Module 11

MODULE 11

MANAGEMENT PRACTICES & OVERVIEW OF LEGISLATIONS

11.1 INTRODUCTION

Management plays a very important role in the functioning of any organization. The performance
of the company largely depends on the way it is managed. Therefore, it’s accountable for welfare
of the organization and its stakeholders i.e. their investors and employees. It can also be said that
there exists a robust relationship between a firm’s productivity and the management practices
that a particular company adopts. Therefore, it would not be wrong to say that behind every
successful organization there is a manager. So, it is very crucial for a firm to look what practices
it can adopt to improve its management keeping in mind the changing environment in which the
firm operates and balancing it with the individual’s needs of the employers. At this point the firm
must know that the needs of the in-house employees and the remote employees are different and
thus the firm should not assume that if a management practice is working for in-house
employees, it will also work for other employees as well. Hence, the management should be
experienced, skilled, qualified and motivated set of individuals, who is willing to do whatever is
in the best interest of the company and its stakeholders1. Management practices are plenty.
Within management these practices can be further separated into different categories such as
technical or human resource etc.

11.2 LEGAL OUTLOOK

Management practices are the ways in which a company regulates or govern its activities for
better results. First and the foremost the management needs to ensure that all the laws are in
compliance with the companies policies. Second, there are various other rules and policies which
a business must take into account such as intellectual property laws, anti-corruption policy,
sexual harassment laws, IT data management are few of them which I will be discussing in this
paper.

at
1Management Best Practices
<http://www.tutorialspoint.com/management_concepts/management_best_practices.htm>

11.3 STATUTORY AND REGULATORY COMPLIANCES

This is the way or process to ensure that all the laws, rules and business regulations are followed
by an organization. Today, it has expanded to even include the ethical codes especially in the
corporate field including self-monitoring2. Thus, the organization must make sure that these
policies are in accordance and complete with regard to the law. These compliances are mainly
divided into various categories to cover various legal requirements. These legal requirements
broadly include corporate law, Environment laws, Labour laws, Tax laws and other general
laws3. Corporate law covers the original Companies Act, 1956, the Companies Act, 2013 and
the Companies (Amendment) Act, 2017. The Companies act was formulated to form a uniform
law for all the companies to follow throughout India. The said Act provides for issues relating to
formation, functioning and winding up of companies in India4. But for the Act to be applicable, a
company needs to be incorporated under the Companies Act and for that it needs to decide the
type of company i.e. private or public. Then the company needs to decide its name and file a
form 1A before Registrar of Companies (ROC). Further, it needs to finalize its Articles of
Association and Memorandum of Associations. Lastly, certificate of incorporation is issued by
the registrar and the company can start its operation after that5. For Limited Liability
Partnerships, the applicable law is the Limited Liability Act, 2008. It also take into account
auditing both legal and financial and due diligence to make sure that all the compliances are met
on daily basis. If the company fails to comply with the provisions of the said Act, then it can lead
to substantial amount of penalty and can even result in the closure of the company.

A company further must make sure that it takes all the adequate and required steps to protect and
preserve the environment, ensure safety and promote labour welfare. Environment laws cover
various Acts such as The Environment Protection Act, 1986, The Air (Prevention and Control of
pollution) Act, 1981, The Water (Prevention and Control of pollution) Act, 1974, The Noise
Pollution (Regulation and Control) Rules, 2000, The Hazardous Waste (Management, Handling


2 Legal governance, risk management and compliance, Wikipedia, 13th March, 2014 at
<http://en.wikipedia.org/wiki/Legal_governance,_risk_management,_and_compliance>
3 Legal Compliance Manual, Ministry of Corporate Affairs, Government of India, IICA, 2012 at
<http://www.indiacompliance.in/sitepages/Home.aspx>
4 Ibid. at <http://www.indiacompliance.in/sitepages/Company.aspx>
5 Supra note 12, a public company in addition to certificate of incorporation also requires certificate of
commencement before starting its operations.

and Trans boundary Movement) Rules, 2008, The Indian Forest Act, 1927 etc. These rules,
notifications and enactments have been outlined to provide healthier and better environment to
the people of the country and to safeguard them from the dangerous effects of the ever growing
manufacturing and production capacities of industries in India. And if the company fails to
comply with the provisions or requirements provided under these Acts, then it can lead to
penalties being imposed by the relevant Departments and it can even result in imprisonment of
the company’s Directors or the person concerned of the Company found in default6.

