Sebi panel on governance may suggest sweeping changes

24-member body to submit its report this week

A panel on corporate governance, set up by the Securities and Exchange Board of India (Sebi), is expected to recommend sweeping changes to the current framework governing listed companies.

According to sources, the panel, in its report to be given this week, is likely to recommend a host of stringent measures, widening the roles and responsibilities of board members to curb governance violations.

Several unique governance-related issues have come to the fore after recent boardroom battles such as one between Ratan Tata and Cyrus Mistry, who was ousted as chairman of Tata Sons, as also the one between the management at Infosys and its founders and promoters. The expert panel did a detailed study of both of the cases.

Among the major recommendations, the panel might ask the regulator to bring in clear demarcation on information-sharing with promoters who are not part of the board of a company. The panel would suggest formalising the information given to the promoters, even if they are not representatives of the board. It may also suggest what, how and at what point of time the information could be given. Other important recommendations will likely be on the role and appointment of independent directors. Sources said the panel might seek wider participation by independent directors who are "gatekeepers for investors", which would be one of the key highlights of the report.

The panel could give its views on whether the appointment of independent directors will be in control of the company's board. The report would also highlight the contentions and concerns which have been raised on the evaluation of the company performance by an independent entity, especially in case of state-run entities.

Besides, the panel would bat for greater accountability for auditors in red-flagging discrepancies found in listed companies. Sources say the panel may suggest barring and taking action against auditors who fail to spot or advertently ignore crises.

The role of auditors has come under the scanner after a Reserve Bank of India (RBI) report showed huge divergence in actual non-performing assets and those disclosed by some private banks.

The panel could also recommend bifurcation of the post of chairman and managing director (CMD) in listed companies to enhance governance standards. Also, suggest splitting the roles of the CMD at listed companies, to prevent a conflict of interest arising out of the same person playing the two roles.

Sebi, in June, had constituted the 24-member committee under chairmanship of Uday Kotak, executive vice-chairman and managing director of Kotak Mahindra Bank, to improve standards of corporate governance at listed firms.