Sebi approves new corporate governance code
Market regulator Securities and Exchange Board of India (Sebi) on Thursday approved a new corporate governance code aimed at improving transparency and disclosure standards of listed companies in India.
Providing more clarity on how Indian companies are run is part of the government's agenda to attract retail investors back into stocks. These investors have been heavy sellers since 2008 because of lack of trust in India's volatile markets.
The changes, due to come into effect from October 1, would make it mandatory for companies to put in place a whistleblower policy, which would establish a process through which employees can report to management concerns about unethical behaviour, or suspected fraud or violation of the company's code of conduct or ethics policy.
The code also requires companies to disclose how they decide remuneration for their top management.
It also puts restrictions on the maximum number of boards that one individual would be allowed to sit on and also makes it mandatory for at least one woman to be represented on a company's board of directors.
The rules are in line with India's new companies law that was ratified last year and was designed to enhance shareholder rights.
Sebi has stepped up its rules to protect small investors as well as to reduce the power held by so-called "promoters" of a company, or key stakeholders who have a disproportionate say on management appointments and day-to-day operations.
Last year, Sebi asked stock exchanges to beef up their compliance departments to ensure that companies make proper disclosures of market sensitive information, while a new insider trading law is also in the works.
Also on Thursday, Sebi proposed new measures aimed at helping India's mutual funds industry, including higher tax incentives for equity funds and a proposal to allow India's state-owned pension fund to channel money into mutual funds.
India's domestic equity funds have seen net redemptions of Rs 31,014 crore since April 2008.
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