Board Structure & SEBI

In my earlier posting dated Nov 28,2006,I had written that according to the current understanding of governance, while board’s fiduciary duty must be appreciated, oversight on behalf of other constituencies makes their role much wider.With this background, I would like to raise a question on the SEBI’s prerogative or authority to recommend the structure of the board of directors.As we are awre, Clause 49 stipulates the structure of the board based on whether the Chairman is full-time or part-time.(The very basis for deciding the structure depending on whether the Chairman is full-time or part-time is flawed as it doesn’t affect the power equation in any family managed company when the Chairman-usually a family member- changes from full-time to part-time, but that is not the point of discussion here).SEBI’s role on Corporate Governance shall commence only when a company goes to the capital market for funds.But, if one agrees to the contention that governance encompasses a number of constituencies in addition to the shareholders, any corporate entity, whether unlisted,listed,or delisted will have to honour the governance responsibilities.Hence, won’t it be better for regulatory bodies like Company Law Board to prescribe the structure of the board?SEBI, as market regulator, should actually be concerned about “what” is being reprted rather than “who” reports.The role of the market regulator is to energize the market forces(like proveders of equity/debt) to get the board/company implement good governance practices by empowering them by offering necessary developmental efforts.