5.1 Global and National Perspectives

International Standards (OECD, World Bank)

Corporate governance standards have evolved significantly on the global stage, largely influenced by international organizations such as the Organisation for Economic Co-operation and Development (OECD) and the World Bank. These organizations have developed frameworks and guidelines to help countries and corporations establish robust governance practices.

The OECD Principles of Corporate Governance are a set of recommendations that provide a comprehensive framework for good corporate governance. They focus on key areas such as the rights of shareholders, the equitable treatment of shareholders, the role of stakeholders, disclosure and transparency, and the responsibilities of the board. These principles are not legally binding but serve as a benchmark for assessing and improving corporate governance practices worldwide. They emphasize the need for transparent and accountable governance structures to foster economic growth and stability.

The World Bank also plays a crucial role in promoting good governance practices through its various initiatives and assessments. The World Bank often collaborates with national governments to improve regulatory frameworks and corporate governance standards, especially in emerging markets. The focus is on enhancing transparency, accountability, and the protection of shareholder rights, which are critical for attracting investment and promoting economic development.

Regulatory Frameworks in India (Companies Act, SEBI)

In India, corporate governance is primarily regulated by the Companies Act, 2013 and the rules and regulations set forth by the Securities and Exchange Board of India (SEBI). These frameworks are designed to ensure that companies operate transparently and accountability, safeguarding the interests of shareholders and other stakeholders.

The Companies Act, 2013 lays down the legal framework for corporate governance in India. It mandates various provisions related to the composition and functioning of the board of directors, audit committees, independent directors, and other governance mechanisms. For instance, the Act requires companies to appoint independent directors to their boards to ensure that there is an unbiased and objective oversight of management. It also includes provisions for the protection of minority shareholders, the requirement for board committees, and the implementation of a vigil mechanism (whistleblower policy).

SEBI, as the regulatory authority for securities markets in India, has also introduced several regulations to strengthen corporate governance practices. The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, commonly known as LODR, outline the requirements for listed companies regarding disclosure, compliance, and corporate governance. These regulations require companies to provide timely and accurate information to investors, maintain a minimum number of independent directors, and adhere to a code of conduct. SEBI's guidelines are aimed at promoting transparency, protecting investors, and ensuring the fair treatment of all stakeholders.

Last modified: Monday, 21 October 2024, 3:33 PM