Professional Documents
Culture Documents
CORPORATE GOVERNANCE
PRACTICES
IN
SUBMITTED TO:
SUBMITTED BY:
PUNEET KUMAR
TABLE OF CONTENTS
Acknowledgement
Abbreviations used
India
ACKNOWLEDGMENT
Corporations around the world are increasing recognizing that sustained growth of their
organization requires cooperation of all stakeholders, which requires adherence to the
best corporate governance practices. In this regard, the management needs to act as
trustees of the shareholders at large and prevent asymmetry of benefits between various
sections of shareholders, especially between the owner-managers and the rest of the
shareholders.
PART I: INDIA
An Introduction
During the last decade, there has been a sustained effort on the part of the Indian
regulators to strengthen corporate governance norms. This been strongly influenced by
developments that occurred in other parts of the world, particularly the Sarbanes-Oxley
Act in the U.S. and the Cadbury Committee Report in the U.K.
• The broad features of the Indian corporate governance norms have been
transplanted from other jurisdictions such as the U.S. and U.K. that follow the
Anglo American Model of corporate governance
Global era of corporate governance was triggered by the developed countries way back
in 1950. The evolution of the Anglo American Model which has been a keen
inspiration for the norms developed in India is till date searching for the most
appropriate answer for the question “The conflict between who runs and who owns
public companies” i.e. Ownership & Management. The following timeline indicates
the emphasis on various aspects of Management:-
Indian Evolution
The Indian corporate governance can be broadly classified in two era’s i.e.
Pre -1991 – Companies Act 1956
Post -1992 – Desirable Code of Corporate Governance (CII – 1998)
During this era, the focus was predominantly on the manufacturing sector. The prevalent
license-raj and industrial capacity quota system ensured that only a few businesses
thrived. This led to the growth of certain business families and industrial groups that held
large chunks of capital in even publicly listed companies. Finance was essentially
available only through banking channels (as opposed to the capital markets). The banks
and development financial institutions took up large shareholdings in companies and
also nominated directors on boards of such companies. During this era, due to
concentrated ownership of shares, the controlling shareholders, which were primarily
business families or the state, continued to exert great influence over companies at the
cost of minority shareholders. Governance structures were opaque as financial
disclosure norms were poor.
In 1998, a National Task force constituted by the Confederation of Indian Industry (CII)
recommended a code for “Desirable Corporate Governance,” which was voluntarily
adopted by a few companies. Thereafter, a committee chaired by Mr. Kumar Mangalam
Birla submitted a report to SEBI “to promote and raise the standard of Corporate
Governance in respect of listed companies”. Based on the recommendations of the
Kumar Mangalam Birla committee, the new Clause 49 containing norms for corporate
governance was inserted in 2000 into the Listing Agreement that was applicable to all
listed companies of a certain size. Although both the CII Code as well as the Kumar
Mangalam Birla Committee Report expressly cautioned against mechanically importing
forms of corporate governance from the developed world, several concepts introduced
by them were indeed those that emerged in countries such as the U.S. and U.K. These
include the concepts such as an independent board and audit committee.
Thereafter, following Enron and other global scandals, SEBI decided to strengthen
Indian corporate governance norms. In the wake of the enactment of SOX in the U.S.,
SEBI appointed the Narayana Murthy Committee to examine Clause 49 and recommend
changes to the existing regime. Following the recommendations of the Narayana Murthy
Committee, SEBI, on October 29, 2004, issued a revised version of Clause 49 that was
to come into effect on April 1, 2005. However, since a large number of companies were
not yet in a state of preparedness to be fully compliant with such stringent requirements,
SEBI extended the date compliance to December 31, 2005.
Hence, detailed corporate governance norms were introduced into Indian corporate
regulations only from January 1, 2006. Clause 49 in its present form provides for the
following key features of corporate governance:
1) boards of directors of listed companies must have a minimum number of
independent directors, with independence being defined in a detailed manner
2) listed companies must have audit committees of the board with a minimum of
three directors, two-thirds of whom must be independent; the roles and
responsibilities of the audit committee are specified in detail
4) the CEO and CFO of listed companies must (a) certify that the financial
Statements are fair and (b) accept responsibility for internal controls
5) annual reports of listed companies must carry status reports about compliance
with corporate governance norms
The drive towards a more stringent corporate governance regulation over the last
decade is due to the following factors:-
In the pre-1991 era the capital markets were heavily regulated, thereby impeding foreign
investors from investing in the Indian markets. However, with the liberalization of the
Indian economy in 1991 and the consequent promotion of capital market activity by
SEBI, a simplified process became available to Indian companies to access capital from
the public. Simultaneously; the FDI norms were relaxed thereby increasing the avenues
available to foreign investors to participate in the Indian capital markets. These activities
& events marked the beginning of the phenomenon of internationalization.
