Corporate Governance Survey

Despite developments in regulation of corporate entities around
the world and India’s own share of scandals in recent years, corporate
governance continues to be a matter of “check the box” or a set of compliance
requirements, with only limited emphasis on the spirit of governance. This has
been underscored in a recent corporate governance survey The
India Board Report 2011
prepared jointly by AZB & Partners, Hunt
Partners and PWC. The key findings are summarized in the report as follows:
Corporate governance is a subject that attracts a lot of
media attention, especially just after a scandal. This usually prompts
governments and regulators to appoint committees to review and change laws.
After a while, the hype fades and it’s back to business as usual.
Regulation only ensures compliance. Unfortunately,
compliance does not equal commitment to corporate governance. This has been one
of the key findings of the third edition of our biennial India Board Report – 2011.
Clause 49 of SEBI’s listing agreement has been widely praised, in terms of the
standards of corporate governance that it sets. However, only 38% of the
respondents felt that it significantly contributed to improving governance!
There are other indications as well. More than half the
respondents pointed out that their boards did not have a formal process to
evaluate their effectiveness. Two-thirds of the independent directors surveyed
said that the roles and responsibilities of non-executive directors were not
defined clearly. Around 50% of them felt that the time spent by the board in
completing the agenda of the meeting was inadequate.
The findings of the survey are also discussed in a report
in the Mint.

Part of the findings may be attributed to the fact
that the emphasis of governance norms lately has been to adopt a voluntary
approach. In addition to Clause 49 of the listing agreement that lays down the
basic norms, the Ministry of Corporate Affairs’ Corporate Governance Voluntary
Guidelines of 2009 set out best practices to be adopted by companies on a
voluntary basis. However, the proposed approach under the Companies Bill, 2011
is vastly different as it seeks to impose mandatory norms of governance on
companies. As and when the Companies Bill is enacted into legislation, it is
likely that it would have a significant impact on the manner in which companies
approach matters of governance.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.


  • I think given the results of the survey ought to lead us all stakeholders to think about corporate governance in "contractual" terms between the owners and the managers-controlling shareholders at the very least, rather than as regulatory issue. By "contractual" I mean, an issue to be dealt with dynamically through shareholder monitoring of corporate actions that the former will enforce through Courts (as opposed to the regulator laying down prescriptions upfront and then the constituents following the same by box-ticking). A case in point being the recent TCI- Children's Investment Fund initiative against Coal India Boards. Institutional investors like Mutual Funds could be great at monitoring their portfolio companies if the prudential limits on investments could be removed. More skin in the game would mean they would vote at the ballot rather than vote with their feet when there are corporate governance issues in a portfolio company. Compensation -alignment reforms intra-fund would also alter the incentives for governance activism. Interestingly, analysts like Veritas, Credit Suisse are taking the lead in exposing governance lapses more recently.

  • Isn't the situation the same in Singapore? Rule 1207(10) is a classic example – it created a much needed re-think on the adequacy internal controls. But was the focus on the spirit of good gevernance?

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Top Posts & Pages


Recent Comments


web analytics

Social Media