Posted by: CS Shilpi Thapar
I thought of sharing some enlightening insights from ACGA“CG Watch 2012”.
On September 19, 2012, Asian Corporate Governance Association (ACGA) jointly with CLSA Asia-Pacific Markets publicly released “CG Watch 2012”, its sixth joint survey on corporate governance in 11 Asian markets undertaken since 2003. The 11 Asian Markets selected for Corporate Governance Survey was Singapore, Hongkong, Thailand, Japan, Malaysia, Taiwan, India, Korea, China, Philippines and Indonesia.
As per the survey, most of the rising markets are in Southeast and South Asia including Singapore, Thailand, Malaysia, Korea, India and Philippines. North Asia Markets i.e Japan, Taiwan, China and Indonesia markets are falling. Hongkong is rising marginally.
As per survey report, the main reasons for falling markets in North Asia are rigid hierarchies and closed corporate cultures followed in most companies, conflicts between regulators and conservative corporates over company law/board reforms, weak government steps in developing corporate governance culture. On other hand, main reasons for rising markets in South Asia are clearer corporate governance policies in area of Board reforms and shareholders rights, well designed and adopted systems regarding director training and board development, stronger government steps in developing clearer and consistent corporate governance policies and independent audit regulators.
During the survey, the scores were given for 5 parameters i.e Corporate Governance Rules and Practices, Enforcement, Political and Regulatory, Accounting and Auditing (IGAAP) and Corporate Governance Culture.
India ranks 7th among 11 asian countries gaining average score of 51 points. India Inc score in the area of Corporate Governance Rules and Practices have dropped in 2012 as compared to 2007. Rules relating to timeliness and frequency of financial reporting, disclosure of director share transactions, disclosure of substantial ownership stakes i.e 5 percent and above, mandatory audit committee, non financial reporting, voting by poll, legal remedies for shareholders, definition of Independent Directors, Quality of Corporate Governance codes and pre-emptive rights was considered for giving scores.
In area of Enforcement and Political and Regulatory Environment, India Inc score is higher in 2012 than its previous high in 2007 &2010. In Accounting and Auditing (IGAAP) India and Hongkong market were found weak. As far as Corporate Governance Culture score is concerned few markets have made progress and shown improvement. India Inc score is stable in this area in 2012 as compared to its previous high in 2007. Six of the 11 markets are either stable or declining, while three of the remaining markets recorded only minimal improvement.
In light of above, India Inc needs to have stronger Corporate Governance Rules and Practices especially in area of non financial reporting, voting by poll, legal remedies for shareholders, Independent Directors, Quality of Corporate Governance codes and pre-emptive rights. Regulators should develop proper and strong political and regulatory environment and frame consistent, fair and strong rules, regulations to develop strong Corporate Governance Culture in India.
References: ACGA “CG Watch 2012: Market Rankings”, September,2012,