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Indian corporate governance- time to change
Tue, 23 Sep Pre-Open

All is not well here. From large business groups to the telecom scandal, the Indian corporate governance story is a telling one. We have been reading this! Vijay Mallya led United Spirits have been facing acute dissent from its shareholders over the re-appointment as chairman for another term. Shareholders of the automaker giant Maruti Suzuki stood up to revolt against the company's proposal to allow the building of a manufacturing facility by Japanese parent Suzuki Motor Corp. In yet another case, Tata Motors' shareholders had voiced the concern against executive compensation a couple of months ago.

Poor corporate governance standards have been an area of major weakness in India's corporate setup. Dodgy promoter activities continue to haunt India's corporate governance standards. Time and again, many authorities at the company boards have failed to make justice to their positions.

The Indian shareholders have been prone to the whims of knavish promoters. Sometimes they abstain from questioning the management's ulterior motives. And at other times they get suppressed by the red tape prevalent in the system. In a way this fuels the corporate misgovernance that has become widely rampant in India today. And hence the aforesaid cases that have come fore are worth noticing. The growing trend of shareholder activism is quite encouraging. It is undoubtedly the need of the hour. Unlike in the past, shareholders today are quite forthcoming to engage with the company boards to safeguard their investments. They are well-versed with their rights and choose to voice their opinions.

To get better insights into the shareholders' rights, have a glimpse at the following. These are the principles of corporate governance published by the Organization for Economic Co-operation and Development (OECD) and compiled by a leading financial website.

Shareholders have the basic rights to:

  • secure methods of ownership registration and transfer of shares

  • obtain relevant and material information on the company on a timely and regular basis

  • participate and vote in general shareholder meetings

  • elect and remove members of the board

  • share in the profits of the company
In addition to the above, it was also quite heartening to learn that the Securities and Exchange Board of India (SEBI) had decided about an overhaul of its corporate governance code early this year. While the investor community awareness is a welcoming change, regulatory vigilance turning stronger is a good sign too. Moreover, such initiatives are likely to set higher standards of corporate governance and transparency in corporate India. And this expedition to improve the governance practices will prove to be a win-win situation for all. More importantly, it will go a long way in building a strong and competent corporate set-up in India.

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