Sebi pulled up for lax corporate governance

Despite Sebi’s stringent orders, only 2,020 companies out of 4,149 listed on the BSE and needing to comply with Clause 49 had done so as on February 1 this year. “That’s less than half the number of listed companies. Some of the reasons cited for this is the shortage of quality independent directors and lack of teeth for stock exchanges to punish errant companies,” Parekh told a CII conference on corporate governance.

“Corporate India is not finding it easy to find qualified, suitable candidates for non-executive directorships and the shortage of qualified independent directors is causing widespread concern,” Parekh said.

Parekh also said that the whistle-blower policy be made mandatory in a bid to improve corporate governance standards in Indian companies.

“I think it is necessary to make a whistle-blower policy mandatory, rather than voluntary, as it currently is now. Although independent directors are supposed to be whistle-blowers in their own right, staff has the potential to play an important role,” he said.

Though the Narayana Murthy panel had recommended a whistle-blower policy for corporates in 2003, the regulator made this provision voluntary due to stiff opposition from some in the industry.

Parekh said the drivers of change in corporate governance standards in India have predominantly come from one set of players — foreign institutional investors (FIIs). “In India, mutual funds play a passive role in corporate governance and while insurance companies and banks are somewhat more active than mutual funds as they do attend shareholder meetings and vote, they are not as active as the FIIs,” he said.