Time, economic conditions, pressure of high expectations and the tax department may have taken a toll on his image, but there was a time when NR Narayana Murthy not only walked the talk on good governance but showed how committees can function differently
In 2003, I had the privilege of being a part of the Narayana Murthy Committee on Corporate Governance set up by the Securities and Exchange Board of India (SEBI). The committee made some tough recommendations, many of which have now become a part of the ‘voluntary’ code prescribed by the ministry of corporate affairs. The recommendations agitated corporate India, notably Ratan Tata, who dashed off an angry letter to the Confederation of India Industry (CII), saying that the committee was going too far with its demand for disclosures. But it didn’t make much of a difference to the report, because the process was flawless and democratic. It is another matter that corporate lobbying succeeded in ensuring that many of the recommendations were dropped; in fact there was so much anger that SEBI, as an independent regulator, was forced to send the report to the then finance secretary for approval before putting it out on its website for discussion.
It is worth revisiting what Mr Murthy did in 2003 to ensure that a significant report was completed in just three sittings (plus an additional one to review some recommendations following Ratan Tata’s angry letter). Here are excerpts from a speech that I made at the CII’s national conference in Delhi in 2003 where I addressed unnecessary anger of corporate India about the report and outlined the process that was followed.
It is important to remember why the committee was set up in the first place. In 2003, just after the Ketan Parekh scam corporate India was exploiting the freedom granted by liberalised laws to exploit shareholders. As I said that day, the best of corporate groups (among the top 50) had short-changed investors—especially during mergers and takeovers; independence of directors had been exposed as a sham after they remained silent about rampant insider trading and illegality by companies; top corporate houses were found indulging in price manipulation and insider trading. And almost every merger/acquisition exploited the loopholes provided by Section 391 of the Companies Act (or the scheme of arrangement via the high court route) to short-change retail investors. Hence the decision to revisit good governance norms.
CII’s main objection to Narayana Murthy Committee’s recommendation was that independent directors should step down from the board after three terms of three years each. (Something that Mr Murthy himself has forgotten with respect to his two key independent directors Omkar Goswami and Deepak Satwalekar). At the conference itself, we saw JJ Irani, otherwise a highly regarded Tata director making absurd statements like “directors began to make the best contribution only after they have been on the board for 20 odd years”. This was at a time when the most countries (Bill Clinton in the US, Tony Blair in UK and Valdamir Putin were ruling the world’s most powerful countries in their ’40s or ’50s).
A senior Tata director R Gopalakrishnan was on the committee. Why did he or the CII and FICCI representatives on the committee not protest? Well, because as the committee chairman Mr Murthy had put in place a process that was democratic and flawless. Here is how he completed the work in just three sittings.
* Mr Murthy wrote to every member, including four investor representatives asking for a two-page note on the key governance issues that needed to be addressed. His own office collated the submissions (some industry representatives, used to long-drawn deliberations did not bother to participate) into 75 key issues. This eliminated the usual round of opinions and speeches that usually happen on day one of any new committee meeting.
Each committee member was then asked to rate each of the 75 issues on a scale of 1 to 10, on the following parameters:
Importance: is the issue important enough?
Fairness: Does the report enhance fairness?
Accountability: Will it make companies more accountable?
Transparency: Will it increase transparency?
Ease of implementation: Is it easy to implement?
Verifiability: Is the recommendation verifiable?
Enforceability: Is it enforceable?
The submissions were again processed by Infosys – or rather Sumant Chidambi of Progeon—and aggregated. Only those issues that scored more than 50 marks were taken up for discussion at the second meeting. These were issues that received high ratings from a majority of members.
The result? All extreme views were eliminated leaving a smaller set of issues that the committee deliberated. Even here, every point was decided by a vote. For instance, the debate on the term of independent directors started with a demand that independent directors must change every three to five years. Finally, the majority decision by vote settled for three terms of three years, to be applied prospectively.
SEBI itself was pushing its own agenda for introducing good governance ratings—which probably was its reason for setting up the committee. But that too was outvoted.
Muthy’s commonsensical and businesslike approach was never followed before or after that committee, as far as I know. In fact, the endless talkfests at most committee meetings ensure that only those with the hidden agenda succeed while the rest keep talking.
