| Hony.
Editor |
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Dr.
Bindi Mehta
(Director,
Research at ICSI - CCRT, Formerly, Chief economist, CRISIL |
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National
Events |
| Lack
of corporate governance is
long-term health hazard: SEBI |
| Lack
of corporate governance is a long-term
health hazard for the corporate world
and adoption of ethical standards along
with governance could reflect in the bottomlines
of companies, according to Securities
and Exchange Board of India.
"Failure
to comply with corporate governance is
a long term health hazard," SEBI
Wholetime Director, A K Batra said at
a seminar 'Corporate Governance Rating
Model', organized jointly by the market
regulator and FICCI in New Delhi today.
The
SEBI official said the substance of corporate
governance was provided by commitment
to ethics. However, he added that incorporating
corporate governance was a huge task and
would take time.
"Ethical
output cannot be measured directly, but
it is possible indirectly through value
addition. In the long run, it will get
reflected in the bottomlines of companies,"
he said.
He
said one had to differentiate between
what was illegal and what was unethical
and cited that in the case of Andersen,
though the experts feel that the accounting
firm had nothing illegal, it was "certainly
unethical".
Batra
said the corporate governance rating would
help the corporates and shareholders alike,
but did not specify whether it should
be made mandatory or not.
Stressing
that SEBI had mandated independent directors
and the role of board of directors, Batra
said an in depth scrutiny was "eschewed"
at times of good performance.
ICRA
General Manager Anjan Gosh said there
were key challenges on assessing board's
effectiveness from outside the boardroom.
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CRISIL
to rate corporate governance |
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Rating agency Crisil has developed a ‘GVC (governance and value
creation) model’ of rating for benchmarking governance practices
in Indian corporates.
The GVC methodology can be used for benchmarking governance and
value creation, Arun Panicker, director (ratings), Crisil, said.
It looks at corporate governance as a means to create wealth for
all stakeholders. The GVC rating is a framework in which stakeholder
relationship is recognised as one which contributes to wealth
creating capabilities, Panicker said.
The rating integrates shareholder-centric and stakeholder-based
models of corporate governance, Panicker said. The ratings would
strike a balance between the qualitative and quantitative parameters
and the past performance and future expectation of the company.
The methodology of the rating incorporates feedback from the industry
associations and market regulators, he said.
The twin foci of the analysis include value creation and management
along with fairness and transparency in dealings.
The corporates can attract investments by highlighting the effectiveness
of their governance practices, assessing existing status, setting
up a roadmap for further improvements, evaluating treatment of
various stakeholders by management, creating visibility across
all stakeholders and broadening the appeal of the company to the
investors, Panicker said.
The rating will help the investors identify companies with effective
corporate governance practices.
It will also help the investor compare two equally well-governed
companies and presents an independent insight into the governance
practices and their sustainability.
HDFC, Hero Honda, HDFC bank and Infosys are assigned Crisil GVC
level-one ratings and Dabur India is assigned Crisil GVC level-two
rating, he said.
“While evaluating governance practices, Crisil felt there is still
scope for improvement in the composition and functioning of the
board,” Panicker said.
Indian companies have made significant progress in transparency
and disclosure and revamping of corporate boards to induct professionals
and non-executive members, Panicker said.
Indian corporates lacked an explicit focus on all stakeholders.
Transparency and disclosures are more regulatory and less voluntary,
he said.
Compliance with corporate governance code is treated as a structure
and not as a way of life.
“The shortcomings of the Indians corporates could be overcome
through legislation, institutional activism, market as a disciplining
factor and self-regulation,” Panicker said.
(Source: Business Standard Jan 22, 2004)
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‘States
support system must for corporate governance’ |
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The states
should provide the basic support system for effective corporate
governance as corporate entities are major economic agents, said
D Chanda, chief general manager, Securities and Exchange Board
of India (SEBI).
He was speaking at a workshop on corporate governance organised
by the Federation of Indian Chambers of Commerce and Industry
in association with Sebi and Crisil in Ahmedabad on Saturday.
The workshop was aimed at creating awareness on corporate governance.
“The corporate sector is primarily for wealth creation and Sebi’s
primary responsibility is to ensure disclosure standard, an effective
online trading system, a reliable and effective enforcement and
high standards of governance.” Chanda said.
