Hony. Editor
Dr. Bindi Mehta
(Director, Research at ICSI - CCRT, Formerly, Chief economist, CRISIL






 
 
National News - Oct, 2002
Prof J. R. Varma to Chair New Committee on
Corporate Governance

A new committee under the Chairmanship of Professor J. R. Varma from IIM, Ahmedabad, has been created to look into corporate governance with regard to Employees Stock Options (ESOPs). The committee will be largely made up of representatives and members from the regulatory bodies and industry associations. ESOPs have been viewed with a lot of skepticism given the fact that they are linked to the share price. Fraudulent means can be adopted by greedy promoters (to boost their profitability, and in turn their share price) to benefit from the better ESOP valuations. There is, thus, a felt need for corporate governance in this area to curb such mal-practices. In the US, The ESOP Association plays a strong advocacy role in communities directed towards an army of employee owners, who interact with the elected members on a continuous basis.

 
 
 
"Corporate governance is observing the spirit, not just the form" SEBI Chief

In a detailed interview the SEBI Chief, Shri G. N. Bajpai, has said that corporate governance has two aspects, one is the form or the façade and the other is the spirit. The second aspect is the most important. The form (i. e. at least 50 % of the directors to be independent, an audit committee, which will review all assets and revenues of the company) was in place, both in case of ENRON and Worldcomm. There is need for a lot of introspection, on why the recurring crisis, both in abroad and in India. The solution lies in a principal based approach and not a form based approach. The fundamental purpose of the existence of a corporate body is to create wealth, to manage it and to distribute it. He felt that eventually, companies with an ethical base will find it easier to raise capital than those that do not have ethical foundations.



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ICSI to redefine directors' role


In the backdrop of going importance being attached to corporate governance and disclosures, the Institute of Company Secretaries of India (ICSI) has taken up a major drive to redefine the duties and responsibilities of directors on boards of companies, said Shri S. Gangopadhyay, President of the ICSI. The Institute has drawn up a comprehensive list of rights and obligations for directors of companies. The Department of Company Affairs (DCA) has already accorded an in-principle approval to the plan, and the list will be distributed through the registrar of companies at the time of registration of new companies. The ICSI has taken up three more crucial issues as focus areas in the coming year. These include investor protection and education, advisory services and corporate governance. The ICSI will disseminate information on topics that are of interest to the investing public, through its regional chapters, by setting up "Investors' Clinics" as also through stock exchanges.




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SEBI committee on accounting standards

The Securities & Exchange Board of India (SEBI) committee on accounting standards has recommended a number of new measures to improve corporate disclosures and make it difficult for companies to commit irregularities. The committee headed by Y. H. Malegam has suggested among other things - 1) Companies to disclose annually the loans and advances given to the subsidiary and associate companies 2) A limited audit of the quarterly results of companies from the first quarter of FY 2003 - 04 and full audit of the half-yearly results from fiscal 2003 -04. 3) A risk report which should form a part of the annual report The committee has invited suggestions from the public on these measures.



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© 2001 Academy of Corporate Governance