Apart from seeking capital at better valuations, overseas listings were also driven by the
desire of companies to build credibility and reputation in the international markets.
Greater numbers of offshore listings by Indian companies compelled such companies to
adhere to norms and practices of corporate governance applicable to markets where
they listed their securities.
These motivating factors reveal that apart from the general desire to enhance
governance & transparency among Indian companies, the developments in Indian
corporate governance since 1991 were also largely driven by the need to attract foreign
capital into the Indian markets which indicates the trend to borrow, well-understood
concepts of corporate governance from the developed economies such as the U.S. and
U.K.
First are the public sector units (PSUs) where the government is the dominant (in fact,
majority) shareholder and the general public holds a minority stake (often as little as
20%).
Second are the multi national companies (MNCs) where the foreign parent is the
dominant (in most cases, majority) shareholder.
Third are the Indian business groups where the promoters (together with their friends
and relatives) are the dominant shareholders with large minority stakes, government
owned financial institutions hold a comparable stake,& the balance is held by the general
public.
The governance issues aroused in each of the above 3 categories are different but the
whole system is yet to find a balance between dominant shareholders & minority
shareholders also taking stakeholders into the context.
Indian corporate governance broadly follows an insider model as the ownership &
management are not different in India INC. This model is devised by Stilpon Nestor &
John K. Thompson, Corporate Governance Patterns in OECD Economies: Is
Convergence Under Way?
The insider model is characterized by cohesive groups of “insiders” who have a closer &
more long-term relationship with the company. This is true even in the case of
companies that are listed on the stock exchanges, let alone privately held companies.
The insiders (essentially the controlling shareholders) are the single largest group of
shareholders, with the rest of the shareholding being diffused and held by institutions or
individuals constituting the “public”. The insiders typically tend to have a controlling
interest in the company and thereby possess the ability to exercise dominant control
over the company’s affairs. As to the identity of the controlling shareholders, they tend to
be mostly business family groups or the state.
This is particularly true of Asian countries such as India and China, which are “marked
with concentrated stock ownership and a preponderance of family-controlled businesses
while state controlled businesses form an important segment of the corporate sector in
many of these countries.” It is also otherwise referred to as the “family/state” model. In
this regime, the minority shareholders do not have much of a say as they do not hold
sufficient number of shares in the company to be in a position to outvote or even veto
the decisions spearheaded by the controlling shareholders. The dominant shareholders
often improve their position in the company by seeking control and voting rights in
excess of the shares they hold. In other words, their control rights far exceed their
economic interests in the company.
This is achieved through cross-holdings, pyramid structures, tunneling and other similar
devices. By virtue of their control rights, these dominant shareholders are in a position to
exercise complete control over the company. They are virtually able to appoint and
replace the entire board &, through this, influence the management strategy and
operational affairs of the company. For this reason, the management will likely owe its
allegiance to the controlling shareholders. The controlling shareholders nominate senior
members of management, and even more, they often appoint themselves on the boards
or as managers. It is not uncommon to find companies that are controlled by family
groups to have senior managerial positions occupied by family members.
India is a classic insider system where most public companies are controlled (by virtue of
dominant shareholding) by either business families or the state. Business families
predominantly own and control companies (even those that are listed on stock
exchanges). This is largely owing to historical reasons whereby firms were mostly owned
by families. In addition, it is quite common to find state-owned firms as well. Several
listed companies are also majority owned by multinational companies. However, diffused
ownership (in the sense of the Berle and Means Corporation) can be found only in a
handful of Indian listed companies, where such structures exist more as a matter of
exception rather than the rule.
Indian boards are amenable to the wishes of the shareholders. Directors can be
appointed and even removed, all through a simple majority as these decisions
are required to be taken merely by ordinary resolutions at a shareholders’
meeting. Where directors or senior management do not demonstrate
performance, they are liable to be removed by the controlling shareholders.