It also contains various Labour laws. Labour laws are further divided into central and state laws.
Central laws contain various enactments such as The Minimum wages Act, 1948, The Payment
of Bonus Act, 1965, The Payment of Gratuity Act, 1972, The payment of wages Act, The Equal
Remuneration Act, 1976, The Workman’s Minimum House Rent Allowance Act, The Contract
Labour (R & A) Act Employment Exchange Act, ESI Act, 1948, The Maternity Benefits Act,
1961 (in case there are female employers) etc. if the female employees are working during night
shifts, then the Company would have to take exemption by applying to the Ministry of Labour of
each particular state. It even includes Shop & Establishment Act of that particular State in which
the establishment is set for commercial purposes. Any violation or non-compliance of the said
rules under these acts can lead to huge penalties.

Compliances are also necessary in case of taxes. The company must take into account all the
direct i.e. Income Tax Act, 1961 and indirect taxes which it needs to pay while processing,
manufacturing and selling its products. These indirect taxes include the Central Sales Tax Act,
1956, The Customs Act, 1962, The Central Excise Act, 1944, Service Tax Rules, 1994 etc. Any
failure to comply with the provisions of these acts may lead to severe consequences and may
even result in closure of the company with heavy penalties.

In addition to these major enactments there are various general laws as well which a company
needs to comply with and these include Information Technology Act, 2008, Public Liability
Insurance Act, 1991, Foreign Exchange Management Act, 1999, Micro, Small and Medium
Enterprises Development Act, 2006 and so on.


6 Statutory and Regulatory Compliances by Mid-Sized Corporates, Helpline Law, Business Law at <
http://www.helplinelaw.com/business-law/NSRCCM/statutory-and-regulatory-compliances-by-mid-size-
corporate.html>.

11.4 CORPORATE GOVERNANCE UNDER COMPANIES ACT

Corporate governance is a set of principles, systems and processes by which a company is
directed, controlled and governed. Corporate governance is defined by Organization for
Economic Cooperation and Development (OECD) as “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 in 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”7. The ever-growing rivalry and competition in
the businesses of almost all economic sectors, both at national and international levels has
intensified the importance of such corporate governance8. Corporate governance ensures that
there exists a healthy relationship between the company, its stakeholders and the community at
large. It also ensures transparency and accountability on the part of the company, used to govern
the managers and to make sure that the practices adopted by the management are in the interests
of its stakeholders. In this regard, the Companies Act, 2013 has introduced some new innovative
and refining things to make corporate governance in India more transparent, progressive and
beneficial to all the people concerned. Before the Companies Act of 2013 came into play, the
corporate governance was mainly guided by the Clause 49 of the Listing Agreement. Later, the
provisions of the clause 49 were amended to bring into line with the provisions of the Companies
Act, 2013 regarding corporate governance norms.

Now, in light of the new regulations and provisions introduced by the Companies Act of 2013
for corporate governance, SEBI has also permitted some significant modifications in the Listing
Agreement, in order to improve transparency mainly transactional of the listed companies, and


7 Surendra Arjoon, Corporate Governance: An Ethical Perspective at
<http://sta.uwi.edu/conferences/financeconference/Conference%20Papers/Session%205/Corporate%20Governance
%20-%20An%20Ethical%20Perspective.pdf>
8 Hemant Goyal and Sandhya Agarwal, India: Corporate Governance – A new outlook, Mondaq, 3rd June 2014 at <
http://www.mondaq.com/india/x/318040/Corporate+Governance/CORPORATE+GOVERNANCE+A+NEW+OUT
LOOK. SEBI defines Corporate Governance as: "acceptance by management of the inalienable rights of
shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It
is about commitment to values, about ethical business conduct and about making a distinction between personal &
corporate funds in the management of a company."

offer more power to the minority shareholders in swaying management decisions9.

