Corporate Governance report on Vodaphone

Corporate governance is the system by which companies are directed and controlled. It involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined

Corporate Governance refers to the way a corporation is governed. It is the technique by which companies are directed and managed. It means carrying the business as per the stakeholders’ desires. It is actually conducted by the board of Directors and the concerned committees for the company’s stakeholder’s benefit. It is all about balancing individual and societal goals, as well as, economic and social goals.

Corporate Governance is the interaction between various participants (shareholders, board of directors, and company’s management) in shaping corporation’s performance and the way it is proceeding towards. The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the two. The owners must see that individual’s actual performance is according to the standard performance. These dimensions of corporate governance should not be overlooked.

GMI Rating Governance Metrics International (GMI) is an independent governance research and ratings firm founded in 2000 to provide institutional investors an objective way of assessing corporate governance risk as well as governance leaders in their portfolios. GMI Ratings provides the broadest global research coverage of the environmental, social, governance and accounting-related risks affecting the performance of public companies.

GMI Average Global Rating INDIA- 4.54 on the rating of 10.00 as compared to UK (Highest) is 7.60 Principles of Corporate Governance Key elements of good corporate governance principles include honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization. Commonly accepted principles of corporate governance include:

1. Rights and equitable treatment of shareholders 2. Interests of other stakeholders 3. Role and responsibilities of the board 4. Integrity and ethical behaviour 5. Disclosure and transparency Vodafone’s CG Vodafone corporate governance has been measured using five basic parameters namely : Board Accountability, Shareholders rights, Remuneration, Market for Control and Corporate Behaviour.

Achievements 1. In March 2010 Governance Metrics International, a global corporate governance ratings agency, ranked Vodafone amongst the top UK companies with an overall global corporate governance rating of ten, the highest score assigned and achieved by only 1% of the 4, 216 companies rated. 2. In October 2009 they received the Golden Peacock Global Award for Excellence in Corporate Governance. The directors can be removed without cause. The company does not have a single entity or shareholder group with voting power in excess of 50% (majority owner).

At each AGM all directors who were elected or last re-elected at or before the AGM held in the third calendar year before the current year shall automatically retire. Fair price provision is in place or the company is subject to fair price protection under applicable law In 2005 the Company reviewed its policy regarding the retirement and re-election of directors and, although it is not intended to amend the Company’s articles of association in this regard, the Board has decided in the interests of good corporate governance that all of the directors wishing to continue in office should offer themselves for re-election annually.

GMI considers such large ownership positions to be a deterrent to an offer for the company, thus non- existence of such major ownership strengthens the Market for Control. The Articles of the company states that there must be at least three directors for the normal working of the company. Directors are not required under the Company’s articles of association to hold any shares of the Company as a qualification to act as a director, although executive directors participating in long-term incentive plans must comply with the Company’s share ownership guidelines.

In AGM of 2010 a resolution was passed regarding the continued operation of the Vodafone share incentive plan through voting. This is considered positive by GMI (substitute of the TIDE provision). We have given board accountability, financial disclosures and internal control, remuneration higher priority and then shareholders rights, market control and corporate behaviour. Board Accountability : We have got a score of 9.1 out of 10 as there is a proper demarcation of the roles and responsibilities of the Board ,proper policies for shareholders are laid down. The Election Procedure is quite transparent.

Financial disclosures :Vodafone has been scored high in this area. It maintains all disclosure and control in accordance with Rule 13a- 15(e) of Exchange Act. Internal and external audit and is cross checked by Vodafone Disclosure Committee on behalf of CFO and CEO giving a high level of transparency to the company. Market for Control: Company is subject to Fair Price Protection. Directors can offer themselves for re-election annually thereby acting as a deterrent to an offer for the company. Thus absence of nonexistence of ownership strengthens market control thereby giving it a score of 8.5/10

Corporate Behaviour : Has been quite good at the company. The company practices safe environmental practices, abide by workplace safety and does not encourage child labour. Thus Corporate Behaviour is quite high for the company. Remuneration: In this case Vodafone has been performing relatively poorly. This is because remuneration is an acknowledged concern by the management itself as per AR 2012. They have been trying to improve but there are issues of conflict of interest as far as the Remuneration committee is concerned and also excessive payouts to the Board.

Shareholder’s Rights: Vodafone has rated fairly as far as Shareholder rights are concerned. While there could be improvements in areas such as confidential ballot and disclosure of vote related issues, it performs well overall. Thus in a nutshell the company has a good board accountability record, abide by the laws and regulations of the society, makes complete financial disclosures and is not into any accounting scams.

OVERALL CONCLUSION:

GMI considers 500 Variables, however in our report we have considered 100 variables approximately. Since 2004 GMI ratings for Vodafone has been 8.5+/10, however in our calculations for 2012 we have got Vodafone has been considered as one of the top 50 companies as per GMI Ratings.