At present, LIC has representations on boards of only 73 companies out the 123 companies it has invested in
GN Bureau | October 21, 2013
With a view to ensuring protection of shareholders’ rights, the government has directed Life Insurance Corporation (LIC), which has investments in over 100 companies, to appoint nominees on boards of all those companies in which it has significant investment.
According to a report in The Economic Times, state-run LIC has investments in 123 companies out of which at present, it has representation on boards of only 73 of them. The government is of the view that given the poor business scenario, managements tend to overlook shareholder interests to continue making profits. The government thus, wants LIC to have representation on as many company boards as possible so as to voice out concerns of shareholders when decisions are taken on key policies and actions.
"LIC, having invested equity and extended debt, is a major shareholder. It has to maintain the highest standards of corporate governance. There is no other way of doing it but by being on the board," Rajiv Takru, secretary, department of financial services, told ET. "This assumes importance especially in the current stressed business environment because LIC has to look after the interest of its stakeholders," said Takru, who is also on LIC’s board.
The insurer is in the process of reviewing the performance of directors it has nominated in various companies and it is also looking at appointing nominees on boards of around 50 companies. "We are looking at whether LIC's nominee directors on the boards have done their job well and if we find that their performance is not satisfactory, they will be changed," Takru added.
Till recently, corporate governance was not given adequate importance in the country. The move is amongst a series of other measures that the government has undertaken to enhance the corporate governance standards in the country. Also, the new Companies Act is a major step in that direction.
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