Whistle blowing is one of the key tools used in corporate governance to act as a check on managerial actions. It is also recognised in India as a non-mandatory requirement under Clause 49 of the listing agreement. While whistle blowing is useful in enhancing governance standards, the recent episode at Renault suggests that it is also capable of abuse. Lessons from that episode include the need...
Nomination Committees of Corporate Boards
The recent episode relating to the nomination of directors for appointment on the board of Hewlett-Packard Co. brings to the fore the role of the nomination committee. Institutional Shareholder Services (ISS), a shareholder advisory group, recommended a vote against certain nominees on the ground that HP’s nomination committee was heavily influenced by the HP CEO, Leo Apotheker. While HP’s...
Actions Against Independent Directors
On March 11, 2011, SEBI passed an order in relation to Pyramid Saimara Theatre Limited (PSTL) restraining three of its independent directors (Mr. K.S. Kasiraman, Mr. K. Natarahjan and Mr. G. Ramakrishnan) from being independent directors or members of audit committees of any listed company for a period of two years from March 11, 2011. The order was passed on the ground that these independent...
Scams and Corporate Governance
The various scams afflicting India over the last few months were largely perceived as matters within the realm of public governance involving the Government, ministers and officials. Lately, however, the spotlight seems to be shifting to the private sector and to companies that are alleged to be beneficiaries of public mismanagement of resources. Questions are being asked about the acts and...
Managerial Remuneration in Unlisted Companies: Process Eased
When the rest of the world is tightening the screws on payment of managerial remuneration in the wake of the financial crisis, the Ministry of Corporate Affairs (MCA) in India has eased the process for such payments in the case of unlisted companies. However, this is certainly understandable. The erstwhile process of requiring even unlisted public companies to approach the MCA for payment of...
RBI Sub-Committee on Microfinance
With several legal and regulatory issues affecting the microfinance sector lately, more so in the state of Andhra Pradesh, the Reserve Bank of India (RBI) had appointed a sub-committee under the chairmanship of Mr. Y.H. Malegam to “study issues and concerns in the microfinance sector in so far as they related to the entities regulated by the [RBI]”. The keenly awaited report, which was expected...
Corporates and Lobbying
Issues surrounding lobbying by corporates have cornered media attention over the last few weeks. Broadly speaking there does not seem to be any legal provision that directly regulates lobbying, although the Government has announced that it is considering the enactment of a specific legislation that governs lobbying. For an analysis of the legal aspects governing corporate lobbying in India and...
“Professional” Independent Directors
In a recent Economic Times column, Prof. T.T. Ram Mohan discusses the concept of a professional board propagated by Lee Pozen in the Harvard Business Review (Dec. 2010, p. 50). The idea goes as follows: The author, Robert Pozen, lists reasons why boards are ineffective. They are too large (the average size of the top 500 companies in the US was 11 in 2009). Members lack domain expertise (only one...
Advisory Boards for Indian Companies
About a week ago the Economic Times’ Corporate Dossier carried two columns (here and here) highlighting the growing popularity of advisory boards in Indian companies. The individuals on such boards perform advisory functions and almost no monitoring functions. In that sense, an advisory board is distinct from the statutorily required board of directors of a company. As one column notes: Fiduciary...
Corporate Governance: India and China Compared
While a fairly extensive body of literature that compares India and China has developed in the economics and business spheres, comparative analyses of the legal regime in these two countries is somewhat nascent. In that regard, a new book China, India and the International Economic Order, edited by Professors M. Sornarajah and Wang Jiangyu at the Faculty of Law, National University of Singapore...
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