Clause 49 of

the listing agreement only applies to listed companies, whereas, The Companies Act is

applicable on all companies. The main change which has been brought up by the Companies Act

is the whistle blower policy. This policy of whistle blower is mandatory for the listed companies

under the listing agreement. It provides a mechanism for directors and employees to report any

unethical behavior, fraud or any violation of the company’s code of conduct10. It consists of

persons who make any misconduct, illegal activity, fraud, misappropriation happening within the

company public11. Various provisions have been inserted by the Companies Act 2013 for

stakeholders and directors. It includes appointment of at least one woman director on the board12.

The concept of independent directors13 has been introduced under the Companies Act, 2013 for

listed public companies and it does not include nominee director within its purview. Further, the

Companies Act, 2013 also lays down the rules and procedures for tenure of the independent

directors, mandatory appointment and meetings etc.14 It has also increased the role played by

Audit committees. It has also widened the scope of related party transactions15. It also stated that

for all related party transactions prior approval of the audit committee is needed. The constitution

of nomination16 and remuneration committees has been made mandatory. Moreover, it said that

the chairman of the committee shall be independent. It has also made a provision for corporate

social responsibility i.e. the responsibility of the company towards the society at large17. It also

provides e-voting facilities to its shareholders18.


9 Ibid.
10 Section 177(9), The Companies Act, 2013, Available at: < http://indiacode.nic.in/acts-in-pdf/182013.pdf>
11 Anannd Kankni, Revised Corporate Governance Norms – Clause 49 of the Listing Agreement, Feb 17, 2014 at <
http://www.slideshare.net/ananndkankni/revised-corporate-governance-norms-clause-49-of-listing-agreement>
12 Section 149 (1), The Companies Act, 2013, Available at: < http://indiacode.nic.in/acts-in-pdf/182013.pdf>
13 Section 149(6), The Companies Act, 2013, Available at: < http://indiacode.nic.in/acts-in-pdf/182013.pdf>,
Independent directors are those who does not have any pecuniary relationship with the company and is not the
promoter of the company.
14 Section 149, 165, The Companies Act, 2013, Available at: < http://indiacode.nic.in/acts-in-pdf/182013.pdf>
15 Supra note 11, A Related Party Transaction (RPT) is a significant transfer of resources, services, facilities, or
obligations, between a company and any specified related party, with or without a monetary price.
16 A Nomination committee is focused on evaluating the board of directors of its respective firm and on examining
the skills and characteristics that are needed in board candidates.
17 CS Nilesh Patel, CSR as per Companies Act, 2013, 12 June 2014 at < http://www.caclubindia.com/articles/csr-as-
per-companies-act-2013-20758.asp#.U58IW5SSxqk>, CSR is only applicable in case the net worth is 500 crores or
more, Turnover is 1000 crores or more, net profit is 5 crores or more,
18 Section 108, The Companies Act, 2013, Available at: < http://indiacode.nic.in/acts-in-pdf/182013.pdf>

The New Companies Amendment Act, 2017 has brought in some changes to the above
mentioned provisions. Sec 149(6) under the 2013 Act demands for independent directors without
any minor pecuniary relationship also with the company. But, the recent Act in consonance with
the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 introduces
‘materiality’ concept, in order to determine if material pecuniary relationship disqualifies a
person from being appointed as an Independent Director. Also, the Amendment Act of 2017
clarifies on certain requirements given under Sec 149(6) in regards to a person’s relative being
appointed as an ID by mentioning about separate limits for holding of security/ interest,
indebtedness, provision of guarantee/ security and other pecuniary relationships. Apart from this
Section, the 2017 Amendment Act addressed on the debatable Sec 177 which is about the
requirement of Audit Committee in listed and such other class of companies. The New Act
replaces listed companies with listed public companies and prescribed class of companies to
constitute an audit committee. Similarly, Nomination and Remuneration Committee are to be
constituted only by those listed public companies and other class of companies and not by the
private companies who have listed their debt instruments as per the SEBI debt Listing
Regulations19.

