ONGC strongly believes that Corporate Governance in any organisation derives its genesis from culture and mindset of the organisation and is based on the principles of integrity, fairness, equity, transparency, accountability and commitment to the values. It is a way of life rather than a mere legal compulsion.
The premise of Corporate Governance framework in ONGC is based on the following key drivers:
• Adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders including customers, employees and society at large.
• A sound system of internal control to mitigate the risks to achievement of business objectives both short term and long term.
• Compliance of laws, rules & regulations in true letter and spirit.
• Independent verification of the Company's financial reporting.
• Strategic supervision by the Board of Directors of appropriate composition, size, varied experience and commitment to discharge their responsibilities.
• Timely and balanced disclosure of all material information to all the stakeholders.
• Clearly defined standards against which performance of responsibilities can be measured.
• A clear delineation of shareholders' rights.
• Accuracy and transparency in disclosures regarding operations, performance, risk and financial position.
Based on the aforesaid objectives and in compliance with the disclosure requirements of Clause 49 of the Listing Agreement executed with the Stock Exchanges as well as the Guidelines on Corporate Governance for Public Sector Enterprises, issued by the Department of Public Enterprises (DPE), the detailed Corporate Governance Report of ONGC is as follows:
1. Corporate Governance Recognitions
At the outset, it may be mentioned that many organisations have recognised the excellence in Corporate Governance in ONGC and the following accolades have been conferred on ONGC in recent years:
i. 'ICSI National Award for Excellence in Corporate Governance for 2011'- Certificate of Recognition by the Institute of Company Secretaries of India.
ii. 'ICSI National Award for Excellence in Corporate Governance-2010'- by the Institute of Company Secretaries of India;
iii. 'Golden Peacock Global Award' for Corporate Governance by World Council for Corporate Governance, U.K. in the years 2005, 2007,2008 and 2009
iv. 'Golden Peacock Award' for Excellence in Corporate Social Responsibility in Emerging Economics 2006 by World Council for Corporate Governance, U.K in 2006;
2. Board of Directors
The Company is managed by the Board of Directors, which formulates strategies, policies and reviews its performance periodically. The Chairman & Managing Director (CMD) and Six Whole-Time Directors viz. Director (Onshore), Director (Technology & Field Services), Director (Finance), Director (Offshore), Director (Exploration) and Director (Human Resources), manage the business of the Company under the overall supervision, control and guidance of the Board.
The Board of Directors has an adequate combination of Executive (Functional) and Non-executive Directors. As on 31st March, 2012, the Board of Directors had 13 members, comprising of 5 Functional Directors (including the Chairman & Managing Director) and 8 Non-executive Directors (comprising 1 part-time official nominee Director and 7 part-time non-official Directors) nominated by the Government of India. To share the global experience and business strategies, Managing Director, ONGC Videsh Limited (OVL) is a permanent invitee to the meetings of the Board.
The composition of the Board of Directors of ONGC as on 31.03.2012 complies with the provisions of Clause 49 of the Listing Agreement, except that for the periods from 1st April, 2011 to 19th June, 2011 and from 10th November, 2011 to 13th December, 2011, the Board of Directors did not comprise of the required number of Independent Directors as per the terms of the above mentioned Listing Agreement.
2.2 Board/ Committee Meetings and Procedures
(A) Institutionalised decision making process
With a view to institutionalize all corporate affairs and setting up systems and procedures for advance planning for matters requiring discussion/ decisions by the Board, the Company has defined guidelines for the meetings of the Board of Directors and Committees thereof. These guidelines seek to systematize the decision making process at the meetings of Board/ Committees, in an informed and efficient manner. Company's guidelines relating to Board Meetings are applicable to Committee Meetings as far as practicable.
(B) Scheduling and selection of Agenda items for Board / Committee Meetings
(i) The meetings are convened by giving appropriate advance notice after obtaining approval of the Chairman of the Board/ Committee. To address specific urgent need, meetings are also being called at a shorter notice. In case of exigencies or urgency resolutions are passed by circulation.
(ii) Detailed agenda containing the management reports and other explanatory statements are circulated in advance in the agenda format amongst the members for facilitating meaningful, informed and focussed decisions at the meetings. Where any document or the agenda is of confidential nature, the same is tabled with the approval of CMD. Sensitive subject matters are discussed at the meeting without written material being circulated. In special and exceptional circumstances, additional or supplemental item(s) on the agenda are permitted.
(iii) The agenda papers are prepared by the concerned officials, sponsored by the concerned Functional Directors and approved by the CMD. Duly approved agenda papers are circulated amongst the members of the Board/ Committee by the Company Secretary or by the convener of the Committee.
(iv) The meetings of the Board/ Committees are generally held at the Company's Registered Office in New Delhi.
