Sebi should implement recos than wait for Cos Bill: SES

Market regulator Sebi has called for overhauling the corporate governance norms for listed companies. In a discussion paper, Sebi has proposed several key changes including curbs on what it calls unjustifiable CEO pay and more stringent norms for appointing independent directors. JN Gupta, founder and managing director, Stakeholders Empowerment Services shares his views on the discussion paper.

Q: This is in a way Securities and Exchange Board of India (SEBI) aligning itself to what the new companies bill, which is still pending in one house of parliament, attempts to do. It is also Sebi's way of perhaps aligning corporate governance norms in India to best international practices. Do you think that a lot of this is practical? A lot of this is warranted at this point in time. Or do you think that this is may be to extreme and too heavy handed?

A: I must congratulate the Sebi for putting such a path breaking paper. If all the recommendations are implemented, the level of corporate governance in Indian companies would, if not best, be atleast at par with the best in the world. Whether they will be practical or not it depends upon the intention of the regulator, because at present this concept paper has been put in the public domain for comments. It is upto Sebi to see how strongly they feel about the implemention of the recommendations.

Secondly, this is a pro-active approach of Sebi, because rather than waiting for the companies bill to be passed by both houses and then being enacted, they have taken a pro-active action. They should implement all those recommendations which are practical before waiting for the companies bill.

However, there should be some provision for transition, because today if you say that the listing limit is changed, then from tomorrow itself, the company will not be able to comply with this. Three months or six months transit time should be given to them.

Q: Sebi is discussing that independent directors should be appointed by minority shareholders. Do you see that facing significant opposition from corporate India?

A: There will be significant opposition from corporate India and I myself am not in agreement with this for the simple reason that you cannot take away the rights of the majority. The second thing is, if the independent directors are truly independent, it will not matter whether they are appointed by majority or minority. So, rather than focusing on how they are appointed, the focus should be to make sure and make an independent director accountable for their independence. Then, no matter whether X appoints or Y appoints or whether they are source from my friend or your friend, it is immaterial as long as they are independent.