Search the Internet          Tips  Sites: Finance, Investment

Sebi plans corporate governance index

Tamal Bandyopadhyay

The Securities and Exchange Board of India is planning to come out with a corporate governance rating index.

The proposed index, first of its kind, is still at a conceptual stage. The objective is to gauge the level of corporate governance in a company.

"The index will be based on three principles: the level of wealth creation by a corporate, the quality of wealth management and sharing of the wealth with all stake- holders," Sebi chairman G N Bajpai said.

"We will discuss the concept with the leading rating agencies of the country. To start with, Sebi itself can fund the project. After all, the aim is to protect the investors and the Sebi's investors' protection fund can be used to develop the index," Bajpai pointed out.

He is keen on developing the index as he feels that the low level of corporate governance is largely responsible for eroding investors' confidence and the present state of the markets.

"We will have to bring the small investors back to the bourses and it is very important that the companies create wealth and share the wealth with all stake holders," he pointed out.

The corporate governance rating index will be the second attempt by the capital market regulator to raise the standard of corporate governance in listed companies.

It had earlier constituted a committee on corporate governance under the chairmanship of Kumar Mangalam Birla and an amendment to the listing agreement was made by incorporating clause 49.

The Kumar Mangalam Birla committee focussed on the quality of disclosures and recommended setting up of an independent audit committee to oversee the financial reporting process of a company among other things.

It also dealt with remuneration of directors and board meeting procedures to bring in more transparency and recommended that a separate section on corporate governance should be attached to the annual report with a detailed compliance report.

A recent survey of global rating Standard & Poor's has not shown the Indian corporates in poor light.

In the run up to the launch of its corporate governance rating, S&P undertook a "transparency & disclosure survey" covering 40 markets and representing about 70 per cent of the world's tradable market capitalisation.

Powered by

ALSO READ:
The SEBI Story
The Rediff Budget Special
The Rediff-Business Standard Special
Money

Tell us what you think of this report