Recent Developments in Corporate Governance in India: Role of Shareholder's Activism

Abstract

Asian Corporate Governance Association on January 19, 2010 presented its white paper on Corporate Governance in India. Shortly before, Ministry of Corporate Affairs held its ‘India Corporate Week 2009’ in the last week of December 2009. The emphasis of the corporate week was on corporate governance and CSR. MCA came up with two voluntary guidelines on corporate governance and corporate social responsibility respectively. The voluntary guideline was given shape by the CII’s Task Force under the chairmanship of Mr. Naresh Chandra and in a way it was an extension of the original Naresh Chandra Report on Corporate Governance. The draft of the extension report emphasizes on the unfortunate history of major corporate misconduct even in the presence of best standards, either it be UK, Germany, France, Italy, or South Korea. The Satyam-Maytas Infra fiasco highlighted the loopholes in the corporate transparency and disclosure norms. This warranted a re-consideration of the boasted of corporate governance norms in India. Though we have a very good set of corporate governance principles inherent in the companies act and the listing agreement, there has been a problem of ‘check and balance’. There was never a question as to non-disclosure in the annual reports about the facts of the company, but the problem is that the shareholders are not vigilant about their duties. There has always been a lack of ‘shareholder activism’. It has not been the case that there was no accountability of auditors under the law, but the problem was the sleeping habit of auditors after a tough initial scrutiny. Related-party transactions were regulated but the changing character of ‘related-party’ has changed over-time. Mr. Raju having his professors on Board of Satyam who owed an obligation to him did not come under the scanner of related-party. The present paper would focus upon the role of ‘Shareholder Activism’, which was a trigger in finding out the Satyam fraud, in development of good corporate governance.