Corporate Governance And Performance: Expectations And Realities

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: Corporate governance received a major fillip with the publication of the OECD principles in 1999, which was preceded by the CACG principles in 1998 that were the outcome of the earlier initiatives and the international concern for corporate collapses, capital market development, systemic risks and economic growth. The principles and recommendations of various committees acknowledge the importance of the Boards of Directors in directing and controlling the corporation, especially the publicly-listed ones.

The focus has been to ensure a structure and a system that will enable the boards to be independent of management; exercise due care and diligence in carrying out their responsibilities and be accountable to the shareholders at large.

There is convergence in thinking that corporate governance must assure equitable treatment of shareholders, uphold shareholder rights, have adequate disclosure and transparency and make boards responsible.

Popular Expectations
It is assumed that a good board, a transparent system, proper accounting, reporting and disclosure practices and protection of shareholder rights and stakeholder interests will ensure the success of company and save it from potential risks of collapse. It is against this background that the company laws, the stock exchange rules as well as the accounting and secretarial standards have been undergoing a major reform. Such reform and conformity with global standards are being considered important from the perspective of developing equity markets as well.

Thus improved corporate governance standards are claimed to be pave the way for attracting international finance as also to improve domestic investor confidence and the related channelling of savings into the capital markets. Such flow it is expected will in turn spur economic growth and the resultant social benefits.

Annual reports and policy statements have started resounding the concern for corporate governance and the hope that improved governance will be reflected in better shareholder value. The virtues and benefits of corporate governance have been further asserted with the now popular findings of McKinsey.