CORPORATE GOVERNANCE RATING OF JINDAL POWER AND STEEL

GMI RATINGS
GROUP 3 CHETAN PARANJPE TUSHAR RAI JOSEPH PHILIP NIKUNJ KR. GUPTA AMRITA CHANANA OJAS BAGAL

COMPANY BACKGROUND
Jindal Steel and Power Limited (JSPL) is one of India's

major steel producers with a significant presence in sectors like Mining, Power Generation and Infrastructure. The company has scaled new heights with the combined force of innovation, adaptation of new technologies and the collective skills of its 15,000 strong, committed workforce. JSPL has recently been rated as the second highest value creator in the world by Boston Consulting Group. One of the Best Blue Chip companies.

CORPORATE GOVERNANCE
JSPLs corporate governance philosophy is based on the

principles of equity, fairness, transparency, spirit of law and honest communication. The Company believes that sound corporate governance is necessary to retain stakeholders trust and ensures efficient working and proper conduct of the business of the company with integrity. Development of Corporate Governance guidelines is a continuous process, which evolves over a period of time and undergoes changes to suit the changing times and needs of the business, society and the nation.

INTERNAL CORPORATE GOVERNANCE

Board of Directors (Board) : The JSPL Board is a

balanced Board, comprising Chairman, 3 Executive and 8 Non-Executive Directors (including 9 Independent Directors) as on March 31, 2010. Shareholders : JSPL believes that it acts as trustees of shareholders wealth, it is their responsibility to protect and enhance their wealth and continue to enjoy their trust. Their primary concerns remain continued profitability and growth, communication and investor servicing. Employees : JSPL continued to advance its strategic agenda of making each of its businesses globally competitive and create new engines of growth by blending proven skills and capabilities drawn from different parts of the JSPL Group.

EXTERNAL CORPORATE GOVERNANCE

Customers : Understanding customers and addressing their needs and aspirations

continued to be prime focus for all business strategies and plans of the JSPL. Government : JSPL comply with all the economic, environmental & social regulations, pay all relevant taxes and monitor and report all the relevant parameters/information to the regulatory bodies. We have also achieved beyond compliance status by adopting international best practices. Community : JSPL actively engage with the communities around our operations. Its unique social development initiatives are closely aligned to the needs and concerns of these communities. The goals, which target reduction of poverty by half, promote gender equality and provide universal education form a blueprint agreed to by all the nations of the world and leading development institutions. Suppliers : JSPL believe that suppliers are its partners in progress and are critical to JSPLs value chain. All the businesses have periodic reviews and vendor audits resulting in ongoing development. The managers are stationed in a number of important outsourced manufacturing sites, to support quality management systems, provide expertise and support in manufacturing technology which in turn results in improved vendor capabilities and competitiveness. Competition : The Companys activities are subject to antitrust and trade regulation statutes designed to promote fair and honest competition. These laws govern the ways in which employees and directors interact with both competitors and associates and prohibit activities such as fixing prices, setting discriminatory prices and entering into agreements with competitors. All employees and directors must comply with these laws.

GMI RATINGS PARAMETERS

Parameters Board Accountability Weights 20

Financial Disclosure and Internal Controls

Shareholder Rights Remuneration

20
15 10

Market for Control

Corporate Behaviour Stakeholder Engagement

10
15 10

BOARD ACCOUNTABILITY
Combined Chair/CEO Has a designated "lead" or senior non-executive director Non-executive Chair
YES
Non-executive directors have a formal session without the executive members at least once a year Board policy is for the non-executive directors to meet in executive session before or after every board meeting, time permitting At least one director serves on the boards of four or more public companies NO

YES

NO

NO

NO

Non-executive independent

chair

is

NO

Executive Chairman, Chief Executive Officer or Managing Director (as applicable) serves on the boards of three or more public companies
Related-party transactions involving officers or directors in the past three years

NO

Directors subject to annual election by all shareholders

YES

NO

BOARD ACCOUNTABILITY
Uses, or has adopted, some form of majority voting in the election of directors YES Related-party transactions involving the Chairman, CEO, President, COO or CFO or a relative thereof, or the controlling shareholder, if any, within the last three years Discloses a code of ethics for senior executives or the employee code of ethics also covers senior executives NO

