ignore the accountabilities of others.

----------------------------------------------

2. Look at potential causes for the problem

a. It's amazing how much you don't know about what you don't know. Therefore, in this phase, it's

critical to get input from other people who notice the problem and who are effected by it.

b. It's often useful to collect input from other individuals one at a time (at least at first). Otherwise,

people tend to be inhibited about offering their impressions of the real causes of problems.

c. Write down what your opinions and what you've heard from others.

d. Regarding what you think might be performance problems associated with an employee, it's often

useful to seek advice from a peer or your supervisor in order to verify your impression of the problem.

e.Write down a description of the cause of the problem and in terms of what is happening, where,

when, how, with whom and why.

----------------------------------------------------

3.Define the Goal or Objective

In a sense, every problem is a situation that prevents us from achieving previously determined goals. If

a personal goal is to lead a pleasant and meaningful life, then any situation that would prevent it is

viewed as a problem. Similarly, in a business situation, if a company objective is to operate profitably,

then problems are those occurrences which prevent the company from achieving its previously defined

profit objective. But an objective need not be a grand, overall goal of a business or an individual. It

may be quite narrow and specific. "I want to pay off the loan on my car by May," or "The plant must

produce 300 golf carts in the next two weeks," are more limited objectives. Thus, defining the

objective is the act of exactly describing the task or goal.

-------------------------------------------------------------------------------------

4. Identify alternatives for approaches to resolve the problem

a. At this point, it's useful to keep others involved (unless you're facing a personal and/or employee

performance problem). Brainstorm for solutions to the problem. Very simply put, brainstorming is

collecting as many ideas as possible, then screening them to find the best idea. It's critical when

collecting the ideas to not pass any judgment on the ideas -- just write them down as you hear them.

-------------------------------------------------------------

5. Select an approach to resolve the problem

When selecting the best approach, consider:

a. Which approach is the most likely to solve the problem for the long term?

b. Which approach is the most realistic to accomplish for now? Do you have the resources? Are they

affordable? Do you have enough time to implement the approach?

c. What is the extent of risk associated with each alternative?

-----------------------------------------------------------------------------------------------

6. Plan the implementation of the best alternative (this is your action plan)

a. Carefully consider "What will the situation look like when the problem is solved?"

b. What steps should be taken to implement the best alternative to solving the problem? What

systems or processes should be changed in your organization, for example, a new policy or procedure?

Don't resort to solutions where someone is "just going to try harder".

c. How will you know if the steps are being followed or not? (these are your indicators of the success of

your plan)

d. What resources will you need in terms of people, money and facilities?

e. How much time will you need to implement the solution? Write a schedule that includes the start

and stop times, and when you expect to see certain indicators of success.

f. Who will primarily be responsible for ensuring implementation of the plan?

g. Write down the answers to the above questions and consider this as your action plan.

h. Communicate the plan to those who will involved in implementing it and, at least, to your immediate

supervisor.

(An important aspect of this step in the problem-solving process is continually observation and

feedback.)

--------------------------------------------------------------------------------------------

7. Monitor implementation of the plan

Monitor the indicators of success:

a. Are you seeing what you would expect from the indicators?

b. Will the plan be done according to schedule?

c. If the plan is not being followed as expected, then consider: Was the plan realistic? Are there

sufficient resources to accomplish the plan on schedule? Should more priority be placed on various

aspects of the plan? Should the plan be changed?

-------------------------------------------------------------------------------------

8. Verify if the problem has been resolved or not

One of the best ways to verify if a problem has been solved or not is to resume normal operations in

the organization. Still, you should consider:

a. What changes should be made to avoid this type of problem in the future? Consider changes to

policies and procedures, training, etc.

b. Lastly, consider "What did you learn from this problem solving?" Consider new knowledge,

understanding and/or skills.

c. Consider writing a brief memo that highlights the success of the problem solving effort, and what

you learned as a result. Share it with your supervisor, peers and subordinates

=======================================================

FOR  STRATEGIC  DECISIONS,  THE  APPROACH  IS AS  FOLLOWS:

THE  COMPANY  ANALYSES  THE  FOLLOWING   DATABASE

AND  APPLYS   THE  PROBELM  SOLVING/ DECISION

MAKING   APPROACH   /   FINALIZES   THE  PLAN.

-apply  the  pestel  analysis with  respect  TO ITS BUSINESS

1.Political (incl. Legal)   

-Environmental regulations and protection

[what  are  the  government regualtions/ protection laws  that  must be  observed ]

-Tax policies

what tax  hinder the business and what  taxes  incentives  are available]

-International trade regulations and restrictions

[ does  the  government    encourage  exports / with  high tariffs  on  imports]

-Contract enforcement law/Consumer protection

[does  the  government  enforce  on  consumer  protection ]

-Employment laws]

[ is the  government    encouraging  skilled  immigrants  with  temp. permits]

-Government organization / attitude

[ does  the  government  have  a   very  positive  attitude  towards  this   industry]

-Competition regulation

[ are  there   regulation  for  limiting  competition]

-Political Stability

[ politically ,  does the   government    have   a  very   stable  government ]

-Safety regulations

[ has  the  government      adopted  some  of  the  modern  safety regulations]

==============================================================

===

2.Economic     

-Economic growth

[  what  is  the economic growth rate  /  what  are  the  reasons ]

-Interest rates & monetary policies

[ are  the  interest  rates    under control /  is there   a  sound  monetary  policies]

-Government spending

[is  government  spending  is  significant   and  is it   under control ]

-Unemployment policy

[what  is  the  employment / unemployment  policies  of the government ]

-Taxation

[  has  the  taxation    encouraged  the  industry ]

-Exchange rates

[ is   there  well  managed   exchange  controls  and  is it  helping  the  industry]

-Inflation rates

[ is  the  inflation  well   under  control ]

-Stage of the business cycle

[ is  your    industry  is  on  the   growth  pattern]

-Consumer confidence

[ is  the  consumer  confidence   is   high/ strong and  if  not, why ]

==================================================

3.Social  

-Income distribution

[is there   balanced   income  distribution   policy ]

-Demographics, Population growth rates, Age distribution

[ what  is   population   growth  and  why ]

-Labor / social mobility

[ what   are the  labor  policies  and  is  there  labor  mobility]

-Lifestyle changes

[ are  there  significant  lifestyle   changes     taking  place--more  modernization/ why  ]

-Work/career and leisure attitudes

[ are  the  population      career  minded  and  are  seeking  better  lifestyle]

-Education

[ what  are  the  education  policies /  is  it  successful ]

-Fashion, hypes

[are  the   people    becoming  fashion  conscious ]

-Health consciousness & welfare, feelings on safety

[ are  the  people     becoming  health  consciousness]

-Living conditions

[ is the  living  conditions   improving  fast  and  spreading  rapidly]

=========================================================

4.Technological  

Government research spending

[is  the  government    spending  on research  and  development]

Industry focus on technological effort

[are  the   industries    focused  on  using  improved  technology]

New inventions and development

[ are  new  inventions     being   encouraged  for  developments]

Rate of technology transfer

[ is  the  rate  of  technology  transfer  is  speeding  up ]

(Changes in) Information Technology

[ is  the   information  technology    rapidly  moving  and  is  there  government  support]

(Changes in) Internet

[ is the   internet  usage    rapidly  increasing   and  why]

(Changes in) Mobile Technology

[is  the   Mobile   technology    rapidly developing  and  is there  government  support]

-------------------------------------------------------------------------------------

5.External Assessment---

Areas for opportunities and threats

* Markets [ what  is  the market  situation, which is forcing the change requirements

*Customers [ how can service the customer -internal / external -better .               

* Industry  [ is  the  industry  trend ]

* Competition [ is  it the  competitive situation      

*Factors of  business [ causing  the change]

* Technology [ is  it  technology  change ]

===========================================================

STEP  6

CONDUCT  A   ''SWOT''   ANALYSIS  OF   THE   COMPANY'S  RESOURCES.

Internal Assessment

Areas  for strengths, weaknesses, and barriers to success

ORGANIZATION DIMENSIONS

*Culture  [ is the  working  culture  change ]

* Organization [  is the  organization  demanding  change ]

* Systems  [ is it  the  systems change ]

* Management practices  [ change in  managemement process]

OTHER KEY DIMENSIONS

*Cost efficiency[  is it for  cost efficiency ]

* Financial  performance  [ is  it for  financial  performance improvement ]

* Quality [ is  it for  quality  performance improvement

*Service [ is  it for  service   performance improvement

*Technology[ is  it for  technology   performance improvement

* Market segments [ is  it for  sales  performance improvement

* Innovation[ is  it for    performance improvement

*new products[ is  it for new product   performance improvement

*Asset condition[ is  it for  financial  performance improvement

*productivity[ is  it for  financial  performance improvement

=====================================================

STEP 7

NOW  THE  CO.  KNOWS    WHERE   IT  STANDS.

PRIORITY   ISSUES

FROM  THE  ABOVE , DETERMINE   THE  CORE  ISSUES

WHICH  NEEDS  TO  SOLVED  WITH  YOUR  INVESTMENT.

STRATEGIC  PROGRAMS

FROM  THE  ABOVE  CORE  ISSUES , DETERMINE  YOUR

STRATEGIC  PROGRAMS.

==================================

CORE  ISSUES  WERE

1.-change  the organization  structure  to  a  matrix  format,

to  enable  the product managers  to concentrate  on

product development/ planning/ product marketing.

-change  the distribution systems  to introduce

more channels  to  widen  the  market  coverage.

========================================

 Mission  STATEMENT

[ to  stay close to  the  customers and  provide  extended service]

  Your CORE  PURPOSE  

[ to  bring  maximum  satisfaction  to  the customers]

   Your   CORE   OBJECTIVES

[to extend  the  market  coverage  and gain  sales ]

   Your   Core markets;

[defence -major customers like  mines-medium  industries]

  Your  CORE  strategic thrusts.

[ productline  extension - extended market coverage-channel  exploitation]

BUSINESS DEFINITION:

The arena of products, services, customers, technologies, distribution methods, and geography in

which you'll compete to get results.

-===================================================

STEP  8

WHERE  DOES  THE  CO.   WANTS    TO  GO  

¬

THE  COMPANY  ARRIVES  AT  THE  FOLLOWING

DECISIONS   AT  THE  END  OF   THE  SESSIONS:

1.REVENUE BUDGET.

[280 million  dollars--maintain a  growth  rate of  20% over  3  successive years.]

2.GROSS  PROFIT  BUDGET.

[ aim  for  35%  of   sales]

3.NET PROFIT  BUDGET.

[aim  for  10%  of  sales ]

4.SALES  TOTAL  FORECAST.

5.SALES  BY  PRODUCTS.

6.OPERATIONAL  EXPENSES  BUDGET.

[22%  constant for  next   3  years ]

7.FIXED  EXPENSES  BUDGET.

[13 % constant  for  next   3 years]

8.PRODUCTIVITY  IMPROVEMENT

[over   the  next  3  years---3%  annually]

9.PROFITABILITY  INCREMENT  

[over   the  next  3  years -----5%]

10. RETURN  ON  INVESTMENT.

[constant  6%  over  the  next  3  years]

===========================================

##############################################################

###

Q1. Identify the features of Corporate Philosophy and examine it with reference to an organisation

(Name and describe the organisation you are referring to).

corporate philosophy consists of the following four pillars:

•   Roles to be assumed for society, customers, etc. (mission)

•   Means of implementing the mission (business domain)

•   Independent management style (management goals)

•   Standards guiding employees in conducting business activities (action guidelines)

NTT DOCOMO is Japan's premier provider of leading-edge mobile voice, data and multimedia services.

