Corporate governance undergoing major review

Corporate governance is the acceptance by a company’s management of the inalienable rights of the shareholders as the true owners of the company and of the management’s role as trustees on behalf of the shareholders. In essence, corporate governance is about commitment to values, ethical business conduct and distinguishing between personal and corporate funds in the management of the company.

The basic framework for regulation of all companies in India is contained in the Companies Act, 1956, which provides for checks and balances over the powers of the board. In addition, under the Securities Contracts (Regulation) Act, 1956, every listed company in India needs to comply with the Equity Listing Agreement.

Clause 49

Considering the emergence of codes of best corporate governance practices all over the world and to promote and raise the standard of corporate governance in India, in February 2000 the Securities and Exchange Board of India (SEBI) inserted a new clause in the Equity Listing Agreement, i.e. clause 49.

Ranjana Roy Gawai, the managing partner at RRG & Associates, participated in the roundtable consultation on SEBI’s consultative paper to review corporate governance norms in India, organized by the Indian Institute of Corporate Affairs, Ministry of Corporate Affairs. Vasudha Sen is a team leader at RRG & Associates.