Institutional EYE

Commentary on Corporate Governance Issues

Turbulence at Tata Sons: What stakeholders are asking

Tata Sons, while not listed, sits at the apex of the largest business group in India. It enjoys a stellar reputation and is considered the epitome of all that is good and ethical. It sets the tone and tenor that all other Indian companies try follow. And it is in this context, the Tata group needs to be more forthcoming about the recent developments. The abruptness of developments at the Tata group has left stakeholders bewildered. In replacing Cyrus Mistry, the Tata Sons board has asserted its rights and exercised its privilege of appointing and sacking its CEO - irrespective of whether you agree with the decision or not. But, the board has failed to recognize their need to communicate. Thi

Nurturing corporate culture

How often does the board discuss company culture? The Wells Fargo and the Volkswagen incidents highlight the importance of – or rather, the lack of – a corporate culture that put ethical behavior ahead of performance targets. It took a seemingly long time for the board of Wells Fargo, a US Bank, to act on the cross-selling scandal. When they did, they first fell short of what was expected. The board initially meted out a strong rebuke to its chairman and CEO John Stumpf, but did not sack him. The Bank announced Mr. Stumpf had agreed to forgo all unvested equity awarded to him, worth some $41 million (- an action first proposed by Mr Stumpf himself) and not take his 2016 bonus. He was not to

Arundhati Bhattacharya’s unfinished agenda at SBI

The State Bank of India (SBI) is modernizing itself. It is leveraging technology, improving the quality of disclosures in its annual report, and behaving as any market leader should. But, its ability to become a beacon of good corporate governance is being scuttled by the half-century old State Bank of India Act 1955. IiAS believes Arundhati Bhattacharya must focus on getting the State Bank of India Act 1955 changed so that public shareholders enjoy their rights as shareholders in any other company. If she can orchestrate this, it may well become her enduring legacy. State Bank of India, in its current structure, was formed under The State Bank of India Act 1955 (SBI Act). For entities that

Aditya Birla Financial Services – will it benefit from being a Grasim subsidiary?

The Aditya Birla group contends that housing the Aditya Birla group’s financial services business within Grasim will help it leverage a stronger balance sheet. But, without any explicit support from Grasim, it is unlikely to benefit from Grasim’s stronger credit quality. The financial services business has the size to raise capital from the market on its own. Additionally, the Aditya Birla group has been increasing its debt without commensurate increases in revenues and profits – as a result, the group’s overall credit quality may be under pressure over the medium to long term. In August 2016, the Aditya Birla group (AB Group) announced a restructuring plan, in which, as the first step, Adit

Dividends: SEBI mandates a policy

On 8 July 2016, SEBI amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2016, to make it mandatory for the top 500 listed companies to formulate and disclose a dividend distribution policy. In order to help companies through this transition, IiAS has put together a sample template that can be used by boards as a guiding reference for drafting their dividend policies. The template can be accessed by clicking here.

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