One of our pet peeves on this Blog has been the fact that the corporate governance regime in India does not adequately address the requirements of companies that have controlling shareholders (or promoters), which dominate the landscape in India. I have also advanced this argument in a couple of academic papers (here and here). While there does not seem to be much momentum in India to address...
Prohibition on Acquisition of Shares by Employee Trusts
One of the decisions taken at SEBI’s board meeting escaped attention until some recent discussion in the financial press (here and here). The relevant paragraph in SEBI’s press release is as follows: Listed entities shall frame employee benefit schemes only in accordance with SEBI (ESOS and ESPS) Guidelines, 1999. Entities whose schemes are not in conformity with the same would be given...
Miscellaneous
1. Online Shareholder Participation In a previous post, we discussed the recent introduction of mandatory e-voting for large listed companies with effect from October 1, 2012. The Harvard Law School Corporate Governance Forum has a post that sets out some principles and best practices that companies are encouraged to adopt while conducting...
E-voting in Top Listed Companies
As we have previously discussed, the participation of retail (or even institutional) shareholders in Indian companies’ decision-making is still far from desirable. The Government has, however, been taking steps to enhance participation. About a decade ago, the concept of postal ballot was introduced. However, that has not made significant inroads, due to which the next round of reforms have been...
The LIBOR Crisis and Corporate Governance
Whenever a corporate crisis erupts (a phenomenon all so common these days), questions quickly emerge regarding the role of governance (or failure thereof) at the companies involved. On a similar note, questions are being raised regarding the failure of board oversight, risk management systems and internal controls at banks such as Barclays that failed to curb manipulation in “fixing” the LIBOR...
Standing Committee Report on the Companies Bill, 2011
After the Companies Bill, 2011 was presented in Parliament late last year, it was referred to the Standing Committee on Finance chaired by Mr. Yashwant Sinha. The Standing Committee had previously submitted a detailed report on the Companies Bill, 2009, and most of its recommendations had found their way into the 2011 version of the Bill. The Standing Committee has now issued its report on this...
Shareholder Power: Say-on-Pay
Recent Developments in the US: Dodd Frank Act, section 951, requires companies to approach shareholders for their non-binding vote on executive compensation and golden parachutes. Recent Developments in the UK: A new proposal would require companies to approach their shareholders for a binding vote on executive pay. Existing Position in India: Managerial remuneration has been historically...
JP Morgan’s Trading Losses: Regulation and Governance
There has been a great deal of debate surrounding JP Morgan’s hedging losses announced last week. There is some mystery surrounding the nature of the transactions involved, without full clarity yet on the amount of losses. Andrew Ross Sorkin has a brief explanation of the episode in the New York Times: … Here’s an overly simplistic primer, but you’ll probably get the idea: The company’s...
Impact of SEBI Order on Governance of Exchanges
The concept of demutualization of stock exchanges has given rise to some questions regarding the governance of demutualized exchanges. That concept requires exchanges to separate ownership and governance from that of its trading members. Some issues pertaining to demutualization have come up before SEBI in its investigation into the affairs of the United Stock Exchange of India Limited (USE)...
Corporate Governance in MFIs
In order to achieve greater scalability, the microfinance sector has witnessed the emergence of for-profit microfinance institutions (MFIs) that are managed on similar lines as companies. They attract investors and lenders and they even list on the stock markets. That creates a dilemma as far as boards of MFIs are concerned, as they are required to manage two interests: one being the investors...
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