Game-changing governance set to reshape Indian corporate culture

Posted
24 April, 2019

Whilst game-changing governance is set to reshape the Indian corporate culture, impetus should
also be on making the culture effective and ethical, finds IR Magazine’s Andrew Holt

It’s not hyperbole to say that 2018 was a corporate governance game-changer for India. It was
the year the securities regulator, the Securities and Exchange Board of India (Sebi), rubber-
stamped a number of recommendations made by the Kotak Committee on corporate
governance, and gave these recommendations the regulatory clout they needed.

And from April 1 many of these changes started to apply, with all listed companies required to
ensure their implementation. The amendments cover the whole gamut of modern corporate
governance, with a focus on the board of directors and a strong emphasis on independence,
diversity and transparency.

Corporate reporting is an essential and inseparable part of corporate governance and SEBI has
encouraged the adoption of integrated reporting to reflect the broadening role of the board and
the resources and relationships they are stewards of. Its adoption is also a response to
increasing demands by investors for insights into an organization’s strategy, governance,
performance and prospects. Over recent years, over 30 of India’s leading businesses have
moved to produce an integrated report.

Deepak Balwani, associate vice president of investor relations at chemical manufacturer Deepak
Fertilisers and Petrochemicals Corporation, tells IR Magazine that he feels the changes to
corporate governance will prove beneficial to the Indian financial marketplace.
‘I am confident the new set of corporate governance rules will deal with large issues – with
industry expectations to synchronize various rules under various acts, guidelines, Sebi
requirements and standards – and act as a catalyst in increasing the wave of investor activism in
India,’ he says.

It does, however, present a challenging environment for Indian Investor Relation Officers (IRO).
‘With institutional investors focusing more on ESG-compliant companies, the IRO has to play a
significant role in such a challenging environment – to manage internal, as well as external,
expectations,’ notes Balwani.

Balwani added that given the growing number of reporting frameworks and standards, there
needed to be a more unified approach to reporting globally. The importance of an effective and ethical corporate culture also plays a central role in the whole governance narrative for Sandeep Mahindroo, head of investor relations at tech and consulting multinational Infosys.

‘The onus should be on companies to think about governance rather than regulators imposing it
or investors seeking for it,’ he tells IR Magazine. ‘Governance is how a company lives and
operates on a day-to-day basis. It reflects the value system of a firm. Governance standards
need to become more proactive in adoption [by companies] rather than imposed by regulators.’

At the same time, the governance push can be a balancing act, as governance should not stifle
the work of corporates, observes Mahindroo: ‘It is important to have a high level of governance.
But it shouldn’t reach such a point that it starts to constrain the business. Higher governance
standards are broadly welcome up to a certain level – beyond which they should be weighed
against the costs of compliance.’

This will come from a change of mindset in Indian corporate culture, which recognizes the
broader drivers of value in a business, beyond the financials. These ideas are beginning to take
hold in the market, with integrated reporting – which is based on the concept of breaking down
silos and driving integrated thinking – playing a key role.

These issues and more will be explored further at the IR Magazine Forum – India: Investor
relations trends and best practices.

Join the debate here.