In search for transparency

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: Jang Hasung is a crusader in his own right — he makes the giant corporations accountable to the minority shareholders and vouches for corporate governance reforms. Jang, a PhD in finance from Wharton and Dean and Professor of Finance, Korea University Business School, got SK Telecom to set up an independent committee to audit its books, and Samsung Electronics to adopt measures to maintain its accounting books. Kiran Yadav tries to understand his philosophy.

You credit failure of corporate governance to the current global financial turmoil and the Asian financial crisis in 1997. Why?

Corporate governance is a system that maintains transparency and accountability to protect interests of stakeholders of corporations. Current crisis is caused by failure of transparency and accountability of investment banks. They were left in grey area of regulations and market watch. They were not subject to either the US Securities and Exchange Commission (SEC) nor Federal Reserve Board (FRB) regulations. What they do in business and how they fund their business, and how they manage risks are totally unknown to outsiders and to markets. It is total failure of corporate governance in these institutions. Same applies to commercial banks who made huge loan to investment banks.

What has been the progress of reforms in the corporate governance?

Since 1997 Asian financial crisis, progress is made mostly in introducing new rules and regulations. That includes India. However, practices have not improved much. It is mostly due to lack of enforcement by regulatory agency. It is also due to lack of capacity and independence of courts and prosecutors.

What is the ideal corporate governance model according to you?

The model each country adopts varies according to its social system and culture. However, fundamental principle is the same. Corporate governance says nothing but that ‘don’t steal someone else's money’, ‘don’t lie to others’. That’s what accountability and transparency means.

What is the key lesson to be learnt from the current global financial turmoil?

Opaque operation in financial sector poses risk not just to shareholders and investors. It poses system risk that inflicts everyone in the society. In a globalised world, problem in one country can be contagious to other countries. Therefore, we need globally concerted regulations to ensure transparency and accountability of financial institutions as well as of corporations.

How does India fare in terms of corporate governance?