An Enquiry into Compliance of Corporate Governance Codes by the Private Sector Indian Companies

Abstract

In line with the international trend SEBI has promulgated clause 49 (and later on revised clause 49) in the form of Corporate Governance (CG) Codes for the listed Indian Companies. The present study attempts to find out the degree of compliance of the CG codes by private sector Indian companies listed in BSE. Data regarding 1245 companies for the year 2004-2005 are taken for the present study. Data have been collected from the CG report (which is included in Annual Report) of these companies. 21 codes (19 mandatory and 2 non-mandatory) have been selected for study. Compliance rate of CG codes has been first tested individual company-wise. Further, mean compliance rate (taking into account all the companies under the study) and the variation among the companies from the mean compliance rate have also been tested. It is observed that more than 70% of the sample companies comply with 80% or more of the codes. In respect of code-wise compliance rate, the compliance rate is greater than 80% in respect of 17 codes. Almost all the companies have compliance rate which is significant even at 1% level. The grand compliance rate is significantly greater than of variation of compliance is significantly less than 18.77% at 1% level.

Keywords: Corporate Governance codes, clause 49, revised clause 49, compliance rate