Discloses corporate governance policies or guidelines

YES

YES

All directors attended at least 75% of the board meetings and committee meetings in the last fiscal year

YES

All non-executive directors own shares after excluding options held

NO

The company discloses an over-boarding policy limiting the number of directorships held by non-executive directors

YES

All executive directors own shares after excluding options held

YES

The company discloses an over-boarding policy limiting the number of directorships held by executive directors

YES

Within the last three years, company has failed to adopt the specific recommendations (or a comparable alternative) of a shareholder proposal approved by a majority vote

NO

RATING

8.0

FINANCIAL DISCLOSURES
Audit committee wholly composed of independent members At least one member of the audit committee serves on the boards of four or more public companies At least one non-executive member of the audit committee has expertise in accounting or financial management Chair of the audit committee is non-executive and has expertise in accounting or financial management At least one non-executive member of the audit committee has substantial industry knowledge Non-executive members of the audit committee with substantial industry knowledge form a majority of the committee No Chair of the audit committee is non-executive Yes

Yes

Currently under formal investigation for accounting irregularities Someone other than senior management (such as the audit committee, shareholders or the board) has sole authority to hire and fire the companys outside auditor

No

Yes

No

Yes

Audit committee has sole authority to approve any non-audit services from the company's outside auditor
Makes comprehensive disclosures on its enterprise risk management policies (ERM) in its annual report or in other publicly available sources The board has adopted a separate committee or subcommittee responsible for oversight of risk management

Yes

No

Yes

No

Yes

RATING

8.33

SHAREHOLDERS RIGHT
Shareholders meetings procedures Yes Shareholders information on voting procedure Any deposit agreement for overseas listing Shareowners mechanism grievance redressal No

Notice of meeting

Yes

Yes

Documents sent to shareholders

Yes

Yes

Dividend History

Yes

Share structure- classes and rights of common and preferred shares

Yes

RATING

8.75

REMUNERATION
Remuneration committee wholly composed of independent members No Shareholders have the ability to affect remuneration policy through shareholder approval of the remuneration committee Report. The remuneration committee has discretion to alter the criteria for management after being established or has power to grant incentives on a discretionary basis. Some or all restricted shares that have met all performance conditions are required to be held until retirement Discloses stock ownership guidelines for the CEO Discloses stock ownership guidelines for the rest of senior management Yes

Discloses specific numeric performance targets for the upcoming fiscal year. Discloses a policy requiring company executives to retain some or all of the shares acquired through stock options for a period of time after the options have been exercised The retention period for some or all shares issued upon exercise of stock options is 3 years or longer. Some or all shares issued upon exercise of stock options are required to be held until retirement Discloses stock ownership guidelines for nonexecutive directors

Yes

Yes

Yes

No

Yes

Yes

No

Yes

Yes

RATING

9.09

CORPORATE BEHAVIOUR
Company (or a current or former senior executive) has been subject to a formal regulatory investigation for a material issue other than for accounting irregularities within the last year Company (or a current or former senior executive) has been cited, settled, or been found guilty of by either national or supranational authorities for some breach of law involving non-accounting issues within the last year Discloses its environmental policies Discloses its environmental performance Discloses its policy regarding corporate level political donations

Yes

Alleged by a responsible party that the company used child labor (under 14 or the minimum in market, whichever is higher) within the last three years

No

No

Alleged by a responsible party that the company used child labor as a source for subcontracted work within the last three years

No

Yes Yes Yes

Has been charged with three or more serious workplace safety violations within the last two years Has a policy addressing workplace safety Discloses its workplace safety record in the annual report or in another form accessible to shareholders

No Yes Yes

RATING

SHAREHOLDER ENGAGEMENT
Identify, prioritize and address the needs and concerns of all our stakeholders, across all businesses and units as well as at the corporate level.

Shareholders Customers Employees Farmers Suppliers Government Community

RATING 7

OVERALL RATING
Parameters
Board Accountability Financial Disclosure and Internal Controls Shareholder Rights Remuneration Market for Control Corporate Behavior Stakeholder Engagement

Weights
20 20 15 10 10 15 10

Ratings
8 8.33 8.75 9.09 8 9 7 8.34

Final Rating