Corporate governance: Fundamental issues

Corporate governance (CG) has emerged as a very important ideal. The reason is today companies are substantially contributing to the overall growth and development, particularly in emerging economies such as India and a healthy investment environment is vital. The corporate form of business has succeeded gradually and expanded worldwide. However, not all companies are managed successfully. There has been a spree of corporate frauds worldwide, e.g., Enron in the United States and Satyam Computers in India. The latter had accounting and auditing flaws apart from lack of accountability and oversight by Independent Directors at Board meetings. There was no whistle-blowing in case of Satyam Computers unlike Enron. The Satyam Computers revelation was an outcome of a takeover attempt. It eroded the wealth of shareholders. From this fraud it is evident that we need to review the enforcement of CG practices. The role of the Ministry of Corporate Affairs as one of the stakeholders in case of Satyam Computers has been commendable especially in appointing reputed members on the Board immediately after the fraud, in order to restore confidence among investors, customers, employees and to revive the company. This initiative by the government also encouraged the stock markets to some extent. The paper is discussed with the corporate governance's history, developments, and some fundamentals issues.