Corporate Governance: An Emerging Scenario

Abstract

Beginning with a brief review of the major developments in the field of corporate governance especially during the last decade, this paper identifies some of the major challenges that hinder good corporate governance, which broadly fall under three groups - board independence and effectiveness, shareholder protection, and credible gate keeping. The authors offer major recommendations in each of these areas, such as introducing quorum requirements for board meetings that would ensure the presence and participation of a majority of independent directors; approving key decisions only if a majority of independent directors affirmatively vote in favour; accepting the mid-term resignations of directors only by shareholders to whom such directors are answerable; preventing shareholders from voting on those resolutions where they are beneficially impacted to the exclusion of other shareholders (at general meetings); separating the disciplinary function of professional bodies over their members from their other functions; enhancing audit fees according to perceived value rather than criteria such as time and effort (which are adopted currently); and ensuring not only basic mandates but also their compliance on pain of punitive action for breach, whether the defaulters are in the private or public sector (the last being the responsibility of market regulators). The implementation of these recommendations would help to strengthen India’s standing as a desirable and acceptable investment destination.

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