The Amendment Act of 2017 also addresses on various issues under Corporate Social
Responsibility (CSR). The main points for consideration are:

The replacement of the words “during any financial year” with the words “during the
immediately preceding financial year” in the Sec 135(1) of the Act, clarifies on the CSR
requirement.
The Amendment Act makes a subsequent change in Sec 384 of the 2013 Act, making the
Sec 135 relating to CSR applicable to the foreign companies, in case of meeting the
criteria’s for the Indian business.
Repealing the criteria for appointment of IDs even by the companies not covered under
the ID appointment requirements in order to induct into CSR committee, the Amendment


19 Companies Amendment Act 2017: an overview of key changes, EY Building a better working world, 2017, at
<http://www.ey.com/Publication/vwLUAssets/ey-companies-amendment-act-2017-new/$FILE/ey-companies-
amendment-act-2017.pdf>

Act has made it clear that in case of companies not required to appoint an ID under Sec
149(4), it shall constitute the CSR committee with two or more directors.

11.5 INTELLECTUAL PROPERTY

Intellectual property methods are vigorous as it provides an incentive for an individual or any
business organization to be innovative and creative. The law governing the intellectual property
right is mainly the one laid down by the WIPO under the Agreement on Trade Related Aspects
of Intellectual Property Rights (TRIPS). India has ratified the agreement and thus following the
said agreement minimum standards has been laid down with to Patents, copyrights, trademarks,
designs and geographical indicators20. These standards are laid down to protect and enforce
intellectual property rights. It has massive impact on trade and Indian businesses. They are used
because they benefit public at large, good for business and act as a substance for technical
progress. At the same time these rights are misused too and thus companies must ensure that they
do not fall into the trap of misuse of patents and trademarks. The company has to be extremely
careful while choosing a brand name, which should be as far as possible free from future
potential litigation. Good brand names are easy to remember, easy to spell, easy to pronounce
and must be readable, short and attractive to the naked eye and ear and most significantly must
be distinctive from others21.

Under trademarks22, it is not necessary to register the brand name with the respective
Trademarks Office, but it is definitely beneficial to do so because in the event of any clash over
the same brand name, it is only required to establish that you own the right to the monopoly over
the brand, which is also known as the certificate of registration. The brand name is as valuable as
company’s other fixed assets and can be assigned to any other third party for an amount of


20 Doing Business in India: An Overview, J. Sagar Associates, June 15 2013 at < http://www.jsalaw.com/pdf/doing-
business-in-india.pdf>
21 Vandana Vaidya, Intellectual Property Rights: A Boon to Indian Companies, Legal Service India at <
http://www.legalserviceindia.com/articles/ipr_vandana.htm> (assessed on 20th June, 2014)
22 A trademark is a brand name; it identifies the product and its origin, creates an image of the product, guarantees
the quality and advertises the product.

consideration. The company can even grant its brand name for further use by way of a license to
others.

Indian Acts on intellectual property are mostly TRIPs compliant. There are areas in the Patents
Acts where procedural or substantive amendments could be taken into account to act in
accordance with the TRIPS. In view of the Indian companies, changes may be required under the
Patents Acts by providing protection to business methods certified as technology, which is not
patentable at present. Business methods or computer programs comprising only of scientific or
mathematical principles are also not patentable till date under the Patent act. Although, these
programs can get protection under the copyright law (for coded expression of the software) and
to some extent in some sectors the need has been felt for getting protection more than the
protection provided under the copyright law for certain kinds of software. These additional
protections will include patent protection to protect the qualifying features of the software such
as its structure, sequence and functional or its organizational elements23.

Patents are Intellectual property created by employees in and out of the course of their
employment, but what is controversial is that who will own the IP, which is established on the
facts and circumstances of an employer-employee relationship. Therefore, many organizations
have framed policies to this effect to avoid any sort of confusion in the future regarding the
ownership. But again if there is no such policy in place then the problem arises once again that
who will own the IP rights. Hence, it is of significant importance to get professional or an
expert’s advice before entering into any kind of agreement with employees as documentation and
confidentiality are considered as the main issues.

