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| Experts feel that the investment community is not yet taking the climate change seriously enough. According to a report released by Innovest Strategic Value Advisors, companies in emission intensive sectors could see their value drop up to 40 % if they fail to take positive action to address the issue. Few are doing so. The report, an initiative of the Carbon Disclosures Project, representing 35 leading institutional investors found that only 35 % to 40 % of the companies were taking steps to mitigate the financial risks to their businesses from severe weather events and new regulatory environments. Climate change is among a growing number of issues of which investors need to be aware. Companies’ social behaviour, particularly relating to human rights and labour practices, is also under scrutiny, while a drive towards transparency has accelerated by recent corporate scandals and is pushing corporate governance up the agenda. However,
climate change poses one of the most tangible threats to companies’
financial performance. This one of the important thing one must
consider while purchasing stock and it is not being properly considered
according to Martin Whittaker, Managing Director of Innovest.
It is not only emission intensive industries that could suffer.
The share price value of banks could fall as much as 29 % for
institutions without strategies to protect against the growing
threat of bad loans, the study says.
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The last lifeline of India’s regional stock exchanges could be yanked very soon. Thanks to screen-based trading, the days of multiple listing on the exchanges are drawing to a close. Companies listed on multiple stock exchanges are now seeking voluntary de-listing from regional stock exchanges to save on the costs associated with maintaining these listings. The voluntary de-listing trend, which started after the introduction of screen- based trading, firstly by the National Stock Exchange (NSE) and then the Bombay Stock Exchange (BSE), is gathering momentum in 2003. In 2002
as many as 88 companies informed the BSE that their respective
boards had resolved to de-list their stocks from all bourses
other than the main stock exchanges. Of the 88 companies, five
are from group A, nineteen from Group B1, 52 from group B2 and
four from group Z. Blue-chip companies in the A group that have
sought de-listing from the smaller exchanges are Asian Paints,
LML, Sun Pharmaceuticals and Tata Telecom. The most prominent
B group stocks in the list are Birla Corporation, Honda Siel
Power, Kajaria Ceramics, Omax Autos and Kajaria Ceramics. Sun
Pharmaceuticals has de-listed its shares from the Ahmedabad,
Calcutta and Delhi Stock Exchanges. While two-wheeler maker
LML is planning to de-list its shares from the Delhi Stock Exchanges.
Most companies are seeking to de-list their shares from the
Ahmedabad and Delhi stock exchanges. The volume on these exchanges
has been very poor during the last one and half years.
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The Narayanan Murthy Committee report on Corporate Governance has made a number of recommendations in its draft report submitted to the Securities and Exchange Board of India (SEBI). The terms of reference of the committee are to review the performance of corporate governance and to determine the role of companies in responding to rumours and other price sensitive information circulating in the market, to enhance the transparency and integrity of the market. The committee has recommended that the audit committee of publicly listed companies should be required to review, among other things, the following information –
The committee has also said that all audit committee members should be ‘financially literate’ and at least one member should have accounting or related financial management expertise. Procedures should be in place to inform board members about the risk assessment and minimisation procedures. Companies should be encouraged to train their board members in the business model of the company as well as the risk profile of the business parameters of the company. The committee has said that appointment of nominee directors by institutions should have shareholders approval. It said that an institutional director, so appointed, will have the same responsibilities and shall be subject to the same liabilities as any other director. Government nominees on PSUs should also follow a similar procedure. The
provisions relating to the composition of the board of directors
of the holding company should be made applicable to the composition
of the board of directors of subsidiary companies. At least one
independent director on the board of directors of the parent company
should be a director of the subsidiary company. |
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| Indian
companies are ill prepared to handle frauds and corporate espionage,
says the 2003 Frauds and Misconduct diagnostic survey conducted
by professional services firm, KPMG. As many as 58 % of the 196
respondent companies said they had no policy to counter corporate
espionage. Around 50 % of the respondent companies said their
companies did not have in place a conflict of interest policy.
The survey also brought out that Indian companies did not have
adequate screening procedures to bar fraudsters from joining.
The survey also shows that companies do not have well-developed
channels of communication to report frauds or corporate espionage.
According to KPMG India executive director, Mr. Deepanker Sanwalka,
this was an area where India had to cover a lot of ground, as
it did not have a history of people coming up and talking about
harassment and discrimination.
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SEBI will soon
issue guidelines to implement recent amendments in the SEBI Act,
to pave the way for swift and severe punishment for those involved
in insider trading. Stating this at a seminar organised by the
PHD Chamber of Commerce and Industry, Mr. U. K. Sinha, Joint Secretary,
Ministry of Finance said that SEBI was working towards the judicious
implementation of the amendments recently announced, so as to
ensure that all manipulative instances are dealt with severely.
Insider
trading leads to undermining of investors’ confidence in the
fairness and integrity of the market. Therefore, detection and
prosecution of insider trading violations has to be a priority
to promote an active securities market and attract international
investments, according to one speaker at the seminar. |
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The Securities and Exchange Board of India (SEBI) has clarified
that the discussion paper on code of conduct for Foreign Institutional
Investors (FIIs) does not intend to suggest any policy change
and the present set of policies and practices will continue. SEBI’s
clarification comes as a breather for the market which have been
on a downward spiral ever since SEBI’s draft paper containing
a proposal to disallow foreign funds from dealing in derivatives
– with underlying domestic securities – that are issues outside
India. |
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The
two leading rating agencies, CRISIL and ICRA, appear to differ
in their corporate governance rating initiatives by SEBI, thus
creating confusion among the Indian companies. While CRISIL has
adopted a liberal approach, ICRA it is reported that has deliberately
tightened its norms. This gives the impression that the CRISIL
rated companies are far better that ICRA rated companies. The
ratings made public so far are:
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The
Securities and Exchange Board of India (SEBI) has rejected the
demands of industry to put in place a system of “period of limitation”
for taking up investigations on price manipulation and other capital
market misconducts.
“We cannot agree to this suggestion. There cannot be limitation on investigations. It must be understood that investigations a mechanism for collection of evidences. As and when complaints are received and fresh information is before us, we will take up investigations irrespective of the time period,” a senior SEBI official said. (Source:
The Business Line, March 23, 2003)
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The
Institute of Chartered Accountants of India (ICAI) has asked the
Department of Company Affairs (DCA) to drop a key recommendation
of the Naresh Chandra Committee on Corporate Audit and Governance
that would require audit firms to annually file a certificate
of independence to the Audit Committee or the board of directors
of the client company.
“We feel that the certificate of independence to an audit firm would result in more paper work. We have, therefore, written to DCA that the requirement of certificate of independence should not be considered in the proposed amendments to the relevant laws,” the President of the ICAI, Mr. R. Bupathy said. (Source:
the Hindu Business Line, April 10, 2003)
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| © 2001 Academy of Corporate Governance |
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