Sebi Chairman U K Sinha stresses on the need for better governance practices at listed companies
New Delhi : Stressing on a need for better governance practices at listed companies, Sebi Chairman U K Sinha said things are changing for good and shareholder meetings should not be like a “chai and samosa party”. Sinha gave credit for this change to growing activism of institutional investors, stronger regulations and an improved surveillance mechanism at Sebi, while asking independent directors to act like “an extended arm of the regulator” when companies discuss business matters in their board meetings.
The Sebi chief also asserted that the onus needs to be put more on the promoters or the top executives, rather than the companies as a whole, when it comes to penalties. Speaking at a session on ‘Improving Board Effectiveness’ during a KPMG event, Sinha said that positive changes are also been seen at board meetings where compensation proposals for top executives are being rejected almost on a regular basis — a trend which was “unheard of” till about 4-5 years ago.
He also rejected the criticism that regulators were becoming activists and praised the institutional investors for adopting an effective activism to put shareholder proposals for proper discussions.
“Many people even didn’t go to attend board meetings and it was granted that it (their renominations) was going to happen. In fact the general meetings of corporates of India were mainly a ‘chai and samosa’ party,” he added.
“There is an alliance now of institutional investors and activists. Previously this alliance did not exist and because of that even if there were some murmurs… It was not proven to be effective. Now, in countries after countries this alliance is proving its worth and they are proving they can be effective,” Sinha said.