Along with the considerable enhancement in the duties and responsibilities of boards of directors of Indian companies that was occasioned due to the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, there has been a considerable emphasis on board evaluation as a measure of not only enhancing corporate governance in general, but also as a means...
Et tu Tata!
[The following guest post is contributed by Professor Bala N. Balasubramanian, who is an Adjunct Professor at the Indian Institute of Management, Ahmedabad] Recent developments at the Tata Group in general and Tata Sons particularly have shaken corporate India in terms of standards of good governance in companies. The group had meticulously built a reputation over the years for ethical and...
Appointment and Removal of Independent Directors: Need for Reform?
The removal this week by three Tata group companies of Mr. Nusli Wadia as an independent director from each of them has reinvigorated some of the debate surrounding board independence from a conceptual standpoint. This has provided critics of board independence with more fodder. In the past, there was anecdotal evidence that whenever there were disagreements between managements or promoters on...
Comparative Paper on Corporate Purpose
Professor Afra Afsharipour has posted on SSRN a paper titled “Redefining Corporate Purpose: An International Perspective”, the abstract of which is as follows: Over the past decade, corporate law in India has begun a reform journey with important implications for not only corporate governance, but also for deeper questions about the purpose of the corporation and beneficiaries of the corporate...
Tata Group Companies: “Long-Term Interests” the Key Touchstone
The episode surrounding the Tata Group has taken further twists and turns. After several Tata Group companies expressed their support in favour of Mr. Mistry, who continues to be chairman of several of those companies, one company – Tata Global Beverages – adopted a different stance. In a board meeting held this week, the directors of Tata Global Beverages decided by a 7:3 majority to replace Mr...
Further Analysis on Compensation Agreements
[The following guest post is contributed by Rohit Sharma, who is a Research Associate at Vinod Kothari & Co. Two earlier posts on this topic are available here and here.] Introduction The Securities and Exchange Board of India (SEBI) drew attention to the issue of compensation arrangements that take place between the private equity investors (PE) and the promoters, directors and key...
The Tata Episode: Corporate Governance and the Continuing Influence of Promoters
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...
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