A company must adopt some internal policies and rules or guidelines on inventions made by
employees and these policies and guidelines should contain all the necessary provisions on the
categories of inventions. These provisions include notification on the part of the employee to the
employer with regard the invention, the employer’s rules and procedures for managing such


23 Supra note 22.

notifications, confidentiality agreements, patent prosecution, and remuneration or payment of
royalty to the inventor, etc.24

Next is the issue of licensing. An organization must keep in mind all the benefits which it can
accrue by way of licensing. Licensing must be done by way of a legally binding contract with
specific conditions in return for the payment of royalties25. Another way of sharing IP license is
where both parties mutually exchange their IP without any monetary consideration between
them. IP can also help to keep competitors out of the market by creating monopoly over the
product. Hence, it acts as a barrier for entry of other companies and targeting your domain.
Moreover, the same intellectual property can also be utilized for providing faster services in a
better manner. However, marketing and commercialization of IP remains the main issue.

11.6 PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE LAW

The main objective of this law is to provide safe and healthy working environment free from any
kind of harassment for employees especially female employees (applicable to both organized as
well as unorganized sectors). The law defines sexual harassment as, “unwelcome26 verbal27,
visual28, non-verbal29 or physical30 conduct of a sexual nature or based on someone’s sex that is
severe or pervasive and affects working conditions or creates a hostile work environment”31.
India enacted the law on prevention of sexual harassment at workplace against female employees
known as The Sexual Harassment of Women at Workplace (Prevention, Prohibition and
Redressal) Act, 2013, commonly known as the Sexual Harassment Act32. The statute came into
place almost after 16 years of the landmark judgment laid down by the Supreme Court of India
in the case of Vishaka and others v. State of Rajasthan33. In this case the Hon’ble court laid
down various guidelines making every employer to mandatorily provide a system to redress the


24 Bronwyn H. Hall, Patents and Patent Policy, OxREP article, December 2007 at <
http://elsa.berkeley.edu/pub/users/bhhall/papers/BHH07_OxREP_patents.pdf>
25 Ibid.
26 Unwanted and illegal.
27 Commenting on someone that is offensive, making sex jokes, rumors about someone’s sex life or personal life etc.
28Displaying Drawings, pictures, videos, emails, posters etc.
29 Staring at someone inappropriately, making weird gestures etc.
30 Making inappropriate contact with someone, kissing, hugging, stroking, touching someone against her will etc.
31 Sexual Harassment at work, Fighting for Women’s Equality, Equal Rights Advocates at<
http://www.equalrights.org/legal-help/know-your-rights/sexual-harassment-at-work/>
32 Ibid.
33 Vishaka and others v. State of Rajasthan, AIR 1997 SC 3011

grievances relating to sexual harassment at workplace and thus it enforces the right to gender
equality of working women34.

In India, the management has been confined to laws and issues mainly related to salaries,
promotions, hiring and firing, compliances etc. but today the focus have also been shifted to a
new area of law with respect to the rules and enactments relating to sexual harassment.
Assuming that the rules are in place, the next important issue is to ensure their sanctity and
impartiality of the complaint investigation process35. Today, the law mandates every
organization to form an internal complaints committee (ICC) to address any complaints
regarding workplace harassment and the failure to comply with the provisions of the said Act can
result in the closure of the company's business operations36.

11.7 ANTI-CORRUPTION POLICY

A company’s anti-corruption policies are intended to communicate that the company is against
any form of corruption and to make sure that all employees/staff and any other
representatives/third party is able to understand the use and scope of these Anti-corruption rules.
The policy is aimed to describe what we understand by the term corruption, how it impacts our
business and what the steps we are taking to fight against it37. “Corruption is the willingness to
act dishonestly in return for money or personal gain and is an aspect of human behavior that has
been around for a long time”38. By wrongly profiting a few individuals who use their position or
power in a wrong way, corruption produces unfair competition, harms innovation and weakens
integrity. Because of the damage caused by way of corruption to the public at large, it is


