Thursday, August 30, 2012

Securities and Exchange Board of India

Although extensive reforms have been set in motion by corporate watchdogs like Securities and Exchange Board of India, Company Law Board, et al, in the last few years, there remain significant lapses in its implementation and enforcement. by Manish K. Pandey

There is another school of thought that says one cannot ensure better governance standards merely by tightening the laws or by enhancing them. “In India, the idea of corporate governance is well received; however, its implementation is still a big problem,” says Sai of Chess. Further, India Inc. has had a reactive attitude when it comes to deal with frauds which certainly needs to be changed to a more proactive approach. Even amongst those that do undertake a fraud risk assessment, the focus is more on financial frauds rather than a holistic assessment. No doubt India is said to be better than its Asian counterparts in disclosure practices, but it still has miles to go as far as implementation is concerned.

In fact, SEBI, at several occasions, has come under fire for not having a proper enforcement process, particularly after the Satyam fiasco. In a recent media gathering, when asked about SEBI’s enforcement actions, HDFC Chairman Deepak Parekh, who was appointed as the Chairman of the Satyam board (post fiasco) by the Ministry of Corporate Affairs to clean up the mess stated that still many companies don‘t follow Clause 49 guidelines (it deals with the role of independent directors and assumes that not being related to a promoter or having a direct economic benefit from a firm, makes a director independent), but no action is taken “because there are far too many corporations listed on the exchange and the SEBI staff is too small.” He further stated that the rules are meaningless if there is no enforcement, and to ensure that “SEBI needs to delist some companies, and throw some promoters out. It needs to teach a lesson.” And for that SEBI certainly has to develop draconian teeth just like the US SEC had put in post Enron fiasco. That too very fast... before it gets darker inside India Inc.’s boardrooms.
 

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