Corporate governance norms promote outbound investments

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: March 2003, the Naresh Chandra Committee also recommended various measures to fortify Corporate Governance code. The recommendations had formed part of Companies (Amendment) Bill 2003, but the Bill was withdrawn after numerous objections.

Although some disclosures and transparency are required by the statute, ‘corporate governance’ can never be reduced to a set of rules in the market regulators’ rulebook. It is about attitude towards stakeholders and a sense of equity and fairplay. Large corporate groups in India often have their own corporate governance policies which, in some cases, are much more comprehensive.

In case of small and mid sized companies, not governed by the above regulatory framework, the disclosures are often inadequate.

The issue that arises then is what are the steps that companies must take. It is important to recognise that a corporate governance perspective is more of a culture and a mindset rather than being mandated by law especially in the context of the unlisted Indian acquirer companies where several of the regulations outlined above would not even apply.

Regardless of statutory applicability, having a robust board of directors is important. Having reputed advisors both on an ongoing basis and for the transaction is usually costlier, but is a sign that the acquiring company has inbuilt corporate governance checks.

Employing talented and professional managers, even if the company is family controlled, sends out a strong corporate governance signal particularly in these days of talent crunch. It may be an expensive proposition, but it’s worth it when a company is seeking to make global strides.