Kotak Committee on Corporate Governance
Also called: Kotak Committee, SEBI Kotak Committee 2017 · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
The Kotak Committee was set up by SEBI in June 2017 and chaired by banker Uday Kotak. Its job was to suggest better corporate governance rules for listed companies. Corporate governance means the rules for how a company's board runs the company and answers to its shareholders. The committee looked at independent directors, related-party transactions (deals between a company and its own promoters or group firms), shareholder voting and disclosure. It submitted its report in October 2017.
Its main suggestions for every listed company were:
- at least six directors on the board
- at least one independent woman director
- at least five board meetings a year
- separate people as the non-executive Chairperson and the MD/CEO
In April 2018, SEBI accepted most of the suggestions, some with changes. It ordered the top 500 listed companies to split the Chairperson and MD/CEO roles from 1 April 2020, but that deadline was later pushed back. SEBI rejected the proposal that a director who misses half the board meetings must get shareholder approval, because it clashed with the Companies Act, 2013.
Example
Under these norms, a listed company where the promoter is both Chairperson and Managing Director would have a non-executive Chairperson instead. The board would have at least six directors, including an independent woman director, and would meet at least five times a year. The aim is that one powerful promoter cannot control both the board and the management.
Don't confuse with
- Company Law Committee, 2019: it worked on decriminalising offences under the Companies Act, 2013, meaning minor lapses get penalties instead of criminal trials. It was not about the make-up of company boards.