Sadly, pretty soon after that Mr Murthy forgot the report and accepted the NDTV directorship, even though he knew he couldn’t attend a single meeting in the first year.
(See: Corporate Governance: Convenience Rules with Infy Too)
A close above 5,885 on the Nifty tomorrow can reverse the downtrend
The weak rupee and a sell-off in metal stocks following CBI action saw the market declining over 1.5% today. A close above 5,885 on the Nifty tomorrow can reverse the downtrend. The National Stock Exchange (NSE) recorded a volume of 66.40 crore shares and advance-decline ratio of 301:1063.
The Indian market opened lower on worries as the rupee hit a new all-time low. Unsupportive cues from the Asian markets also weighed on investor sentiment. Meanwhile, US markets closed flat in overnight trade even as ratings agency Standard & Poor’s revised US’ sovereign credit outlook to stable from negative.
The Nifty opened 29 points lower at 5,549 and the Sensex resumed trade at 19,382, down 59 points from its previous close. The benchmarks hit their intraday high in initial trade itself on support from IT and technology stocks as the declining rupee brightened their prospects.
The gains were short-lived as the market soon continued its southbound journey on selling in metal, healthcare, realty and power sectors. The rupee the rupee on Tuesday fell by a whopping 74 paise to hit a new all-time low of 58.90 in the late morning trade on persistent dollar demand from importers and banks as well as heavy capital outflows amid weak local equities.
The market continued its decline and touched its low in noon trade on selling pressure from metal, realty, consumer durables, power and banking stocks. The Nifty fell to 5,780 and the Sensex declined to 19,121 at their respective lows.
The benchmarks made a feeble recovery attempt after touching their lows but selling pressure kept the market range-bound in the negative terrain.
The impact of the weakness in the rupee was seen on the consumer durables sector which was the lop today while the metal sector declined after the CBI filed fresh cases against Navin Jindal and his company Jindal Steel & Power and former minister of state for coal Dasari Rao in the coal block allocation scam.
The market finally closed near the lows of the day with the Nifty declining 89 points (1.52%) to 5,789 and the Sensex settling at 19,143, a drop of 298 points (1.53%).
Among the broader indices, the BSE Mid-cap index declined 1.60% and the BSE Small-cap index dropped 1.82%.
All sectoral indices closed in the red today. The main losers were BSE Consumer Durables (down 6.36%); BSE Metal (down 4.13%); BSE Realty (down 3.68%); BSE Bankex (down 2.24%) and BSE Power (down 2.07%).
Out of the 30 stocks on the Sensex, five settled higher. The gainers were Cipla (up 1.90%); Bajaj Auto (up 0.83%); Wipro (up 0.69%); Coal India (up 0.39%) and Hindustan Unilever (up 0.30%). The major losers were Jindal Steel & Power (down 15.18%); Hindalco Industries (down 5.97%); Tata Power (down 5.87%); ONGC (down 3.91%) and ICICI Bank (down 3.75%).
The top two A Group gainers on the BSE were—Satyam Computer Services (up 4.17%) and Tech Mahindra (up 2.91%).
The top two A Group losers on the BSE were—JSPL (down 15.18%) and JSW Energy (down 11.16%).
The top two B Group gainers on the BSE were—Saboo Sodium Chloro (up 20%) and Best & Crompton Engineering (up 19.73%).
The top two B Group losers on the BSE were—Capital First (down 19.52%) and MVL (down 19.51%).
Of the 50 stocks on the Nifty, 11 ended in the in the green. The main gainers were Ambuja Cement Company (up 1.85%); Cipla (up 1.84%); Bajaj Auto (up 1.01%); GAIL India (up 0.61%) and Ranbaxy Laboratories (up 0.57%).The major losers were JSPL (down 15.25%); Hindalco Ind (down 6.31%); Tata Power (down 6.10%); DLF (down 4.23%) and ONGC (down 4.02%).
Markets in Asia settled in the negative as the Bank of Japan declined from making any announcement to ease the recent market volatility. A sell-off in other markets in the region led to the overall decline.
