Compliance to Clause 49 improves investors’ perception: FICCI

Compliance to Clause 49 and the quality of disclosures have improved the investors’ perception about companies in India, FICCI said in a study.

According to FICCI-Grant Thornton report on Corporate Governance review of mid-market listed companies in India reveals that 84 per cent of the companies feel compliance to Clause 49 and the quality of disclosures have improved the investors’ perception about them. Clause 49 is the over-arching legal provision in relation to corporate governance.

It provides a framework with respect to rules and composition of a Board and its committees, disclosure of information like the level of activism shown by Directors in the affairs of the company, regulation of the auditors, internal controls and risk management.

Another key positive trend that emerges out of the review is that 24 per cent respondents complied even with the non-mandatory provisions of Clause 49.

This is a significant indicator of developments to come as compliance to non-mandatory provisions not only helps in better corporate governance but makes adoption of these standards easier as and when they get regulatory back up, it said.

One such example is the provision of whistle-blower policy that is proposed to be made mandatory by the new Companies’ Bill, it said.

Investor community echoed an equally strong voice in favour of a robust corporate governance system with an overwhelming majority of 90 per cent agreeing to the importance of corporate governance while making an investment decision, it said.

As a matter of fact, 78 per cent of the investors said corporate governance related issues were as important as financial ratios while considering a potential investment, it said.

However, 89 per cent of the investors felt that quality of information provided by companies was of reasonably good quality and was relied upon by them in making decisions about their investments, it added.

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