3. Managerial Pay
The remuneration of directors and senior managers in Indian companies are not
Comparable to the kind of proportions witnessed in the U.S., although Indian
pay-scales at the top most layer of the management have seen a steady
increase over the years. However, the key difference in India is that senior
management’s pay is subject to shareholders approval & also to certain
maximum limits in view of Sections mention in the Companies Act, 1956.
4. Board Oversight
Indian companies follow the separation of the chairman & the CEO of an
organization. In the Indian context, non-executive chairmen of several companies
do play a significant role in stimulating more open discussions on boards and
also acting as a check on the management of the company such as the
CEO/managing director & other senior managers.
(i) Improve the external audit process by eliminating or mitigating the influence
of the controlling shareholders. The appointment, remuneration & control of
auditors should not be within the influence of the controlling shareholders
(vi) Encourage large investors (such as financial institutions) who are not
controlling shareholders or promoters to take up a more activist role in
corporate governance of Indian companies so as to protect the rights of
minority shareholders
Overcoming the crisis, Singapore saw an increasing in its capital markets and
thus indicating a need for practicing international accepted corporate
governance practices.
Regulation of Takeovers
The major source of guidance on the conduct and procedures to be followed
in takeover and merger transactions is the Singapore Code on
Takeovers and Mergers (hereafter, “The Code”). The Code is non-
statutory and supplements and expands on the statutory provisions on
takeovers found in sections 213 and 214, and the Tenth Schedule of
the Companies Act. The Code is modeled after the UK model, whereby
shareholders, rather than directors (as is the case in the US), decide whether
to accept or reject an offer. Companies listed on the SGX that are parties to
a takeover or merger also have to comply with the provisions in the Listing
Manual of the SGX.
The Securities Industry Council administers the Code, which is divided into
General Principles, Rules and Practice Notes. It was developed to aid
directors and officers in the discharge of their duties in the event of a merger
or takeover of a listed company. In general, the Code was set up as a way to
protect the minority shareholder from possible adverse impact. As the
concentration of stockholdings is very high in Singapore, the likelihood
of minority oppression is very real because many takeover resolutions
require only majority, rather than super-majority assent by the
shareholders.
This is to prevent directors from taking their own interests into
consideration during a tender offer, and such interests being to
prevent the loss of a position or to capitalize on a golden parachute.
Partly this is a reflection of the thinness of the market and the
concentration of shareholdings that can lead to minority oppression.
Disclosure Regulation
Regulation in the public sector is effected primarily by the Registry of
Companies and Businesses (RCB), which administers the Companies Act of
1990, and the Monetary Authority of Singapore, which administers the
Securities Industry Act of 1986. The Companies Act requires financial
statements to comply with the detailed disclosure requirements in the
Ninth Schedule and to present a true and fair view. There are some
differences in accounting and auditing requirements for private
companies, public companies and listed companies. The regulation of
accounting in Singapore involves a combination of private sector and public
sector regulation. The Statements of Accounting Standards (SAS) together
with the rules contained in the Stock Exchange Listing Manual (administered
by the SGX) and the Companies Act determine how accounting is practiced in
Singapore.
The two major institutions involved in private sector regulation are the
professional accounting body, The Institute of Certified Public Accountants of
Singapore (ICPAS), and the Singapore Exchange (SGX).5 The ICPAS has sole
responsibility for developing and maintaining the Statements of
Accounting Standards (SAS) and issuing Statements of Recommended
Accounting Practice (RAP), which specify how to account for various
business transactions. Standards-setting is done through the Accounting
Standards Committee appointed by the Council of the ICPAS. Each new
Standard becomes part of GAAP, the “accounting law of the land.” There is
also the Financial Statements Review Committee of the ICPAS which
reviews published financial statements for compliance with statutory
requirements.
Since the SAS issued by the ICPAS does not have legal backing and the
ICPAS only has the authority to require members to follow its standards and
guidelines, compliance with these standards depends largely on general
acceptance by the business community. The SAS is based on the
International Accounting Standards (IAS) issued by the International
Accounting Standards Committee (IASC). In most cases, SAS are
identical to IAS, although there are occasional deviations and omissions.
Government Ownership
A major feature of the Singapore economic landscape is the dominance of
government linked corporations (GLCs). Up to 80% of some GLCs are directly
and indirectly controlled by the government while a smaller percentage of
major non-GLCs in the banking, shipping, and technology sectors are
controlled indirectly through inter-corporate equity shares between the GLCs
and non-GLCs. At the end of the 1980s, GLCs comprised 69% of total assets
and 75% of profits of all domestically controlled companies in Singapore. In
the 1990s, through a program of privatization, which dispersed the equity of
these companies, those numbers have been reduced. However, the
government continues to hold majority ownership in these GLCs. Directors of
GLCs are often also senior government or ex-government officials, so it is
an indirect method for controlling and monitoring corporate activities
and business policies by the government.
