Opinion | Sebi and sensibility

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Large Indian companies have two more years to meet corporate governance norms that require them to separate the positions of chairman and managing director. This is something they were finding difficult to comply with. The change of mind by the Securities and Exchange Board of India (Sebi) less than three months before the original deadline reflects an acceptance of the predominantly family-held business culture of the country.

Putting some distance between shareholder interests and those of the executive management is considered a mark of good governance. Yet, it may not be feasible when there is a shortage of boardroom talent. Asking entrepreneur promoters to hand over the company reins to professional managers can be fraught with trouble, as recent high-profile boardroom battles in some of India’s most vaunted companies bear out.

In any case, externally imposed governance criteria are unlikely to be as robust as what companies evolve for themselves. Shareholders, on their part, can push for better management oversight without assistance from India’s securities regulator. Progressive Indian companies do strive to attain global best practices. These practices have, however, emerged in mature markets, where entrepreneurial and managerial skills are relatively abundant, and where shareholder democracy is far better established. Bootstrapping India Inc to acceptable levels of ethical behaviour needs a calibrated approach, and Sebi’s attempt may have been a case of overreach. As long as they know where they need to get, Indian companies should be cut some slack on their reform schedule. With business conditions as tough as they are, they need to focus on performance right now.



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