T N Ninan: Off-balance sheet

T N Ninan: Off-balance sheet: "The Enron scandal in the US was facilitated by off-balance sheet items — transactions and entities that were not disclosed to shareholders. The build-up to the US financial collapse of 2008 also saw banks taking large transactions and risks off the publicly reported books, and tucking them away in unreported corners where regulators and shareholders could not get a peep. Many similar scams have been possible only because companies created entities and accounts that were used to indulge in unreported transactions, and to create hidden assets and liabilities. The question is whether the same thing has been happening in India."

SEBI to disallow interested shareholders in voting on special resolution on related party transaction

To protect small and diversified shareholders in listed companies from abusive related party transactions, SEBI to recommend  Ministry of Corporate Affairs to  disallow interested shareholders from voting on the special resolution of the prescribed related party transaction.
This view was taken based on the learning from the investigation in the matter of Satyam Computer Services Limited.

It's time for Indian companies to act more ethically | Nishika Patel | Global development | guardian.co.uk

It's time for Indian companies to act more ethically | Nishika Patel | Global development | guardian.co.uk: "The global economic fallout and mounting concern with sustainable growth and climate change has spawned a new breed of ethical investors. They are urging companies to report on the environmental and social costs of their operations and improve corporate governance. 'One of the root causes of the global economic crisis was a lack of transparency, investor greed and poor corporate governance … How companies report, how they tell us about the risk in their company both financial and non-financial is the solution,' said Jane Diplock, chairwoman of the International Organisation of Securities Commissions, speaking at the Responsible Investment conference in Mumbai in January."

Indian corporate needs Public Company Accounting Oversight Board

In United States to protect the interests of investors, Stock Exchange Commission (SEC) has mandated that all Certified Public Accountants (CPA) should register with Public Company Accounting Oversight Board               ( PCAOB) as per Sarbanes-Oxley Act of 2002 (SOX) if they wish to audit of public companies. PCAOB oversee the audit of public companies that are subject to the securities laws, establish audit report standards and rules, investigate, inspect and enforce compliance relating to registered public accounting firms, associated persons, and the obligations and liabilities of accountants.

Securities Exchange Board of India (SEBI) also should follow US Stock Exchange Commission and setup similar board to oversee the audit of public companies in India so that frauds like of Satyam Computers can be minimised

Corporate Governance Watch 2010

Corporate governance standards have improved over the past decade, but

even the best Asian markets remain far from international best practice.

Regulators make it too easy for companies to get away with box-ticking.

Markets still lack effective rules on fundamentals such as independent

directors and audit committees. Not enough has been invested to make best

practices work. Meanwhile, most institutional investors are yet to invest

sufficiently in voting, engagement or stewardship. Rather than use the global

financial crisis as a platform to push reform forward, governments have taken

a complacent view, happy that the crisis this time did not start in Asia

Phil Armstrong at 10 th ICSI National Award for Excellence in Corporate Governance

Crises such as Satyam compromise India’s promising and enduring economic outlook. Because it

exposes fundamental areas of concern that are important to foreign investors and capital markets.

Issues such as: 3

• the relationship between controlling and minority shareholders particularly in family owned

or controlled companies

• related party transactions and its proper regulation

• quality of financial disclosure

• the role of promoters

• independent oversight of the Indian accounting profession

• limited activism of domestic institutional investors, and

• issues of director independence and board effectiveness.

: Amendments to the Equity Listing Agreement

In line with the objective of enhancing the quality of disclosures made by listed entities, it

has been decided to effect certain amendments to the Equity Listing Agreement (“the

LA”) with respect to various continuous disclosures made by listed entities.

2. The full text of amendments to be effected in the LA is given in the Annexure hereto. A

gist of the said amendments is as follows:-

(I) Amendments to Clause 35 – Disclosure relating to shareholding pattern

(a) Disclosure of shareholding pattern prior to listing of securities

Entities which seek listing of their securities post-IPO shall mandatorily submit their

shareholding pattern as per Clause 35 of the LA one day prior to the date of listing,

in order to ensure public dissemination of updated shareholding pattern. The stock

exchanges shall upload the same on their websites before commencement of

trading in the said securities.

