No compromise on governance norms, Sebi tells India Inc

More power to small shareholders on appointment of directors, CEO pay; woman director, whistle-blower mechanism a must on listed firms

Unperturbed by intense lobbying by industry, capital markets regulator Sebi has said that listed companies must follow higher corporate governance standards and there will be no dilution to the new norms kicking in from next month.

At the same time, the regulator's doors are open if firms want to discuss any apprehensions they might have and those can be resolved in the meantime to help them adapt to the new regulations, Sebi Chairman U K Sinha said.

He made it clear however that there can be no compromise on safeguarding the interest of investors, saying that this was of paramount importance in the new corporate governance norms coming to effect from October 1.

Among others, the new regulations give more powers to minority shareholders on various issues such as related party transactions, appointment of directors and CEO salaries, while listed companies would also have to mandatorily appoint a woman director and put in place whistle-blower mechanism.

Many of these provisions are common to those provided in the new Companies Act, while Sebi has decided to keep the bar higher for listed companies in terms of corporate governance.

A consultation process was launched by Sebi for the new norms way back in January 2013 and final norms were proposed after taking into account the comments from public and various stakeholders. However, the regulator is now being criticised in some quarters for being harsher vis-a-vis listed companies.

"New companies law was enacted in October 2013, but now there is lobbying from corporate India that Sebi is working like an activist. One comment from some very responsible section was that Sebi is acting like a dragon. These things are going on and on," Sinha told PTI in an interview.

He also brushed aside the perception that harsher norms would result in companies leaving Indian markets and said that the regulations were still less stricter in India as compared to many developed countries.

"So when people say that we have become a dragon and they threaten us we will go out of India, I would like to ask them which part of the world they want to go. In fact, we are little behind of what the developed world is doing," the Sebi chief said.

"But, I must also add that there are corporates who are willingly adopting the new norms and privately many have told that what you (Sebi) are doing is right," Sinha said.

He said that Sebi follows a consultation-process for every new norms and the corporates have always been a major stakeholder in such deliberations.

"So my answer to this thing (lobbying against new norms) is that Sebi came out with a consultation paper, which was there for more than a year. Secondly, we have consulted retail investors, investors bodies, analysts and journalists, among others and we have engaged industry bodies of the corporates on more than one occasion... After that we have come out with the final norms," he said.