With more than 57 million customers in Japan, the company is one of the world's largest mobile

communications operators.

DOCOMO also is an influential force in the continuing advancement of mobile technologies and

standards. In 1999, DOCOMO launched i-mode™, the world's most popular platform for mobile Internet

services including e-mail, browsing, downloading and more. Over 48 million DOCOMO subscribers now

use i-mode.

In 2001, DOCOMO introduced FOMA™, the world's first 3G commercial mobile service based on W-

CDMA, which has transformed the mobile landscape in Japan while bringing the DOCOMO brand global

recognition.

The role of mobile phones as "lifestyle tools" was cemented when DOCOMO launched Osaifu-Keitai™, a

mobile wallet platform enabling quick, contactless transactions for cash, credit, ID, and more. More

than 37 million phones equipped for Osaifu-Keitai services are now in use.

Building on a solid foundation of research and development, and guided by its customer-first

philosophy, the company leverages the power of mobile communications to enable customers to

enrich their lives.

DOCOMO is expanding its global reach through offices and subsidiaries in Asia, Europe and North

America, as well as strategic alliances with mobile and multimedia service providers in markets

worldwide.

Quick Facts

Established:  August 1991

President and CEO:  Ryuji Yamada

Headquarters:  2-11-1 Nagata-cho, Chiyoda-ku, Tokyo, Japan 100-6150

Capital:  949.68 billion yen

Employees:  23,409 (NTT DOCOMO Group)

CORE  FOUNDATION

-corporate  philosophy

-brand  slogan

-corporate  vision

-mid  range   strategy

Corporate Philosophy

With the aim of creating a new world of communications culture, we NTT DOCOMO will devote all the

skills, know-how and energy towards the establishment of more "personal communication" with our

customers that contributes to their heartfelt satisfaction.

A New World of Communications Culture

More personal communication

•   Reliable access

•   Real-time access

One-to-one “personal •   Ecommunication

This gives birth to a new world of communications culture

•   Freedom to enjoy communications anytime, anywhere with anyone

•   Birth of customs and etiquette corresponding to the “personal access Eparadigm

•   Opening of endless lifestyle horizons

To achieve this...

In order to create a world of more innovative and enriched communications, we will improve service

quality, aggressively move forward with the development of various services. We will also research

and develop a more advanced user-friendly communications interface, and at the same time we will

provide these services and technologies to an ever expanding area.

Customer Satisfaction

•   Communications that are always ready when needed.

•   Capability to contact whomever, from wherever and whenever the customer desires.

•   Happiness that comes from heart-to-heart communications.

•   Bringing customers another step closer to realizing their dreams.

•   Responding to every customer with consideration, courtesy and thoroughness.

•   Providing products that give customers easy and convenient access to cutting-edge functionality.

To achieve this...

First and foremost, we will fulfill expectations of customers by fulfilling our response to their needs

through improved service quality, building original networks, enriching functionality and expanding the

service area. In addition, by providing an expanding and ever-improving selection of services at

inexpensive rates, we will deliver satisfaction to a growing diversity of customers.

Making the most of the talents of each individual in our company

•   Respect for the individuality and sense of values that are unique to each person.

•   Enable internal corporate communication to flow free from vertical and horizontal organizational

barriers.

•   Make the most of the ideas of each individual.

•   Foster a corporate culture that is not restricted by conventional thinking and systems.

•   Create a creative office environment that supports the fulfillment of the individual.

•   Fostering an "open" corporate culture that welcomes the ideas and views of the individual.

•   Evaluate personnel based on their merits.

•   Build a company that overflows with a challenging spirit.

To achieve this...

By improving our system and programs for the enhancement of human resources and unifying our

human resource development, we will empower each individual to exert their skills to the utmost of

their capabilities and discover new potential. At the same time, we will strive to create a workplace

that motivates individuals through measures such as improvement of the working environment and

labor conditions and enhancement of health and welfare benefits.

Corporate  vision

NTT DOCOMO, INC. introduced a new corporate vision in 2010, named “Pursuing Smart Innovation:

HEART,” under which the company will achieve new growth by delivering new value to customers and

ever-changing society.

In the first decade of the 21st century, DOCOMO implemented its former corporate vision, “Challenging

the Mobile Frontier: MAGIC,” to successfully create new communications culture by delivering diverse

services and enhanced value. Under its new vision, DOCOMO will leverage its considerable powers of

innovation to align its future growth with the challenges and opportunities of the next 10 years,

including accelerating globalization, environmental protection and the increasing spread of broadband.

DOCOMO’s innovations will address the needs of society during a time when the use of mobile

technologies continues to diversify and the quality of communication continues to evolve, particularly

in the approaching era when mobile phones are owned by virtually everyone and are thoroughly

integrated with daily life.

Through its new corporate vision, DOCOMO intends to enhance the uniquely joyful and inspirational

qualities of mobile communication, as well as pioneer innovative new solutions for pressing social

issues. The company expects to partner with a broad range of companies to drive such innovation, and

thereby connect people and society in smart, innovative ways for enhanced quality of life.

Harmonize: Social contribution beyond borders, across generations

During this decade DOCOMO will continue to enhance and add values to industries and to our daily

lives through further evolution of mobile technologies. A society where the hearts of people resonate

and they can feel the richness of life – DOCOMO will contribute toward the realization of this vision.

Evolve: Evolution of service and network

Leveraging the vast array of technologies and knowhow we have accumulated in the mobile sector,

DOCOMO will continue to bring evolution to the high-speed, high-capacity broadband network, provide

easy-to-use services, and deliver seamless comfort where you are not even aware of devices or

connections.

Advance: Advance industries through convergence of services

A vast range of devices will be connected to the network in diverse ways in the coming years, bringing

ever-increasing convenience. DOCOMO will continue to help connect industries and services in the

network, and contribute toward smart innovation and advancement of industries and infrastructure

through convergence of services.

Relate: Creating joy through connections

People, materials and information connected freely and flexibly beyond time and space — through this

visionary world, DOCOMO will help people each day to express, enjoy and create knowledge and fun

that fit individual lifestyles, anywhere, anytime.

Trust: Support for safe, secure and comfortable living

Environment, healthcare, and education will continue to attract more attention in future society.

DOCOMO will connect expert knowledge and knowhow from diverse specialized fields to provide timely

assistance and support for greater safety, security and comfort in a broad range of daily activities.

SMART  INNOVATIONS

Continuous change (innovation) for realization of a society where everyone can live a safe, secure, and

comfortable life, filled with richness, beyond borders, and across generations.

Corporate  committments

With more than 100 million users in Japan, the market for mobile phones has entered a mature phase.

During the high-growth era, market demand was driven by early adopters, who want to be the first to

have all the latest features. Now that the spectrum of users is broader than ever, needs are much

more diverse.

In reflection of these changing market conditions, a new paradigm has been established: "the mobile

phone business has changed from being carrier-driven to user-driven." But diversification of customer

needs is not the only change facing the industry. We have also come to understand that product

differentiation is no longer a question of mere technology; in addition to appealing to users through

the latest technologies and features, growing importance is being placed on the ability to meet the

precise needs of each individual customer in terms of design, network quality, rates, and customer

service at the point of sale, among others.

In very simple terms, we conceive of DOCOMO as being a "relations service company" - a company

that helps strengthen ties between people, or between individuals and their lifestyles. Because mobile

communications has become so closely integrated into our daily lives, we have chosen to use the word

"relations" to express this concept of deeper personal relationships with other people and one's

environment. Positioning ourselves as a "relations service company" is also an expression of our

dedication to providing flexible, customer-focused service.

Creating relationships and connections that meet the needs of each individual customer represents a

new form of brand value for DOCOMO. To express this corporate vision more clearly, we have created

the following "New DOCOMO Commitments".

New DOCOMO Commitments

(1) We will revamp our brand and strengthen ties with our customers.

(2) We will actively seek out the voices and opinions of our customers so that we can continue to

exceed their expectations.

(3) We will continue to drive innovation so that we can earn the respect and admiration of people

worldwide.

(4) We will become an organization whose energetic staff is capable of overcoming all challenges in

pursuit of our corporate vision.

We will take specific steps to implement each of these four visions for change.

First, we will redefine our concept of the DOCOMO brand and its image, developing a brand statement

and corporate logo to embody this new vision. Among the concepts to be promoted through our

business activities is "Loyalty".

Next, we will solicit and implement feedback from customers so that we can continue to be a company

that both understands customer needs and exceeds their expectations. For this purpose, we will

reinforce all points of contact with customers; will reflect the opinions of front-line staff in our business

activities; and will create deep relationships with users of our services.

We are also driven to remain a company valued for its contributions around the globe. We will achieve

this by creating an environment that delivers convenience to customers worldwide; that fosters both

technological and operational innovation; and that reinforces our environment-related initiatives, such

as reduction of CO2 emissions.

Finally, we will continue to recruit a diversity of talent so that together we can effectively respond to

the increasingly more diversified needs of customers while adapting to changes in market conditions

and trends. We will also simplify our organizational structure, becoming a more nimble operation able

to respond flexibly to customer and market demands. Furthermore, we will energize our organization

so that all employees can work in unison toward a shared vision; to achieve this goal, we will

strengthen communication at all levels.

Looking ahead, we would like DOCOMO to continue to evolve as a company that consistently earns the

trust and loyalty of its customers

Corporate   strategy

DOCOMO's future business direction is based on a new action plan, "DOCOMO's Change and Challenge

to Achieve New Growth," which covers initiatives to be implemented between the current fiscal year

2008 ending March 31, 2009 and fiscal year 2012 ending March 31, 2013. Under the plan, DOCOMO

aims to contribute to society's sustainable development and a safer, more secure environment for

people to lead enriched, convenient lives.

1.Basic philosophy

After a period of rapid expansion, the Japanese mobile communications market has entered a mature

phase. Now that total subscriptions exceed 100 million, it is difficult to expect further growth on a

significant level unless breakthroughs are made. In addition, customers' values have diversified and

their demands have become increasingly sophisticated.

Under such market circumstances, DOCOMO has implemented a thoroughly hands-on approach to

serving its customers, working to deliver the best possible service, safety and security to each user. At

the same time, the company has strived to exceed customer expectations by delivering on the pledges

made in its New DOCOMO Commitments proclamation.

DOCOMO believes that the market has potential for significant growth if services that take advantage

of unique mobile properties—such as real-time immediacy, personal authentication and locating

capabilities—can be developed in conjunction with the evolution of networks and handsets. The

increasing adoption of open-platform handsets and entry of new global players will produce new

services that transcend conventional boundaries and thereby propel further advancements and

diversification in the market. Perceiving this as an opportunity, DOCOMO intends to drive innovation in

collaboration with a wide range of partners on a global scale, committing the company to taking on the

challenge of creating new value by leveraging the virtually unlimited potential of mobile phones.

An overview of DOCOMO's future actions follows.

2.DOCOMO's Change

•   (1) New DOCOMO Commitments and review of operational structure

•   After DOCOMO's introduction of its New DOCOMO Commitments, the company, as first steps

towards implementing the "Change and Challenge" action plan, changed its corporate branding and

integrated its regional subsidiaries following a comprehensive review of operational structure.

