In 2017, the SEBI (Securities and Exchange Board of India) panel was reformed by the Kotak Committee on Indian corporate governance. The principles of corporate governance were reviewed by the “Kotak Committee” and recommendations by the governance were made transparent.
Thereby the listed companies in the governance standard were also improved. The suggestion to make changes was mostly in board diversity, board and committee independence, transactions for the related party, and director remuneration among other factors.
The Finance Minister and SEBI are in charge of handling the changes proposed in monitoring the board and implementation of the Company Act 2013 and thereby the SEBI regulations exist in line with international practices. The proposal for the board was with listed companies with at least six directors, with half of the board consist of independent members rather than 1/3.
The confidence of investors to be boosted up was with the use of Independent disclosures as expected and in compliance with the 2013 Companies Act requirement where at least one woman should be on the board in the Kotak Committee. Some challenges faced in the implementation of the 2013 Companies Act in the director’s fiduciary duties, accountability, and perhaps liabilities are: –
- The responsibilities for the Nomination and Compensation/Remuneration Committee to be increased with a scope where the directors require the right set of skills to be serving on the boards.
- The planning and evaluation of CEO succession were with oversight of the board in case of executives.
- One female independent director needs to be employed and it is mandatory for most listed companies.
- In risk management, the board oversight and proactive role in regard to cybersecurity risks.
- The establishment of a corporate social responsibility committee is required so that the company can spend 2 percent of the net profits on CSR- related activities such as environment, social, and governance initiatives.
Source:- Harvard Law.