Skip to main content

Board rooms to become more robust, transparent

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

Popular posts from this blog

Shrinking footprints of foreign banks in India

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…

New money laundering norms stump jewellery sector

New money laundering norms stump jewellery sector Dealers with turnover of Rs 2 crore and above covered; industry says threshold too low The central government has notified the money laundering rules for the gems and jewellery sector with immediate effect. Now, any entity deals in precious metals, precious stones, or other high-value goods and has a turnover of Rs 2 crore or more in a financial year will be covered under the Prevention of Money Laundering Act, 2002 (PMLA, 2002). The limit of Rs 2 crore would be calculated on the basis of the previous year’s turnover, said the notification. The directorate general of goods and service tax intelligence has been appointed under the Act. Sources said the government’s move to apply the PMLA to the jewellery sector was a fallout of income-tax raids on jewellers soon after demonetisation last November, when it was found that they sold gold and jewellery at a huge premium and accepted old currency notes as payment. The notification, issued on Augus…

Confusion over branded food GST

Confusion over branded food GST The GST Council's statement over the weekend on applying tax on branded food items has left most of the trade confused.

Even though the Council has not changed the rates on food -0 per cent on unbranded stuff and 5 per cent on brands -many small traders who didn't levy GST earlier said they could come under the 5 per cent slab after the clarification.

While they predicted some increase in consumer prices, large players said they can absorb GST in many ways and keep prices steady.

"Trade is confused and hence on behalf of our chamber, we have asked our members to go ahead and charge 5 per cent GST," said Sushil Sureka, general secretary of the Ahilya Chamber of Commerce and Industry in Indore.

The statement clarifying the application of GST came after some businesses were found deregistering their brands and selling under corporate brand name without paying tax, after the Council exempted unbranded food from the new all-encompassing indirec…