•   (2) Promotion of customer-focused marketing

•   From the perspective of customer-focused marketing, the entire DOCOMO Group will join forces in

all aspects of business based on a hands-on approach to serving customers. The aim will be to earn

long-term customer loyalty by delivering the best possible service, safety and security to each

customer.

•   (3) Steadfast implementation of actions for improved customer satisfaction

•   DOCOMO will perform a comprehensive review of all operations—from customer relations to

handset and network development—to enhance customer satisfaction, aiming at being ranked No. 1 in

customer satisfaction by FY2010.

3.DOCOMO's Challenge

As mobile services and networks evolve, mobile phones will assume the role of assisting customers'

individual behavior, in addition to providing the means for communication, information access and

support for daily activities. DOCOMO will take on the challenge of advancing each of these roles.

DOCOMO will also contribute to the sustainable development of society by providing solutions to

pressing issues.

•   (1) Personalization of services

•   DOCOMO will deliver personalized services and functions that cater to the varying lifestyles and

needs of individual customers, and further enrich their lives.

•   (2) Development of social-support services

•   DOCOMO will launch new businesses in fields such as environment, ecology, safety, security and

health management for the sustainable growth ofsociety and the creation of value in these new

domains.

•   (3) Provision of converged services

•   DOCOMO will link mobile phones with various devices to provide convenient services tailored to

specific usage scenarios.

•   (4) Evolution of video services

•   Through collaboration with content providers, DOCOMO will support customers' lives and individual

behavior with value-added video services available uniquely on mobile phones.

•   (5) Deployment of mobile broadband using LTE*1

•   To facilitate a widening array of advanced mobile broadband services, DOCOMO will construct a

high-speed, low-latency, large-capacity network by implementing LTE from 2010.

•   (6) Handset evolution

•   DOCOMO will provide handsets and devices that better fit customers' specific needs. This will be

achieved through the adoption of open platforms, the enhancement of hardware and software

functions, and the diversification of designs and user interfaces.

•   (7) Collaboration of handsets and networks

•   DOCOMO will provide advanced services by optimizing the allocation of functions between handsets

and networks, in particular to leverage the high-speed, low-latency, large-capacity properties of its LTE

network.

•   (8) Basic research aimed at new value creation

•   DOCOMO will conduct research aimed at creating infrastructure that contributes to the

development of society and its economy, ultimately to realize a more affluent society that fully

leverages the advantageous characteristics of mobile communications.

•   (9) Expansion of international businesses

•   DOCOMO will expand its revenue streams from international business and achieve sustained growth

by strengthening its international service offerings and pursuing investments and alliances mainly in

the Asia-Pacific region.

•   (10) New domestic investments and alliances

•   DOCOMO will grow revenues and achieve sustained growth by creating new businesses and

reinforcing core businesses through the pursuit of investments and alliances in Japan.

4.Actions to strengthen core businesses

As the market matures in line with the increasing rate of mobile-phone penetration, DOCOMO will

strengthen ties with existing customers, cultivate new markets and continue to provide convenient,

attractive services with the aim of reinforcing its core businesses.

5.Improvement of cost efficiency

Under the plan, DOCOMO expects to achieve a 10% reduction in costs and expenses to solidify the

company's financial standing for sustained growth. Initiatives include the nationwide optimization of

operations and reduction of costs related to networks and sales.

6.Corporate Social Responsibility (CSR) Activities

DOCOMO will also contribute to society through initiatives to help protect the environment, promote

universal design products and services, and realize a safer, more secure mobile society.

7.Operating income and return to shareholders

Under the plan, DOCOMO expects to achieve over ¥900 billion in annual operating income in FY2012.

The company will also endeavor to maintain the highest level of payout ratio in Japan and stable

dividends.

*1 Abbreviation for Long Term Evolution. Also known as "Super3G" as proposed by DOCOMO or "3.9G"

mobile communications system.

Special Note Regarding Forward-Looking Statements

This Press Release contains forward-looking statements such as forecasts of results of operations,

management strategies, objectives and plans, forecasts of operational data such as expected number

of subscribers, and expected dividend payments. All forward-looking statements that are not historical

facts are based on management's current plans, expectations, assumptions and estimates based on

the information currently available. Some of the projected numbers in this report were derived using

certain assumptions that are indispensable for making such projections in addition to historical facts.

These forward-looking statements are subject to various known and unknown risks, uncertainties and

other factors that could cause our actual results to differ materially from those contained in or

suggested by any forward-looking statement. Potential risks and uncertainties include, without

limitation, the following:

1.   As competition in the market becomes more fierce due to changes in the business environment

caused by Mobile Number Portability, new market entrants, competition from other cellular service

providers or other technologies, and other factors could limit our acquisition of new subscribers,

retention of existing subscribers, or may lead to diminishing ARPU or an increase in our costs and

expenses.

2.   Current and new services, usage patterns, and sales schemes introduced by our corporate group

may not develop as planned, which could affect our financial condition and limit our growth.

3.   The introduction or change of various laws or regulations or the application of such laws and

regulations to our corporate group could restrict our business operations, which may adversely affect

our financial condition and results of operations.

4.   Limitations in the amount of frequency spectrum or facilities made available to us could negatively

affect our ability to maintain and improve our service quality and level of customer satisfaction.

5.   The W-CDMA technology that we use for our 3G system and/or mobile multimedia services may not

be introduced by other overseas operators, which could limit our ability to offer international services

to our subscribers.

6.   Our domestic and international investments, alliances and collaborations may not produce the

returns or provide the opportunities we expect.

7.   As electronic payment capability and many other new features are built into our cellular phones,

and services of parties other than those belonging to our corporate group are provided through our

cellular handsets, potential problems resulting from malfunctions, defects or loss of handsets, or

imperfection of services provided by such other parties may arise, which could have an adverse effect

on our financial condition and results of operations.

8.   Social problems that could be caused by misuse or misunderstanding of our products and services

may adversely affect our credibility or corporate image.

9.   Inadequate handling of confidential business information including personal information by our

corporate group, contractors and other factors may adversely affect our credibility or corporate image.

10.   Owners of intellectual property rights that are essential for our business execution may not grant

us the right to license or otherwise use such intellectual property rights on acceptable terms or at all,

which may limit our ability to offer certain technologies, products and/or services, and we may also be

held liable for damage compensation if we infringe the intellectual property rights of others.

11.   Earthquakes, power shortages, malfunctioning of equipment, software bugs, computer viruses,

cyber attacks, hacking, unauthorized access and other problems could cause systems failures in the

networks required for the provision of service, disrupting our ability to offer services to our subscribers,

and may adversely affect our credibility or corporate image.

12.   Concerns about wireless telecommunications health risks may adversely affect our financial

condition and results of operations.

13.   Our parent company, Nippon Telegraph and Telephone Corporation (NTT), could exercise

influence that may not be in the interests of our other shareholders.

CSR  INITIATIVES

-environmental  protection

-safety  and  security

-consistent  quality

-serving  customers

ENRICHMENT, CONVENIENCE , SUSTAINABILITY.

TOWARD  A  CONNECTED FUTURE

What can NTT DOCOMO do to help move society towards sustainability?

It can develop and offer services based on the mobile phone, and by making connections, it can

continue finding ways to contribute to society.

Mobile phones have spread rapidly around the world in the past ten or more years.

Having both positive and negative aspects, these devices are continually creating change in our lives,

even as they themselves evolve.

The future of mobile phones is not for us to envision alone.

We would like to create the vision together with our stakeholders.

DOCOMO reaches out to join with its stakeholders and create a new culture of communication that

connects us with our goal of a sustainable society.  

QUESTION 1 : EXPLAIN THE CONCEPT OF CORPORATE GOVERNANCE.  WHY HAS IT BECOME

NECESSARY FOR BSUINESS HOUSE TO HAVE GOOD CORPORATE GOVERNANCE.

ANSWER : In recent years, corporate governance has received increased attention because

of high-profile scandals involving abuse of corporate power and, in some cases, alleged

criminal activity by corporate officers. An integral part of an effective corporate governance

regime includes provisions for civil or criminal prosecution of individuals who conduct

unethical or illegal acts in the name of the enterprise.

Corporate governance is a term that refers broadly to the rules, processes, or laws by which

businesses are operated, regulated, and controlled. The term can refer to internal factors

defined by the officers, stockholders or constitution of a corporation, as well as to external

forces such as consumer groups, clients, and government regulations.

Governance has proved an issue since people began to organize themselves for a common

purpose. How to ensure the power of organization is harnessed for the agreed purpose,

rather than diverted to some other purpose, is a constant theme. The institutions of

governance provide a framework within which the social and economic life of countries is

conducted. Corporate governance concerns the exercise of power in corporate entities. The

OECD provides the most authoritative functional definition of corporate governance:

A well-defined and enforced corporate governance provides a structure that, at least in

theory, works for the benefit of everyone concerned by ensuring that the enterprise adheres

to accepted ethical standards and best practices as well as to formal laws. To that end,

organizations have been formed at the regional, national, and global levels.

"Corporate governance is the system by which business corporations are directed and

controlled. The corporate governance structure specifies the distribution of rights and

responsibilities among different participants in the corporation, such as the board,

managers, shareholders and other stakeholders, and spells out the rules and procedures for

making decisions on corporate affairs. By doing this, it also provides the structure through

which the company objectives are set, and the means of attaining those objectives and

monitoring performance."

DEFINITION:  HISTORICAL PERSPECTIVE :-

The concept of Corporate Governance has a long history. In the ancient times, when humans

roamed on this earth in tribes, there were tribal communes in existence. The activities of the

tribe as well as individual members were supervised by the tribal communes to ensure

adherence to tribal norms. Over a period of time, the tribal form gave rise to agrarian

communities where the concept of family took hold. The family had a structure based on age

and experience and the activities of the family members were viewed by the family councils.

In the Roman Empire, specific corporate bodies, such a municipal bodies were developed to

manage public affairs with transparency for common good. In the Middle East, the nomadic

tribes had their councils to ensure fair play and justice. The evolution of Christianity and

Islam in the Middle East placed the responsibility of governance on religions. The Church and

the Mullahs were the torchbearers of the concept and practice of governance.

In ancient India, the ruling emperors decided the concept and practice of governance. The

treatise on economic administration, Arthashastra, written roughly 315 years before Christ

developed a complete structure of governance in a kingdom with clear demarcation of

authority, responsibility and accountability. In the Far East, Japan and China also placed the

governance in the hands of their kings.

In the post Christ period, with improved navigation and availability of vessels, the traders

from Europe, especially the Portuguese and the Dutch explored the known expanse of the

earth and gave rise to global trading entities. These entities reported to the kings. This was

the beginning of corporate governance. As we approach the 16th century, the most powerful

trading nation, England, formed a variety of regulations and regulatory authorities such as

joint stock companies and Bank of England to govern all trading activities on a platform of

accountability, efficiency, effectiveness and stakeholders satisfaction. The concept of

corporate governance was the basic platform for these regulations and regulatory

authorities and over a period of time the concept and its practice took a firm root for all

activities.

