Corporate Governance in India - Mechanisms and Key Issues

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CORPORATE GOVERNANCE IN INDIA: MECHANISMS & KEY ISSUES
Author
Mr. Kiran J. Patel
Assistant Professor, V. M. Patel College of Management Studies, Ganpat University, Kherva (North Gujarat). India
E-mail: kjp01@ganpatuniversity.ac.in, Mo.: 099249 29070

Co-Author
Mr. Siddharth Raval
Assistant Professor, V.M. Patel College of Management Studies, Ganpat University, Kherva (North Gujarat). India
E-mail: srr01@ganpatuniversity.ac.in, Mo.: 098242 22989

Co-Author
Mr. Vipul A. Patel
MBA (Pharma) Student, Centre for Management Studies,
Ganpat University, Ahmedabad. India
E-mail: vipullogat0@yahoo.co.in, Mo.: 080006 60251

ABSTRACT:
The paper portrays about the existing Codes of Corporate Governance (CG) in India. Corporate Governance has become a buzz word in the corporate sector. It has emerged as a means of corporate excellence and driving force for attaining greater performance, maximizing the wealth of stakeholder and corporate values. Corporate Governance problems in India are very different from that of the US or the UK, where the issue is essentially that of disciplining the management, who have ceased to be effectively accountable to their owners. Lack of adequate governance of Indian corporate has been cited in the popular press, in academic debates and in some committee reports as one of the primary reasons for under-performance of companies and the growing disinterest of the small investor in corporate financing. The paper uses secondary data for analyzing the adaptability of CG codes in the Indian context. The secondary were collected through various published and unpublished reports, websites, journals, magazines, etc. The paper reveals that India has a good CG mechanism and disclosure practices on par with world counterparts. KEY WORDS:

Codes of Corporate Governance, Corporate Values, Corporate Excellence, India, Stakeholder value, CG mechanism.

“CORPORATE GOVERNANCE IN INDIA: MECHANISMS & KEY ISSUES” INTRODUCTION:
In recent years, corporate governance has attained significance all over the world because of the integration & globalization of financial markets and a surge of corporate scandals such as World Com, Enron and others. The combined GDP of BRIC countries (Brazil, Russia, India and China), have emerged as an influential economic power in the global economy, is likely to be higher than that of developed countries. Amongst the BRIC economies, India has the potential to grow the fastest over the next 30-50 years (Wilson & Purushothaman, 2003). Foreign investments in India come directly and through secondary markets. The cumulative foreign direct investment (FDI) to India until August 2010, was US $137,960 million (RBI Bulletin, 2010). In Indian Capital Market, foreign institutional investors have made substantial investments of $4.78 billion in November 2010 alone and a total investment of $ 38 billion until March 2011. Foreign institutional investors are insisting that Indian Companies follow international best practices with an emphasis on corporate governance. As per McKinsey Survey 2002, investors were willing to pay a premium upto 25% for a well governed company (Barton, Coombes, & Wong, 2004). The scandals related to the Indian markets (Goswami, 2002), the global financial crisis of 2008 and the more recent corporate fraud at Satyam has raised a lot of concerns about governance practices in India. As a result, there has been an increasing effort around corporate governance structures and apparatus by both regulators and corporations. CONCEPT OF CORPORATE GOVERNANCE:

Corporate governance is “the system by which companies are directed and controlled” (Cadbury Committee, 1992). It involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders; it deals with prevention or mitigation of the conflict of interests of stakeholders (Goergen, Marc. 2012). The way of mitigating or preventing these conflicts of interests...
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