Acknowledging positively on global harmony of Indian regulations, Mr U K Sinha, Former Chairman, SEBI asserted that Indian laws and regulations are comparable to global governance regulations. It is the implementation of the same that needs focused attention in India. Mr Sinha was addressing the 13th Corporate Governance Summit organized by Confederation of Indian Industry (CII) at Mumbai today. Mr Sinha enforced that corporate India must gauge horizontal trends of global developments and keep up with them to remain globally relevant.
He highlighted how there is growing focus on economic and social governance globally and commended CII for including the same in the Code released at the Summit. Speaking on the changing profile of investors, he explained how the earlier nexus between managements and institutional investors may not be relevant anymore. Competitive domestic and international institutional investors are now constantly challenging Boards and managements all over the world. He also spoke about a cultural shift wherein the Boardroom atmosphere now allows room for healthy discussions and questions by independent directors and auditors. He also discussed how creditors have also now been recognised as an important stakeholder after promulgation of the Insolvency and Bankruptcy Code. Mr Sinha also cautioned how technology has made measurement of data and its availability easy and lucid which needs to be factored in by companies in their decision-making processes.
Mr. Uday Kotak, President-Designate, CII and Managing Director & CEO Kotak Mahindra Bank Limited asserted that there is no alternative than to be a well-governed company if India needs to achieve the growth rates it aspires for. Explaining that return of capital is more important than return on capital, he said suggested the need for enhanced risk capital for industry. There is need for heightened responsibility of fiduciaries of companies and stakeholders which they need to focus on. He highlighted the need for encouraging the growth of start-ups and MSMEs for risk capital. Mr Kotak cautioned that lack of trust towards corporates may be leading to the risk aversion - in which case, building the trust bridge is core to the future of India’s growth.
Chairman, CII National Council on Corporate Governance Mr Keki Mistry, Vice Chairman and CEO, HDFC Limited reflected on global trends and how boards are operating under far greater scrutiny than ever before with increased regulatory requirements. He highlighted that a whistle blower policy is a critical element of internal control. But it is also equally important to ensure that there are sufficient checks and balances in the system so that mala fide intentions are discouraged and complaints with dishonest intents penalized. On independent directors, he said they cannot be held accountable for the performance or functions which are typically the responsibility of the executive management. In the current scenario, independent directors ability to objectively look at risk management is diminishing. Some immunity needs to be provided to them unless there is a wilful case of fraud. Until this is done, people of calibre will be reluctant and fearful of joining boards. Mr Mistry also discussed that being on a lessor number of boards is gaining traction amongst investors and there may be significant level of reduction in the level of over- boarding in years to come. He explained how there is an increasing expectation around the oversight approval of the board which includes overall strategic planning, investor engagement and executive succession planning. Particular attention is being paid to directors’ skill profiles, diversity and the making of a robust mechanism for board refreshment that goes beyond the box ticking exercise. Boards are increasingly expected to play a more active role in risk management particularly cyber security risks. Speaking about recent technological innovations like mobile applications; big data and cloud computing, he said technology awareness at the Board level has become indispensable for the growth of the company. Speaking on shareholder activism, he highlighted how investors exert influence in governance both directly and through their proxy advisors and hence, shareholder activism is bound to become more pronounced in India. Mr Mistry enumerated the increasing focus on environmental, social and governance issues and asserted how markets are giving greater weightage to companies that provide sustained value creations.
Delivering the Regulatory Outlook, Mr Ashishkumar Chauhan, MD & CEO, Bombay Stock Exchange said that governance is an ever-evolving field. He enumerated that corporates are a part of soft infrastructure and there is need to ensure symmetry of information and symmetry of power among stakeholders. Corporate Governance is beyond regulatory compliances and sets the tone of how the Corporate’s board of directors and management deal with shareholders and all stakeholders. Several committees in India and abroad have discussed, suggested and improved up on previous frameworks of corporate governance. Kotak committee recently suggested several improvements to the extant regulations. As soon as the recommendations become regulations, they become part of compliances. Companies Act 2013, Sebi LODR and several other laws as well as regulations govern the conduct of corporate boards and managements. These ever-evolving reform measures create a corporate regulatory environment that promotes business activity, market integrity and investor confidence – especially small investors, he explained.
Mr Shyamak Tata, Chairman, Deloitte India charted some of the global trends relating to Board effectiveness, alignment of culture, technology governance to better leverage exercise of oversight roles etc. Explaining the constituents of governance, he highlighted the role to be paid by each of them. For the entity along with the management and the Board, there is need to adopt and adapt the changing environment; For third party fiduciary role holders, it is to gauge the undercurrents in the company; for corporate lenders to remain agile and for Regulators, to evolve with the changing society. He also commended the initiative of the Government in decriminalising Companies Act 2013 which will encourage directors to conduct business without anxiety of adverse repercussions.
Talking about 125 years of CII’s partnership with the nation, Mr Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII) delivered the welcome remarks at the Summit. He charted CII’s role in the evolution of corporate governance in the country asserting the need to ensure that efforts are sustainably aimed at creation of a facilitative streamlined and harmonized regulatory environment that promotes voluntary adoption of best practices and self-regulation by corporates without warranting additional regulations. Explaining that a Code of Corporate Governance cannot be static, he said it must be reviewed in time to keep pace with the changing regulatory scenario.
14 February 2020