This seems like season for advisory boards or panels. A fortnight ago, Zee Entertainment Enterprises unveiled a three-member independent advisory committee, aimed at restoring shareholders’ confidence. Similarly, Paytm, responding to regulatory action by the RBI, announced a fortnight ago the formation of a three-member group advisory committee. This committee will collaborate closely with the board to bolster compliance and regulatory measures, with the option of inducting additional members if required.

While it’s true that lapses and mishaps can occur in compliance and governance, genuine efforts to address these issues must stem from a commitment to rectify past mistakes and prevent future ones. However, if these lapses are a result of deliberate actions or arrogance on the part of promoters, mere formation of advisory panels cannot serve as a substitute for accountability. In such cases, severe action is warranted not only to send a clear message to the errant parties but also to set a precedent for the entire sector.

Take ownership

Core compliance and corporate governance are best upheld by the boards of companies, as they are entrusted with the primary responsibility of steering corporate governance. Timely and proactive action by the boards is crucial in maintaining trust and confidence among shareholders, investors, and the wider community. Therefore, rather than relying solely on external advisory committees, boards must take ownership of core compliance and governance functions.

When faced with a loss of trust and faith, promoters cannot simply resort to forming advisory panels as a quick fix for addressing problems or crises, nor can they use it as a sympathy card to portray efforts towards building governance or compliance.

The willingness of individuals with established reputation and experience to join non-accountable advisory panels raises eyebrows and invites scrutiny. While there could be various motivations behind such decisions, including personal connections or lucrative financial incentives with minimal legal or regulatory risk, it also reflects a calculated trade-off. Are these experts truly lending their expertise, or are they simply cashing in on their reputation at a premium during times of crisis? However, this practice raises concerns about the integrity and effectiveness of such advisory mechanisms, as well as the broader implications for corporate accountability and governance.

During times of peace within a company, when there are no imminent crises or regulatory challenges, one would expect corporate boards or promoters to actively engage such talented experts by inviting them onto their boards or seeking their advisory input. However, the reluctance to do so raises questions about the prevailing corporate culture and mindset. Perhaps there is a tendency to prioritise maintaining the status quo rather than proactively seeking diverse perspectives and expertise. Additionally, there may be concerns about relinquishing control or facing uncomfortable scrutiny from independent voices.

The formation of advisory panels during a crisis should not serve as a shield to deter regulatory actions, as they risk becoming nothing more than a mere ‘optical illusion’. While these panels may be touted as a proactive measure to address issues and restore trust, they should not overshadow the need for concrete regulatory scrutiny and accountability.

Regulatory bodies must remain vigilant and ensure that any lapses in compliance or governance are met with appropriate action, irrespective of the formation of advisory panels. Failure to do so undermines the integrity of regulatory oversight and perpetuates a culture of impunity within the corporate sector. True accountability can only be achieved through robust regulatory enforcement and transparent governance practices, rather than through the creation of illusionary advisory structures.

The writer is a policy researcher and corporate advisor