In an attempt to regulate information, SEBI discusses corporate governance

The Uday Kotak panel Sebi committee was set up in June to review corporate governance rules since the last such exercise was conducted more than a decade ago. However, given the controversies referred to above, the panel’s deliberations have gained a certain urgency. 

The Uday Kotak panel set up on corporate governance is debating, rules pertaining to the sharing of information with promoters who are not board members. Securities and Exchange Board of India (Sebi) whole-time member S Raman said in an interview. “Corporate governance is always a very evolving subject. A few of the subjects which were in sharp focus in recent controversies.” 

The regulator set up the committee under the chairmanship of Kotak, executive vice-chairman of Kotak Mahindra Bank, to advise it on issues relating to corporate governance. 

“Another question coming up is, should a promoter get information through a company when they are not present on the board,” Raman said. “So the committee is having extensive discussions on this — if there is a way to formalize this kind of information given to the promoters even if they are not representatives of the board. What, how and at what point of time can information be given and with all the paraphernalia surrounding it so it is done properly — it is a grey area.” 

Raman’s comments pertaining to the Kotak panel were general in nature and made no reference to any specific companies.  “If you are a large promoter there is a view that as a matter of right you have to have some information, since you have a sizeable stake. But the other side of the argument is that you’re not a representative of the board. These are very true conflicts,” Raman said.

“This committee has taken it upon itself to examine this grey area and make it black and white and then say this is the information that can be given to promoters even if they aren’t on the board and at what point of time, etc. The important point is establishing an institutional formula through which these kind of issues can be addressed.” 

The panel is also discussing the issue of independent directors, a matter that came up in the boardroom battle in the Tata Group that was sparked by the ouster of Cyrus Mistry as chairman of Tata Sons last year.  “It is not unique to India that independent directors aren’t truly independent,” Raman said. “Throughout the world regulators have been grappling with this issue. This is one of the main subjects the committee is deliberating on.”