Definition

Governance can be defined as a control over each activity, which will result in overall growth, if practiced properly. Governance is a set of rules stipulated for according due weightage to foster ethical behaviour which would help in enhancing the reputation. Thus the code of Governance is as applicable to individuals, the same is also applicable to Corporate. As such Corporate Governance is nothing new but to stipulate boundaries by law or by regulation for the benefit of stakeholders. Corporate Governance looks at the institutional and policy framework for to corporations market exit from and their very beginnings, integrity in of entrepreneurship, through their governance structures, company law, privatisation, insolvency. The corporations, financial institutions and markets is particularly central to the health of our economies and their stability

Introduction
Corporate governance has established itself globally as a

fundamental component of every corporates process. Far from the amorphous existence corporate governance once entailed, it has evolved into a firm set of guidelines, unerringly similar despite different cultures, with the sole intent of ensuring that companies retain a firm commitment to values and an ethical business conduct. Business leaders have always emphasised that the key to corporate growth and long-term survival is

adaptation to changing times. Corporate governance is one of those instances where change is necessary. In fact, corporate governance should be seen as an opportunity where companies can introduce better internal controls, improve performance and ultimately increase public understanding of the key activities and policies of their organisation. Businesses have been quick to seize the opportunity and the secrecy of boardrooms has given way to transparency laid out before investors and scrutinised by independent directors. Indias commitment to corporate governance is demonstrated by an understanding that in a globalised world, capital flows to where it is best protected and bypasses places where protection is limited or non-existent. Unlike some countries, efforts to compile a corporate governance code were not precipitated by evidence of accounting or corporate irregularities. Moreover, it was Indian industry that provided the impetus towards a corporate governance code. Thus, when the Securities and Exchange Board of India (SEBI) first introduced a corporate governance code in 1999, it put India ahead of many others. The CLSA Asia Pacific Markets and Asian Corporate Governance Association joint report in 2005 concludes that India ranks among the top three in terms of corporate governance. Recognising that new international principles and best practices now exist, in 2005, SEBI amended its corporate governance code, or Clause 49 of the listing agreement, ensuring that Indian companies match their business counterparts anywhere in the world. Such meticulousness has brought numerous plaudits from investors as well as the Institute of International Finance (IIF), Washington D.C., whose India task force recently affirmed that Indian corporate governance norms strengthen domestic capital formation and foreign portfolio investment.

Tata steel company

Profile
Established in 1907, Tata Steel is Asia's first and India's largest private sector steel company. Tata Steel is among the lowest cost producers of steel in the world and one of the few select steel companies in the world that is EVA+ (Economic Value Added). Its captive raw material resources and the state-of-the-art 5 MTPA (million tonne per annum) plant at Jamshedpur, in Jharkhand State, India give it a competitive edge. Determined to be a major global steel player, Tata Steel has recently included in its fold NatSteel, Asia (2 MTPA) and Millennium Steel (1.7 MTPA) creating a manufacturing network in its eight markets in South East Asia and Pacific rim countries. Soon the Jamshedpur plant will expand capacity from 5 MTPA to 7 MTPA by 2008. The Company plans to enhance its capacity, manifold through organic growth and investments. The Company's wire manufacturing unit in Sri Lanka is known as Lanka Special Steel, while the joint venture in Thailand for limestone mining is known as Sila Eastern.

Tata Steel's products are targeted at the quality conscious auto sector and the burgeoning construction industry. With wire manufacturing facilities in India, Sri Lanka and Thailand, the Company plans to emerge as a major global player in the wire business.

Values:

Trusteeship Integrity Respect for the individual Credibility Excellence

Key Enterprise Processes:

Leadership Strategic Planning & Risk Management Market Development Investment Management Human Resources Improvement & Change Management Order Generation Operation & Fulfillment Supply Management Research & Development Information Management

Social Responsibility & Corporate Services

Corporate Social Responsibility Policy:

Tata Steel believes that the primary purpose of a business is to improve the quality of life of people. Tata Steel will volunteer its resources, to the extent it can reasonably afford, to sustain and improve healthy and prosperous environment and to improve the quality of life of the people of the areas in which it operates

Social Accountability Policy:

Tata Steel, in accordance with its founding principles, will continue to improve the quality of life of its employees and the communities it serves. Tata Steel will conduct its business ever mindful of its social

accountability, respecting applicable laws and with regard for human dignity. Tata Steel will positively impact and influence its partners in fostering a sense of social commitment for their stakeholders.

Corporate governance

Defined by a deeply rooted set of values and beliefs, corporate governance in the Tata Group rests on the twin pillars of trust and integrity.

Corporate governance as

practice by TATA group Translate into

being fair and civic Minded, fulfilling its duties to entire spectrum of stake holders, and most importantly making Integrity an article of faith across all its operations.

