When the financial fraud at Satyam occurred nearly a year ago, there was tremendous anticipation of swiftly regulatory activity to follow in terms of reforms to corporate governance norms. But, that was not to be. Any hopes were only dampened when it was announced that the Companies Bill (drafted in the previous year) would be presented in Parliament without any change whatsoever. More recently...
Locus Standi for Oppression and Mismanagement: Dilution of Section 399(1)
Remedies for oppression and mismanagement under Section 397 and 398 of the Companies Act, 1956 provide for some relief to shareholders. However, in order to invoke the provisions of Sections 397/398, the petitioners must demonstrate their standing under Section 399. Section 399, which deals with the right to apply under Sections 397 and 398, says in the relevant part: (1) The following members of...
Derivative Actions – Part I
The issue of shareholders making claims on behalf of a corporation has been a bone of contention ever since the decision in Foss v. Harbottle. However, in recent times, two particular aspects of this controversial area of corporate jurisprudence have received significant attention. These are the issues of multiple derivative claims, and the statutory requirements laid down for a derivative claim...
Task Force on Governance Reforms
A few days ago, the website of the Ministry of Finance carried a draft report consisting of recommendations by a Task Force appointed by the Confederation of Indian Industry (CII) to reform corporate governance norms in India. This Task Force was appointed in the wake of the Satyam scandal earlier this year, and its recommendations represent one of the most significant pieces of reform following...
Dissecting Indian Corporate Governance
India Knowledge@Wharton carries a discussion (or a mutual interview of sorts) between Wharton professors Jitendra Singh and Harbir Singh and former SEBI Chairman M. Damodaran on several issues pertaining to Indian corporate governance, including the role of independent directors. The discussion is rich in that it dissects several fundamental issues of Indian corporate governance, such as whether...
Some Literature on Governance and Social Responsibility
Professor Balasubramanian of IIM Bangalore has posted two interesting papers. In the first paper, Addressing Some Inherent Challenges to Good Corporate Governance, he examines certain specific issues arising due to the concentrated ownership in Indian listed companies. Specifically, he notes: While the objectives of good governance, namely creation, protection and equitable distribution of...
UN Corporate Law Tools project: Corporate Structures and Governance and Human Rights
The United Nations has been developing a project on Reports on Corporate Law Tools, which involves leading law firms from across the globe working with UN Special Representative John Ruggie to analyse how corporate structures in different legal systems foster respect for human rights. The idea behind the project is found in this note prepared by the Special Representative. Reports from several...
Much Ado About Executive Compensation
Over the last few weeks, significant attention has been drawn to the issue of executive compensation, following observations by the Minister for Corporate Affairs that there ought to be moderation in CEO salaries in India. Two factors seem to have triggered such attention. One, which carries political overtones, is the Government’s own measure of austerity. The other is the raging debate on CEO...
Corporate Governance Accreditation
In Singapore, there is a proposal for listed companies to seek voluntary accreditation of their corporate governance processes and framework from an independent body. This is akin to the ISO certification process. As this report suggests, while such accreditation will better inform retail investors regarding corporate governance practices followed in a company, this could also be riddled with...
Fiduciary Duties and Non-Executive Directors
An earlier post had discussed a recent Australian judgment on the role and duties of a non-executive director, Australian Securities and Investment Commission v. MacDonald. More recently, according to a report on the Corporate Law and Governance blog, the Inner House of the Court of Session of Scotland has again commented on the role of non-executive directors. (The Court of Session is Scotland’s...
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