The term Corporate Governance is not easy to define. The term governance relates to a

process of decision making and implementing the decisions in the interest of all

stakeholders. It basically relates to enhancement of corporate performance and ensures

proper accountability for management in the interest of all stakeholders. The Cadbury

Report of 1991 on Corporate Governance considers it as a system through which corporates

are guided and directed. On the basis of this definition, the Core Objectives of Corporate

Governance can be defined as under: • Strategic Focus • Predictability • Transparency •

Participation • Accountability • Efficiency & Effectiveness • Stakeholder Satisfaction The

Strategy Focus defines the direction the organization should take to meet its goals and to

ensure Stakeholder Satisfaction. The Strategic Focus should be based on Predictability as

the evolution of strategies have to consider the dynamic environment within which it has to

operate and hence the challenges from the environment need to be anticipated. A well-

designed process to evolve and deploy strategy has to have Transparency for all

stakeholders so that there is a commitment and an understanding of the result expected

from the operations. For proper execution of any processes aimed at achieving the desired

end result, Participation of all stakeholders is important and actually necessary. The

participation should have a clear goal of Efficiency and Effectiveness of the organization as a

whole and this where Accountability is the key. All stakeholders have to have a clear

understanding of their accountability for the most effective operations of any organization.

IMPLICATIONS OF CORPORATE GOVERNANCE :-

The purpose of Corporate Governance system is to assure that the managers of a

corporation maintain healthy and sustainable corporate performance over the long term,

thereby, resulting in a superior performance. Any organization having its CG practices in

place is a futuristic organization, laying the roadmap for its development. The present paper

looks into the framework of corporate governance and presents a case study on an Indian

Cooperative Sector which by following the norms of good governance has emerged to be No.

1. in the world.

However corporate governance has wider implications and is critical to economic and social

well being, firstly in providing the incentives and performance measures to achieve business

success, and secondly in providing the accountability and transparency to ensure the

equitable distribution of the resulting wealth. The significance of corporate governance for

the stability and equity of society is captured in the broader definition of the concept offered

by Sir Adrian Cadbury (2002): "Corporate governance is concerned with holding the balance

between economic and social goals and between individual and communal goals. The

governance framework is there to encourage the efficient use of resources and equally to

require accountability for the stewardship of those resources. The aim is to align as nearly

as possible the interests of individuals, corporations and society."

The current wave of reform of corporate governance commenced with the Cadbury Code of

Practice published by the London Stock Exchange in 1992; proceeded with an OECD inquiry

in 1997-99, and the publication of OECD guidelines on corporate governance which have

been adopted in national codes by all of the industrial countries, and with the assistance of

the World Bank and Asian development bank, by many developing countries. The urgency of

this endeavour was increased by the Asian financial crisis of 1997-98 that revealed the

danger of systemic corporate governance failure. These codes have been reinforced by the

influence of the market through investment institutions, and national regulators. Even with

the efforts towards comprehensive reform serious weaknesses in corporate governance still

occur as with the HIH Insurance and One-Tel collapse in Australia, and the failure of a series

of major corporations in the United States in 2001/2002 commencing with Enron and

WorldCom. It is likely interest in creating more robust institutions of corporate governance

will remain an important social and economic priority for some time to come.

EXCELLENCE IN CORPORATE GOVERNANCE :

For excellence in Corporate Governance, the most important processes one has to

concentrate on are: • Strategy Process, which provides: - A link between Strategy &

Operations, - Sets up a mechanism for Strategy Review • People Process, which provides: - A

link between People & Operations • Operations Process, which provides: - A link between

Strategy & People The link between Core Objectives of Corporate Governance and the

important processes is the structure of the corporate & the systems through which the

activities are organized and executed.

In the corporate sector, Corporate Governance is guided by a set of regulations. However,

for Non Governmental Organizations, (NGOs), there are no specific rules or regulations and

hence there is an urgent need to provide guidelines for Corporate Governance for their

effectiveness based on achievement of core objectives of Corporate Governance.

NON-GOVERNMENTAL ORGANISATIONS:

Non Governmental Organizations or NGOs have been defined by the World Bank as “private,

not for profit organizations that pursue activities to relieve suffering, promote the interests

of poor, protect the environment or undertake community development”. NGOs have also

been defined as “non profit making organizations outside of direct state Control”. The

definitions of NGOs identify the characteristics of these organizations as: • Independent of

any direct control of the government • It will not be constituted by any political party • It will

not have profit making as a goal • It will not conduct any illegal activities • It will be devoted

to managing resources & implementing projects with the objective of addressing social

problems

The NGOs have stakeholders such as individuals, trusts and corporates from where they

generate funding for their operations, the people for whose benefit the NGOs operate the

society at large and the employees of the organizations. The need for NGOs to be effective

and efficient is of the highest order and this is the area where Corporate Governance will be

the crucial differentiating factor between the success and failure of the NGO.

NGOs AND CORPORATE GOVERNANCE:

NGOs are managed by people who are genuinely interested in the objectives of their

organizations. They are compassionate, passionate, competent and dedicated to the cause.

However, in terms of results these organizations have some key differences as compared to

the organizations or corporates, which need to have efficiency & effectiveness for

profitability. The key differences are: • Lack of result orientation • Lack of uniform

accounting & financial practices • Lack of accountability

This is the precise area where Corporate Governance will lead the way. Corporate

Governance will help NGOs in: • Enhancing credibility through transparency • Ensuring that

all activities are aimed at achieving the vision & the mission of the organization • Ensuring

proper allocation of resources for essential activities • Setting up a good managerial process

that decentralizes authority and ensures decision making at the appropriate levels and at

the right time • Designing a system of rules and regulations for operations • Designing and

implementing a review mechanism for ensuring that the operations of the organization are

focused on the objectives of the NGO.

The challenges for NGOs today are increasing as the expectations from them are on the rise,

talent & passion is not freely available to them and increasing interference and demand for

interaction by governmental authorities. More often that not, NGOs also suffer from

conflicting goals. NGOs are often caught in issues such as expanding services to increase

coverage versus the desire to keep the operations in “manageable” proportions. Fund

raising without any strings attached from donors is another touchy area NGOs have to

address. This issue also casts a shadow on the sustainability and hence the very existence

of the NGO is threatened. Good Corporate Governance practices will certainly help NGOs in

addressing these challenges in near future.

For good corporate governance, each organization must identify its responsibility to each of

its stakeholders. In the case of an NGO in the healthcare segment, identification of

responsibility should be on the following basis:

To the Recipients:

• To ensure high quality medical care at affordable & fair prices or free • To ensure an

advisory service to educate the recipients about the medical issue and for post treatment

care • To ensure good service, ethical conduct and courtesy to the recipients • To ensure

continuous liaison between the recipients and the NGO

To the Society:

• To ensure contribution to the Society in most deserving areas • To ensure fairness in all

dealings through careful assessment and scrutiny and professional service • To ensure

maintenance as well as continuous improvement in the health amenities essential to the

society • To promote and participate in health related programmes for educating the society

and for improvement in the general well being

To the Employees:

• To provide all employees opportunity for meaningful work and adequate facilities for

development of their abilities and potential through proper training • To ensure

acknowledgement and appreciation for good work • To encourage and facilitate increased

association of the employees in decisions related to their work spheres • To provide best

possible conditions of employment through fair wages & working environment

To the Governing Body:

• To provide thorough and adequate information regarding the operations of the

organization • To ensure economic viability of the operations through sound financial

policies • To ensure continuation and growth of the operations through investing funds in

essential tools, facilities & infrastructure for the operations • To ensure proper dissemination

of information, research, innovation for expanding the operations in needy areas.

EXAMPLE :-

Now a days, there are numerous well-organized and well-run NGOs, information about the

corporate governance practices is not available nor is it forthcoming from such

organizations. On the other hand, information from the corporate sector on the practices of

corporate governance, which is generally referred to as Corporate Social Responsibility, is

amply available. The House of Tatas, the prominent business house in India, has developed

a framework for Corporate Social Responsibility for all their companies under the title: Tata

Code of Conduct. The clause 10 of the Tata Code of Conduct brings out the corporate

governance philosophy of the Tata Group brilliantly. The clause 10 states:

“ A Tata Company shall be committed to be a good corporate citizen not only in Compliance

with all relevant laws & regulations but also by actively assisting in the improvement of the

quality of life of the people in the communities in which it operates with the objective of

making them self-reliant. Such social responsibility would comprise of initiating & supporting

community initiatives in the fields of community health, family welfare, water management,

literacy, education and vocational training and encourage application of modern scientific

and material techniques & expertise. “ This will be reviewed periodically in consonance with

national and regional priorities. The company will not treat these activities as optional ones

but would strive to incorporate them as integral part of its Business Plan. “ The company will

also encourage volunteering amongst its employees & help them work in the communities.

All Tata companies are encouraged to develop social accounting systems and carry out

social audit of their operations.”

This clause sums up the objective and the direction of the Tata Group companies and also

makes such activities as a part of their key activities. In addition, it also provides guidelines

for monitoring & evaluation of the activities through a “ social audit”.

Corporate Governance in India : Post- Satyam the way ahead: What needs to be done ?

TITLE : Corporate Governance in India : Post – Satyam the way ahead : What needs to  be done?

                                                

                                                           Abstract

  

                     Corporate governance has been a topic of hot debate in developed countries like U.K. & U.S.A.  for the last two decades. With the opening up of economies, it has also been a concern for developing country like India.  This is because opening up of economies has changed the scenario of Indian market i.e. on one hand, it has made the world market accessible to the Indian corporates & on the other hand, it has increased competition in the domestic market with the advent of the multinational companies. In this changed scenario, the quality of governance has been an important factor not only for survival of the companies but also for influencing the company’s ability to raise money from capital market. Again corporate governance is important in Indian context because of the scams that occurred since liberalisation from 1991, for e.g.  the UTI scam, Ketan Parekh scam , Harshad Mehta scam, & the latest Satyam Fraud case. 

                  In this paper, we will look into the historical background of corporate governance in India, recent developments in corporate governance in India till date, issues related with respect to corporate governance in India . We will also look into the latest & the biggest scam that had

occurred with respect to corporate governance i.e. The Satyam Fraud Case & will try to suggest some solutions so that such frauds does not occur in the near future.

 

 

Keywords : Corporate governance, Satyam Fraud case.

 

 1.0   INTRODUCTION :

                  The term ‘Corporate Governance’ has become a buzzword worldwide. According to Vittal, N., this is because of two reasons. First  is ,that after the collapse of Soviet Union & the end of  cold war in 1990 the concept of government controlling the commanding heights of the economy has gone,  instead the  concept that market dynamics must prevail in the economic matters has  been the conventional wisdom that is accepted worldwide. Second reason is the setting up of World Trade Organisation (WTO) as a means of promoting globalisation. Globalisation involves the movement of four economic parameters namely financial capital in terms of money invested in the capital markets, physical capital in terms of plant & machinery, financial capital in terms of money invested in the Foreign Direct Investment (FDI)  & labour moving  across national borders. According to Vittal, N., the pace of movement of the financial capital has grown because of the world becoming a global village . 

