BSE Chairman S Ravi on Wednesday stressed the need for a “stronger” corporate governance framework to ensure efficient functioning and curbing malpractices.

According to him, governance can be strong if the role between functional directors and independent directors of the board is clear.

Kotak panel’s proposals

The BSE Chairman’s comment comes at a time when a number of entities, including Punjab National Bank and Fortis, have come under the regulatory scanner on account of alleged irregularities and lapses pertaining to corporate governance.

With a view to enhance the standards of corporate governance of listed companies in India, a committee was set up under the chairmanship of Uday Kotak in June 2017.

“Many of the recommendations proposed by the committee are good and need to be followed,” Ravi told newspersons on the sidelines of an interactive session organised by the Merchants’ Chamber of Commerce and Industry here on Wednesday.

While some of the recommendations of the committee were accepted without modifications by the SEBI board recently, some were modified and some rejected.

Some of the recommendations that were accepted include reduction in the maximum number of listed entity directorships to eight from 10 by April 1, 2019, and to seven by April 1, 2020; expanding the eligibility criteria for independent directors; enhanced role for the Audit Committee, Nomination and Remuneration Committee, and Risk Management Committee; disclosure of utilisation of funds from QIP and preferential issue; and disclosures of auditor credentials, audit fee, reasons for resignation of auditors, among others.

However, one should be cautious and not get into ‘over-governance’.

“While governance is good, one should be careful about over-governance as compliance comes at a cost,” he said.

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