Corporate governance in tata steel

The company believes that good corporate practices enable the board to direct and control the affairs of a company in an efficient manner and to achieve its ultimate goal of maximising shareholders value. Realising this, the company has adopted many practices over the last few years, even when there were no mandatory requirements in this regard. As a result, a number of provisions regarding Corporate Governance prescribed by the Listing Agreement have already been complied with and steps are being taken to comply with the balance provision within the current financial year. The Internal Audit Department reports, on a quarterly basis, any

significant findings to the Audit committee, which comprises of three nonexecutive Director: Mr. P.K Kaul - Chairman, Mr. S. M. Palia and Mr. Ishaat Hussain - Members. The committee met three times during the year to review the audit observation, adequacy of actions taken and followed up implementation of corrective actions. The committee also met the company's statutory Auditors to ascertain their views on the adequacy of internal control systems in the company. The committee submits an annual report of its observation to the Board of Directors. The company has adopted the Tata Code of Conduct which entitles it to use the Tata Brand name. All the officers of the company have

pledged compliance with the code of conduct which prescribes a manner in which the employees will conduct the company's business.

Code of Conduct for Non-Executive Directors

Non-Executive Directors of a company will always act in the interest of the company and ensure that any other business or personal association which they may have, does not involve any conflict of interest with the operations of the company and his role therein. Non-Executive Directors will comply with all applicable laws and

regulations of all the relevant regulatory and other authorities as may be applicable to such Directors in their individual capacities. Non-Executive Directors will safeguard the confidentiality of all

information received by them by virtue of their position.

The Companys Corporate Governance Philosophy

The Company believes in adopting the best practices in the areas of Corporate Governance. Even in a fiercely competitive business environment, the Management and Employees of the Company are committed to uphold the core values of transparency, integrity, honesty and accountability which are fundamental to the Tata Group. During the year, the Company has fine-tuned its corporate practices so as to bring them in line with the revised Clause 49 of the listing agreements. The Company adopted the Tata Code of Conduct for Non-Executive Directors and the Whistle Blower Policy as prescribed in the revised Clause. The Company will continue to focus its resources, strengths and strategies for creation and safeguarding of shareholders wealth and at the same time protect the interests of all its shareholders.

Board of Directors
The Company has a Non-Executive Chairman and the number of Independent Directors is more than one-third of the total number of Directors. The number of Non-Executive Directors (NEDs) is more than 50% of the total number of Directors. None of the Directors on the Board is a Member on more than 10 Committees and Chairman of more than 5 Committees (as specified in Clause 49), across all the companies in which he is a Director. The necessary disclosures regarding Committee positions have been made by the Directors.

BOARD
(As on 06th October, 2006) Mr R N Tata Mr Nusli N Wadia Mr S M Palia Mr P K Kaul Mr Ishaat Hussain Dr Jamshed J Irani Mr Subodh Bhargava

OF

DIRECTORS

(Chairman)

(Financial Institutions' Nominee)

Mr Suresh Krishna

Mr B Muthuraman(Managing Director) Dr T Mukherjee A N Singh (Deputy Managing Director Steel) (Deputy Managing Director Corporate Services)

Remuneration Policy
The Company while deciding the remuneration package of the senior management members takes into consideration the following items : a) employment scenario

b) remuneration package of the industry and c) remuneration package of the managerial talent of other industries. The annual variable pay of senior managers is linked to the performance of the Company in general and their individual performance for the relevant year measured against specific Key Result Areas, which are aligned to the Companys objectives. The Non-Executive Directors (NEDs) are paid remuneration by way of Commission and Sitting Fees. In terms of the shareholders approval obtained at the AGM held on 19th July, 2001, the Commission is paid at a rate not exceeding 1% per annum of the profits of the Company (computed in accordance with Section 309(5) of the Companies Act, 1956). The distribution of Commission amongst the NEDs is placed before the Board. The Commission is distributed on the basis of their attendance and contribution at the Board and certain Committee Meetings as well as time spent on operational matters other than at the meetings. The Company pays sitting fees of Rs. 10,000 per meeting to the NEDs for attending the meetings of the Board, Committee of the Board and Audit Committee. For other meetings, the Company continues to pay to the NEDs sitting fees of Rs. 5,000 per meeting.

The Company pays remuneration by way of salary, perquisites and allowances (fixed component) and commission (variable component) to Managing and Whole-time Directors. Salary is paid within the range approved by the Shareholders. Annual increments effective 1st April each year, as recommended by the Remuneration Committee, are approved by the Board. The ceiling on perquisites and allowances as a percentage of salary, is fixed by the

Board. Within the prescribed ceiling, the perquisites package is approved by the Remuneration Committee. Commission is calculated with reference to net profits of the Company in a particular financial year and is determined by the Board of Directors at the end of the financial year based on the recommendations of the Remuneration Committee, subject to overall ceilings stipulated in Sections 198 and 309 of the Companies Act, 1956. Specific amount payable to such directors is based on the performance criteria laid down by the Board which broadly takes into account the profits earned by the Company for the year.

