Shri Narayana Murthy Committee on Corporate Governance

SEBI constituted a committee on corporate governance in 2002 under the chairmanship of Shri N.R. Narayana Murthy to evaluate the adequacy of existing corporate governance practices and further improve these practices. The committee submitted its report on February 08, 2003. The key recommendations focused on strengthening the responsibilities of audit committees; improving the quality of financial disclosures, including those related to related party transactions and proceeds from initial public offerings; requiring corporate executive boards to assess and disclose business risks in the annual reports of companies; introducing responsibilities on boards to adopt formal codes of conduct; the position of nominee directors; and stockholder approval and improved disclosures relating to compensation paid to non-executive directors.

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The Securities and Exchange Board of India (SEBI) has framed rules to register and regulate stock dealers, share shoppes, and unauthorised stock exchanges under Section 12 of the SEBI Act. These rules are proposed with a view to redressing the grievances of investors in semi-urban and rural areas who have been experiencing difficulties in getting services for disposal of securities or consolidating odd lots. The regulations impose a statutory duty on stock dealers to deal only on a spot delivery basis and issue receipts in a specified form. Additionally, every applicant eligible for grant of a certificate must pay an initial fee of Rs 50,000 to keep the certificate in force. Stock dealers will have to submit information relating to their activities as and when required by SEBI.

Development finance institutions have played a constructive role in establishing India's industrial base. However, these institutions seem to have moved away from their developmental role and are getting entangled deeper in management and control of private sector industries. Corporate circles have been pleading for a re-examination of the role and appointment of nominee directors to avoid day-to-day interference in company operations. Furthermore, some argue that financial institutions should keep their funds rolling by disposing of shares with a ready market. The concept of growth or mutual funds has yet to take root in the country, but such funds could prove successful in mobilising and canalising community savings for industrial development.