Poor performance by A2Z Maintenance & Engineering Services IPO on listing

Poor performance by  A2Z Maintenance & Engineering Services IPO on listing 

Indian stock market "Warren Buffett " Rakesh Jhunjhunwala invested Company A2Z Maintenance & Engineering Services IPO down 18 percent on day of listing. company issued shares to public at Rs. 400 a share of which 4%(out of 21 percent) were offloaded by Rakesh. He invested in the company in 2006 at Rs 14 a share

Press Information Bureau English Releases

Press Information Bureau English Releases: "Corporate Governance

The National Foundation of Corporate Governance (NFCG) has been expanded so as to make its membership more broad based and to enable it to function as the national apex platform on corporate governance issues. In order to raise the bar of corporate governance practices in the Indian corporate sector, the Ministry had released Voluntary Guidelines on Corporate Governance in December last year which highlighted some of the issues related to independent directors, audit, compensation to directors etc. Keeping in view the adoption of these guidelines and the feedback from stakeholders, the Ministry is considering incorporation of some of the features in the Companies Bill itself"

Good governance creates value | mydigitalfc.com

Good governance creates value | mydigitalfc.com: "It was two years ago, on a cold winter morning that India woke up to one of the most shocking revelations; in an open letter, the promoter of Satyam seemed to have confessed to one of corporate In­dia’s largest fraud. Two years later, investigations still continue but there seems to be no result and the saga continues. Satyam almost heralded the beginning of the scam saga of India as the past two years seem overcast with corruption and scandals of all kinds. All this has left us questioning the credibility of every single institution of India, including corporate India, the media and judiciary. Where this recent investigation will end is anybody’s guess. What is it that makes India so prone to corruption? There is no deterrent to corruption in India. The corrupt simply get away too easily."

The Idea Of A “Professional” Independent Director

The Idea Of

A “Professional”

Independent Director

http://www.sid.org.sg/uploads/bulletin_sub/documents/406_The%20Idea%20of%20A%20Professional%20ID.pdf

The Big Idea: The Case for Professional Boards - Harvard Business Review

The Big Idea: The Case for Professional Boards - Harvard Business Review: "When the world’s largest financial institutions had to be rescued from insolvency in 2008 by massive injections of governmental assistance, many blamed corporate boards for a lack of oversight. This was a problem we had supposedly solved nearly a decade ago, when blatant failures of corporate governance (remember Enron?) prompted Congress to pass the Sarbanes-Oxley Act. The new rules had seemed promising. The majority of a board’s directors had to be independent, which would, in theory, better protect shareholders. Senior executives were required to conduct annual assessments of their internal controls for review by external auditors, whose work would be further reviewed by a quasi-governmental oversight board.

The recent financial meltdown, however, has made it clear that the new rules were insufficient. Most major financial institutions in 2008 were more than compliant with SOX. Indeed, at the banks that collapsed, 80% of the board members were independent, as were all members of their audit, compensation, and nominating committees. All the firms had evaluated their internal controls yearly, and the 2007 reports from their external auditors showed no material weaknesses in those controls. But that didn’t stop the failures."

SEBI tightens promoter norms - The Economic Times

SEBI tightens promoter norms - The Economic Times: "The capital markets regulator, Securities and Exchange Board of India (SEBI) has made some significant changes in the capital market regulations. It has tightened the framework for preferential allotment of shares to promoters' groups to prevent misuse of preferential allotments, warrants, and convertibles to manipulate share prices.

If a promoter or a promoter group fails to exercise warrants they have previously subscribed to, equity shares, convertibles or warrants cannot be issued for one year from the date of expiry of the currency or cancellation of the warrants. The promoter and the promoter group are also ineligible for preferential allotment if it has sold shares in the previous six months. This has been a long-standing demand from investor protection groups."

Poor Corporate Governance at Birla Power Solution Ltd.

Promoters sold shares in open market at high price and now buying through preferential warrant issue at lower price 

Birla Power Solutions Ltd. is issuing equity share warrants of around 21 crores  to its promoters on preferential basis at average one week market price (present market price is around Rupees 1.25) . with this promoters share holding in the company will go up to 12.76 percent (at present 4.04 percent )

As per Bombay stock exchange data  in march 2010 Promoter  share holding in the company was was at 10.02 percent and at the end of September  quarter 2010 they reduced it to 4.04 percent. in the month of march shares were quoting  at Rupees 3.50  and now present market price is at Rupees 1.25 

promoters have sold their stake at 3.50 and now they are making preferential allotment to them at around at rupee 1.25

Is this justifiable on part of promoters ? 

Is Security Exchange Board of India is watching ?

Corporate governance at stake at Hero Honda Motors

Corporate governance at stake
Is it right on the part of Hero Honda promoters (Munjals) to buy out 26 percent stake of Honda  in Hero Honda motors (JV) at more than 30 percent discount to market price and increasing royalty payment to Honda  for technology