Question
Download Solution PDFComprehension
Read the following passage carefully, and answer the questions.
Securities and Exchange Board of India (SEBI) in 1999 set up a committee under Shri Kumar Mangalam Birla, member SEBI Board, to promote and raise the standards of good corporate governance. The primary objective of the committee was to view corporate governance from the perspective of the investors and shareholders and to prepare a 'Code' to suit the Indian corporate environment.
The mandatory recommendations apply to the listed companies with paid up share capital of Rs. 3 crore and above. The composition of board of directors should be a combination of executive and non-executive directors. Audit committee should contain 3 independent directors with one having financial and accounting knowledge. The Board should hold at least 4 meetings in a year with a maximum gap of 4 months between 2 meetings to review operational plans, capital budgets, quarterly results, minutes of committee's meeting. The director shall not be member of more than 10 committee and shall not act as chairman of more than 5 committees across all companies.
The non-mandatory recommendations were to apply to all the listed private and public sector companies, their directors, management, employees and professionals associated with such companies. The committee recognizes that compliance with the recommendations would involve restructuring the existing boards of companies. It also recognizes that smaller ones will have difficulty in immediately complying with these conditions.
The Kumar Mangalam Birla Committee report is on:
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is Corporate Governance
Key Points
- Kumar Mangalam Birla Committee focused on Corporate Governance:
- The passage clearly states that SEBI set up the committee to promote and raise the standards of good corporate governance.
- The committee's objective was to develop a code tailored to the Indian corporate environment, ensuring accountability, transparency, and investor protection within corporate structures.
- Corporate governance involves a set of systems, principles, and processes by which companies are directed and controlled to enhance stakeholder trust and long-term value.
- For financial enterprises, sound corporate governance ensures operational integrity, promotes investor confidence, and mitigates risk by improving oversight and decision-making structures.
Additional Information
- Investors' Protection:
- Although investor protection is an indirect goal, the report's direct and central theme was governance frameworks, not specific laws or measures focused solely on protecting investors’ rights.
- Investors and Shareholders Awareness:
- This is inaccurate because the committee's mandate was not about conducting awareness campaigns or educational efforts for investors, but about improving the governance mechanisms within companies.
- SEBI Guidelines on Market Operations:
- This option refers to the broader regulatory functions of SEBI concerning market conduct, trading mechanisms, etc. The Birla Committee’s focus was limited to governance issues within companies, not operational market guidelines.