Corporate Governance Disclosure Practices: The Portrait of a Developing Country

Madan Lal Bhasin

doi:10.5539/ijbm.v5n4p150

Abstract

CG disclosure is a fundamental theme of the modern corporate regulatory system, which encompasses providing information by a company to the public in a variety of ways. In the light of CG compliance requirements and disclosure standards, as envisaged by provisions of Clause 49 of the Listing Agreement, this study analyzes the CG disclosure practices in India. We have primarily used the secondary sources of information, both from the Report on CG and the Annual Report of Reliance Industries Limited (RIL) for the financial year 2008-2009.In this study of RIL, we have developed our own model as a ‘working’ method. In order to ascertain how far this company is compliant of CG standards, a ‘point-value-system’ has been applied. Based on the disclosures made by the Company and an in-depth evaluation of the results, we conclude that this company has shown ‘very good’performance, with an overall score of 85 points. Despite some limitations, this study will help us to pinpoint the effectiveness of CG practices followed by the Reliance group. Based on our findings, we can conclude that RIL group is in the forefront of implementation of “best CG practices in India,” but some scope still exists for its improvement.

Highlights

During the 1990s, a number of high-profile corporate scandals in the USA and elsewhere in the world, triggered an in-depth reflection on the regulatory role of the government in protecting the interests of shareholders
In order to assess the structure and processes for CG followed by Reliance Industries Limited (RIL), and its effectiveness in terms of substance and quality of disclosure of CG in the annual report, we have conducted the study based on statutory and non-mandatory requirements stipulated by the revised Clause 49 of the Listing Agreement, as the provisions required by the Companies Act, 1956
7.2.5 Disclosure of Stakeholders’ Interests: Here, we focus briefly on the disclosure made by the RIL in its annual report on various initiatives and measures taken by the company on the following items, in order to meet its commitments on the expectations and interests of stakeholders: (a) Environment, Health and Safety measures (EHS); (b) Human Resources Development (HRD); (c) Corporate Social Responsibility (CSR); and (d) Industrial Relations (IR)

Summary

Introduction

During the 1990s, a number of high-profile corporate scandals in the USA and elsewhere in the world, triggered an in-depth reflection on the regulatory role of the government in protecting the interests of shareholders. The Sarbanes-Oxley legislation in the USA, the Cadbury Committee recommendations for the European Union (EU) companies, and the OECD principles of corporate governance, are perhaps the best-known among these. The Hampel Committee (1998) regulated disclosure as “the most important element of accountability and in introducing a new code and set of principles stated that their objective was not to prescribe corporate behavior in detail but to secure sufficient disclosure so that investors and others can assess companies performance and governance practice and respond in an informed way.”. The disclosure should be clear, concise, precise, and governed by the substance over form principle.”

Methods

Results

Discussion

Conclusion