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...
OECD Report on Related-Party Transactions
One area that is yet to receive significant attention in terms of regulatory reforms pertains to related-party transactions (RPTs). This is despite the enormous potential for RPTs in India given the concentrated ownership structures of public listed companies. All of these provide less protection to minority shareholders. In the past, although several suggestions for reform have been made (see...
Women on Boards Survey
The issue of diversity on corporate boards (particularly gender diversity) has garnered much importance lately, including in academic studies. The Harvard Corporate Governance Blog cites to a GMI Ratings’ survey that measures board representation by women in 45 countries across the globe. The survey reports heterogeneity in trends both among developed markets and emerging markets as distinct...
The Debate over Staggered Boards
Staggered boards are found to be a form of anti-takeover defence. This concept, which is prevalent in several U.S. companies, ensures that only a third of the board can change each year. Hence, it would not be possible for shareholders to replace the board, except through a gradual process of changing a third of the board each year. There is an interesting battle brewing in the U.S...
Miscellaneous
1. Reactions to Vodafone The discussions on the Vodafone judgment of the Supreme Court continue to raise questions regarding tax avoidance, and also aspects of corporate law (distinguishing the sale of shares and sale of assets). While Prashant Bhushan has raised questions regarding the judgment on several counts (here and here), Arvind Datar...
Minority Shareholder Protection in M&A
The Economic Times examines a recent trend whereby companies have preferred asset sales or business sales (also known as “slump sales”, an expression that bears uniqueness to India, as I am yet to come across that expression elsewhere) over takeovers thereby shortchanging minority shareholders of the seller companies. The argument goes: by structuring the deal as a business sale, all that is...
Regulating the Pay of Bankers in the Private Sector
Last week, the Reserve Bank of India (RBI) issued compensation guidelines for implementation by private sector and foreign banks that become operational from the financial year 2012-2013. This approach is consistent with the trend that corporate governance norms in the banking sector tend to be more controlled than in other industry sectors. Apart from the fact that the pay of CEOs and wholetime...
Companies Bill, 2011: Duties of Directors
The Companies Act, 1956 does not contain any specific provision that generally governs the duties of directors. The duties are instead governed by common law, which judges are required to apply to a given set of facts and circumstances. Under common law, there are two broad sets of director duties: (i) duty to act with skill, care and diligence, and (ii) fiduciary duties (to act in the interests...
Companies Bill, 2011: Independent Directors
Corporate governance generally places a fair amount of emphasis on board independence, and it is no different in India. Having a minimum number of independent directors (IDs) on the board is said to enhance monitoring of the management and promoters, and thereby protect the interests of the public shareholders. The Companies Bill, 2011 takes the concept of board independence to another level...
Shareholder Activism and Proxy-Advisory Firms
One constantly hears calls for greater activism among shareholders (particularly institutional investors) as one of the measures towards enhancing corporate governance in India. A method that has been utilized in other jurisdictions such as the U.S. is through proxy-advisory firms who advise investors on how to vote on resolutions proposed by companies. The concept of proxy-advisors seems to have...
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