Clause 49: Redefining corporate governance in India

The capital markets watchdog, the Securities and Exchange Board of India (SEBI), constituted a committee in 2002 under Mr. NR Narayana Murthy, Chief Mentor of Infosys Technologies to look into how Clause 49 of the listing agreement (that companies have to sign when they list in a stock exchange in India) could be changed to align corporate governance practices in India with global standards and investors’ interests.

Raghuvir Mukherji is a Senior Consultant with the Financial Securities team of the Domain Competency Group of Infosys Technologies Ltd, Bangalore, India. He can be reached at raghuvir_mukherji@infosys.com.

Perhaps taking a cue from the then recently passed Sarbanes Oxley Act, and some very visionary recommendations made by an earlier committee constituted under Mr. Kumaramangalam Birla, a leading industrialist (in 1999) on corporate governance, the Narayana Murthy committee gave its recommendations. The reason why this is in the news now, is because after numerous postponements, this clause has finally taken effect from 1 January, 2006 and companies will have to show compliance with it when they submit their quarterly filings in April 2006.