It seems India might be headed towards large-scale corporate governance ratings of its corporations. In a consultation paper published in January, the Securities and Exchange Board of India (SEBI) had been seeking views on the governance requirements for listed companies. One of the proposed measures was that in order to strengthen monitoring, SEBI will consider the corporate governance rating of companies by credit rating firms, and inspections by stock exchanges and other agencies.
Yesterday, at a press conference, the Institute of Company Secretaries of India (ICSI) announced that it was planning to launch a corporate governance rating model, to be developed by a 6-member committee in the near future. While the SEBI consultation paper envisions credit rating agencies to carry out the assessments, ICSI plans to appeal to SEBI to also allow other entities to conduct ratings.
The article in Hindu Business Online also explains that the committee has already designated two types of ratings of the model: India Mandatory and ICSI Desirable. India Mandatory will be given to companies who comply with India’s mandatory corporate governance requirements in their entirety. Since one might imagine that this should be the vast majority of companies, ICSI Desirable offers companies a chance for distinction. According to the president of ICSI, this rating will be awarded to companies going beyond mandatory requirements. How far above or what kind of best practices a company needs to follow to obtain such a rating has not been specified yet. Clarification should be offered upon conclusion of the work of the committee.