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mains Test Series 2018
Q. SEBI on corporate governance: Analyse the SEBI’s recent move, which intended to raise the corporate governance.
Mar 14, 2017 Related to : GS Paper-3

Ans :

Introduction-

To raise corporate governance and reinforce director’s responsibility, recently the Security exchange board of India (SEBI) wants an overhaul in the way boards of listed companies to discharge their duties that include the appointment and removal of directors. Such move makes sense in the backdrop of recent developments in Infosys and Tata Sons.

Analysis-

  • Last month SEBI directed to companies to go with broad evaluation and to prepare a report card that a company holds to itself to see how it fares is considered as one of the welcome move, but there is need of overhaul various issues.
  • Domain knowledge and expertise of a board member alone will not suffice. What counts is whether one can think independently, and challenge the management. Board discussions must be conducted in a frank way by accommodating criticism.
  • The SEBI’s criteria for assessment of board and management performance are proper. Whether the remuneration is aligned with performance, industry peers and the company’s long-term interests, whether the board selects, compensates, monitors.
  • Similarly checks must be in place to allow independent directors to perform their roles effectively, as Indian companies take on the turbulence of global uncertainty. Globally, many entities rope in external experts to the evaluation process.
  • Bringing in independence makes sense in the Indian companies. Recent SEBI’s guidance note should have the force of law to protect the interest of shareholders. The corporate governance should move beyond a check-the-box exercise.

Conclusion-

Recently India has witnessed some issues in corporate governance of big companies. In this backdrop SEBI’s recent move to overhaul the corporate governance is welcome move to protect the interest of shareholders. The government should come up with a strong law in line with SEBI guideline.

 

 


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