Shareholders' Committee
An Investors Grievance Committee was constituted on 23rd March, 2000 to specifically look into the redressal of Investors complaints like transfer of shares, non-receipt of balance sheet and non-receipt of declared dividend, etc. One meeting of the Investors Grievance Committee was held on 23rd March, 2006.

Committees
In addition to the above Committees, the Board has constituted 3 more Committees, viz. Committee of the Board, Committee of Directors and the Ethics and Compliance Committee.

The terms of reference of the Committee of the Board (COB) are to approve capital expenditure schemes and donations within the stipulated limits and to recommend to the Board, capital budgets and other major capital schemes, to consider new businesses, acquisitions, divestments, changes in organisational structure and also to periodically review the Companys business plans and future strategies. The composition of the COB and details of the meetings attended by the Directors are given below :

Names of Members during the year 2005-06 Mr. R. N. Tata, Chairman Mr. Nusli N. Wadia, Member Mr. S.M. Palia, Member Mr. Ishaat Hussain, Member* Dr. J.J. Irani, Member Mr. B. Muthuraman, Member

No. of Meetings attended

6 4 7 3 8 8

The Committee of Directors has been constituted to approve of certain routine matters such as Opening and Closing of Bank Accounts of the Company, to grant limited Powers of Attorney to the Officers of the Company, to appoint proxies to attend general meetings on behalf of the Company etc. The Members of this Committee are Mr. R.N. Tata (Chairman), Mr. Ishaat Hussain and Dr. J.J. Irani. The business of the Committee is transacted by passing Circular Resolutions which are placed before the Board at its next meeting.

Ethics and Compliance Committee

In accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as amended (the Regulations), the Board of Directors of the Company adopted the Tata Code of Conduct for Prevention of Insider Trading and Code of Corporate Disclosure Practices (the Code) to be followed by Directors, Officers and other Employees. The Code is based on the principle that Directors, Officers and Employees of a Tata Company owe a fiduciary duty to, among others, the shareholders of the Company to place the interest of the shareholders above their own and conduct their personal securities transactions in a manner that does not create any conflict of interest situation. The Code also seeks to ensure timely and adequate disclosure of Price Sensitive Information to the investor community by the Company to enable them to take informed investment decisions with regard to the Companys securities. In terms of the said Code, a Committee has been constituted on 30th May, 2002, called Ethics and Compliance Committee.

The Board has also appointed the Vice President (Finance) as the Compliance Officer to ensure compliance and effective implementation of the Regulations and also the Code across the Company.One meeting of the Ethics and Compliance Committee was held on 23rd March, 2006. During the year under review, the Compliance Officer submitted Monthly Committee Report of the Tata Code of Conduct for Prevention of Insider Trading to the Board of Directors.

Disclosures
i) The Board has received disclosures from key managerial personnel relating to material, financial and commercial transactions where they and/or their relatives have personal interest. There are no materially significant related party transactions which have potential conflict with the interest of the Company at large. ii) The Company has complied with the requirements of the Stock Exchanges, SEBI and other statutory authorities on all matters relating to capital markets during the last three years. No penalties or strictures have been imposed on the Company by the Stock Exchange, SEBI or other statutory authorities relating to the above. iii) The Company has adopted a Whistle Blower Policy and has established the necessary mechanism in line with clause 7 of the Annexure I D to Clause 49 of the Listing Agreement with the Stock Exchanges, for employees to report concerns about unethical behaviour. No personnel has been denied access to the Ethics Counsellor/Chairman of the Audit Committee. iv) The Company has fulfilled the following non-mandatory requirements as prescribed in Annexure I D to Clause 49 of the Listing Agreement with the Stock Exchanges : a) The Company has set up a Remuneration Committee.

b) A half-yearly declaration of financial performance including a summary of the significant events in shareholder. c) The Company has moved towards a regime of unqualified financial statements. the six-months period was sent to every

Secretarial Audit
A qualified practicing Company Secretary carried out a secretarial audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and listed capital. The audit confirms that the total issued/paid up capital is in agreement with the total number of shares in physical form and the total number of dematerialized shares held with NSDL and CDSL.

Certificate
To the Members of TATA STEEL LIMITED

We have examined the compliance of conditions of Corporate Governance by Tata Steel Limited, for the year ended on 31st March, 2006, as stipulated in Clause 49 of the Listing Agreement of the said Company with stock exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination has been limited to a review of the procedures and implementations thereof adopted by the Company for ensuring compliance with the conditions of Corporate Governance as stipulated in the said Clause. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us and the representations made by the Directors and the management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in Clause 49 of the above mentioned Listing Agreement. We further state that such compliance is neither an assurance as to the future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company.

For S.B. BILLIMORIA & CO. Chartered Accountants CharteredAccountants

A.K. MAHINDRA UDAYAN SEN Membership No : 10296 Membership No : 31220 Mumbai : 18th May, 2006