I expected more from Sebi panel on corporate governance: M Damodaran

The Securities and Exchange Board of India’s (Sebi’s) expert panel report on corporate governance is good but more could have been done, says M Damodaran, chairman, Excellence Enablers, a governance firm, in an interview to Shrimi Choudhary. The former Sebi chairman says public shareholders would approve high executive salaries if they see merit. Edited excerpts:
 
How would you rate the Sebi panel report on corporate governance?
 
There are a number of good recommendations. However, given the collective wisdom and experience of the committee members, I expected a little more.
 

Railway Minister Piyush Goyal has said the report is “completely off the mark”. Do you agree?

 
Piyush Goyal spoke in his personal capacity, not as a minister. He stated that educational qualifications do not necessarily translate to good corporate leadership. I agree entirely. What the committee has recommended is that qualifications should be disclosed so that shareholders can take a view on the appropriateness of the persons proposed for board membership. They should remember that maturity, wisdom and integrity are the desirable attributes.
 
Do you think the suggestions to make independent directors more accountable would be effective?
 
Independent directors have always been tasked with high responsibilities. Since some seem to have slept on the job, the committee’s recommendations should serve as a good wake-up call. As for disclosing reasons for resignation, the intended purpose will be served only if the right reasons are honestly disclosed.

India Inc is mostly dominated by promoters and run on the ‘raja model’. There are more checks and balances prescribed to curb misuse by promoters, and also on high executive salaries. Do you think such proposals would bring more transparency?
 
It is unfair to paint the entire promoter community with the same brush. Enlightened promoters have already done some of the things the committee has now recommended. On compensation, the committee recommends shareholder approval through a special resolution if it exceeds a limit. If the proposal to pay high salary has merit, the shareholders would have no problem supporting it.

 
The report also talks about reducing government interference in public sector undertakings (PSUs). Do you think the government would accept the proposals?
 
The recommendation that PSU boards should have the freedom to take decisions is most welcome. Functional autonomy is critical for the leadership that boards are expected to provide. It is useful to hope but expect no change overnight.