  2.0 CORPORATE GOVERNANCE IN INDIA : A BRIEF HISTORY  [PRE- LIBERALIZATION i.e. PRE-1991] :  

                The historical development of Indian corporate laws are marked with many interesting contrasts. For example at independence, India inherited one of the world’s poorest economies but it had a factory sector which accounted for  a tenth of the national product. India also had four  functioning stock markets and a banking system which had well-developed lending norms & recovery procedure.[ Goswami, O. (2002) ] 

                Corporate development in India was marked by the managing agency system, which contributed to the birth of dispersed equity ownership & also gave rise to the practice of management enjoying controlling rights disproportionately greater than their stock ownership. [ Goswami, O. (2002) ] 

                 The enactment of  1951 Industries (Development & Regulation) Act & the 1956 Industrial Policy Resolution marked the beginning of a regime & culture of protection, licensing & red tape that encouraged corruption & stilted the growth of the Indian corporate sector. Soon, corruption, nepotism & inefficiency became the hallmark of Indian corporate sector. [Chakrabarty, R., Megginson, W. & Yadav, P. (2007)] 

                 The corporate bankruptcy & reorganisation system was also not free from problems. In this regard, we should consider the SICA or the Sick Industrial Companies Act 1985 & the Board for Industrial & Financial Reconstruction (BIFR) . According to SICA, a company is declared ‘sick’ only when its entire net worth has been eroded & it has been referred to BIFR. The BIFR usually took over 2 years on average just to reach a decision with respect to the companies. Only a few companies emerged successfully from the BIFR & the legal process on average took more than 10 years by which the assets of the company were virtually worthless. Thus, protection of the creditors’ rights existed only in paper & the bankruptcy process was featured among the worst in the World Bank survey on business climate. [ Goswami, O. (2002) ]  

                    Again, although the Companies Act provided clear instruction for maintaining & updating share registers but in reality minority shareholders often suffered from irregularities in share transfers  & registrations .For example, there were cases where the rights of the minority shareholders were compromised by the management’s private deals in case of corporate takeovers. [Chakrabarty, R., Megginson, W. & Yadav, P. (2007) ] 

               Thus it can be concluded that for most of the pre-liberalization era the Indian equity markets were not sophisticated enough to exert effective control over the companies. Listing requirements of exchanges provided some transparency but non-compliance was not rare & was also not punished. 

2.1 RECENT DEVLOPMENTS IN CORPORATE GOVERNANCE IN INDIA TILL DATE [POST- LIBERALIZATION i.e. POST- 1991]:

                Liberalization of the Indian economy began in 1991. Since then, there has been major changes in both laws & regulations & in the corporate governance landscape.

 (a)    The most important development in the field of corporate governance & investor protection has been the establishment of the Securities & Exchange Board of India (SEBI) in 1992. It has played a crucial role in establishing the basic minimum ground rules of corporate conduct in India. [Chakrabarty, R., Megginson, W. & Yadav, P. (2007) ]

 (b)   The next significant event was the Confederation of Indian Industry (CII) Code for Desirable Corporate Governance developed by a committee chaired by Rahul Bajaj . The committee was formed in1996 & it submitted it’s recommendation on April 1998. [Chakrabarty, R., Megginson, W. & Yadav, P. (2007)] 

(c)    Later two more committees were constituted by SEBI, one chaired by Kumar Mangalam Birla & the other by Narayana Murthy. The Birla committee submitted its report on early 2000 & the second committee submitted its report on 2003.The recommendation of these two committees had been instrumental in bringing major changes in the corporate governance through the formulation of Clause 49 of the Listing Agreement. [ Chakrabarty, R., Megginson, W. & Yadav, P. (2007)] 

(d)   Along with SEBI, the Department of Company Affairs & The Ministry of Finance , Government of India, also took some initiatives for improving corporate governance in India. For example, the establishment of a study group to operationalize the Birla Committee recommendations in 2000, the Naresh Chandra Committee on Corporate Audit & Governance in 2002 & the Expert Committee on Corporate Law (J.J. Irani Committee) in late 2004. [ Goswami, O. (2002) ]   

(e)    SEBI implemented the recommendations of the Birla Committee through the enactment of Clause 49 of the Listing agreement. Clause 49, can be referred to as a milestone with respect to the changes in corporate governance in India. It is similar to Sarbanes – Oxley Act (SOX) in U.S. [Chakrabarty, R., Megginson, W. & Yadav, P. (2007)]

 Clause 49 looks into the following matters :

            (i)   Composition of the board of the directors.

           (ii)    Composition & Functioning of the Audit Committee.

           (iii)    Governance & disclosures regarding subsidiary

                     companies.

            (iv)   Disclosures by the company.

             (v)    CEO/CFO certification of the financial results.

             (vi)   Reporting on corporate governance as part of the

                      annual report.

              (vii)  Certification of compliance of a company with the

                      provisions of Clause 49.

 

 (f)    The  National Foundation for Corporate Governance (NFCG) was formed by the Ministry of Corporate Affairs, Govt. of India, in partnership with Confederation of Indian Industry (CII), Institute of Chartered Accountants of India (ICAI) & Institute of Company Secretaries of India (ICSI) with the goal of promoting better corporate governance practices in India.[http://www.nfcgindia.org/home.html]

 

 3.0  ISSUES IN CORPORATE GOVERNANCE IN INDIA:

             Corporate governance has been a topic of hot debate in developed countries like U.K. & U.S.A.  for the last two decades. With the opening up of economies ,it has also been a concern for developing country like India.  This is because, opening up of economies has changed the scenario of Indian market i.e. on one hand, it has made the world market accessible to the Indian corporates & on the other hand, it has increased competition in the domestic market with the advent of the multinational companies. In this changed scenario, the quality of governance has been an important factor not only for survival of the companies but also for influencing the company’s ability to raise money from capital market. 

                 Corporate governance is also important in Indian context because of the  scams that  occurred since liberalisation from 1991, for e.g.  the UTI scam, Ketan Parekh scam , Harshad Mehta scam & the latest & the biggest of them all the Satyam Fraud scam . 

                  Another reason, is that in emerging market like India when investments take place investors want to verify that not only are the capital markets or the companies on which they have invested run competently but they also have good corporate governance.  

                Another reason, is that it is believed that poor transparency & corporate governance norms were one of the main reasons for the Asian crisis in 1997. And also because such crisis have huge impact on the economy which can set a country several years back in its path to development. [Vittal, N.] 

                 Another reason, is that the legal & administrative environment in India provide excellent scope for corrupt practices in business. [Vittal, N.] 

                 According to Goswami, (2000), the research on corporate governance has remained in its infancy in India because of opaque disclosure practices followed by Indian corporate sector.

                 However it should be noted that the corporate governance problems in India is different from that in U.S. or U.K. The governance issue in U.S. or U.K. is that of disciplining the management while the problem in the Indian corporate sector is that of disciplining the dominant shareholder & protecting the minority shareholders .[Varma, J. (1997)]

 

 4.0 THE SATYAM FRAUD CASE :

                In one of the biggest frauds in India’s corporate history, B. Ramalinga Raju, founder & CEO of Satyam Computers, India’s fourth largest IT services firm announced on January 7th, 2009 that his company has been falsifying accounts for years, overstating revenues & inflating profits by $ 1 billion. The Satyam scam had been referred to as ‘India’s Enron’ by the experts.

[http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4344]

                  The admission of committing fraud & resignation by Raju showed that the company had been feeding investors, shareholders, clients & employees a steady diet of untruth with

respect to its financial performance. Raju said in a letter addressed to the board, the stock exchanges & SEBI that Satyam’s profit was inflated over several years to unmanageable proportions & that it was forced to carry more assets & resources than its real operations. According to Raju, ‘It was like riding a tiger not knowing how to get off without being eaten’

[http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4344]

                Raju’s departure was followed by resignation of the company’s CFO & appointment of an interim CEO. Meanwhile, a team of auditors from SEBI began investigation into the fraud. Also, since Satyam’s stocks were registered on the New York Stock Exchange along with the Bombay Stock Exchange international regulators swung into action. Two US law firms filed class- action law suits against Satyam. Satyam’s share price fell to Rs.11.50 on January 2009 compared to a high of Rs. 554 in 2008. In New York Stock Exchange also Satyam’s shares were trading at .80 in March 2009 as compared to .10 in 2008.

 [http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4344]

                  Satyam fraud case had laid bare the complete lack of accountability in the company & prompted questions about corporate governance practices of the company.   

      (A)   ROLE OF THE BOARD:

                  Among the many shortcomings of the Satyam episode, the most significant one has been the role of the independent directors who were supposed to safeguard the interest of all stakeholders. While the three committees had explicitly mentioned the role, independence, remuneration & responsibilities of independent directors the same did not translate into action but was only on paper.

. [http://www.rediff.com/money/2009/jan/19satyam-what-india-must-do.htm. ]

                  According to Andrew Holland , CEO, equities Ambit capital, independent directors should also be held accountable for board decisions & audit-related compliance practices.

[http://www.rediff.com/money/2009/jan/19satyam-what-india-must-do.htm].

   (B)   ROLE OF THE AUDITORS :

                 Although maximum focus in the Satyam episode was on the role of the independent directors, experts believe the role of the auditors in this case Pricewaterhouse Coopers should also be taken into account. 

                  According to a fund manager, there should be a system similar to one adopted in case of Public Sector Unit (PSU) banks where auditors are changed every three years. [http://www.rediff.com/money/2009/jan/19satyam-what-india-must-do.htm.]

                   A major reason for the fallout of the Satyam case was the issue related to the delay in implementation of Indian corporate laws. According to N.K. Jain , secretary & CEO of the Institute of Company Secretaries of India, the need of the hour is to enforce corporate laws in transparent, swift & uniform fashion.

[http://www.rediff.com/money/2009/jan/19satyam-what-india-must-do.htm] 

      (C)      MINORITY SHAREHOLDERS :

                  According to experts, institutional investors have the tools, bandwidth & clout to extract information & play an activist role in ensuring that management don’t go off track. If institutional investors act collectively they can demand the required change in the companies they have invested.

[http://www.rediff.com/money/2009/jan/19satyam-what-india-must-do.htm] 

                According to Anup Bagchi, executive director, Industrial Credit & Investment Corporation of India (ICICI) Securities, although independent directors play an important role in ensuring better risk management, it is the demand for good governance by institutional shareholders which is the best driver towards higher governance standards.

 [http://www.rediff.com/money/2009/jan/19satyam-what-india-must-do.htm]

  (D)      IMPACT ON BRAND INDIA :

                   The Satyam Fraud Scam had raised concerns about the potential damage to India’s appeal to foreign investors & the IT services industry in particular.

                    According to Michael Useem, Wharton management Professor, one or two more accounting scandals similar to Satyam will make the foreign investors wary about investing in India.

[http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4344]

                    On the other hand, corporate India had tried to control the damage. For example, Rajeev Chandrasekhar , president of the Federation of Indian Chambers of Commerce & Industry (FICCI), called upon regulators to move quickly to demonstrate that the Satyam was an exceptional case among corporations & investors need not worry about Indian corporate governance & accounting standards.   [http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4344 ]  

                     Even though, Raju was widely blamed for unleashing India’s Enron, a major difference between Enron & Satyam is that in Enron the CEO stonewalled, while whistleblowers came out with the truth but in Satyam there were no whistle-blowers the CEO blew the whistle on himself.

[http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4344]

 

5.0  RECOMMENDATIONS :

 1.          SEBI should develop adequate expertise for analysing financial statements so that it is able to detect fraud in the financial statements in the future.  

2.        The Institute of Chartered Accountants of India ( ICAI )or the Government should encourage the development of a whistle-blowing committee so that anybody who finds anything doubtful or fishy  about a company should report against the same immediately to the committee . 

3.         SEBI should reconsider its financial disclosure norms. A few years back SEBI suspended sending of printed copy of audited balance sheets to the shareholders as a cost cutting measure. In today’s world , it can be done easily by uploading the same in the internet. 

