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Institutional investors input to new India governance recommendations

White paper on shareholder rights and audit issued by Asian Corporate Governance Association

A year on from January 2009’s accounting fraud at Satyam, the Indian software company, the Asian Corporate Governance Association has published a white paper with a raft of proposed corporate governance reforms in the country. The ACGA White Paper on Corporate Governance in India – the first initiative of its kind – was produced with input from a number of the world’s largest pension fund managers including the California Public Employees’ Retirement System (CalPERS) Ontario Teachers’ Pension Plan, PGGM Investments, F&C Asset Management and Hermes Fund Managers. The report says critical corporate governance areas still need to be addressed in India, despite noting that the regulator has tightened up corporate governance over the past decade on issues such as independent company directors and disclosure and accounting standards. Further necessary reforms, it says, include better corporate disclosure and governance of the audit profession. Following the 2009 accounting fraud at Satyam, questions were raised by investors over the quality of the company audit. Other standards improvements raised by the report include greater accountability of controlling shareholders and theregulation of related party transactions and preferential share warrants. On share voting, the report recommends that the quality, transparency and reliability of shareholder meeting agendas be improved and published at least 28 days before the meetings. Agenda and explanatory notes should be posted on company websites and those of India’s exchanges with a ten-year AGM and EGM archive. The report also recommends that the Securities and Exchange Board of India encourage the top 100 listed companies in India to start
voting by poll as soon as possible. It encourages Indian companies to allow proxies to speak at shareholder meetings, irrespective of whether company law is amended on this point.
On corporate reporting and audits, the report says all companies should be required to produce audited annual results within three months of the year-end, and their full annual report within four, or at most five, months. It says listed should be encouraged to provide both cash-flow statements and balance sheets with their quarterly reports. The report also calls for an independent Indian audit regulator.
Link to the report: ACGA White Paper on Corporate Governance in India

Indian corporate governance is one of the discussion topics at RI’s forthcoming Sustainable Emerging Markets conference: Link to conference programme