(v) Presentations are made to the Board/ Committee covering Finance, Production, Operations, major Business Segments, Human Resources, Marketing, Joint Venture operations, whenever required.
(vi) The members of the Board/ Committee have complete access to all information of the Company and are also free to recommend inclusion of any matter in agenda for discussion. Senior officials are called to provide additional inputs to the items being discussed by the Board/Committee, as and when required.
(vii) Each Committee has the authority to engage outside experts, advisers and counsels to the extent it considers appropriate to assist the Committee in its work.
(C) Recording minutes of proceedings at the Board Meeting
Minutes of the proceedings of each Board/Committee meeting are recorded. Draft minutes are circulated amongst all
members of the Board/ Committee for their critical appreciation and comments. The comments are incorporated in the minutes, which are finally approved by the Chairman of the Board/ Committee. These minutes are confirmed in the next Board/ Committee Meeting. Minutes of the meetings of the Committees are also noted by the Board in its next meeting. The finalized minutes are entered in the Minutes Book.
(D) Follow-up mecha nism
The guidelines for the Board/ Committee meetings provide for an effective post-meeting follow-up, review and reporting process for the action taken on decisions/instructions/directions of the Board and Committee. As per the Board's decision, the Company Secretary intimates the Action Points arising from deliberation during the meeting to the concerned Functional Directors who in turn provide updates to be apprised to the Board on the areas of their responsibilities in the next meeting. Functional Directors submit follow-up Action Taken Report (ATR) once in a quarter.
(E) Safety Snapshots
Considering the fact that ONGC is in hydrocarbon business, safety is paramount for continued operations within the organisation. With a view to apprise the Board regarding various safety measures being taken throughout the length and breadth of ONGC, as well as to seek their guidance in the implementation of these measures, periodic presentations are made to the Board of Directors in the form of Safety Snapshots.
(F) Presentation after the meeting
With a view to keep the members of the Board apprised with the latest developments in the Industry, presentations on the subjects relevant to E&P business are being made periodically to the Board. This also ensures that the Directors are constantly in touch with the developments in the Industry in general and ONGC in particular in its operations.
Functional Directors are responsible to ensure adherence to all the applicable provisions of law, rules, guidelines etc. A Quarterly Compliance Report (collected from all work centres) confirming adherence to all the applicable laws, rules, guidelines and internal instructions/ manuals, including Corporate Governance, is reviewed by the Audit & Ethics Committee and the Board.
(H) Training and Evaluation of Non-Executive Board Members
(a) Pursuant to Clause 3.7 of the Guidelines on Corporate Governance for Central Public Sector Enterprises 2010, issued by Government of India, Ministry of Heavy Industries and Public Enterprises, Department of Public Enterprises with regard to Training of Directors it is provided that the company “shall undertake training programme for its new Board members (Functional, Government Nominee and Independent) in the business model of the company including risk profile of the business of the company, responsibility of respective Directors and the manner in which such responsibilities are to be discharged. They shall also be imparted training on Corporate Governance, model code of business ethics and conduct applicable for the respective Directors.”
Further, in terms of Non-Mandatory Requirements as per Annexure I D to Clause 49 of the Listing Agreement with the Stock Exchanges it is provided as under:
“A company may train its Board members in the business model of the Company as well as the risk profile of the business parameters of the company, their responsibilities as directors, and the best ways to discharge them.”
Board of Directors have approved a three tier training policy for Independent Directors:
• Induction Training;
• External Training;
• Board Presentation.
The non-executive Board members are eminent personalities having wide experience in the field of business, education, industry, commerce and administration. Their presence on the Board has been advantageous and fruitful in taking business decisions.
(b) Policy on Performance Evaluation of Directors
In terms of the non-mandatory requirements stated in Annexure ID of clause 49 of the Listing Agreement with the Stock Exchanges it is provided as follows:
Mechanism for evaluating Non-Executive Board Members
The performance evaluation of non-executive directors could be done by a peer group comprising the entire Board of Directors, excluding the director being evaluated; and Peer Group evaluation could be the mechanism to determine whether to extend /continue the terms of appointment of non-executive directors.
Further as per the Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, it is stipulated as follows:
“Evaluation of Performance of Board of Directors, Committees thereof and of Individual Directors:
The Board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. The Board should state in the Annual Report how performance evaluation of the Board, its committees and its individual directors has been conducted.
CRISIL had conducted a study on Governance and Value Creation in ONGC and one of the Key recommendations of the aforesaid study was:
Formal appraisal process for board as a whole should be institutionalized
In line with best practices, board should undertake a formal and rigorous annual evaluation of its own performance; performance of independent directors can be evaluated through a peer evaluation process.”
Accordingly, with a view to comply with the aforesaid non-mandatory recommendations as well as to put in place a policy in this regard, a Policy on Performance Evaluation of Directors was approved by the Board in principle.
