Capital allocation—an ignored factor in corporate governance3 min read 11 Jan 2015, 07:46 PM IST
It serves to put the spotlight on an often ignored area of capital allocation in the context of governance
At a recent event, Anil Singhvi, a director of Institutional Investor Advisory Services Ltd, presented a radical idea. He suggested that instead of shareholders approving the dividend that the board of directors have recommended, company law should require that the board of directors recommend retaining a portion of the profits in the company giving justification for the same and it should be put out for approval by shareholders. In the absence of shareholders approving profit retention, it should be paid out to shareholders by default.
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