34 India’s New Labour Law - Prevention of Sexual Harassment at the Workplace, Nishith Desai Associates, April 30
2013at < http://www.nishithdesai.com/information/research-and-articles/nda-hotline/nda-hotline-single-
view/article/indias-new-labour-law-prevention-of-sexual-harassment-at-the-workplace.html>
35 Pankaj Sharma, Are Indian Workplace ready for sexual harassment law?, Business Standard, February 19 2014 at
< http://www.business-standard.com/article/opinion/pankaj-sharma-are-indian-workplaces-ready-for-the-sexual-
harassment-law-114021901321_1.html>
36 Ibid.
37 Anti-Corruption Policy, Tata Communications, Corporate Policies & Procedures: Anti-Corruption Policies &
Procedures, Issue 1, August 2011 at
< http://www.tatacommunications.com/sites/default/files/Designed_AntiCorruption_Policy.pdf>
38 Ibid.

unlawful around the world to indulge in corrupt practices, and therefore each nation has its
individual Anti-corruption Laws that it follows.

In India, the law which is mainly deals with corruption is the Prevention of Corruption act, 1988
(amended in 2008). India even became the signatory to the United Nations convention against
corruption. It Prohibits acceptance, facilitates and gives illegal gratification (either in cash or in
kind) with respect to official acts of a public worker. Public workers include Government
officers, govt. aided societies / NGOs, employees of govt. owned companies, arbitrators, Judges,
court appointed officers etc.39 Under this Act certain social or casual hospitality is permissible.
There are few other Acts as well which govern/deals with these corrupt practices such as Indian
Penal Code, 1860, Income Tax Act, 1961, Information Technology Act, 2000, Right to
Information Act, 2005, Prevention of Money Laundering Act, 2002, Foreign Contribution
(Regulation) Act, 2010 etc. There are even various bills pending in the parliament of India for its
approval regarding corruption. These include the Judicial Standards and Accountability Bill
2010, the Prevention of Bribery of Foreign Public Officials and Officials of Public International
Organizations Bill 2011, the Whistle Blowers Protection Bill 2011, and the Public Procurement
Bill 201240.

There are various anti-corruption agencies located even within every state to deal with the
complaints of corruption. The Central Vigilance Officer (CVC) is an independent watchdog
agency with an obligation to undertake investigations and inquiries of transactions involving
certain categories of public servants and has supervisory powers over the Central Bureau of
Investigation41. Following enormous protests/demonstrations from international organizations
and the public, the courts felt the need to protect the whistleblowers and authorized the CVC is
authorized to take actions on their complaints42.

This policy is applicable on all i.e. on each and every individual which is related with the
company or have any kind of connection with the company. Failure to comply with the provision


39 Note on Anti-Bribery Laws (US, UK and India), The Attorneys: Corporate Law Consultant, 2012 at <
http://theattorneys.co/images/Teaser%20Article%20-%20Anti%20Bribery%20-%20TheAttorneys.pdf>
40 Public Anti-Corruption Initiatives, Business Anti-Corruption Portal, My 2014 at < http://www.business-anti-
corruption.com/country-profiles/south-asia/india/initiatives/public-anti-corruption-initiatives.aspx>
41 Ibid.
42 Ibid.

of such policy may result in termination of that person’s employment involved in corruption
practices or its association with the company. Strict actions will be taken against that individual
such as disciplinary actions and proper inquiry will be done before that by the respective
departments. It may even result to imprisonment, criminal penalties and civil liability. Failure on
the part of the Company Personnel to comply with this anti-corruption policy could even
jeopardize the reputation of the company and its operations. The company can even lose its
customers, investor and employees confidence in the company.

11.8 IT DATA MANAGEMENT

The ability and the talent which is required to use information in a productive and dynamic
manner has been one of the main success factors behind any organization these days. IT sector
has grown beneficially for various organizations over a decade. Mostly companies these days
have made a practice to hire professionals or individuals who are experts in this field to compile
and handle their data to enhance information privacy accountability. They have well-managed
sophisticated programs on data security management and information privacy.

IT has transformed the commerce overall. Today, the universal nature in which the information
flows reflects the ever-growing impact of open networks of information systems and the internet
around the world43. Developing information technologies, together with progressively refined
software to assist business processes and digitize information, permit business organizations to
improve its operations and satisfy customer expectations for “real-time” service, 24X7 i.e. 24
hours a day and 7 days a week, around the globe in every time zone44.

