• PAGE ONE
• INDEX
• HOME

`Corporate governance here to stay'

Our Bureau

MUMBAI, Sept. 18

MAJOR institutional investors set the standards of corporate governance. The companies and countries which wish to attract international investment or raise funds in the global capital markets must meet what are now recognised as world standards of corpo rate governance.

There are two driving forces behind the international pressure to raise the governance standards, Sir Adrian Cadbury, the author of Cadbury Code of Corporate Governance, said. One, major institutional investors must insist on similar standards of board-e ffectiveness, accurate and timely financial reporting and equal treatment of all shareholders. Second, any company wishing to raise capital has to meet the standards which world capital markets now set if it wishes to raise the money on acceptable terms.

Delivering the keynote address at the Bombay Stock Exchange (BSE) here on Monday, Sir Adrian recommended the need to encourage institutional investors to raise the standards of corporate governance.

Sir Adrian, revered the world-over for the work of codifying corporate governance, further said that he had recommended in his report that institutional investors should encourage regular, systematic contact at senior executive level to exchange views an d information on strategy, performance, board membership and quality of management.

Institutional investors should make positive use of their voting rights and they should register their votes wherever possible on a regular basis. To encourage investors to play their part in raising standards of corporate governance, ``we ended with the recommendation that institutional investors should disclose their policies on the use of their voting rights,'' Sir Adrian said.

Narrating the examples in the UK markets, he said that about 80 per cent of the shares of UK companies are now held by institutions and pension funds alone own around one-third of these shares. Therefore, the institutions cannot sell and walk away from p roblem companies, since, in practice, they can only sell to each other. It is in their interest to use their influence and voting power to persuade under-performing companies to make whatever changes in their management are needed to bring about improvem ent.

Mr Deepak Parekh, HDFC Chairman, who was a guest speaker, said that corporate governance is not a book of rules and laws but is a way of life to improve corporate performance keeping in mind the shareholders' interest. On raising the standards of corpora te governance, Mr Parekh's advice -- ``Do not do something which would make you ashamed if it becomes public.''

Pic.: Sir Adrian Cadbury, author of Cadbury Code of Corporate Governance, addressing a seminar held at BSE in Mumbai on Monday. Pic. credit: Paul Noronha