(c) Board Charter
As per Clause 3.5 of the guidelines on Corporate Governance for CPSEs, a clear definition of the roles and the division of responsibilities between the Board and the management is necessary to enable the Board to effectively perform its role. The Board of each CPSE may be encouraged to articulate its corporate governance objectives and approach (within the board parameters of the guidelines and the general perception of business risk) to satisfy the expectations of its majority shareholders and other stakeholders. This charter should be read in conjunction with the Company's Memorandum and Articles of Association. As a good Corporate Governance practice a Board Charter will assist directors in fulfilling their responsibilities as a board member. The Board Charter sets out the respective roles, responsibilities and authorities of the Board and of Management in the governance, management and control of the organization.
The Board of ONGC has approved in-principle a Board Charter.
Both the Policy of Performance Evaluation of Directors and the Board Charter shall be finalised by Independent Directors.
2.3 Board Meetings
During 1st April, 2011 to 31st March, 2012, Twelve Board meetings were held on April 27, May 30, June 28, July 28, August 29, September 27,November 04, December 01,2011 and January,04, February,08, March 07 & 15,2012
The minimum and maximum interval between any two Board meetings was 08 day and 38 days respectively.
The details of number of Board meetings attended by Directors, attendance at last AGM, number of other directorship/committee membership held by them during the year 2011-12 are tabulated below:-
|3. Strategy Meet & Conclave
The 9th Strategy Meet 2011 'Abhyuday' was held on November 11 & 12, 2011 at Anand in Gujarat where all members of the Board and senior officials of the Ministry of Petroleum & Natural Gas participated. Intense discussions and deliberations took place during this two days meet covering areas of concerns and growth for ONGC. To have the benefit of cumulative knowledge and experience of the elders of the ONGC family, an assembly of the past and present members of the erstwhile Oil & Natural Gas Commission and Board is organized every year. 10th ONGC Conclave-Mantrana, to maximise momentum, was organized during January 15 &16, 2012 at Bhubaneswar.
4. Vichar Vishleshan
The Key Executives In-charges of Assets, Basins, Services, Institutes and Corporate Functions meet periodically with CMD and the functional Directors to review performance and to formulate future plans. During the year under review, 11th Key Executives Meet (Vichar Vishleshan XI) was organized during 11th-13th May, 2012 at Mysore on the theme “Strategising Today for Sustaining Growth beyond 2030”.
5. Resume of Directors Proposed to be Re-appointed
The brief resume of Directors retiring by rotation and Additional Director seeking appointment including nature of their experience in specific functional areas, names of companies in which they hold directorship and membership/ chairmanship of Board/ Committee is appended to the notice of the 19th Annual General Meeting.
6. Board Committees
The Company has the following Committees of the Board:
6.1 Audit & Ethics Committee
The terms of reference of the Audit & Ethics Committee are in accordance with Section 292A of the Companies Act, 1956, guidelines set out in Clause 49(II) of the Listing Agreement and the Guidelines on Corporate Governance for Central Public Sector Enterprises issued by the Department of Public Enterprises in May, 2010.
Shri S.Balachandran was the Chairman of the Committee upto 10.11.2011. Thereafter, the Committee was headed under the stewardship of Smt. Usha Thorat, an Independent non-executive Director upto 10.02.2012. Smt. Usha Thorat has a Master's degree in Economics from the Delhi School of Economics. She joined the Reserve Bank in April 1972. During her career in the RBI spanning 38 years, she has had a stint in virtually each and every area of central banking. Besides banking regulation/supervision, rural/urban cooperative banking, deposit insurance and currency management, she has rich experience in the areas of foreign exchange and reserves management, debt management of central and state governments, development and regulation of money, forex and government securities markets, rural planning and credit, cooperative banking, customer service and grievance redressal, and payment and settlement systems.
All members of the Committee have requisite financial and management experience and have held or hold senior positions in other reputed organizations.
Director (Finance), Chief-Corporate Finance and Chief Internal Audit are the permanent invitees. Representatives of Statutory Auditors and Cost Auditors are invited to attend and participate in the meetings, whenever required. Functional Directors, Executives of Finance and other departments are invited on need basis.
The Chairman of the Audit & Ethics Committee was present at the last AGM of the Company.
Company Secretary acts as the Secretary to the Committee.
The role of the Audit & Ethics Committee includes the following:
(i) Oversight of the company's financial reporting process and the disclosure of its financial information to ensure that the
financial statement is correct, sufficient and credible.
(ii) Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the
statutory auditor and the fixation of audit fees of the Statutory Auditors.
(iii) Approval of payment to statutory auditors for any other services rendered by the statutory auditors.
(iv) Reviewing, with the management, the annual financial statements before submission to the Board for approval, with
particular reference to: