Enforcing Corporate Governance In India

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: As corporate governance regulations pile on greater responsibility on ‘independent directors’, it is time to question whether meaningful corporate governance reform could really be forced on companies. At a recent seminar, Indian Merchants Chamber president, Shailesh Haribhakti, said that on many of the boards that he serves, companies have made great strides in putting in place independent structures and better systems. He may be right, but good governance is tested only when there is dissent or a difference of opinion. Consider this latest US experience.

On November 30, Roy Edward Disney, nephew of the founder of Walt Disney & Co, resigned from the board, slamming its chairman, Michael D Eisner, for muzzling dissent on the board and other failings. On December 1, his friend and investment advisor, Stanley Gold, also submitted a blistering resignation letter that ripped Disney directors for “using corporate governance as a shield to protect Mr Eisner”. Disney, who was chairman of the Feature Animation Division and vice-chairman of the board of directors, accuses Eisner of driving “a wedge between me and those I work with” and asking his associates to report back his conversations. He accuses Eisner of trying to oust him from the board and “effectively muzzling” his voice just as he did with another director, “Andrea Van de Kamp last year”.

Saluting Eisner’s leadership in the first decade of his 19 years at Walt Disney, Roy said that he was “no longer the best person” to run the company. He believes that Walt Disney had “lost its focus, its creative energy, and its heritage” after the death of Frank Wells in 1994.

Eisner’s failings, according to Disney, include: A big drop in ratings of ABC Prime Time; a creative brain drain; ‘consistent micro-management of everyone’ leading to a ‘loss of morale’; timidity of investments in Disney’s theme park business; creating the perception among stakeholders that Disney is a rapacious company, always looking for a “quick buck”; absence of succession planning and failure to build “constructive relationships with creative partners, especially Pixar, Miramax, and the cable companies distributing our products”.