However, the government appears to facilitate governance through GLCs,
there are some problems associated with this approach. The appointment of
government officers to senior management and board positions within
GLCs raises the question as to whether the best managers are running
corporations that form an important part of the economy. In addition, even
though GLCs are supposed to be run like commercial enterprises, they may
have to meet objectives that are associated with the well-being of the
country and which may conflict with commercial objectives. As a result, GLCs
may also face less pressure in earning acceptable returns. In addition, the
government is expected to play the role of the long-term investor in these
GLCs. Therefore, GLCs are even more protected from an already weak
market for corporate control. GLCs are also likely to have easier access to
different sources of capital when compared to non-GLCs. Often, the
government is perceived by the lenders to have a moral and legal
responsibility for their liabilities and this tacit backing of the state implies
that the enterprise is guaranteed solvency. This results in a greater
willingness by banks and non-bank financial institutions such as insurance
companies to lend money liberally to these enterprises. This reduces the
potential discipline to which a GLC will be exposed in a competitive capital
market.
There is little doubt that GLCs were instrumental in the rapid transformation
of the Singapore economy from an entrepot-based economy to an
industrialized economy. Most commentators would also agree that
relative to state-owned enterprises in most other countries, GLCs in
Singapore are much better run. One significant advantage that Singapore
GLCs have over those in some other countries is that the Government's
emphasis on clean government and the severe penalties it imposes on
corruption has meant that directors and senior management of GLCs in
Singapore (which often include government officials) are generally honest.
However, the relative success of the GLCs may have come at the cost of
development of private enterprise. Entrepreneurs wanting to start their own
businesses in Singapore often have to contend with well-resourced and
powerful GLCs.
The government recognizes these problems and has recently indicated that it
is willing to divest more of its ownership. Therefore, government ownership
in Singapore companies may be further reduced in the near future. The
authors believe that further divestment of government ownership will
have multiple benefits of stimulating private enterprise, energizing
the local equity markets (by improving liquidity and increasing the
investment by international institutional investors), improving efficiency in
the management of GLCs, and contributing significantly to the development
of the fund management industry in Singapore (if funds released from
privatization are re-invested through fund managers).
Incentive Compensation
In recent years, many Singapore companies have adopted employee share
option schemes (ESOS) as a means of compensating directors, managers
and employees. However, most companies only issue options to senior
management and directors, although there have been several recent
instances of the adoption of broad-based ESOS that include stock options for
lower-level employees. Stock options can be an effective tool for aligning the
interests of managers/employees and shareholders and provide a
stronger link between pay and performance, and therefore perform an
important corporate governance function. However, as many writers have
noted, providing proper incentives through stock options requires a well-
designed ESOS. Further, as the recent U.S. experience indicates, stock
options can be controversial as they are often seen to lead to an inflation of
executive compensation. Further, questionable practices such as re-pricing
options can mitigate the incentive effects associated with options.
In Singapore, ESOS are subject to rules in the SGX Listing Requirements
(Practice Note No. 9h) and the Companies Act 1990. The Companies Act (s.
201) requires the number and class of shares for which options are issued,
date of expiration of the options, and basis upon which the options may be
exercised to be disclosed in the directors' report. The maximum expiration
term of options is 10 years. The SGX Rules relate to matters such as
exercise price, expiration terms, vesting periods, total size of the
scheme, number of options issued to particular individuals, participation
in ESOS, and administration of the ESOS. In general, options are to be
issued at the market price. However, options may be issued at a discount of
up to 20% provided they have a minimum vesting period of 2 years and are
approved by shareholders. Controlling shareholders and their associates who
are directors or employees may participate in the ESOS provided it is
approved by independent shareholders for each person. Award of options to
controlling shareholders, awards to employees receiving in aggregate
5% or more of the options, and aggregate number of options to be made
available for grant have to be approved by independent shareholders. For
Main Board companies, the number of shares available under the ESOS must
not exceed 15% of the issued share capital. There are also limits on
proportion of options that may be issued to controlling shareholders and to
each individual participant. The ESOS has to be administered by a board-
level committee.
