Posts Tagged 'India'

Will the corporate governance structure change?

by Deepak Patel for Business Standard

With the government notifying new rules for the appointment of (IDs) for public sector banks (PSBs), public sector insurance companies, Reserve Bank of India (RBI) and (FIs), it has become clear that the government wants to alter the level ofpractised in these boardrooms. However, many experts familiar with the functioning of these companies’ boards feel that it might not be enough to change the status quo and more needs to be done to change the governance structure in the boardrooms.

So what has changed?
While the Companies Act, 2013, which was implemented last year, was one step forward to give IDs more power, they were much more broadly defined – focusing more on the duty on the ID to ensure that the interest of all stakeholders are protected; particularly minority shareholders.

According to Companies Act, 2013, an ID should be a person who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience. Further, he/she should also possess ‘appropriate skills, experience and knowledge’ in one or more fields of finance, law, management, sales etc.

On the other hand, the rules recently notified for PSB, FIs, and have a much more focused tone – giving them a tenure of six years, asking for a minimum 20 years of experience from persons coming from industry, putting an age restriction at 67 years.

Moreover, the government officials who have 20 years of experience with 10 years at joint secretary or above; retired chief managing directors/executive directors of PSBs after one year of cooling period; academicians, chartered accountants and professors with more than 20 years experience ; will be the only eligible ones to apply.

“The normal expectation globally of the role of an Independent Director is essentially two-fold: advisory and monitoring,” said an expert who did not wish to be named.

“While the focuses more on the ‘monitoring’ part – asking ID to ensure the interest of all stakeholders; particularly minority shareholders; the rules for ID appointment in and insurance companies envisage him/her more as a ‘strategic advisor,” the expert added. ” For example, one of the acceptable qualifications of an independent director is that he or she led a reputed organisation or brought turnaround in a failing organisation.” Read more here.

Corporate governance will lead to better managed organisations: Chris Pierce

Sachin Dave for The Economic Times

While India is hoping to attract foreign direct investment, global investors are still cautious when it comes to taking a call on the country, mainly due to its corporate governance issues, says Chris Pierce, CEO, Global Governance Services, an authority on corporate governance. While India is making all the right moves in the Companies’ Act around independent directors, a lot more responsibility needs to be fixed, Pierce told ET’s Sachin Dave in a wide-ranging interview.

Do you think that quality of boards have changed since the credit crisis?

Absolutely. I think the change was taking place anyway. If I go back to 1992, that was the first year when we were talking about corporate governance, we had a number of collapses in 2002, including Enron and the dotcoms.

These collapses let us look at corporate governance closely. Then in 2008, we had a very serious global financial crisis and a lot of pressure was built on companies to make some changes in their corporate governance. The Companies Act in India is the result of legislation to improve corporate governance. This is one of the first major changes that India has had in over 50 years.

Then you have also got Sebi circulars which are an attempt to deal with governance issues as a result of the global financial crisis. Read more here.

Funds Learn to Say No as Boardrooms Challenged: Corporate India

by Santanu Chakraborty and Bhuma Shrivastava for Bloomberg

Money managers in India’s $1.7 trillion stock market are no longer giving rubber-stamp approval to the nation’s corporate boards.

Local mutual funds voted to reject 6.6 percent of the proposals presented to shareholders in the nine months ended December, up more than fourfold from the year to March 2013, India’s securities regulator said in an e-mailed response to questions from Bloomberg News. Their participation rate in shareholder votes jumped to 83 percent from 49 percent, spurred by new disclosure rules that require fund managers to provide a rationale for their decisions to investors.

The more assertive stance from minority shareholders prompted United Spirits Ltd. to modify plans to loan money to companies run by its former chairman and led Maruti Suzuki India Ltd. to put on hold a proposal to transfer a new factory to its parent. While India still lacks the type of activist investing personified by U.S. billionaire Carl Icahn, funds’ growing willingness to challenge management may help improve governance in a nation ranked 94th out of 144 countries for the efficacy of its corporate boards by the World Economic Forum. Read more here.

Gatekeepers of Governance: Corporate governance summit

for Moneycontrol

Following a series of significant developments in the Companies Act 2013 and clause 49 of the listing agreement SEBI has demanded a stringent change in the corporate governance requirements. Gatekeepers of Governance of governance was organised by excellence enablers as a two day corporate governance summit to enable stakeholders of corporate India to discuss and deliberate on good corporate governance practices.

Spread over two days the summit comprised of nine enlightening sessions aimed at addressing the pertinent issues regarding corporate governance.

Watch video here.

From One Woman Board Member in Emerging Markets to 1,500

by Natasha Doff, Zahra Hankir and Adi Narayan for Bloomberg

When Kiran Mazumdar-Shaw set up Indian biotechnology company Biocon Ltd. (BIOS) in 1978, female entrepreneurs were so rare that she said a bank offered her credit under a special program meant mostly for the disabled and the country’s poorest castes.

“They had a very patronizing attitude toward women,” Mazumdar-Shaw said. “There was a cap on the amount of loans they were giving to women. I didn’t take it, of course.”

A lot has changed in the last 36 years. Today, there are 22 female chief executive officers of publicly traded companies in India, the developing country with the second-most women holding CEO or equivalent posts, according to data compiled by Bloomberg.China is No. 1, the data show.

Buoyed by wider educational opportunities, laws mandating female participation in corporate governance and government support for children and families, businesswomen in emerging nations are narrowing the gap with their more developed counterparts. Ten years ago, there was just one female director of an emerging-market-based company. Now there are more than 1,500, according to data compiled by Bloomberg. Read more here.

Indian companies facing wave of shareholder activism

by Amy Kazmin for Financial Times

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Diageo is the latest in a string of companies to feel the force of investor displeasure in India, as the country experiences a surge of activism by minority shareholders.

Last week the world’s largest spirits group was dismayed when minority shareholders of United Spirits, its recently acquired Indian subsidiary, rejected a proposal to make, sell and distribute spirits with some of the brands of its UK-based parent company. Critics said the plan lacked the financial details needed for a genuine assessment. Read more here.

 

Shareholder activism, stringent disclosures helps India improve corporate governance score

By Rajesh Naidu & Ashutosh R Shyam for The Economic Times

Increasing shareholder activism and stringent disclosure requirements under the new Companies Act have helped India improve its corporate governance score.

While the score has improved three percentage points to 54% in 2014 from 2012, India’s rank has remained seventh on the 11-nation list topped by Hong Kong, a CLSA report has said.

The brokerage and investment group’s corporate governance report is based on a study conducted by the Asian Corporate Governance Association. The scores are based on parameters such as corporate governance rules and practice, enforcement, political and regulatory environment, accounting procedure and corporate governance culture.  Read more here.


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