             Also Bankers & Rating Agencies can also then analyse the financial statements for detecting fraud. 

4.       The ICAI should implement a rule, indicating that audit firms should be allowed to work as auditors of large companies for a period of two years on a rotation basis in order to avoid undue influence committed by the audit forms. 

5.          The SICA Act & BIFR should be banned with immediate effect . In India, SICA has become so convenient for unscrupulous activities that industries become sick but not the owners. [Vittal, N.]

6.           The entire banking system & the Banking Secretary Act should be reviewed. In India, if one borrows one lakh rupees one is afraid of the bank while on the other hand  if one had borrowed tweleve crore rupees the bank is afraid of the person. The Narasimham committee recommendation about putting some conditions at the time of issuing new loans addresses these problems to some extent. [Vittal, N.] 

7.       The Benami Transaction Prevention Act & The Prevention of Money Laundering Act, should be encouraged in order to prevent fraudulent activities & also to ensure that corrupt practices are effectively punished .[Vittal, N.]

 

 6.0 CONCLUSION :

                         Thus, in this paper we have tried to see the historical background of corporate governance in India, the developments in this field till date, the issues of corporate governance in

India, the Satyam Fraud case & also provided recommendations so that similar fraud does not happen in the near future. 

                         Thus , it can be concluded that while corporate governance framework in the country is seen at par with the developed countries the same has to be implemented in letter as well as spirit.

[http://www.rediff.com/money/2009/jan/19satyam-what-india-must-do.htm]

                          Also, shareholders should ensure that the composition of the board of directors is a balanced mix of independent directors & management appointees as this would help to keep a check on the internal process of a company.[http://www.rediff.com/money/2009/jan/19satyam-what-india-must-do.htm]

                          Also, we should approach corporate governance issues in India not merely from the point of view of the Companies Act or the guidelines issued by Birla committee, Murthy Committee, but look at the entire network of various rules & regulations impinging on business so that an integrated wholistic system is created to ensure that transparency & good corporate governance prevail.

OR…………..ABSTRACT

In the wake of recent financial scandals and in the context of the global financial crisis, corporate governance is especially significant. We examine the effect of corporate governance practices on the performance of 106 mid-sized firms in India, between 2005 and 2007. Our results confirm a significant relationship between CEO duality and firm performance. We also find that a small board is more effective and enhances the value of the firm. However, in the Indian context, we find that non-executive independent directors are failing in their monitoring role.

Keywords: corporate governance, non-executive directors, CEO duality, audit committees, board size, Tobin's q

INTRODUCTION

Clich�d though it may sound, financial scandals the world over highlight the ever-growing importance of corporate governance. Future scandals will continue to assure a focus on governance issues - especially transparency and disclosure, control and accountability - and on the most appropriate form of board structure that may be capable of preventing such scandals occurring in future.

The relationship between corporate governance reforms and recession is cyclical, with waves of reform and increased regulation occurring during periods of recession, corporate collapse and reexamination of the viability of regulatory systems (Clarke, 2004). During long periods of expansion, both companies and shareholders are concerned with the generation of wealth rather than in ensuring governance mechanisms are working purposefully for the retention of wealth. This leads to diminishment of active interest in governance.

The recent global financial crisis proves beyond a doubt that we are living in a global age and has brought to the fore the relevance of a sound corporate governance system as an essential element of effective risk-management. Though not the only cause, governance failings are significant where boards fail to understand and manage risk, and tolerate perverse incentives. The recent crisis highlights the need to develop more effective approaches to corporate governance and risk management, as well as the importance of social responsibility in the financial sector; the role that corporate governance can and should play is in restoring trust (International Corporate Governance Network, 2008).

To some extent, shareholders may be criticized for not holding companies accountable, and it is true that shareholders have encouraged companies to ramp up short-term returns through leverage. However, regulators have often not responded decisively on realizing that markets were mispric- ing risk, allowing bank boards to operate with too little capital, excessive leverage, too much liquidity risk and poor mortgage lending practices.

There is an increasing perception that contagion and spill-over effects from the global financial turmoil could undermine the economic achievements of any country. As a result, there has to be an increased interaction between corporate governance and the stability and soundness of the financial system.

Hence, corporate governance practice needs strengthening, in particular by increasing board competence and responsibility. Board members need to have up-to-date knowledge on financial issues and risk-management to fulfill their functions and training should it be required when necessary. Boards should conduct annual evaluations of their performance and report to shareholders. Risk management frameworks, processes, and implementation practices require reform in order to redress the shortcomings revealed by the turmoil. It is vital that regulatory reform augments corporate governance solutions without aggravating existing weaknesses.

We explore issues surrounding corporate governance in the context of the rapidly emerging economy of India.

CORPORATE GOVERNANCE IN INDIA

The concept of corporate governance has attracted public attention for quite some time in India. In 1996, the Confederation of Indian Industry (CII) initiated the first institutional evaluation of corporate governance in Indian industry. The objective was to develop a code for corporate governance to be adopted and followed by Indian firms, financial institutions and public organizations. The 1999 Kumar Mangalam Birla Committee on Corporate Governance made recommendations that define the responsibilities and obligations of boards and management in instituting systems for good governance and emphasizes the rights of shareholders. The 2000 Task Force on Corporate Excellence through Governance recommended the phased implementation of essential measures, depending upon the size and the capabilities of the companies and market requirements. The Advisory Group on Corporate Governance: Standing Committee on International Financial Standards and Codes 2001, laid emphasis on audit committees and the appointment of truly independent directors to raise the quality of board deliberations and performance. In 2002, the Reserve Bank set up the Consultative Group of

Directors of banks and financial institutions to review the supervisory role of boards of banks and financial institutions, and to obtain feedback on the functioning of boards with respect to compliance, transparency, disclosures, and audit committees. They also made recommendations for making the role of the Board of Directors more effective with a view to minimizing risks and overexposure. The Naresh Chandra Committee on Corporate Audit and Governance Committee in 2002 recommended changes in areas such as the statutory auditor-company relationship, the procedure for appointment of auditors and determination of audit fees, independence of auditing functions and measures required to ensure that the management and companies actually present a 'true and fair' statement of the financial affairs of the company. The SEBI Committee on Corporate Governance in 2003 discussed issues related to audit committees, audit reports, independent directors, related parties, risk management, directorships and director compensation, codes of conduct and financial disclosures. Finally, the Naresh Chandra Committee II on Regulation of Private Companies and Partnerships was constituted to suggest a scientific and rational regulatory environment, the hallmark of which is quality rather than quantity, of regulation with particular reference to the Companies Act 1956 and the Indian Partnership Act 1932.

Developing a strategy

A strategy is an organisational plan. Implementing a strategy involves putting that plan into action. In other words a strategy shows how a business will achieve its goals. The strategy thus enables an organisation to turn its values into action. Values are what a company stands for. An important value for Amway is being a caring company. Amway believes in demonstrating this caring approach and this is why it has partnered with UNICEF.

All Directors design strategies for the whole of an organisation. Effective strategies involve discussion and communication with others. The views of IBOs are influential in creating strategies for Amway. Amway's strategies for corporate social responsibility are cascaded through the organisation as shown below.

Amway's Global Cause strategy involves creating responsible plans that make a difference. However, the strategy is flexible. In shaping the strategy, research was carried out to find out which global causes IBOs support. The results showed that many favoured a cause that helped children. There was a clear fit between Amway's aims to help children and UNICEF's 'Immunisation Plus' programme for children.

Objectives

From the outset, Amway set out some clear objectives for its strategy. These were to:

build loyalty and pride among IBOs and employees

enhance Amway's reputation as a caring organisation

make a real difference to human lives.

Child mortality is particularly high in developing countries because of infectious diseases. Many children could still be alive if they had been vaccinated.

For under £12 a child can be vaccinated against these diseases and has a fighting chance to reach adulthood. UNICEF's world child 'Immunisation Plus' programme is a fitting focus for the activities of Amway UK and its IBOs.

The UK initiative is part of a European-wide fundraising campaign for children. It recognises the importance of building good working relationships with UNICEF in each market in order to launch fundraising programmes through Amway's IBOs and their customers. The objective is to raise €500,000 (about £350,000) every year until 2010 across Amway Europe.

In 2005 Amway UK's partnership was deepened through becoming an official Corporate Partner of UNICEF UK. The Corporate Partnership is a closer longer-term relationship which benefits both partners. Working together the two parties raise money for UNICEF.

Read more: http://www.thetimes100.co.uk/case-study--corporate-social-responsibility--11-247-3.php#ixzz1Fk0lVkCP

Developing a strategy

A strategy is an organisational plan. Implementing a strategy involves putting that plan into action. In other words a strategy shows how a business will achieve its goals. The strategy thus enables an organisation to turn its values into action. Values are what a company stands for. An important value for Amway is being a caring company. Amway believes in demonstrating this caring approach and this is why it has partnered with UNICEF.All Directors design strategies for the whole of an organisation. Effective strategies involve discussion and communication with others. The views of IBOs are influential in creating

strategies for Amway. Amway’s strategies for corporate social responsibility are cascaded through the organisation as shown below.Amway’s Global Cause strategy involves creating responsible plans that make a difference. However, the strategy is flexible. In shaping the strategy, research was carried out to find out which global causes IBOs support. The results showed that many favoured a cause that helped children. There was a clear fit between Amway’s aims to help children and UNICEF’s ‘Immunisation Plus’ programme for children.

Objectives

From the outset, Amway set out some clear objectives for its strategy. These were to: build loyalty and pride among IBOs and employees

enhance Amway’s reputation as a caring organisation

make a real difference to human lives.

Child mortality is particularly high in developing countries because of infectious diseases. Many children could still be alive if they had been vaccinated.For under £12 a child can be vaccinated against these diseases and has a fighting chance to reach adulthood. UNICEF’s world child ‘Immunisation Plus’ programme is a fitting focus for the activities of Amway UK and its IBOs.The UK initiative is part of a European-wide fundraising campaign for children. It recognises the importance of building good working relationships with UNICEF in each market in order to launch fundraising programmes through Amway’s IBOs and their customers. The objective is to raise €500,000 (about £350,000) every year until 2010 across Amway Europe.In 2005 Amway UK’s partnership was deepened through becoming an official Corporate Partner of UNICEF UK. The Corporate Partnership is a closer longer-term relationship which benefits both partners. Working together the two parties raise money for UNICEF.

Identifying stakeholders

Amway’s Corporate Social Responsibility strategy has been developed with the interests of the following stakeholders in mind:

Identifying stakeholders

Read more: http://www.thetimes100.co.uk/case-study--corporate-social-responsibility--11-247-4.php#ixzz1Fk2WDfEb

Communicating the strategy

Good, clear communication is essential in making sure that the CSR strategy relates directly to the company business objectives . Communication also helps in putting the strategy into practice.A number of communications media are used:1. Face-to-face communication: Regular meetings take place between UNICEF, Amway and its IBOs. Through meetings with UNICEF staff, Amway is able to discuss the vision and objectives. It then passes the message on by meeting with IBOs. In 2005 the two organisations arranged a joint briefing day for IBO Leaders. They were able to hear firsthand experiences from UNICEF staff about their roles and UNICEF’s work as well as where the money goes.2. Printed material: Amway produces a monthly magazine for all IBOs called Amagram.3. Public relations materials are also important, particularly at launch events for the initiative (e.g. in Milton Keynes in 2006).4. Email communication: Email is very important in the company – it plays a significant part in keeping IBOs up-to-date.5. Online activities: There is a micro-site dedicated to the Amway UK/UNICEF partnership on the UNICEF UK website.

