Suggesting a facilitative role for Sebi, its international advisory board (IAB) Saturday suggested to the regulator to study migration to fee-based model for robo-based investment advisory and also be “tough but open to innovations” in new areas like crowd-funding. The panel also asked the capital market regulator to ensure performance evaluation for boards of listed companies has to go “beyond a box-ticking exercise” and enable disclosure of the evaluation result with shareholders.
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At its two-day meeting that ended Saturday, the IAB discussed in detail the issues and developments relating to corporate governance and noted that it must help the companies achieve their objectives and implement their corporate strategy while keeping the interest of various stakeholders in mind.
“A matrix of expertise may be introduced to make the board diverse, balanced and in tune with the requirements for effective functioning of the company,” the panel noted.
The observations assume significance in the wake of the recent boardroom battles at some big corporate houses including the Tatas, an issue which was also discussed at Sebi’s board meeting held later today in Jaipur.
The IAB said there has to be transparency in board appointments and removal process and similar requirements need to be prescribed at both stages.
Audit committee should also focus on forward looking risk assessment, in addition to retrospective evaluation. The IAB also deliberated on board evaluation as applicable to listed companies in respect of role of the Nomination and Remuneration Committee (NRC), role of independent directors, evaluation of independent directors, disclosure requirements and the like.
The IAB also took note of the global practices and said the process of evaluation of the performance of board has to go beyond a box-ticking exercise. The process has to be conducive to the growth of the company and can differ from company to company.
“The best evaluation is actually an exercise in self evaluation of the company’s own performance and effectiveness in terms of its mission, financial returns, strategy, business model and social responsibility, and in this context whether the standards expected from the board are being realised,” Sebi said in a statement after IAB meeting.
“It would be a good practice if the result of the evaluation of the board as a whole is disclosed to the shareholders.”