It is generally understood that corporate governance norms ought to address agency problems between various actors in a company. Moreover, in companies with concentrated shareholding, the agency problems between controlling shareholders (referred to in India as “promoters”) and minority shareholders tend to be rampant, and hence corporate governance measures need to be targeted to address that...
Management Conflicts and Board Independence
In the ongoing saga involving the boardroom battle for the Tata Group, a new development may have significant implications for corporate governance practice in India. Yesterday, a Tata Group company, The Indian Hotels Company Limited (IHCL) notified the stock exchanges of a meeting held among the independent directors of the company. It stated: Taking into account Board assessments and...
The Tata Sons Imbroglio: Whither Corporate Governance?
Much ink has already been spilt over the last three days following the revelation that the chairman of the Tata Sons board, Mr. Cyrus Mistry, has been “replaced”, and that Mr. Ratan Tata has returned to helm the affairs as interim chairman for a period of four months until a successor can be found. This has not only sent the sprawling corporate group into crisis mode, but it has led to...
Briefing on Board Independence
The new edition of the NSE Quarterly briefing is on “Issues in Board and Director Independence” and is drafted by Professor “Bala” N. Balasubramanian. The executive summary is as follows: – Worldwide, corporate governance best practices and regulations recognise the need for boards and directors to be independent and objective. – In a country such as India, where concentrated...
Promoter Upside Sharing Arrangements in Listed Companies: SEBI Comes Down Hard
[The following post is contributed by Amitabh Robin Singh, who is a corporate lawyer practising in Mumbai. For another perspective on the topic, please see an earlier post on the Blog.] The Securities and Exchange Board of India (“SEBI“) has released a discussion paper (“Paper“) to regulate certain arrangements between private equity investors and the promoters/top...
Compensation Arrangements between Private Equity and Company Management: Corporate Governance Issues
In its board meeting held on 23 October 2016, the Securities and Exchange Board of India (“SEBI”) highlighted the issue of compensation arrangements agreed to by private equity (“PE”) firms with the promoters, directors and key managerial personnel (collectively, the “management”) of investee companies that are listed on the stock exchange, and certain corporate governance issues that emerged...
Non-compete Fee: A Bane for Minority Shareholders
[The following post is contributed by Soham Roy & Akhil Nene, who are 5th year students at the National Law University Odisha] A non-compete fee is paid to exiting promoters or founders of a company to ensure that they do not compete for a certain period of time with the company they are exiting. Recently, there was considerable controversy surrounding the HDFC Life-Max merger as a result of...
The State in Business and the Business of Regulation
[The following post is contributed by Bhargavi Zaveri, who is with the National Institute of Public Finance and Policy, New Delhi. She can be contacted at [email protected].] The public shareholders of a listed public sector bank were reportedly denied e-voting facilities at an extra-ordinary general meeting held in January 2016. In 2008, a state assembly passed a law unilaterally...
Risk Management and Corporate Governance
The current edition of the NSE Quarterly Briefing is on “Risk Management and the Board of Directors in Indian Firms” and is drafted by Professor Afra Afsharipour. The executive summary is as follows: – Enterprise Risk Management (“ERM”) is a systematic and holistic approach for firms to address all their risks, whether operational, strategic or financial. – Although not involved in...
Gender Diversity and Government Companies
It has been more than a year since a provision in the Companies Act, 2013 came into effect that requires all listed companies to have at least one woman director. As we had previously discussed, companies scrambled to comply with the requirement as of April 1, 2015, the effective date. However, a recent news report in the Business Standard indicates that 57 companies listed on the NSE are yet to...
Recent Comments