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The role of corporate governance
13 January 2009:
In fact, even the 2001 Enron scandal in the US, which involved irregular accounting procedures, was perhaps nothing more than news on the foreign page.
But, with the Satyam's fabricated balance sheets fiasco hitting much closer to home, it would seem Indians have front-row seats this time. And today, one cannot help but question the role of corporate governance.
Says Rekha Sethi, director general, All India Management Association (AIMA), "The whole idea behind corporate governance is ensuring the accountability of certain individuals in an organisation through mechanisms that try to reduce or eliminate unfair practices within the corporate system." So, corporate governance is all about transparency.
C V Baxi, acting director, Management Development Institute (MDI)-Gurgaon and professor, corporate governance, explains, "Ethics is an integral part of corporate governance." In fact, corporate governance essentially indicates the trust-worthiness of a company. Adds Jhuma Guha, deputy CEO, Reliance Money: "If the trust factor is suspect or weak, investors and other stakeholders need to be wary. Eventually it is only ethics that determines the action and reaction of individuals, which collectively determines the quality of corporate governance."
The reason why corporate governance is so important today, according to Sethi, is because India has the largest number of listed companies in the world, and the efficiency and well-being of financial markets is critical for the economy in particular and the society as a whole. And as Baxi points out, there are quite a few lessons to be learnt from the Satyam fiasco.
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Source: Times of India
