Press Trust of India
Mumbai, Nov 27: Asking companies not to look at corporate governance norms as an encumbrance, Sebi chairman U K Sinha Friday said the rules are unavoidable in global context and that India’s regulatory framework is under close scrutiny by the world. “Looking at the corporate governance as some sought of an encumbrance or something which has been forced upon corporates by government and the regulator… those days are now over,” Sinha said at an event on corporate governance here.
According to Sebi chairman, some of the corporates in India have been raising their voice against the corporate governance norms without realising that these are being practiced now throughout the world. Talking about OECD’s (Organisation for Economic Co-operation and Development) new corporate governance principles, Sinha urged the companies to adopt the norms on a voluntary-basis to gain a leadership position. “The feeling I have is that only those corporates will become leaders who adopt many of these developments on voluntary basis,” Sinha said, adding that as investors become more informed and smart they would depend not only on financial results but also take a long term view on a company.
To safeguard minority shareholders’ interests and promote capital markets as a key platform to raise funds, G20 and OECD in September came out with new corporate governance principles for listed companies and regulators in all member countries, including India. Consequently, regulators and policymakers across the world, including Sebi in India, will update their regulations for the listed firms in line with the new code. According to Sebi chairman, shareholders are being more active world over, including India. “If you look at S&P 500 companies from 2011 to 2013, almost one-fourth of removal of chief executive officers has happened because they were dismissed by the shareholders,” Sinha said.
“A large number of big corporates proposals for remunerations are being rejected if there is question of compensation and bonus,” he noted. Sinha observed that the OECD norms on disclosures covered new grounds by talking not only of the need for financial disclosures but also non-financial disclosures such as risk factors for a company in the foreseeable future, among others. He said Financial Stability Board (FSB) had recently issued a letter to all participating countries to adopt the new OECD rules as well as assess the measures taken post the global financial crisis and take appropriate measures. Citing an IMF report observation that India’s listing norms through stock exchanges “was not good enough”, Sinha noted that “the outside world is now monitoring us, the regulatory framework much more intensively”.
“IMF report has said Sebi’s disclosure requirements or listing requirements through the stock exchanges are not up to the mark. They are saying that ideally Sebi should be doing it directly,” Sinha said. “We have come out with new listing norms which would be effective soon but the outside advice is that this is also not good enough,” he noted, adding that other international bodies have also found lacuna in India’s regulatory framework. Concerned over the challenges banks face from wilful defaulters, Sinha said the role of a company’s board of directors is crucial.