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:
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.
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!
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.
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.