Corporate governance: A paradigm shift needed

A great deal has been written about corporate governance in India since the turn of the millennium, when the nation’s economy was gaining prominence on the world stage. It became a buzzword in boardrooms and the echelons of management, and the government established committees, several of whose recommendations were adopted.

Listed companies got their first formal regulatory framework for corporate governance in February 2000 – clause 49 of the listing agreement. This was followed by further legislative initiatives pertaining to audit committees, audit reports, codes of conduct, directorships and director compensation, financial disclosures, independent directors, related party transactions and risk management.

Over many years the government has endeavoured to establish checks and balances in this area, as well as stringent penal provisions for violations. The regulatory regime in India is covered under the Companies Act, 1956; the Securities and Exchange Board of India Act, 1992; the Securities Contracts (Regulation) Act, 1956 (which was enacted to check speculation in securities); and the Depositories Act, 1996. The common objective of these pieces of legislation is to protect the interests of investors in the capital markets, and to maintain standards of corporate governance.

Priti Suri is the proprietor of PSA.