Time for 2GCG – 2nd Generation Corporate Governance?

Has Corporate Governance transformed the way the corporates function? Only an empirical study would measure this up. This takes us to another question – whether corporate governance can be measured. There have been few theories floating around for measuring corporate governance, gratifying the ardent statistically oriented fans. Theories aside, the practical realities of business environment have taught the corporate directors a way to judge the efficacy of corporate governance in an organization.

Corporate Governance has been brought to the boardrooms by multitude of laws, rules, regulations, guidelines, principles et al in a codified manner. The directors individually and the board of directors collectively, often struggle to comply with these codifications. With the sword of regulator hanging over their head, the directors either become too aggressive or too defensive. Without doubt, the directors particularly independent directors have a responsibility to act as custodian of the stakeholders. If this responsibility becomes onerous, the reaction becomes unpredictable. The board room discussions have shifted gears over the years with the onset of ‘corporate governance’ environment and the focus remains on what the independent directors say on the items discussed at the meetings.

The concept of  ‘Independent Directors’ has assumed greater significance today with the onset of  ‘Corporate Governance’. In the era of dynamism, the concepts and perceptions change as frequently as the seasons change. The composition of Board of companies in which ‘public interest’ is involved is a subject matter of considerable debate and discussion. A greater emphasis is being laid on transparency in governance and management. The way the Board functions affects the entire corporate culture; the impact and effect of which is also discernable on the economy.