In the annual report, the name of each participant who is a director,
controlling shareholder or who receive 5% or more of the total number of
options available must be disclosed, together with the number and terms of
options, aggregate number of options issued since commencement of the
ESOS, aggregate number of options exercised since commencement,
and aggregate outstanding options.
Share Buybacks
This limit is 3% for media companies. The government has given priority to
the national interest and highlighted the requirement to create Nominating
Committees, and to have a majority of citizens and permanent residents on
the board, will effectively ensure that control of the banks rests with
individuals or groups who will act in a manner consistent with the national
interest. In addition, MAS will tighten existing safeguards on the
accumulation of significant ownership in a local bank". Therefore, the need to
prevent local banks from falling into foreign control remains a concern for the
Singapore government.
Board Committees
Under the Companies Act, all listed companies in Singapore are required to
have an Audit Committee with at least 3 members. The majority of the
members must be independent directors, and the Chairman must be a non-
executive director. The SGX Listing Manual also requires listed companies to
have an audit committee. The Best Practices Guide states that a majority of
audit committee members, including the Chairman, should be independent of
management. A director can be considered as independent if any relationship
he may have would not, in the individual case, be likely to affect his exercise
of independent judgment.
Most companies have the minimum of 3 members on the audit committee as
required by the Companies Act and SGX Rules. Apart from the Audit
Committee, neither statute nor listing rules contain requirements for other
board committees. The exception is the recently introduced requirement for
local banks to form a Nomination Committee and a Compensation
Committee. The Nominating Committee must comprise of five board
members to be approved by the MAS. This committee is responsible for
identifying individuals and reviewing nominations by the board or
shareholders for the following positions: Board membership, the Executive
Committee of the Board, the Compensation Committee, the Audit
Committee, the Chief Executive Officer / Deputy Chief Executive Officer /
President / Deputy President, and Chief Financial Officer. Since three of the
five local banks are family-controlled (the other two being government-
controlled), there was a prevailing view that board members and senior
executives of the family-controlled banks were traditionally chosen from
families and relatives of the controlling shareholders. The Compensation
Committee must have at least 3 members of the Board, a majority of who
are not employees of the bank.
Apart from the Audit Committee for listed companies, and the
Nomination and Compensation Committees for banks, companies are
not required to form other board committees. An exception is the
committee responsible for administering the Employee Share Option Scheme
(ESOS). Under the SGX Practice Note No. 9h, companies having an ESOS
have to form a board-level committee, and to disclose the members of this
committee in the annual report. Not surprisingly, therefore, by far the next
most common committee disclosed by companies in the annual report is the
Compensation Committee, including the committee responsible for the ESOS
(or its equivalent). Forty-two companies (28%) reported the use of this
committee. However, the functions of the Compensation Committee in
Singapore may be more limited than in other countries, because they are
often formed to administer the ESOS as required by SGX rules. The next
most common committee reported is the Executive or Management
Committee.
Some other committees reported were Nomination Committee, Finance
Committee, Investment Committee, Policy Committee, Strategy Committee,
Risk Management Committee, Credit Committee, Management Development
Committee, and Y2K Committee but these were relatively uncommon.
External Auditing
The external auditor is another important element in the system of corporate
governance. He/she lends credibility to the financial statements prepared by
management, so that users of the statements can rely on their fairness and
completeness. The effectiveness of the external auditor as a corporate
governance mechanism depends on the quality of the auditor (independence
and expertise), the quality of the audit (audit planning, procedures and
communication), and the enforcement of standards by a regulatory
body. In Singapore, a Public Accountants Board was set up under the
Accountants Act of 1987 (revised 1998) to register and regulate public
accountants who include external auditors.
Applicants for registration must satisfy requirements in regard to professional
examination, post-examination experience, pre-registration course on ethics
and professional practice subjects (no examination), and proficiency in local
laws. In this regard, the Board has issued a Code of Professional Conduct
and Ethics (Third Schedule to the PAB Rules), which lays out
fundamental principles and more specific principles on pertinent issues such
as independence, use of designator letters, advertising, fees and
confidentiality.
