Sebi to consider new corporate governance code tomorrow

Capital markets regulator Sebi will tomorrow consider a proposal for new corporate governance code for listed companies and their top executives, among other issues.

 

The new corporate governance code would require listed companies to justify high executive salaries, put in place an orderly succession plan, adopt a whistle-blower policy for employees and limit the number of directorship a person can hold on company boards.

 

Various other measures to safeguard the interest of minority shareholders are also part of the proposed norms.

 

These norms, along with an overhaul of nearly two decade-old insider trading norms, would be taken up by the Securities and Exchange Board of India (Sebi) in its board meet tomorrow, scheduled to take place in Delhi.

 

Under the proposed norms on insider trading many new categories of persons, including public servants, regulatory officials, judiciary and government officials, dealing with unpublished price-sensitive information, are being brought under the purview of insider trading.

 

At the same time, new norms would also seek to clearly differentiate between 'innocent mistakes' and genuine transactions of company executives from the unlawful and serious trading offences.

 

Besides, to help the mutual fund industry create more understanding and better positioning of products amongst investors, the market regulator will also consider a long-term policy for mutual funds, in its meeting tomorrow.

 

Other issues likely to be discussed include additional fund-raising avenues in capital markets, including through real estate and infrastructure investment trusts. A final decision on these fronts, however, is expected only after the government decides on tax treatment for such instruments.

 

The new corporate governance code is being put in place after taking into account public comments to draft corporate governance norms released by Sebi earlier this year as well as the related provisions in the new Companies Act, 2013,

 

The draft norms were issued in January 2013 which also seek to grant greater oversight by minority shareholders and independent directors and check any unjustifiable payments to related parties.

 

It is also proposed to introduce a new concept of 'Corporate Governance Rating' by independent agencies to monitor the level of compliance by the listed companies, in addition to regular inspection by Sebi and stock exchanges.

 

The new norms also talk about a greater alignment of CEO salaries with the performance and goals of the company, as also mandatory disclosure of ratio of remuneration paid to the each of their directors and their median staff salary. Similar provisions have been made in the new Companies Act.