Approach:

Introduction: Mention the recent context of NSE.

Body: Discuss some issues related to working culture and then suggest some steps.

Conclusion: Discuss the significance of ensuring better corporate governance.

Answer:

The National Stock Exchange (NSE) scam of 2022(arrest of Former CEO of NSE) revealed the managerial misconduct on their board. It put a red pen on the corporate governance of stock exchanges.

Issues:

• Performance-driven culture in corporate leads to ignoring considerations of equity or fairness. In the last decade, the stock market developed a lot so other aspects related to favouritism were considered forgivable infirmity.
• Nepotism and loyalty-based culture with less focus on integrity. Selection of board members is by top management (In India mostly by promoters). Difficult to raise red flags against those who selected a member.
• Culture of complicity as Incentive among board members to nod heads and ignore wrongdoings in face of lucrative perks. Members raising issues are side-lined as problematic members.

Suggestions:

• Allow top management to choose not more than 50 percent of independent directors. Rest should be chosen from other stakeholders, such directors should be accountable to these stakeholders, not management.
• Provisions for the penalisation of errant directors through instruments like financial penalties, removal provisions etc.
• Accountability of regulators themselves through periodic audits and evaluation.
• Ensure more public scrutiny of internal governance of such regulators as NSE.
• Interaction of industry stakeholders and creating awareness that focus on fairness and equity is crucial to ensure good performance in the long run.

With better corporate governance norms, we can ensure less volatility in markets and better financial stability to help ensure a good image of the Indian corporate sector, and more investments and thus move towards a five trillion-dollar economy.