Insider trading one of key concerns of shareholders: Survey

Insider trading remains one of the biggest concerns of minority shareholders, shows a survey.

According to the Corporate Governance Survey 2020 conducted by LocalCircles, 82% of the individual shareholders believed that insider trading was prevalent in publicly listed companies in India.

The survey found that 66% individual shareholders believed insider trading in public companies takes place through friends, family or agents of the beneficiary.

The top three concerns of the individual shareholders of publicly traded companies are accounting for fraud, selling of company assets without the knowledge of shareholders and insider trading, according to the survey.

The survey found that with respect to the perception of independent directors, 79% of the individual shareholders believed that the constitution of the board of directors of most Indian corporates is tilted towards promoters as many independent directors are not really independent. Also, 65% of the shareholders believed that independent directors in public-traded Indian companies are not acting to protect the interest of minority shareholders.

The survey report said, “One of the other concerns raised by common shareholders in the public discussions is that of the paper directors that is independent directors at publicly traded corporations who exist merely on papers and who get their retainer fee while participating in just a few of the board meetings and many times just skipping them altogether.”

If corporate governance of Indian companies improves, it will most definitely attract an increasing number of foreign institutional investors into Indian markets, the survey states.