Skip to main content

Board rooms to become more robust, transparent

Image
By
Board rooms to become more robust, transparent
Corporate board rooms will go through a sea change with the Kotak committee on corporate governance making some far reaching recommendations on inducting more independent directors, timely disclosure of related-party transactions and splitting the role of chairman and MD/CEO. The formalisation of information flow between promoters and companies will make sure that allegations made against Infosys and Tata Sons are not repeated, say CEOs and corporate lawyers
The recommendations are grounded in market realities and benchmark India against best global governance practices. Though a few promoters said recommendations like appointing more independent directors, including women, would be a difficult task due to lack of talent.
“The recommendations will have far-reaching implications on the board rooms with half of the board consisting of independent directors and dividing the role of chairman and MD/CEO. This is the best in global standards and will change Corporate India’s board room for ever and for good. But for many midsized Indian companies, it would be difficult to enforce these stringent governance norms as they are not used to them,” said a CEO of a company asking not to be named.
If these recommendations are accepted,Reliance Industries will not only have to separate the role of its chairman and MD, Mukesh Ambani, but will also have to include more independent directors, including a woman director apart from Nita Ambani, who is from the promoter family. Many Tata group companies will have to include more independent directors – especially after their role became critical in the aftermath of former group chairman Cyrus Mistry’s battle with group patriarch, Ratan Tata. Many Aditya Birla group companies will have to hire women directors though Kumar Mangalam Birla is not the MD and CEO of any group company.
Many company owners have welcomed the move. “The winds of change are expected to separate the wheat from the chaff. This will augur well for the industry,” said Harsh Goenka, chairman of the RPG group, which has professional management in all its companies.
“The effort to usher greater transparency and improve autonomy and accountability of directors would, hopefully, be a game-changing milestone towards better governance,” said Samir Paranjpe, partner, Grant Thornton India.
“The recommendations are aimed at achieving the dual objective of shareholder protection and long-term value creation by companies,” said Bengaluru-based investor advisory firm Institutional Investor Advisory Services. The report builds on the legal framework established by the Companies Act, 2013, and the SEBI Listing Obligations and Disclosure Requirements, putting recommendations within the reach of corporates. Besides, the transition window from between 2018 and 2020 provides boards time to adjust, allowing for phased implementation of the recommendations, it said.
Another important recommendation of the committee is that the market regulator, Sebi, will have the right to pull up auditors for any lapse in corporate governance norms and penalise them. In the past, some of India’s top auditors, including some from the Big Four firms, were found clearing annual reports despite companies being accused of corporate governance violations as in the case of United Spirits. This recommendation would make sure that auditors, who are seldom pulled up by their self-regulated body, do a thorough job while certifying accounts, said a lawyer.
The recommendations are grounded in market realities and benchmark India against best global governance practices
The Business standard, New Delhi, 07th October 2017

Comments

Post a Comment

Popular posts from this blog

Shrinking footprints of foreign banks in India

By
Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…
Post a Comment
Read more

RBI rushes in to prop up falling rupee

By
RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…
Post a Comment
Read more

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

By
GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…
1 comment
Read more