Under the Code, a public accountant or his firm cannot be appointed as an
external auditor of a company if:
1. He or his immediate family holds a significant beneficial interest, directly
or indirectly, in shares of the company (significant = 5% or more for public
companies and 20% or more for private companies)
2. For the year immediately preceding prospective appointment, he
was an officer or employee of the subject company, or was a partner of
such person(s)
3. He has a direct or indirect material financial interest in the company.
With regard to external auditing, ICPAS (more specifically, its predecessor
the Singapore Society of Accountants) issued Statements of Auditing
Guideline (SAG) and Statements of Auditing Practice (SAP) in the early 80s.
SAGs are guidance statements on generally accepted auditing practices and
on the form and content of audit reports. SAPs deal with the detailed work or
acts which the auditor has to carry out in accordance with the guidelines set
out in the SAGs. The SAGs and SAPs are based on the International
Guidelines on Auditing and Related Services issued by IFAC. Following IFAC,
the SAGs were codified in 1997 and are now referred as the Singapore
Standards on Auditing (SSAs) to better describe their authority. However,
the SSAs are strictly professional and not legal pronouncements — failure to
comply is a disciplinary and not a legal breach.
Investor Relations
Singapore companies generally do not place significant emphasis on
communication with investors. It is only very recently that analysts briefings
and conference calls are starting to be used more widely by
companies.
The concept of corporate governance has been attracting public attention for quite some
time. It has been finding wide acceptance for its relevance and importance to the
industry and economy. It contributes not only to the efficiency of a business enterprise,
but also, to the growth and progress of a country's economy. India INC represents a
heterogeneous mixture of small & large businesses & as an implication we have many
companies which adopted the code of corporate governance voluntarily well in advance
such as Infosys, Tatas but at the same time we have many companies which have
adopted the systems to protect from the huge liabilities which they could have incurred
by violating the governments code of policies & guidelines.
Firms which have voluntarily adopted systems of good corporate governance may be
due to one of the following reasons:-
Several studies in India and abroad have indicated that markets and investors
take notice of well managed companies and respond positively to them. Such
companies have a system of good corporate governance in place, which allows
sufficient freedom to the board and management to take decisions towards the
progress of their companies & to innovate, while remaining within the framework
of effective accountability
In today’s globalize world, corporations need to access global pools of capital as
well as attract & retain the best human capital from various parts of the world
The credibility offered by good corporate governance procedures also helps
maintain the confidence of investors – both foreign and domestic – to attract
more long-term capital
A corporation is a congregation of various stakeholders, like customers,
employees, investors, vendor partners, government and society. Its growth
requires the cooperation of all the stakeholders. Hence it is imperative for a
corporation to be fair and transparent to all its stakeholders in all its transactions
by adhering to the best corporate governance practices
Effective governance reduces perceived risks, consequently reduces cost of
capital & enables board of directors to take quick and better decisions which
ultimately improves bottom line of the corporate
Adoption of good corporate governance practices provides long term sustenance
and strengthens stakeholders' relationship
Potential stakeholders aspire to enter into relationships with enterprises whose
governance credentials are exemplary
Adoption of good corporate governance practices provides stability & growth to
the enterprise
The issues of governance, accountability and transparency in the affairs of the company,
as well as about the rights of shareholders and role of Board of Directors have never
been as prominent as it is today.
India has become one of the fastest emerging nations to have aligned itself with the
international trends in Corporate Governance. As a result, Indian companies have
increasingly been able to access to newer and larger markets around the world; as well
as able to acquire more businesses. But, as the global environment changing
continuously, there is a greater need of adopting and sustaining good corporate
governance practices for value creation and building corporations of the future.
It is true that the 'corporate governance' has no unique structure or design and is largely
considered ambiguous. There is still lack of awareness about its various issues, like,
quality & frequency of financial and managerial disclosure, compliance with the code of
best practice, roles & responsibilities of Board of Directories, shareholders rights, etc.
There have been many instances of failure & scams in the corporate sector, like
collusion between companies & their accounting firms, presence of weak or ineffective
internal audits, lack of required skills by managers, lack of proper disclosures, non-
compliance with standards, etc. As a result, both management and auditors have come
under greater scrutiny. But, with the integration of Indian economy with global markets,
industrialists & corporate in the country are being increasingly asked to adopt better and
transparent corporate practices. The degree to which corporations observe basic
principles of good corporate governance is an increasingly important factor for taking key
investment decisions. If companies are to reap the full benefits of the global capital
market, capture efficiency gains, benefit by economies of scale and attract long term
capital, adoption of corporate governance standards must be credible, & consistent.
Hence, in the years to come, corporate governance will become more relevant & a more
acceptable practice worldwide.