Mr Ajay Tyagi, Chairman, SEBI highlighted that adequate level of disclosures, risk assessment and sound digital infrastructure and high standards of data protection and cyber-security as critical issues since the onset of COVID – 19. Mr Tyagi was addressing the 14th Corporate Governance Summit organized by Confederation of Indian Industry (CII) organised over the virtual platform today. Mr Tyagi said that SEBI issued an advisory providing an illustrative list of information that should be disclosed relating to the impact of the CoVID 19 crisis stating the need to avoid selective disclosures while disclosing material information. He listed steps taken by SEBI to improve the ease of compliance by promoters covering review of regulatory framework for re-classification of promoter / promoter group; revamp of rights issue process to make fund raising easier and review of framework of Innovators Growth Platform to make the platform more accessible to the start-ups and new age entrepreneurs. He explained that the problem arises when some of the errant controlling shareholders attempt to misuse their dominant position to the detriment of others. While giving power to minority shareholders, SEBI acknowledges the need to have a fine balance between the role and responsibilities of controlling shareholders and minority shareholders.
Against the backdrop of the recent enhancement of applicability of Risk Management Committee (RMC) to top 1000 listed entities by market capitalization from the existing top 500 companies, Mr Tyagi said company boards need to critically consider if they are looking at the right risks, by remaining active in their risk assessment activities. This includes paying attention to new emerging risks, reassessing resilience, and preparing the organization for any future event that could result in similar business disruptions as the CoVID-19 pandemic. In view of the increasing use of technology, sound digital infrastructure and high standards relating to data protection / cyber-security, are of utmost importance, Mr Tyagi asserted.
Mr Tyagi explained the underlying idea for separation of the roles of Chairperson of the Board and MD / CEO of a listed company is to provide a better and more balanced governance structure by enabling more effective supervision of the management and not to weaken the position of promoter. With respect to gender diversity on the Boards, he asserted that while there has been an improvement in gender diversity at the board level, data shows that representation of women in key board committees such as the audit committee and nomination and remuneration committee remains quite low. Chairman urged the other institutional participants in the corporates such as banks, insurance companies and pension funds to also follow transparent stewardship code to be truly accountable to their clients / beneficiaries. Speaking about the new framework for Business Responsibility and Sustainability Reporting (BRSR), he enumerated that since Governance is a key element of ESG framework, the new framework emphasizes on oversight by the Board in identifying sustainability related challenges, setting targets and monitoring performance against the same.
Mr. Uday Kotak, President, CII and Managing Director & CEO Kotak Mahindra Bank Limited asserted the most defining aspect of the economy during the pandemic was the way in which Capital Market has supported the economy. Applauding the role of SEBI, Mr Kotak said that capital Markets were active and functioning and saw the highest level of fund raise, due to the steps taken by SEBI for effective functioning of the markets and also ensuring the existence of delicate balance between interest of issuers and investors . Explaining the enhanced governance responsibility of companies that had capital access even during turbulent times, he asserted the need for heightened role of fiduciaries and intermediaries in the overall governance scheme. He highlighted the need to balance the rights of the entire body of shareholders including both majority and minority shareholders – and not to sway the same in favour of one group. He emphasized that Board of Directors have a fiduciary responsibility and speed of decision making by the Board in disruptive time is the key to success. He also highlighted the constructive role independent directors need to play in building the organization. Mr Kotak reasserted how capital markets are the engine for India’s growth and regulators and policy makers need to continuously work towards creating a conducive environment for nurturing and sustaining the growth engine.
(continued in Part 2)