11 February 2009

Corporate Governance reforms

I was on a conference call with the Asian Corporate Governance Association (ACGA) on the Satyam episode and it's lessons. I re-iterated that there were some areas including corporate disclosures which needed a wholesome overhaul in it structure and presentation (something I have blogged about recently - integrated disclosures). I also think there needs to be a lot of foundational rethinking of tolerating related party transactions, while it would be impossible to either prohibit such transactions or even take all of them through the shareholder, I think there is a case for a wholesome relook at the issue. Thirdly, I think we need to look at the opaque investment structures which we have been tolerating (though we are by no means unique) in listed companies.

On a contrarian note, I don't think there is a need to overhaul the existing corporate governance structure based merely on the Satyam episode, though some of the softer issues do need to be looked at (director interest alignment, compensation etc). As I mentioned in an IIM-A seminar, Leverage, two days back, we have more of a case of political reform rather than regulatory reform.

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