Inaugurating the workshop, Hasmukh Adhiya, additional principal
secretary to the chief minister of Gujarat, said, “Corporate governance
is not new to Gujarat. The trusteeship concept was introduced
by Mahatma Gandhi. The primary objective of governance, may it
be a corporate or the government, is to strike a balance between
the shareholders’ interest and the stakeholders’ interest. The
relevance of governance in the government is in dealing with various
groups to serve and maximise the interest of public. That could
be achieved through bringing in greater transparency in the functioning
of the government at all levels.”
He highlighted some of the initiatives taken by the government
to bring in greater efficacy by organising training programmes
for all levels of employees joining government to re-orient and
update them with the current scenario and how to deal with the
changing environment.
“Training programmes are also organised for political leaders,
bureaucrats and employees for corporations. To deal with the current
issues, a professional agency has been appointed. It will take
the feedback from employees on a monthly basis to formulate strategy
and an action plan to provide solutions to them to bring about
better governance.” Adhiya said.
Pankaj Patel, managing director, Zydus Cadila Healthcare, said
“Corporate governance is based upon trust. It takes care of the
stakeholders, brings in transparency at all levels, demands accountability
of the board and integrity as the core value. There is no short
cut to implement and adopt the model for corporate governance.
It enhances value of the company and the stake holders.”
(Source:
Business Standard, 27 Jan, 2004
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Sebi
will tell companies to disclose more |
In its
drive towards greater disclosure in the markets and immediate
dissemination of price-sensitive information, the secondary
market advisory committee of the Securities and Exchange Board
of India on Thursday mandated a detailed format for companies
to report significant changes in their shareholding pattern.
Pointing
out that the shareholding pattern of Indian companies had become
much more complex in recent years, with the entry of new investment
entities, the committee said a detailed format with standarised
nomenclature was called for as "ambiguous information on
the shareholding pattern affects price discovery in the secondary
market. Moreover, research and policies too get vitiated."
Among other
things, the new format replaces the term "promoter holdings"
with "holdings of the controlling group".
This will,
at one stroke, bring into the open the total stake that is,
in effect, under the control of the promoter group, and will
impact promoters who control companies through nominal shareholdings
in their own name but significant stakes through trusts and
other legal entities.
Those who
hold a controlling or strategic interest will have to be individually
listed, while the in the case of public holders only those holding
1 per cent and above would need to be listed. Every single beneficial
owner of ADRs, GDRs and other foreign securities has to be listed.
Further,
companies are required to file their shareholding patterns within
two days of any change of one per cent or more in the stakes
of any entity in the controlling or strategic holdings group.
At present, this information is disseminated through a brief
notice to the stock exchanges.
The revised
format also says that if there is any shareholder related to
the holders of a controlling or strategic interest, "then
its shareholding should not be put under public or free-float,
but be included in the controlling or strategic interest section."
The committee
has expanded on the term `controlling interest and strategic
holding or in-concert holding' to mean entities that are in
control of the company, directly or indirectly, whether as a
shareholder (including a shareholding of 10 per cent or more
in such companies), director or otherwise.
Control
has been defined as the "right to appoint majority of the
directors or to control the management or policy decisions."
Broadly,
the holdings would be categorised under total controlling, strategic,
in-concert holdings, total free-float or public holdings, total
domestic holding (this would be the sum of all domestic entities
whether exercising control or not) and total foreign holding.
New
format
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The
term 'promoter holdings' has been replaced with 'holdings
of the controlling group'.
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Promoters
holding a controlling or strategic interest will have to be
individually listed.
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Every
single beneficial owner of ADRs, GDRs and other foreign securities
has to be listed.
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SEBI
now redefines ‘promoter’
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The SEBI has proposed changing the definition of ‘promoters’ and
has issued fresh guidelines for filing the disclosure forms, including
shareholding patterns, with stock exchanges (SEs). The
Sebi-appointed Secondary Markets Advisory Committee (SMAC) has
suggested replacing the term ‘promoters’ with ‘controlling/strategic
stake’ in the shareholding format and has also suggested a new
format for the shareholding pattern. Sebi has put the SMAC recommendation
on its website www.sebi.gov.in and has invited public comments
on it before finalising its report.
SEBI said that over the past few years, the shareholding pattern
of Indian listed companies has undergone a major change, primarily
due to the entry of new categories of investors. In addition,
various new terminologies have come into practice. The market
players are now demanding data on free float as that is the true
indicator of market size and liquidity.
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© 2001 Academy of Corporate Governance |
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