"Strong corporate governance indispensable "
New Delhi, Feb 18 : Strong corporate governance in indispensable to resilient and vibrant capital markets is an important instrument of investor protection, said Justice Dilip Raosaheb Deshmukh, Chairman, Company Law Board here.
The principal role of the Board of Directors as representatives of the shareholders is to oversee the function of the organization and ensure that it continues to operate in the best interest of all stakeholders, he said while inaugurating a 2nd national conference on Corporate Compliance - Role of Independent Directors - Issues and Solutions organised here by apex chamber ASSOCHAM.
Deshmukh said the governments and regulators, inter-governmental organizations, non-governmental organizations, financial institutions and companies have taken initiatives to strengthen corporate governance framework to restore investor confidence and the trust in the institutions of business. "There is a tendency to make corporate governance overtly conformance oriented."
"Good corporate governance provides the basis for sound commercial decision making as integral to successful and sustainable corporate performance. Although dimensions of conformance are also widening in each country, good governance demands a strong and creative corporate leadership by the Board of Directors," said Deshmukh.
He said the new companies bill inheres the theme "You must be the change you wish to see in the world" by strengthening regulations for directors.
He also said there has to be an attitudinal shift towards minority Directors on the Board.
"The higher and stringent quantum of penalties proposed in the Bill for defaults and violations in the case of directors also indicate the desire to create a stiff deterrent for corporate misgovernance," said Deshmukh.
Preeti Malhotra, chairperson of ASSOCHAM's committee on corporate governance, said it is widely acknowledged that strengthening the board of directors of a company acts as a sound technique to curb inefficient governance.
"A careful balancing of various aspects like adequate information to directors as well as active participation from them, accountability and competence of promoters may aid in ensuring the corporate governance framework in the country functions effectively," Malhotra said.
She further said that there should also be strict adherence to the implementation of the laws. "The regulator/ stock exchanges also have to be vigilant."