Corporate Governance Practices of Listed Companies in India

Abstract

With economic liberalization, privatization and globalization, the role of individual investors/ institutional investors in the overall economic development of country has assumed overwhelming importance as the number shareholders both individual and institutional investors become voluminous. Managers are appointed by the owners to manage the company and provide maximum possible return to the shareholders and adhering to the other principle of governance in the society. But empirical evidences revealed that many of the companies, both public and private, failed miserably in the governance aspects so that the gap between owners and management has got widened. Since, 2000 a series of legal and regulatory reforms have been initiated by the India government to transform corporate governance framework and to improve the level of responsibility and accountability of insiders, fairness in the treatment of minority shareholders and stakeholders, board practices, and transparency. In particular, the SEBI has introduced a corporate governance clause in the listing agreement (Clause 49) to address many issues in the corporate governance. However, the financial press is increasingly reporting violations of shareholders rights. Recent events in India have put the spotlight on corporate governance practices of Indian companies. A key aspect that is being debated in the corridors of India incorporations is whether we need major regulatory changes to improve corporate governance, or whether improved standards of corporate governance could be achieved through adoption of principle based standards of conduct. Indian incorporations have generally been proactive in promulgating corporate governance regulations. From a purely regulatory stand point, India favourably with most other developing and Asian economies as far as its corporate governance rules are concerned. But good governance is characterized by a firm commitment and adoption of ethical practices by an organization across its entire value chain and in all of its dealings with a wide group of stakeholders encompassing employees, customers, vendors, regulators and share holders. At this context a study on the "Corporate Governance Practices of Listed Companies in India" is relevant.