Recommendations by SEBI Panel on Corporate Governance

By Aarushi Singh

With a view of improving corporate governance standards of listed companies in India the panel under the chairmanship of Uday Kotak on Thursday last week submitted its report to SEBI suggesting changes for bringing transparency at companies’ boards. The report gains significance in the backdrop of recent board battles at some of the biggest Indian corporate companies including Tata Group and Infosys.

Some key suggestions of the panel are:

• It is the right time to split Chairman, MD-CEO role of listed companies.
• It should be mandatory for the top 500 companies by market capitalization to undertake D&O insurance for its independent directors.
• More transparency on appointment of independent directors.
• No person to be appointed as alternate director for an independent director of a listed company.
• A formal induction should be mandatory for every new Independent director appointed to the board.
• An audit committee must review use of loans /adv/ investment by holding company in arm over Rs 100 crore.

Apart from these suggestions the panel also pointed on the earlier Companies Act of 2013 which mandated a certain class of companies to have at least one woman Director on board. But, nearly 40% of the companies listed on NSE still have to appoint a woman independent director, if the Uday Kotak led SEBI panel on corporate governance were to be implemented.

According to experts it is a common misconception that there is a dearth of independent women talent for boards. They view this recommendation as a positive step in ensuring independence in gender diversity. Earlier SEBI chairman Ajay Tyagi said that independence of director is a serious issue and we need to examine this along with other government regulators.

Interestingly, the ministry of corporate affairs has opposed some of the recommendations made by the committee on the grounds that they concern matters already covered by the Companies Act.