Fundraising

Amway Europe provides support for fundraising to the extent of €500,000 (about £350,000) per year through selling items such as:

greetings cards

multi-cultural gifts and cards

stationery and wrapping paper

toys for children.

However, Amway UK’s support goes well beyond these activities. In addition, it involves staff fundraising events and raffles organised by the IBOs. UNICEF attends IBO major events (usually supported by 1,000 or more IBOs) where requested. A UNICEF stand outlines the work with speakers, literature and merchandise.

Conclusion

Amway is a family business with family values. Its IBOs are people who want to make a difference to the communities in which they operate and to the wider world community. This is Corporate Social Responsibility (CSR) in action.

The clue to Amway’s success is the careful planning of its strategy and its involvement with many stakeholders in getting the strategy right. Of course, it is early days in the latest chapter of a strong relationship between Amway and UNICEF. Evaluation is taking place to measure the success of the initiative in terms of meeting fundraising goals. Customer research is carried out to test customers‘ views on the relationship and to find out how aware the general public is about what Amway is doing in the field of CSR.

Corporate Philosophy

Based on Promise's founding spirit of "challenge to the limit the pursuit of ideal financing for the

general public", Promise has established "existential philosophy", "management philosophy" and

"action philosophy" as the three pillars of our corporate philosophy defining how a corporation should

conduct itself.

• Existential Philosophy

To work to become a trusted corporate citizen that supports people's affluent

lifestyles

• Management Philosophy

To work to generate appropriate level of profits through efficient management and

achieve sustainable growth

• Action Philosophy

To work to be appreciated by customers and cooperate with society to realize mutual

harmony and benefit together with employees

Declaration of Action

In view of the dramatic changes underway in the consumer finance industry due to implementation of

the Money Lending Business Law and other developments, we at Promise decided to renew our efforts

in practicing our corporate philosophy, toward the goal of sustainable development, and established

our Declaration of Action in January 2010.

• We hereby declare our promise to offer trust, satisfaction and innovation to our

customers and all of our stakeholders; our commitment to action is aimed at becoming a

company esteemed by its stakeholders.

Code of Ethics

Promise respects all stakeholders. To maintain social order as a corporate citizen, Promise has

established the 'Promise Code of Ethics', which makes the following promises to customers, business

partners, shareholders and investors, society, the environment and employees.

1.Our promise to our customers

Our customers are the most important element in our business activities. By ascertaining the

diversifying needs of our customers and proposing proactive solutions in response, we will work to

create new markets and provide high-quality services that our customers can use with complete

confidence and security. Furthermore, we will work to build relationships of mutual trust with our

customers, based on fair and honest business practices and a deep appreciation of their needs.

2.Our promise to our business partners

Our business activities are built upon the cooperation and assistance of our business partners in a wide

range of fields, including the procurement of funds necessary to provide service to our customers. We

work to build relationships of mutual trust with our business partners through fair and proper business

transactions.

3.Our promise to our investors

Our business activities are also based on funds received from shareholders and other investors. With

respect to our investors, we promise to conduct our business in a fair, equitable and efficient manner,

to work for corporate growth and to explain the contents of our business activities clearly and

honestly.

4.Our promise to society

Through our business activities and each and every one of our management executives and

employees, we maintain a deep relationship with society. In this sense, the society we live in provides

the foundation for our very existence. In order to contribute to sound social development as a good

corporate citizen, we will proactively take the initiative in social action programs, cultural programs

and activities designed to assist these agendas.

5.Our promise to the environment

We feel that one of our most important responsibilities as a good corporate citizen and neighbor is to

make society a better place to live by protecting our natural environment. As such, we will work to

implement environmentally friendly practices in all our business activities.

6.Our promise to our employees

At Promise, we respect the character and individuality of every single management officer and

employee. Through the implementation of a working environment, training agenda and human

resources system designed to let them realize their potential and display their talents to the fullest, we

will work to develop a corporate culture that is not only challenging, but satisfying and meaningful.

Code of Conduct

Everyone at Promise, including executives and employees, understand the importance of paying

attention to the smallest actions in order to maintain Promise's reputation as a company with high

ethical standards. With this in mind, we have established this code of conduct for everyone at Promise

as one element of the commitment to code of ethics.

Code of conduct for executives and employees

We will always conduct business activities in conformity with laws, regulations and the highest

standards of corporate ethics. We are dedicated to performing our jobs based on the sound judgment

that is expected of people who work at Promise. Through this approach, we will do our best to earn

recognition as a trustworthy corporate citizen and a company that cooperate with society to realize

mutual harmony and benefit.

We will deepen our understanding of laws and regulations in Japan and other countries that are

associated with our business activities. Furthermore, we will establish internal regulations in order to

better ensure compliance with these laws and regulations. We will also use training programs and

other educational activities to be certain that everyone at Promise understands the importance of

compliance activities.

With regard to confidential business information and customer credit information, we will

conduct a rigorous management program for the storage of this information as well as to prevent leaks

and the improper use of this information. Furthermore, we will never engage in any actions that could

be viewed as insider trading, such as buying and selling stock based on internal information that has

not been made public.

We will treat information gained through business operations as an asset of the Company. The

confidentiality of this information will be maintained either during or after the term of employment.

We will never have any associations with corporate racketeer, members of organized crime

syndicate and other anti-social groups that represent threats to society and public safety.

We will not allow any actions, such as illegal copying, that are detrimental with regard to

external confidential information and the rights of intellectual property holders. We will always use

legal methods to obtain and use this information and intellectual property.

We will never take actions that exceed the authority that comes with his or her job when

performing tasks involving the acquisition, use and disposal of the Company's assets.

Except when acting as private citizens, we will seek prior approval from the Company before

participating in political or ideological activities as executives or employees of Promise.

To eliminate improper behavior and maintain a fair workplace environment, we will not permit

the receipt of monetary gifts within the Company other than gifts of reasonable amounts associated

with ceremonial functions.

Corporate PhilosophyThe Principles We Stand On

- For people, society and the Earth -

As a diversified materials company, Mitsubishi Materials has contributed to the creation of an affluent society through the supply of basic materials indispensable for the world.

Today, our activities cover a wide range, from the manufacture of basic materials to fabricated products and new materials with high-performance features, and further to the provision of systems and engineering services.

To respond to the various needs of society, we are constantly tackling research and development on new technologies and products and endeavor to provide ever more superior products, systems and services to the world.

We will continue to address the requirements of the world in a new era, such as technical innovation, development of information technology, globalization and a heightened awareness of the environmental protection.

At the same time, we will carefully and efficiently use natural resources and raw materials that are the gift of the Earth, and will support building social systems based upon resource recycling.

It is thus our principles to serve people, society and the Earth through our varied business activities.

The 10 Articles of Our Code of Conduct CSR Declaration

Environmental Policy

The 10 Articles of Our Code of Conduct

Article 1 We will seek to create a Mitsubishi Materials Group receptive to diverse personalities and value perceptions by encouraging each member of the Group to be self-committed and self-improving.

Article 2 We will engage in efficient business management and pursue sustainable corporate development.

Article 3 We will respect the basic human rights of all people and create a spirited, safe and comfortable work environment.

Article 4 We will conduct fair and equitable business transactions by providing safe, high-quality products, systems and services at reasonable prices.

Article 5 We will endeavor to secure the understanding and trust of society, and will maintain a harmonious coexistence with society.

Article 6 We will comply with laws and regulations and conduct fair business activities with common sense.

Article 7 We will carry out our duties with integrity, in line with the rules and standards established by the Company.

Article 8 We will endeavor to protect the environment, and will apply every measure for effective uses and recycling of natural resources.

Article 9 We will carry out proactive corporate communications and respect the values and inherent rights of information.

Article 10 We, as members of the international community, will contribute to the development of each region where we maintain a presence.

CSR DeclarationBuilding Trust in the Mitsubishi Materials Group

Since its foundation, the Mitsubishi Materials Group has worked tirelessly to enrich society, by supplying basic materials indispensable to society as well as helping reduce environmental impact and fostering recycling-based social systems.

In order to execute our business operations in a more active and uniformed manner,

the Management implemented "The Principles We Stand On" as the corporate philosophy and "The 10 Articles of Our Code of Conduct" for the realization of this philosophy.

Needless to say, the purpose of our corporate philosophy--"The Principles We Stand On"--is to clearly convey the sincere intentions of our Group companies and employees with regard to their contributions to society. I thus believe that the practice of this corporate philosophy in our daily operations is the foundation of our corporate social responsibility efforts. This will lead to not only sustaining our corporate development but also achieving a mutually beneficial coexistence with society.

In essence, we are returning to our roots, focusing on areas of improvement in order to earn the long-term trust of our shareholders, employees, customers, suppliers, communities and many other stakeholders.

The Management and every employee will draw on the Group's mission to communicate more openly and effectively with stakeholders in its efforts to meet its social responsibilities and enhance enterprise value.

At the same time, we will disclose information in an appropriate and timely manner to fully demonstrate that the Mitsubishi Materials Group is an open and transparent organization.

I hereby declare that the Mitsubishi Materials Group will make every concerted effort to uphold its corporate social responsibility so that it can continue to help make the world a better place through its operations.

April 2005Akihiko Ide

PresidentMitsubishi Materials Corporation

Environmental Policy

At Mitsubishi Materials we are committed to tackling the major issues such as conserving and improving the environment. We are dedicated to developing an advanced resource recycling society, aimed at sustainable development through the supply and recycling of materials essential for our daily lives.

As a comprehensive materials manufacturer, Mitsubishi Materials supplys a variety of key materials essential for industrial society. Our expertise covers the manufacturing and processing of key materials such as cement, aluminum, copper, and powder metallurgy products and tools, and the supply of cutting-edge products, energy sources, high-performance materials, precious metals, and silicon.

These products and materials are indispensable in many areas of our daily lives.

Although in the materials business we produce a higher environmentalimpact during the manufacturing process, at the same time we cancontribute to recycling

resources at the waste disposal stage.

We are committed to creating an environment-friendly recycling-orientedsociety through our efforts for environmental conservation and theefficient use of resources in our business activities.

To this end, centered around our green productivity management (GPM)activities, we are committed to the following activities.

Specific measures:

1. Environment-conscious production and reduced environmental impact:

Energy and resource conservation, reduced amounts of waste and toxic substances

2. Recycling and recirculation of resources:

Waste recovery, and expansion of the waste treatment business

3. Development of eco-friendly products

4. Promotion of green procurement

5. Fostering of environmental management systems

(1) Complying with environment-related laws and regulations and efforts to prevent pollution

(2) Periodically reviewing matters to be dealt with and targets for constant improvement

(3) Improving communications with communities on environmental issues

(4) Making our policy known to all our employees and introducing environmental programs

Vision

Our vision is to continue to advance with vitality through imagination and embracing a world view over the next decade. We endeavor to become a timeless “One and Only” company, a pioneering institution free of limitations, capable of conducting business in an innovate, unique, and industry-leading manner.

Our devotion is to allow people to enjoy the “Dream” created by leading edge electronic technology.