The Shanghai Composite declined 1.39%; the Hang Seng fell 1.20%; the Jakarta Composite tanked 3.50%; the KLSE Composite fell 0.46%; the Nikkei 225 dropped 1.45%; the Straits Times declined 0.94%; the Seoul Composite lost 0.62% and the Taiwan Weighted settled 0.54% lower.
At the time of writing, the key European markets were down between 1.51% and 1.54% as the German constitutional court started a two-day hearing into the legality of the ECB's bond-buying program. At the same time, the US stock futures were in the red, indicating a lower opening for US stock later in the day.
Back home, institutional investors were net sellers in the equities segment on Monday. While FIIs pulled out Rs114 crore, DIIs withdrew Rs69.75 crore from stocks.
Adani Group-owned Adani Ports and Special Economic Zone (APSEZ) has raised Rs1000 crore through institutional placements, thereby reducing the promoter shareholding in the company from 77% earlier to 75% now, confirming to SEBI norms on promoter holding. The stock declined 1.86% to Rs148 on the NSE.
JK Paper, a JK Singhania Group company, is set to commission its Rs1,700-crore expansion project in Rayagada, Odisha by August as it gears up to consolidate its speciality paper business. The expansion project, which adds a capacity of 1.65 lakh tonnes of paper a year, and pulping capacity of 2.15 lakh tonnes, will enable the company to augment Rs800-Rs850 crore in revenues in a full year of operation. The stock fell 0.69% to close at Rs28.80 on the NSE.
IL&FS Engineering Services has bagged a Rs266.50-crore construction order from Rapid Metro Rail-Gurgaon (Phase II) project. The contract involves construction of single and double track elevated viaduct for the metro project in Gurgaon from its special purpose vehicle formed for its implementation and is expected to be completed in 24 months. The stock declined 1.71% to settle at Rs31.70 on the NSE.
VC Shukla, a close associate of late Sanjay Gandhi, not only cut power supply to printing presses but also used to monitor almost each and every story printed during his stint as I&B minister during the Emergency
Veteran Congress leader Vidya Charan (VC) Shukla on Tuesday died of the injuries he had suffered in a Maoist attack in Chhattisgarh on 25th May. Shukla, who held several portfolios in the Union cabinet, was better known as the man who imposed press censorship during the Emergency (1975-77) with zeal.
Shukla sustained severe bullet injuries when nexalites attacked a Congress rally in Chhattisgarh. He was airlifted from Raipur and admitted in the Gurgaon hospital a day after the attack that eliminated almost all the top leaders from Chhattisgarh Congress.
Maoists had ambushed a convoy of Congress leaders in Chhattisgarh’s Bastar district on 25th May, killing 27 people including PCC chief Nand Kumar Patel, his son Dinesh, senior Congress leader Mahendra Karma and ex-MLA Uday Mudaliyar and injuring Shukla and 36 others.
As minister for information and broadcasting, Shukla not only cut power supply to printing presses but also used to monitor almost each and every story printed. During Emergency, he even reportedly, banned famous singer Kishore Kumar from All India Radio (AIR) and Doordarshan, for refusing to sing at a Congress rally in Mumbai.
Shukla belonged to a powerful family of politicians. His father Pt Ravishankar Shukla was a lawyer, freedom fighter and also first chief minister of reorganised Madhya Pradesh. Shyama Charan, the brother of VC Shukla was chief minister of Madhya Pradesh for three times.
VC, himself held several portfolios in the Union cabinet including communications, home, defence, finance, planning, information & broadcasting, civil supplies, external affairs, parliamentary affairs and water resources.
He won nine consecutive elections since his first election in 1957 from Mahasamund constituency as the youngest member of Parliament (MP) at that time.
When Indira Gandhi became prime minister in 1966, she chose him as a minister in her Cabinet. Shukla was also very close to Sanjay Gandhi. It was said, that following poor coverage of Indira Gandhi's rally at Boat Club on 20 June 1975, Sanjay Gandhi removed Inder Kumar Gujral and appointed Shukla as minister of I&B.
Shukla, due to his closeness with Sanjay Gandhi, took on the press and went on to become famous (or infamous) due to his zeal to gag media.