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Journalism of Courage
MUMBAI, OCT 16: The heads of financial institutions FIs, UTI, ICICI and IDBI, have voiced their opinion against certain non-mandatory recommendations of the Birla committee on corporate governance, while agreeing to most of the other recommendations.
In a meeting with the Securities and Exchange Board of India SEBI and Kumar Mangalam Birla committee last night, the FIs strongly protested against a suggestion of the committee disallowing FI nominees on boards of corporates except in the case of a default or potential default.
On the contrary, FIs felt institutional representation on company boards promoted better corporate governance. According to sources present at the meeting yesterday, FIs cited instances where shareholder value was hiked by the presence of institutional nominees. 8220;We are yet to reach international standards of governance where the role of institutions can be done away with,8221; FI sources said.
Given that FIs have large exposures entailing a high credit risk, they felt boardnomination would help take pre-emptive measures. Sources said, 8220;at the macro level, both companies and institutions have to enhance their shareholder value. Hence it is imperative to regularly monitor performance rather than take a seat on the board when the company has defaulted.8221; The Birla committee was of the opinion that presence of institutional representatives on company boards could lead to charges of insider trading.
