Committee on Corporate Governance was formed by SEBI
Committee on Corporate Governance was formed on June 2, 2017 under the Chairmanship of Mr. Uday Kotak with the aim of improving standards of corporate governance of listed companies in India.
The Committee comprised of 24 members. The Committee was requested to submit its report to Securities Exchange Board of India within four months.
The Committee came up with its recommendation report dated 5th October, 2017 on the various issues towards enhancing Corporate Governance
SEBI formed a committee on corporate governance in June 2017 under the Chairmanship of Mr. Uday Kotak with a view to enhancing the standards of corporate governance of listed entities in India.
With the aim of improving standards of Corporate Governance of listed companies in India, the Committee was requested to make recommendations to SEBI on the following issues:
Committee on Corporate governance- Recommendations
- Ensuring independence in spirit of Independent Directors and their active participation in functioning of the company;
- Improving safeguards and disclosures pertaining to Related Party Transactions;
- Issues in accounting and auditing practices by listed companies;
- Improving effectiveness of Board Evaluation practices;
- Addressing issues faced by investors on voting and participation in general meetings;
- Disclosure and transparency related issues, if any;
- Any other matter, as the Committee deems fit pertaining to corporate governance in India.
Need for review of Corporate Governance now
The focus of the companies is primarily to create long term value for protection of its stakeholders at large. This however seems is not being achieved in spirit given the recent event on boards of corporate not only in the nation but also internationally.
Some of the issues recognized by the Committee are:
a) Pace in change of market conditions requiring companies and boards to quickly adapt to the technological and demo graphical changes
b) Increasingly complex regulatory environment
c) Focus of the board on short-term quarterly performance rather than long-term performance of the company wherein the board is not far sighted but is inclined on meeting short-term objectives than long-term strategies
d) Increase in number of passive institutional owners
e) Outperformance of private equity owned companies than the publicly listed ones because of the belief that directors in PE-owned companies are believed to spend far more time on strategy and risk management, have deeper functional and industry expertise and engage more actively in talent management.
f) Significant value erosion in several Public Sector Enterprises (PSEs)
The above factors therefore call for need to review the Corporate Governance measures in the country by way of better board structures, rigorous checks and balances and striking a balance between devotion of time to quarterly reviews, audit reports, budgets and matters crucial to the future direction of the business.
Highlights of recommendations
In order to meet the objectives of:
a) Shaping governance for long-term value creation
b) Shaping governance to protect shareholder interests
c) Building regulatory capacity for enhancing governance of listed entities