Distinct blur in corp gov between letter, spirit: Sebi chief

Sebi Chairman Ajay Tyagi today said there is a "distinct blur" in letter and spirit when it comes to corporate governance even though the practices are likely to stand scrutiny of the law.
Listing out instances of corporate misdoings in different parts of the world, he said "our own jurisdiction has also been marred by various corporate scandals".
"These range from suppression of information to selective sharing of information to falsification of accounts to other aspects of misgovernance such as poor board evaluation and inequitable executive compensation," Tyagi said without taking names.
Speaking at a corporate governance summit here, the Sebi chief said the scandals of Enron, Parmalat and WorldCom shook investor confidence and spurred governance reforms in the past decade.

He said that unfortunately while jurisdictions across have tried to address the challenges posed by such scandals, the instances of misfeasance and misgovernance have also seen an evolution of sorts.
Observing that there has been a spurt in cases that has brought into question the efficacy of corporate governance norms, Tyagi said cases of undue suppression of information from the shareholders "like the recent Volkswagen emission case, or cases of deliberately falsifying data from customers like the very recent Kobe Steel scandal in Japan have shaken investor confidence".

According to him, there have also been cases of differential treatment to different classes of shareholders like Snapchat and Facebook and cases of over-inflating profits by companies like Toshiba.

"There have been many more similar cases like the Takata Airbag recall issue due to which the governance practices of even reputed companies have come under the scanner," he added.
Closer home, Tyagi said, if one takes a deeper dive into the happenings in the corporate world, it becomes immediately apparent that "our own jurisdiction has also been marred by various corporate scandals".
Without citing any particular instance, the Sebi chief said that he is persuaded to "see a distinct blur in letter and spirit" with regard to the corporate governance practices followed by many companies.
Further, he said companies do follow rules and regulations, and if their governance practices are put to test, they will likely stand scrutiny of the law.

"... however, if one delves deeper, one could find that while the letter of the law may have been complied with, the spirit of regulations has not necessarily been embraced wholeheartedly," Tyagi said.
He was speaking at the summit organised by corporate governance advisory firm Excellence Enablers founded by former Sebi chairman M Damodaran.