Corporate governance in India has been reviewed by four committees in the last decade. The objective has been to improve performance on the board of over 5000 listed firms. The latest committee was mandated by SEBI and set up in June under Uday Kotak. There has been squabbling in public in some famous houses in India which has led to the formation of this committee. Recently promoters, founders and professional managers were seen fighting with each other to grab power. Transparency, accountability and independence of directors came under a shadow. The Uday Kotak committee has recommended an egalitarian board environment. The roles of the Chairperson and the CEO should be separated. Board evaluation should be transparent and open to public scrutiny. Half the members of the board should be independent directors. Greater responsibility of audit and remuneration should be thrust upon the board. Some recommendations of the committee have proved a failure. Educational qualifications and expertise in an industry for board members may be off the mark. Investors should of course be made more informed about investment choices.
If corporate governance reforms have to succeed, both institutional and other investors should abandon their present passive approach. Japan has made great strides under Prime Minister Shinzo Abe in this direction. Asset managers in India should be more forceful and should ensure greater public disclosure. The burden for good corporate governance now rests on regulators which are a sad commentary on prevailing standards. Reform is necessary to attract capital flow and sustain the momentum investment.