Even if the electronics industry continually advances and develops, people would not enjoy technology unless it can be felt by the five senses. We continue to offer electronic products that make bridges between people and the ever-advancing electronic technologies.

For this purpose, we strive to further develop the technology that we have cultivated since our formation by procuring and maximizing the use of the finest resources at the best locations to meet the needs of our times.

Management Principles

To realize our mission, we set forth the following seven items as a basic principle of business management and activities.

1. We produce and sell electronic parts used by people throughout the world while quality, efficiency in delivery and cost competitiveness are always recognized world-wide.

2. Our directors and employees respect one another and prioritize the building of strong relationships of mutual trust with our stakeholders.

3. We operate our company with the most suitable locations and employees. 4. We adopt the principle of ability first and do not discriminate based on ethnicity,

race, gender, age, belief, religion and/or physical disability. 5. We respect the manners, customs and laws of local regions in all our business

activities. 6. As global citizens, we positively participate in environmental conservation. 7. We strive through innovation to develop new products while our management

always envisions future generations of technology. We continually challenge ourselves to grow and strive for the better.

Commitment

We promise to our stakeholders the following commitments under our “ Management Principles”:

1. Customers

We consider customer satisfaction perspectives at all times, and endeavor to provide products and services of high quality with speed at appropriate prices.

We never forget the presence of our customers, and respond to their requests and questions with sincerity.

We set “improvement of customer satisfaction” as the underlying objective to all our activities, and judge all internally proposed policies and plans by its level of contribution to this effort.

We establish long-term and prosperous relationships with our clients, while always taking a customer satisfaction perspective.

2. Shareholders

We fulfill our responsibilities to our shareholders by increasing corporate value through business activities, as well as by executing our dividend policy.

We disclose our business activities and performance to our shareholders speedily and accurately.

We respect each shareholder’s ownership and ensure to maintain fairness among them.

3. Employees

We regard our employees as our most important resource, and strive to fully appreciate each person’s individual value.

We aim to be a borderless, transnational corporation in a true sense; we guarantee fair treatment for our employees at all work locations, and promote teamwork among them.

We ensure prohibition of discrimination by ethnicity, race, gender, age, belief, religion and/or physical disability.

We assign appropriate and challenging work to employees according to their ability and evaluate and reward them properly.

We provide employees with safe, comfortable and productive working conditions so that they can employ their abilities to the full.

We continuously develop our human resources, encourage employees to exercise their full potential and create relationships where both the corporation and individual can grow together.

Sumida will assist each employee in fulfilling his/her social responsibilities as a citizen.

4. Suppliers

We aims to establish stable and friendly long-term relationships with our suppliers on the basis of mutual trust and prosperity.

We procure optimum parts, materials, equipment, etc. based on our open door policy and on a fair and free competition basis.

We always try to have at least one second source for the sake of risk management.

We aim to proactively procure parts, materials, equipment, etc. from companies that have well consideration to the environment.

Procurement is carried out in compliance with applicable laws and regulations, and under the terms and conditions set out in Purchasing Contracts.

5. Community

We aim to grow in harmony with society through its business activities, and contribute to its development and the overall economy.

We firmly recognize the value of corporate citizenship, and aim to become a corporation that is trusted by local communities and society by proactively addressing the local issues around us.

We continually support the future generations in which we place our hopes through the Sumida & Ichiro Yawata Foundation.

We uphold “Glocalization” (concurrently both global and local), and respect the practices and cultures of the communities where we conduct business.

6. Other Stakeholders

（1）Local Government/Government Institutions

We faithfully comply with the rules and regulations of the countries and regions where we conduct business.

We strive to establish and maintain good relations with local governments and the public sector.

（2）Industry Relations

We maintain a good and disciplined relationship with other companies in the industry as well as industry organizations.

Code of Conduct

Sumida’s Code of Conduct is a document that illustrates our commitments to all stakeholders as a set of formal written requirements. It embodies our Management Principles and Commitment as defined that govern our corporate activities, formalizes the standards of behavior expected and requested by Sumida and sets the guidelines on how to handle various situations of business dealings.

It reminds us that Sumida is committed to acting with integrity and at the base of our integrity is a set of ethical principles that includes honesty, trust, fairness and respect for others. All of the decisions to be made and actions to be taken on behalf of Sumida must adhere to such standards of integrity and ethical behavior and must comply with all applicable laws, regulations and internal policies. The Code applies to all directors, officers and employees of SUMIDA CORPORATION, its wholly owned subsidiaries, and joint ventures in which Sumida holds a controlling interest.

1. General Standard

1.1 Respect for People and Human Rights

Sumida values its employees as the most important resource and is committed to maintaining an environment of respect for people and human rights in all business

activities. We will not tolerate any discrimination on the basis of ethnicity, race, gender, age, belief, religion and/or physical disability.

1.2 Ethics and Business Integrity

Sumida is committed to conducting all business with integrity, in accordance with its business ethics. In our activities, we have our own business principles, that is, pursuit of customer satisfaction, respect for safety, proper environmental management and contribution to the social and economic development of the regions in which we do business, so that we can always ensure trust from all people and societies.

1.3 Compliance with Legal Requirements and Company Policies

Sumida conducts its business activities in a global and diverse environment. We strive to understand and respect diversity and difference of cultures and customs, and comply with all applicable laws and regulations of each country and region in which we operate. All directors, officers and employees of Sumida are requested to comply with all applicable laws and regulations as well as internal company rules and policies with regard to their business activities. All parties are responsible to understand the necessary requirements as applied to one’s job. In performing these duties, the Compliance Officer, Legal Department, Internal Auditor and Risk Management Officer are available to provide advice and support to all.

1.4 Commitment to Sincere and Responsible Behavior

All directors, officials and employees are requested to be sincere, reliable and prompt in performing their duties, to contrive to improve operations for rationalization and higher efficiency, and to work with optimum use of physical and intellectual ability in cooperation with others.

2. Employment

2.1 Equal Employment Opportunities

Sumida is committed to providing equal opportunity to all employees and applicants in hiring, training and development without regard to ethnicity, race, gender, age, belief, religion and/or physical disability.

2.2 No Forced Labor/Child Labor

Sumida uses neither form of forced, involuntary, nor child labor (the term ‘child’ is defined in accordance with the laws of each country or region which stipulate the youngest acceptable age for labor).

2.3 Sound Labor and Employment Practices

Sumida is a transnational company and so we guarantee fair treatment to our employees without regard to their location of work. Teamwork is highly promoted among all employees. We strive to create and maintain a sound, safe and productive environment which is free from discriminative conduct that may result in a hostile atmosphere, so that employees can exert their ability to its full degree. All directors, officers and employees will make an utmost effort to create a fair and sound working environment as well as comply with all applicable laws, regulations, internal rules and policies.

3. Business Integrity

3.1 Prompt Response and Obligation to Notify

In addition to its commitment to daily business activities, Sumida is also committed to responding sincerely, promptly and appropriately to those business and work related emergencies, accidents, irregularities and unexpected events that could be damaging or unbeneficial to our customers or Sumida. All directors, officers and employees are requested to adhere to their obligation to ensure that appropriate action is taken to prevent insincere conduct, inaccurate records, false reporting, etc.

3.2 Gifts and Entertainment

Sumida is committed to conducting business with integrity and fairness and avoiding all unfair and improper dealings. While bribery is a serious criminal offence in many countries, even under circumstances where it is not explicitly prohibited by local law, it is our policy to prohibit any director, officer or employee from making gifts of cash value to our customers, business partners, relevant government officials or other concerned individuals concerned for the purpose of influencing any business activity. The acceptance of cash, gifts or entertainment that may have undue influence to our business decisions is also prohibited. All directors, officers and employees accordingly are committed to abiding by all applicable laws and regulations in each country and region, as well as the internal company rules and policies with regard to their individual business activities.

3.3 Free Competition and Fair Commercial Transaction

Sumida is committed to compliance with all applicable antitrust, competition and fair trade laws, policies and treaties of each country and region in all its business activities and it is prohibited from any conduct restricting competition or unfair business dealing. All directors, officers and employees must know, understand and comply with these laws and are requested to consult with the Compliance Officer or legal council if they are not certain in connection with the legitimacy of business arrangements.

3.4 The Protection of Intellectual Property Rights and Confidential/Personal Information

3.4.1 Compliance of Laws and Regulations & Internal Rules of Each Sumida Company

1. （1）All directors, officers and employees are expected and directed to comply with the Law on Protection of Personal Information, and all other applicable laws and regulations with regard to Information Security Management in each country as well as the internal rules of Sumida.

2. （2）All directors, officers and employees should recognize the importance of patent right, trademark right, copyright or other intellectual property rights, and are prohibited from infringing such rights.

3. （3）All directors, officers and employees should recognize that when they cause any damages to a third party by unauthorized leakage of business information, not only will Sumida suffer the cost of such damages but the responsible person may undertake further obligation to compensate such damage to the company.

3.4.2 Secure Management of Customer Information

1. （1）All directors, officers and employees are prohibited from misusing or making illegal copies of particular customer information or any information entrusted by a customer (“Customer Information”) without permission.

2. （2）All directors, officers and employees are expected and limited to disclosing Customer Information only to those who are permitted to use such information.

3. （3）All directors, officers and employees are expected and directed to manage and treat Customer Information appropriately complying with the “Trade Secret Management Policy” which sets out information management procedures.

3.4.3 Protection of Personal Information

1. （1）All directors, officers and employees should respect the private information of individuals such as customers, employees of material suppliers, business partners and themselves; and are requested to appropriately protect such information.All directors, officers and employees are expected and directed to manage and treat personal information strictly complying with the “Personal Information Management Policy” which sets out information management procedures.

3.5 Recording and Reporting of Accurate Information

All directors, officers and employees are requested to create and maintain all company documents or records such as financial statements to reflect the business activities accurately and fairly. They are also requested to cooperate fully with our internal and external audits or investigations which are conducted in respect of the compliance status and to make accurate reports based on facts.

4. Ethical Personal Conduct

4.1 Insider Transactions

Insider transactions (insider trading, insider dealing and stock tipping) are criminal offenses in most countries where Sumida does business. Insider trading or dealing means personally buying or selling stocks or other securities of any company while in possession of material or price-sensitive non-public information (inside information) about a company through their work. Stock tipping means disclosing inside information about a company to another person such as a relative, colleague or friend that enables that person to buy or sell stock or other securities of the company for a profit on the basis of such information.

Sumida has established standards of conduct for our employees and others who obtain inside information through their work for Sumida. All directors, officers and employees are required to strictly comply with applicable laws as well as the “Rules for Regulation of Insider Trading and Control of Inside Information” which sets out internal policies and procedures for information management and proper dealings that request them to refrain from trading Sumida stock at certain times and under certain conditions. Nonetheless, these policies and procedures are not meant to restrict the freedom of employees to make appropriate personal investments, or each company's right to legitimately use and disclose inside information in the ordinary conduct of its business.

4.2 Conflict of Interest

All directors, officers and employees should avoid any situation which may lead to an actual or perceived conflict of interest with Sumida. All business activities must be conducted in accordance to the objectives of Sumida, and all business decisions must be made ensuring that any situation which may impair or appear to impair the independence of our judgment is avoided. When such a situation arises, they are required to disclose the relevant information to their supervisors and the Compliance Officer in writing in accordance to the applicable internal policies, and obtain prior authorization before engaging in any further business activities.