The Hindu Business Line : Meet stresses on corporate ethics

Corporate governance is crucial in the Indian context to save the small investor, as the Sensex is currently soaring and several thousands of investors are entering the capital market, according to Mr E.A.S. Sarma, former Union Energy Secretary.

He was delivering a lecture on corporate governance norms here on Wednesday in the Magnus Business School. It was organised by The Hindu-Business Line Club. Expressing reservations over the dramatic rise of the Sensex, Mr Sarma wondered "whether the fundamentals are really strong. We don't know when the bubble may burst. When that happens, lakhs of small investors suffer incalculable hardship. To prevent these kinds of scams, corporate governance with emphasis on disclosure norms is essential."

He said the culture of corporate governance has not really caught on in India except for a few companies such as Infosys. "For instance, Mr Anil Ambani raised the issue when he fell out with his brother, Mukesh. He accused his brother of several corporate governance failures. Subsequently, an arrangement was worked out between the brothers and the issues were pushed under the carpet. It is not an issue between the two of them alone, as several thousands of investors are involved," he said.

He said most Indian companies were controlled by families and "it is difficult to persuade them to change their style of functioning and adopt corporate governance norms." However, he said in a globalised economy Indian companies had no choice but to adopt corporate governance norms. "We have no choice but to globalise and therefore we must have these norms. For instance, to raise money from the American market, an Indian company would have to adopt the American accounting standards which are the best in the world," he said.

Mr Suresh, Regional Manager, The Hindu, welcomed the gathering and Mr R. Vinay Kumar Reddy, Business Head, Magnus School, proposed a vote of thanks.

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