Presented by:Nelson Monis
“Good governance is integral to the very existence of a company. It inspires and strengthens investor’s confidence by ensuring company’s commitment to higher growth and profits. Corporate governance is nothing more than how a corporation is administered or controlled. Corporate governance takes into consideration company stakeholders as governmental participants, the principle participants being shareholders, company management, and the board of directors. Adjunct participants may include employees and suppliers, partners, customers, governmental and professional organization regulators, and the community in which the corporation has a presence. Because there are so many interested parties, it’s inefficient to allow them to control the company directly. Instead, the corporation operates under a system of regulations that allow stakeholders to have a voice in the corporation commensurate with their stake, yet allow the corporation to continue operating in an efficient manner. Corporate governance also takes into account audit procedures in order to monitor outcomes and how closely they adhere to goals and to motivate the organization as a whole to work toward corporate goals. By using corporate governance procedures wisely and sharing results, a corporation can motivate all stakeholders to work toward the corporation’s goals by demonstrating the benefits, to stakeholders, of the corporation’s success. HISTORY OF CORPORATE GOVERNANCE IN INDIA.
The history of the development of Indian corporate laws has been marked by interesting contrasts. At independence, India inherited one of the world's poorest economies but one which had a factory sector accounting for a tenth of the national product. In terms of corporate laws and financial system, therefore, India emerged far better endowed than most other colonies. The 1956 Companies Act as well as other laws governing the functioning of joint-stock companies and protecting the investors' rights built on this foundation.While corporate governance may not dictate the economic prospects of developing countries, it certainly plays an integral role in shaping them. This Note contains a detailed analysis of the corporate-governance architecture of one such developing country, India, from its independence in 1947 to the present. The results are surprising: India's corporate-governance framework is sophisticated for a developing country. Let’s discuss the concept under two heads. A. PRE-LIBERALIZATION
When India attained independence from British rule in 1947, the country was poor, with an average per-capita annual income under thirty dollars. However, it still possessed sophisticated laws regarding "listing, trading, and settlements." It even had four fully operational stock exchanges. Subsequent laws, such as the 1956 Companies Act, further solidified the rights of investors. In the decades following India's independence from Great Britain, the country turned away from its capitalist past and embraced socialism. The 1951 Industries Act was a step in this direction, requiring "that all industrial units obtain licenses from the central government." The 1956 Industrial Policy Resolution “stipulated that the public sector would dominate the economy." To put this plan into effect, the Indian government created enormous state-owned enterprises, and India steadily moved toward a culture of "corruption, nepotism and inefficiency." As the government took over floundering private enterprises and rejuvenated them, it essentially "converts private bankruptcy to high-cost public debt." One scholar referred to India's economic history as "the institutionalization of inefficiency." B. POST-LIBERALIZATION
In 1999, in a defining moment in India's corporate-governance history, the Indian Parliament created the Securities and Exchange...