Institutional EYE

Commentary on Corporate Governance Issues

Independent Directors need training, not eligibility criteria

The proficiency self-assessment test instituted by the MCA is unlikely to provide any meaningful solution to board strengthening. There is no denying that boards in India need training but understanding technical subjects will not help directors in taking the right decision. Recent failures have given enough reason to believe that directors need to have greater awareness of their fiduciary responsibilities. Of the recent failures – several on account of corporate governance lapses – had boards with well-established directors that failed in executing their fiduciary responsibilities. IL&FS and CG Power are cases that come quick to mind. Leave aside abject failures, but governance practices in

Roll over Friedman, corporates will now start to care

Twenty-two years after first committing itself to Milton Friedman’s mantra that the principal objective of a business enterprise is to generate economic returns to its owners, the US Business Roundtable has now given corporations a new purpose. In a statement in August, the Roundtable stated that purpose of the corporation is no longer maximizing returns to shareholders, rather it is a commitment to all stakeholders. This puts shareholders at par with employees, customers, suppliers and communities in which businesses operate. It is useful to remember this is how it was till the Business Roundtable exhorted corporates to embrace the profit motive. The US Business Roundtable has an oversized

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