Corporate Governance

One CEO has commented that appointment of Cyrus Mistry as Tata group chairman was against corporate governance. “It was not Tata who appointed Cyrus, it was the search committee where he was a member. He is an 18% shareholder, his company has got existing contracts.

So his appointment is against corporate governance,” he quipped. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community.

The Indian Companies Act of 2013 introduced some progressive and transparent processes which benefit stakeholders, directors as well as the management of companies. Investment advisory services and proxy firms provide concise information to the shareholders about these newly introduced processes and regulations, which aim to improve the corporate governance in India, writes http://www.corpgov.net/.

Corporate governance ensures strict and efficient application of management practices along with legal compliance in the continually changing business scenario in India. Corporate governance was guided by Clause 49 of the Listing Agreement before introduction of the Companies Act of 2013.

As per the new provision, SEBI has also approved certain amendments in the Listing Agreement so as to improve the transparency in transactions of listed companies and giving a bigger say to minority stakeholders in influencing the decisions of management. These amendments, adds corpgov.net, have become effective from 1st October 2014.

A few new provisions for directors and shareholders are as follows: One or more women directors are recommended for certain classes of companies; Every company in India must have a resident directory; The maximum permissible directors cannot exceed 15 in a public limited company.

If more directors have to be appointed, it can be done only with approval of the shareholders after passing a Special Resolution; The Independent Directors are a newly introduced concept under the Act.

A code of conduct is prescribed and so are other functions and duties; The Independent directors must attend at least one meeting a year; Every company must appoint an individual or firm as an auditor;

The responsibility of the Audit committee has increased; Top management recognizes the rights of the shareholders and ensures strong co-operation between the company and the stakeholders; and Every company has to make accurate disclosure of financial situations, performance, material matter, ownership and governance.