Companies increasingly improve their business processes and client services by viewing beyond
territorial boundaries to leverage resources, time and efficiencies. The flexibility that information
technologies provide for worldwide servicing allows businesses to shape their client service,
inventory delivery, benefits and manufacturing to maximize operational efficiencies45. Business
processes can be tailored based on the demands of the customers, skilled staff availability, costs,


43 Maureen C. Cooney, Trusted Information Management: Data Privacy & Security Accountability In Outsourcing,
NASSCOM’S Establishment of The Data Security Council Of India, September 2007 at <
http://www.informationpolicycentre.com/files/Uploads/Documents/Centre/India_WhitePaper_9.07.pdf>
44 Ibid.
45 Ibid.

efficiencies, and additional strategic business considerations. Therefore, a proper flow of
information is vital for the development of every organization. Management in this area is must
and it can even make a great difference between an early demise and survival of a company.

Any penal act can be harmful for the reputation, expansion and growth of the business
organization. There are various acts and it may not be possible to comply with all of by a
company’s internal management. Therefore, all such compliances with respect to corporate law,
labour and industrial laws, Environmental Laws, laws with respect to shops and establishments,
and various other enactments under the Local/state Laws along with the intellectual property
laws, anti-corruption policy, sexual harassment laws and IT data management could be moved to
professionals/experts who have adequate experience in effectively and productively executing
these compliances. The role of such expert would be to identify the particular laws applicable
according to a particular industry and to carry out all the documentation and filing requirements
in various departments46. These experts can also associate with the officers of the departments
and make sure that the organization is in compliance with all local, state and Central Regulations
and Laws because the cost incurred in paying such penalties would be much higher than actual
costs of compliance47.

11.9 PRACTICAL OUTLOOK

The main critical areas in which management practices are required are communication, setting
and demanding realistic goals, open management style and strategic planning48. Most important
is communication because management in the end is all about communicating clearly and
effectively to its investors, employees, customers/clients and others. If the manager is not able to
communicate effectively then he won’t be able to deal with the staff and convince its clients
properly which can lead to bad consequences. Second, an organization must make sure that its
goals and objectives are achievable and not unrealistic. Since the goals are the deriving factor
behind every organization. Therefore, it must take into account the best practice which it can use
to for setting up realistic goals because achievable goals can boost the corporate morale of the


46 Supra note 14.
47 Ibid.
48 Management Best Practices at
<http://www.tutorialspoint.com/management_concepts/management_best_practices.htm>

organization. Third, the organization must focus on the management styles that are open and
transparent because it can help the managers to get the information directly from the problem
areas. Thus, the problem can be solved at the earliest. Last but not the least is strategic planning,
it is most important when it comes to long-term benefits of the organization. It also includes the
mechanisms which are used for supervising the implementation of the strategy.

11.9.1 FORECASTING, BENCHMARKING AND MONITORING PERFORMANCE

Management practices are also required while monitoring performance of departments and its
people. Management plays a very critical role while forecasting especially when it comes to
financial forecasting according to the needs of the organization. A manager can employ various
techniques to make sure that the forecasting is accurate by using tools such as price sheets etc.
Benchmarking is another form which a company can employ to assess and evaluate the
performance of their organization. Benchmarks are nothing but standards/fixed specifications
which a company sets to compare it with other competing organization in the market and to find
areas where your organization is lacking and where there is a scope of improvement49. The
objective of a benchmark is to find instances of superior performance and to understand the
practices and processes driving that performance50. Organizations then incorporate and tailor
these practices to improve their performance by innovating and not by copying. Apart from this,
there are key performance indicators, the most effective method of observing all the aspects of a
particular business. With the help of key performance indicators, you can set the target and then
observe the progress over a period of time and then compare it with the set indicator. If the
progress did not match with the key performance indicator, then the management of the company
can look into the problems and rectify them accordingly. While setting the key performance
indicators, any business organization must make sure that they are in align with the goals and
objectives of the organization and not superseding it, for e.g. sales targets.

