In the backdrop of the passage of the new Companies Act, SEBI Chairman U.K. Sinha underscored the market regulator’s attempts to soon roll out new corporate governance norms for listed companies.

Addressing the CII summit on Corporate Governance on Friday, Sinha said: “SEBI would try to work in sync with the Companies Act. But for listed companies, if we are going to do something over and above what is mentioned in the Companies Act for the interest of corporate governance for large corporates, it will be after consultation from all.”

“We have already placed the document for consultation and our consultation is almost over. It has been there since January and we are now going to promulgate our rules very soon,” he said while declining to state a clear timeline for the same.

SEBI’s corporate governance paper had made suggestions on enhancing the role of institutional investors by asking them to define a clear voting policy, giving more powers to independent directors and putting curbs on related-party transactions by companies.

‘Realign’ According to Sinha, of the companies listed on the stock exchanges, more than 1,100 are not compliant with Section 40A of the listing agreement stipulating minimum public shareholding requirement. Moreover, over 900 companies are not compliant with Clause 49, which provides that independent directors should constitute a third of the company’s board.

“If action is taken in these cases we would be not just within our rights but also doing the right thing,” he cautioned. He urged corporates to realign their traditional stance on corporate governance in order to reflect the new emerging change of social and political movements gaining strength in India and the rest of the world that were giving voice to previously excluded sections of the population.

“In corporations too, those sections who didn’t have a voice earlier or had their voices taken for granted, will play an important role now. Alliances are also building up between institutional investors and activists and these alliances will get more and more powerful. So, doing business, as far as corporate governance and shareholder voice is concerned, in the same way as we have been doing in the past in India, must go,” he added.

Commenting on the changing expectations of corporate governance from companies in India and rising shareholder activism, Sinha said: “We had instances where the AGMs of corporations were counted as a nuisance but the old practice of chai, samosa and alarm clock as a gift in an AGM is no longer valid.

“People are not going to be satisfied with what gift you give and what tea you give. People are going to ask very difficult questions. This demand has further been exacerbated because of certain actions taken by corporations themselves in India and whole world.”

“The earlier presumption in a democratic set-up, especially in India, was that once you are voted for five years you will be there and nobody will question you. Now since in the larger society and political system things such as Right to Reject and Right to Recall are being implemented, it is only a matter of time before these principles are applied to corporates as well,” he added.

In spirit too Urging corporates to follow corporate governance norms not just in letter but also in spirit, Sinha said, there was also a need to align these rules with the best in the world as there are many corporates already working outside India in a multinational environment or have aspirations to do so. “Now we not only have the problems of foreign guidelines and standards but also issues of extra territoriality of foreign laws. We have to cope with that,” he added.