India’s aspirational growth of 6-7% in the future highly depends on a large amount of risk capital from domestic investors and a strong corporate governance code, said Kotal Mahindra’s MD, Uday Kotak at a panel discussion on guidelines for corporate governance to India Inc organized by the Confederation of Indian Industry on Friday.
Indians for a long time invested largely in assets like real state or gold and recently the mindset shift came to mutual funds, fixed deposits and equities. The economy today is reversing this change again, he said.
“Return of capital is more important than return on capital. We need more risk capital from not just foreign portfolio investors but also from domestic investors for the growth of start-ups and micro small and medium enterprises in India,” Kotak said.
Governance is not just for public companies or large unlisted companies but also to MSME’s he said, adding that some of their leverage ratios are still in a bad state.
CII on its 13th corporate governance summit held in Mumbai has released a report that recommends a list of 15 new guidelines on corporate governance code ranging from global practices to regulatory policy suggestions for India Inc. The report aims to improve the Indian company’s overall governance standards.
“If India is to move to a leadership position in the global corporate space, business strategies can only be effective if complemented with responsible governance and ethical actions,” said Chandrajit Banerjee, Director General, CII.
Corporate Governance is beyond regulatory compliance and sets the tone of how the Corporate’s board of directors and management deal with shareholders, said Bombay Stock Exchange MD, Ashishkumar Chauhan. “Several committees in India and abroad have discussed, suggested and improved upon previous frameworks of corporate governance,” he said.
As soon as the recommendations become regulations, they become part of compliances. These ever-evolving reform measures create a corporate regulatory environment that promotes business activity, market integrity and investor confidence, especially small investors, he said.
“Independent directors ability to objectively look at risk management is diminishing. Some immunity needs to be provided to them unless there is a wilful case of fraud. Until this is done, people of calibre will be reluctant and fearful of joining boards,” he said,” said HDFC’s Vice Chairman, Keki Mistry.
He also said that a strong whistleblower policy must have checks and balances at every end to ensure there are no mala fide intentions.
Speaking about recent technological innovations like mobile applications; big data and cloud computing, he said technology awareness at the Board level has become indispensable for the growth of the company.
In the year 2018-2019, there were only 12 cases of insider trading that was reported, a drastic decline from what used to be the case earlier, said former SEBI Chairman, U.K. Sinha.
“I/3rd of the global investors check if the corporate is environmentally sustainable before they invest. Thus, corporate India must gauge horizontal trends of global developments and keep up with them to remain globally relevant,” he said.
“Initiative of the Government in decriminalising Companies Act 2013 which will encourage directors to conduct business without the anxiety of adverse repercussions,” said Deloitte India chairman, Shyamak Tata.
There is need to adopt and adapt the changing environment; For third party fiduciary role holders, it is to gauge the undercurrents in the company and for corporate lenders to remain agile and for Regulators to evolve with the changing society, Tata said.