11.9.2 THREE BASIC STEPS: SET TARGETS, INCENTIVIZE AND MONITOR

Network at <
49 Best Practice, Info Entrepreneurs, Canada Business <
http://www.infoentrepreneurs.org/en/guides/best-practice/> May 08 2013, at
50 Benchmarking, Brain & Company guide, Insights Management tools,
http://www.bain.com/publications/articles/management-tools-benchmarking.aspx>

In general, there are three practical measures which a company usually adopts. These measures
are considered core elements of good management system. These are targets, incentives and
monitoring51. These simple measures are very important for any organization to manage
efficiently. First, the management needs to set a target, which is feasible, realistic and in
conjunction with the objectives of the company. Second, incentives play a vital role in meeting
the desired objectives. Management must assure that the high performance work is rewarded
because if the person is not given any incentive for putting in extra amount of effort then the next
time he won’t bother to put in that extra effort and thus it will reduce the performance of that
employee as he is not putting on his best. Therefore, the organization must reward the performers
by bonuses and promotions. The management should design the incentives in such a manner so
that employees at all level can benefit from that. The company should not only focus on the top
level directors or managers, it should also take into account the employees working at the lower-
level, to ensure that they are enthusiastically committed to their company’s success52. Third,
monitoring the performance of the employees is important for evaluating and identifying the
opportunities for improvement of any business organization. These simple measures are applied
by every business organization in different ways according to their needs and objectives. Hence,
it is crucial for any well-run organization to set flexible targets on productivity and other factors,
base the promotions and compensation the company offer on achieving those targets, and
constantly monitoring such results. High performance and better management are strongly
connected with measures such as return on capital employed, productivity and company
survival53.

Apart from these basic measures, there are various other practical measures or steps which a
company or its managers can take into account to improve productivity by putting employees at
their best or in a more productive manner. These steps include motivation such as motivating
employees at every level to do their work on efficiently and effectively, providing meaningful
feedback on a regular basis so as to encourage the employee and not to discourage, appraisal of


51 Nicholas Bloom, Christos Genakos, Rafealla Sadun and Jon Van Reenen, Management Practices across the firms
and countries, Harvard Business School, December 19 2011
52 Victor Lipman, 7 Management practices that can improve employees productivity, Forbes, 17th June 2013 at <
http://www.forbes.com/sites/victorlipman/2013/06/17/7-management-practices-that-can-improve-employee-
productivity/> (assessed on 15th June, 2014)
53 Nicholas Bloom, Does Management Really Work?, Harvard Business Review, The Magazine, November 2012 at
< http://hbr.org/2012/11/does-management-really-work/ar/1>

good work in front of the department to motivate others as well to perform better, respect to
employees apart from the job they do, adequate employee development and training at every
levels of management, and adopting flexible policies and working conditions to encourage
diversity along with equality54. Hence, management practices should be such so as to create a
good environment for work where everyone feels equal and respectable, which in turn results in
more productivity55. In the end, celebrate your achievements and laugh together.

Management is a very important part of any organization. It can help the business to grow, to
succeed, and to be better than any other organization in the market. There is ever growing
competition and rivalry in today’s business and if you want your company to be on the top or to
be amongst the top level companies then you have got to do something which others are not able
to take into account. You have got to create a good image and reputation in the market for
customers to come to you and not to others. Why a person will prefer your form over the other?
It depends on you. You can even influence them by planning, strategizing and implementing
them. For e.g. a customer goes to the market to purchase a corn of ice-cream, he prefers a corn
i.e. cornetto manufactured by Kwality walls and not from any other brand because he saw an
advertisement on the television and is aware of the product and its quality. Therefore, it is very
important for any business organization to create its good image. Good image can also be ruined
if the company is not following laws, rules and regulations as described or laid down by the
government of India for country’s betterment. If any organization does not fulfill any of the
obligations as mentioned in any of these enactments as mentioned above, then it runs the risk the
losing its so called “good image” or even its license to carry on its business in extreme cases.
Hence, a business organization must take into account all the management practices including all
the legal aspects and legal advice which suits the business in the best way possible to succeed
and to stand distinct from others.


54 Supra note 6
55 Strategies to improve team performance, Business Strategies, Technology Vibe, April 16, 2014 at <
http://technology-vibe.com/blog/strategies-improve-team-performance/>